The war in Iran is exposing the world’s reliance on fragile fossil fuel routes, lending urgency to calls for hastening the shift to renewable energy.
Fighting has all but halted oil exports through the Strait of Hormuz, the narrow waterway that carries about a fifth of the world’s oil and liquefied natural gas, or LNG. The disruption has jolted energy markets, pushing up prices and straining import-dependent economies.
Asia, where most of the oil was headed, has been hit hardest, but the disruptions also are a strain for Europe, where policymakers are looking for ways to cut energy demand, and for Africa, which is bracing for rising fuel costs and inflation.
Read more: Iran War Should Trigger Faster Exit From Fossil Fuel Dependence: UN Climate Chief
Unlike during previous oil shocks, renewable power is now competitive with fossil fuels in many places. More than 90% of new renewable power projects worldwide in 2024 were cheaper than fossil-fuel alternatives, according to the International Renewable Energy Agency.
Oil is used in many industries beyond generating electricity, such as fertilizer and plastics production. So most countries are feeling the impact, while those with more renewable power are more insulated since renewables rely on domestic resources like sun and wind, not imported fuels.
“These crises regularly occur,” said James Bowen of the Australia-based consultancy, ReMap Research. “They are a feature, not a bug, of a fossil fuel-based energy system.”
China, India Have Built Renewable Buffers
China and India, the world’s two most populous countries, face the same challenge of generating enough electricity to power growth for over a billion people. Both have expanded renewable energy, but China did so on a far larger scale despite its continued reliance on coal-fired power.
Today China leads the world in renewables. About one in 10 cars in China are electric, found the International Energy Agency. It’s still the world’s largest importer of crude oil and the biggest buyer of Iranian oil. But electrifying parts of its economy with renewables has reduced its reliance on imports.
Without that shift, China would be “far more vulnerable to supply and price shocks,” said Lauri Myllyvirta of the Centre for Research on Energy and Clean Air. China also can rely on reserves built when prices were low and shift between using coal and oil as fuel in factories, he said.
India also has expanded its use of clean energy, especially solar power, but more slowly and with less government support for manufacturing renewable energy equipment and connecting solar to its power grid.
After Russia’s invasion of Ukraine in 2022, India prioritized energy security by buying discounted Russian oil and boosting coal production. It also ramped up solar and wind, helping to cushion supply disruptions but not avoid them entirely, said Duttatreya Das of the think tank Ember.
“Everyone cannot be China,” Das said.
India is now facing a shortage of cooking gas. That’s driving a rush to buy induction cooktops and raising fears of restaurant shutdowns. Fertilizers and ceramics industries may also be hit.
Rich Countries Fall Back on Fossil Fuels
The energy shock is familiar to wealthy countries in Europe and East Asia.
In 2022, some European governments tried to cut dependence on fossil fuels. But many soon focused on finding new fossil fuel suppliers instead, said Pauline Heinrichs, who studies climate and energy at King’s College London.
Germany rushed to build LNG terminals to replace Russian gas with mostly American fuel while the energy transition, including efforts to cut demand, slowed, she said.
Europe’s excess spending on fossil fuels since the Russia-Ukraine War amounted to about 40% of the investment needed to transition its power system to clean energy, according to a 2023 study.
“In Europe, we learned the wrong lesson,” Heinrichs said.