As the Middle East conflict sends fuel costs skyrocketing and threatens to put a dent in the global economy, the argument for reducing the world’s dependence on oil and gas and moving towards renewables has grown louder.
Ships have been blocked – and in some cases burning – at the Strait of Hormuz, a narrow passage near Iran through which a fifth of the world’s oil and gas passes. The key supply route has been effectively closed, stopping oil, gas and other essential exports from the Gulf region and sending commodities on a rollercoaster ride.
Skyrocketing oil and gas prices are leaving many countries rationing fuel and staring at rising food prices. The International Energy Agency is calling it the largest supply disruption in the history of the global oil market.
With no sign the conflict will end imminently, bodies including the UN have called for the world to reduce its dependence on oil and gas, with renewables cited as the most obvious alternative. “The resources of the clean energy era cannot be blockaded or weaponised,” UN secretary-general António Guterres said last week.
The European Union‘s energy commissioner Dan Jørgensen has announced a €75 billion clean energy investment strategy, calling for the EU to take its energy future into its own hands. In India, which along with the rest of South Asia is particularly reliant on Middle East energy imports, prime minister Narendra Modi has described the crisis as a lesson for the world’s most populous nation on the need to be self-reliant.
But experts are divided over whether renewable energy can actually offer that off-ramp anytime soon, in a way that reduces dependence on oil and gas disruptions.
The growth of renewable energy in the last few years has been rapid — it now accounts for roughly a third of the world’s electricity generation, and solar power costs have fallen by more than 90 per cent since 2010, making it the cheapest source of new electricity in most countries. But that achievement addresses only one part of an energy system that runs on fossil fuels, as experts say the harder challenges are still ahead.
“Utilising renewables for electrification is a critical first step,” said Chris Wright, principal analyst at Carbon Bridge, “but replacing fossil fuels across the economy — including industry, transport and agriculture — is not feasible in the medium term for any country I am aware of.”
Outside electricity, the global economy still runs on fossil fuels in ways renewables have barely begun to address — gas powers industrial heat, oil moves freight, ships and planes, and across much of the developing world, cooking cylinders still run on petroleum.
Calls to move away from volatile oil and gas supplies also came following Russia’s invasion of Ukraine in 2022, noted Julie Jolly, programme director for oil and gas at Global Energy Monitor.
“The Ukraine war taught us very similar lessons, but it didn’t lead many countries to move away LNG (liquefied natural gas),” she notes.
While renewable electricity has expanded rapidly in the four years since the war began, it hasn’t done so at the expense of dependence on oil and gas in those harder-to-change sectors.
“The fossil fuels problem is really two problems: transportation, and everything else,” said Rosemary Kelanic, director of the Middle East Program at Defence Priorities.
For decades, transport was the sector where oil had no genuine substitute, given its energy density and its suitability for powering vehicles on the move, but price-competitive EVs have changed that calculus, she said.
“The advent of EVs could finally wean automotive transportation off oil in the coming decades, which is a big deal,” she says. Yet even in a sector showing relative promise, limitations like the slow adoption of EVs by ordinary consumers and a lack of charging infrastructure in most of the world means it’s not going to happen overnight.
Beyond transport, the picture is even more stubborn. Coal and gas remain central to heating in most countries, and for heavy industry, shipping and aviation, alternatives are not yet close to being deployed at scale.
Tara Narayanan, head of upstream oil research at BloombergNEF, said electrification is not feasible for aviation or marine fuels.
“There are no easy substitutes for oil use,” she said. “EVs and biofuels represent medium-term options, not rapid-response solutions in a time of crisis.”
More than 80 per cent of the oil and gas that transits Hormuz is headed to Asia, where the disruption has broken two supply chains, neither with a ready substitute. Despite a strong renewable sector, LPG (liquefied petroleum gas) still fills cooking cylinders for homes, restaurants and small industries in India, and the shortage has led to thousands of restaurants shutting.
Supplies of LNG, which powers industrial facilities and petrochemical plants, have also been curtailed across the region. Fuel rationing in Bangladesh and Pakistan has shut down schools and offices, and even led to incidents of violence.
Some of the current dependence on these fuels can be reduced, experts said, but it needs a policy push. Induction-based cooking is already around 14 per cent cheaper than piped gas and 37 per cent cheaper than non-subsidised LPG for a family of four in India, said Purva Jain, energy specialist at the Institute for Energy Economics and Financial Analysis.
“Options are available for sure,” she said. “Maybe we just need to expedite the effort.”
The response to the shortage of industrial fuel, experts said, should be less LNG, not more. “This sort of crisis should act as a warning to countries considering investing in imported LNG,” said Jolly. “It’s not the energy security lifeline that LNG corporations would like people to believe it is.”
Despite the pressure, countries with more renewables and electrification are faring better comparatively. China, while still buying some of the biggest volumes of oil and gas and also being a coal producer like India, appears better insulated from the current disruption.
“China’s strategic reserves and the more diversified supply may have an important impact,” said Biqing Yang, an energy analyst at Ember specialising in China’s transition.
But the way China has pivoted so quickly to EVs has also built some resilience. More than half of all new cars sold there last year were electric, and the country is targeting peak oil consumption by 2030, with transport accounting for nearly half of the country’s oil demand and electrification steadily reducing it.
While calls for faster adoption of renewable energy are one response to the Iran crisis, the other has been to suggest pivoting to whatever fuel is cheapest and most available domestically – even if it is also dirtier. In the UK, some politicians have demanded new North Sea drilling licences, even as analysts shows that achieving the UK’s net zero target by 2050 would cost less than absorbing a single oil shock.
But there’s also a broader point to be made here, according to Peter Osbaldstone, research director for Europe power at Wood Mackenzie. He notes that Europe has raced ahead with clean energy since February 2022 to the point where low-carbon sources now provide nearly two-thirds of the continent’s electricity. That’s good news in terms of emissions, but the fact that it has reduced the diversity of Europe’s energy sources means it hasn’t necessarily made the continent more resilient to shocks.
“We’ve traded one vulnerability for another,” said Peter Osbaldstone, research director for Europe power at Wood Mackenzie. “Losing alternative supplies such as coal capacity means gas price shocks hit harder.
“It’s a process to transition away from oil and gas,” he says. “The benefits are not binary. It’s not like if you have 100 per cent renewables only, then you are protected. [But] the less oil and gas you have, the more insulated you are from those global shocks. It’s worth going down the path.”
Source: independent.co.uk