Twin Fossil Fuel Shocks Speeding Global Shift to Clean Energy: Report
The report draws parallels between the 1970s oil shocks with Russia-Ukraine war and US-Israel war with Iran stating that such crisis reshape global energy systems
The twin fossil fuel shocks of the 2020s are speeding up a structural change towards clean energy, with long term implications for oil, gas, and energy security.
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A new report by Ember showed that the twin fossil fuel shocks of the 2020s are speeding up a structural change towards clean energy, with long term implications for oil, gas, and energy security.
The analysis pointed out that the Russia-Ukraine war in 2022 and US-Israel attack on Iran in 2026 which led to the closure of Strait of Hormuz, a world’s largest oil and LNG supply route, has exposed the fragility of fossil fuel dependence. It also drew parallels with the 1970s oil shocks that removed around five million barrels a day.
The report stated that the supply loss lasted approximately six months in both the 1970s crisis. Even with an immediate reopening, normality will be months away. Wells will need time to restart and over sixty damaged energy sites across the Gulf will require repair and the risk premium for crossing the Strait will persist.
Viable Alternative Exist Today Unlike 1970s
The report, however, noted that unlike the 1970s, the countries now have viable, cost-competitive alternatives. Technologies such as solar and wind power, battery storage and electric vehicles are now cheaper, faster to deploy, and less exposed to global supply disruptions.
The report said that solar power combined with storage is already cheaper than gas-fired electricity in many regions, while electric vehicles are more economical than petrol vehicles. Many sectors are already adopting cleaner energy, for instance, oil demand in the transportation sector is already beginning to decline as EV adoption rises, while liquified natural gas faces growing competition from renewable energy in the power sector. As per the report, this trend suggests that global fossil fuel demand may be nearing its peak.
The report also identified Asia as a key driver of this transition. With over 40% of its oil imports passing through the Strait of Hormuz, the region is among the most exposed to supply disruptions, hence, has strong incentive to accelerate electrification.
Need to Focus on Rapid Electrification Than Increasing Subsidies on Fossils
The report cautioned that during such a crisis, the governments are tempted to respond with increased fossil fuel production and subsidies and such measures in turn risk prolonging dependence on an increasingly unstable system. Instead, it called for a rapid electrification across sectors, along with policies to lower electricity costs and scale up renewable capacity.