The recent disruption in the Strait of Hormuz has triggered the largest global energy supply shock on record, strengthening the case for accelerating the transition to clean energy, according to a new report by the Energy Transitions Commission.
Titled “Lessons on Energy Security after the Hormuz Crisis,” the report warns that reactive investments in fossil fuel infrastructure could deepen long-term vulnerabilities rather than resolve them.
Historic Supply Shock Hits Global Energy Markets
The closure of the Strait disrupted 18.4 million barrels per day (mb/d) of oil supply, surpassing even the scale of the 1973 Arab Oil Embargo. In addition, nearly 20% of global LNG trade and one-third of fertiliser flows were impacted.
The shock has disproportionately affected Asia, with over 80% of LNG and 84% of crude oil shipments through Hormuz destined for Asian markets, exposing the region’s heavy import dependence.
Clean Energy vs Fossil Fuels: A Structural Divide
The Commission highlights a fundamental difference between fossil fuel and clean energy systems:
- Fossil fuels transmit shocks instantly due to reliance on continuous supply chains and chokepoints.
- Clean energy absorbs shocks, with 70–90% of costs incurred upfront, allowing long-term insulation from market volatility.
Technologies such as solar, wind, batteries, and grid infrastructure continue to deliver energy regardless of geopolitical disruptions once deployed.
Rising Costs: A Global Economic Strain
The crisis has sharply increased energy prices:
- Oil surged from $70 to $90–120 per barrel
- LNG prices jumped from $10–12 to over $25 per MMBtu
The resulting inflationary pressure is hitting transport, food, and industrial sectors, with lower-income households and MSMEs bearing the brunt.
Europe alone is incurring losses of nearly €500 million per day, while damage to Qatar’s Ras Laffan LNG facility could take 3–5 years to repair, potentially reshaping global gas markets.
$1–2 Trillion Economic Impact Projected
The report estimates that sustained high fossil fuel prices could add $1–2 trillion in global energy expenditure in 2026 alone—without increasing energy supply, only raising costs.
Notably, this figure is comparable to the $1.5 trillion annual clean energy investment gap, highlighting a critical opportunity for reallocation.
Three Key Findings from the ETC Report
- Fossil fuel systems amplify crises, while clean energy systems provide resilience.
- High fossil fuel prices could equal the clean energy funding gap, underlining the economic case for transition.
- New fossil infrastructure risks locking in future shocks, given long project timelines versus rapid scalability of renewables.
Clean Energy Can Replace Hormuz Flows
The Commission notes that:
- Electric vehicles alone could reduce oil demand by 5 mb/d by 2030 and up to 10 mb/d by 2035
- A coordinated clean energy push could cut 20% of global oil demand and over 30% of gas demand by 2035
This would significantly reduce exposure to geopolitical disruptions.
Case Study: Spain vs Singapore
The report contrasts two energy systems:
- Spain, with 57% renewable electricity, saw power prices around $50/MWh
- Singapore, heavily reliant on gas (95%), faced prices exceeding $200/MWh
The divergence highlights that energy system design—not geography—determines resilience.
Leadership View
Adair Turner, Co-Chair of the Energy Transitions Commission, stated: “The current crisis shows that fossil fuel dependence is not only a climate risk but also an economic and strategic vulnerability. Clean energy systems are more distributed, more efficient and less exposed to price shocks.”
Conclusion: A Strategic Inflection Point
The Hormuz crisis marks the first major fossil fuel shock where scalable alternatives exist across all major energy sectors. The ETC argues that governments must resist short-term fossil expansion and instead prioritise clean energy deployment to ensure long-term energy security, economic resilience, and price stability.
The writer of this article is Dr. Seema Javed, an environmentalist & a communications professional in the field of climate and energy
