The recent disruption to energy flows through the Strait of Hormuz has highlighted the vulnerability of economies that depend on imported fossil fuels and strengthened the case for accelerating electrification, renewable energy deployment and energy efficiency measures.
This is according to a recent report by the Energy Transitions Commission (ETC), which examined the impact of the US-Israeli conflict with Iran and the resulting disruption to one of the world’s most important energy trade routes.
According to the report, the crisis affected approximately 18,4 million barrels per day of oil flows and around 110 bcm of liquefied natural gas (LNG) trade, equivalent to roughly 20% of global LNG trade. The disruption pushed Brent crude prices above US$100/bbl (R1 652/bbl) while Asian LNG benchmark prices rose from about US$10-US$12/MMBtu (R165-R198/MMBtu) before the conflict to more than US$25/MMBtu (R412/MMBtu).
The ETC noted that the disruption also affected around one third of globally traded fertiliser inputs, raising concerns about inflation and food security, particularly in energy-importing developing economies.
Unlike previous oil shocks, however, the report argues that commercially viable alternatives to fossil fuels are now available at scale. According to the ETC, technologies such as solar PV, wind generation, battery storage, electric vehicles and heat pumps can be deployed more rapidly than new fossil fuel infrastructure and can help reduce exposure to volatile global fuel markets.
The commission argues that clean energy systems are inherently less exposed to geopolitical fuel supply disruptions because most of their costs are incurred upfront through capital investment rather than ongoing fuel purchases. It estimates that between 70% and 90% of the lifetime costs of renewable energy systems are associated with initial capital expenditure.
The ETC further notes that around 75% of the global population lives in countries that are net importers of fossil fuels, making many economies vulnerable to supply disruptions and commodity price shocks.
While acknowledging the role of fossil fuels in maintaining short-term energy security, the report cautions against long-term dependence on imported fuels. It argues that accelerating investment in renewable energy, electrification and energy efficiency could reduce global oil demand by more than 20% and natural gas demand by more than 30% by 2035.
