Plumes of smoke and fire at an oil facility in Fujairah, United Arab Emirates
Associated Press/Alamy
Despite Donald Trump’s relentless attacks on climate action, the “drill, baby, drill” president has given the green revolution a huge boost by attacking Iran.
In response, the Islamic Republic has halted almost all traffic in the Strait of Hormuz, a waterway through which a fifth of global oil and a fifth of seaborne gas supplies pass, and has hit oil and gas fields with drones and missiles.
The cost of oil has jumped from around $70 to more than $100 a barrel, and natural gas prices have also shot up in most regions. While Arab countries have diverted as much fuel as possible through pipelines, prices are expected to remain high. Even if oil prices come down to an average of $85 over the whole year, it will cost countries that import fossil fuels an extra $240 billion, according to think tank Ember.
But maximizing the deployment of renewable energy, electric vehicles and heat pumps could reduce this cost by 70 percent, it said.
“The conflict in Iran is almost certainly going to be an accelerator of the energy transition,” says Sam Butler-Sloss at Ember. “As prices rise, as awareness of the fragility of the fossil fuel system grows, it becomes increasingly clear that nations need to find more secure forms of energy, and… everywhere in the world is in a place that receives plenty of solar and wind.”
The consequences of this energy crisis will be even more widespread than when Russia’s invasion of Ukraine in 2022 reduced the flow of Russian oil and gas to Europe. Since then, the EU’s annual solar deployment has more than doubled, and the UK’s has increased by around two-thirds, with wind power also continuing to increase. Renewable energy now accounts for around 45 percent of global energy capacity.
Now the most vulnerable region is Asia, which receives four-fifths of the oil and liquefied natural gas (LNG) shipped through the Strait of Hormuz. Japan and South Korea depend on the strait for 70 percent of their oil, and a third of Taiwan’s natural gas comes from there. Up to half of India’s oil and natural gas imports are shipped through the strait, and some restaurants there have even had to limit their menu choices due to a shortage of cooking gas. “This is Asia’s Ukraine moment,” says Butler-Sloss.
In the short term, greenhouse gas emissions may actually increase because countries like Japan and South Korea have started generating more power from coal, which is twice as dirty as natural gas. The two countries are also increasing the production of existing nuclear power plants.
But Seoul has also promised to speed up financing, permitting and grid access for wind and solar projects, and India’s prime minister, Narendra Modi, said on March 11 that solar and electric vehicles would help reduce the country’s dependence on foreign fuel imports.
“Economies in Asia are getting a wake-up call, just as Europe got its wake-up call four years ago,” says Pavel Molchanov of investment firm Raymond James & Associates. “The wake-up call will push for more renewable energy in the electricity mix because fossil fuels are once again vulnerable to disruption.”
Some analysts expect China, which already installs more solar and wind than the rest of the world combined, to accelerate this even more, since almost half of its crude oil imports pass through the Strait of Hormuz. At the same time, as the world’s largest coal producer, it is likely to increase coal in its energy mix.
“China will pursue its long-term energy strategy with all of the above,” says Li Shuo of the Asia Society Policy Institute. “This is precisely the lesson that many other countries will learn.”
But in nations with poor power grids, the rising costs of natural gas and diesel will now make solar energy more attractive to utility companies as well as villages and households. After the invasion of Ukraine, Pakistan largely priced itself out of the LNG market, for example, solar power went from 4 percent to 25 percent of electricity production there, thanks in large part to homes and businesses installing cheap Chinese solar panels.
In the longer term, the biggest winner worldwide may be electric cars. Most natural gas is not delivered by ship, but by pipeline, so prices may fall again sooner. Oil, on the other hand, is a global market with a global price. Car owners face startling prices at the pump even in the US, the world’s top oil producer.
More people will consider buying an electric car, and governments should encourage them, because the “super handle” of using electric cars can reduce the bills of countries that import fossil fuels by a third, says Ember.
But because the average lifespan of a car is nearly two decades, it will take years to start seeing significantly more electric cars on the road, says Michael Liebreich, an energy consultant at Liebreich Associates. The replacement of natural gas power with renewables will be visible quickly and will continue even if gas prices fall, he says.
“The assumption of a growing demand for gas in a world that has cheap wind, solar and batteries and is increasingly unwilling to depend on global commodity markets, that narrative is wrong. It’s over,” says Liebreich.
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