But there’s also some sense that the increase in oil and gas prices will be more modest than it was in a global economy that was far more dependent on fossil fuels nearly 50 years ago—and that the violence could push more countries to accelerate their transition to renewable energy and energy efficiency options that are more stable and less vulnerable to geopolitical risk.
“You can’t blow up a solar panel,” one analyst wrote on social media.
“High oil and gas prices are in principle good news for alternative technologies because they make them more competitive,” Thijs Van de Graaf, energy fellow at the Brussels Institute for Geopolitics, told the Bloomberg news agency. “It becomes more attractive to put in place solar panels, heat pumps, and other technologies that could lower reliance on gas.”
With Qatari exports directed mostly to Asia, in particular China, policy-makers there “will look at this and be less encouraged to go down the gas route,” said Kingsmill Bond, energy strategist with the Ember energy think tank. “The longer this conflict lasts, the higher the pressure will be to find alternative solutions.”
The European Union has already been down that road, added Frauke Thies, Europe director at Germany’s Agora Energiewende think tank. Between 2019 and 2024, motivated in part by Russia’s invasion of Ukraine, the EU installed enough new wind and solar capacity to replace 92 billion cubic metres of gas and 55 million tonnes of hard coal in 2024, though it also pivoted to new gas suppliers that have now become uncertain.
“We’ve had tangible results,” Thies told Bloomberg. “It was thanks to renewables that Europe wasn’t hit harder by the last energy crisis.”
Even so, “the main problem I see here is that Europe’s strategy of diversifying LNG sources is not the right approach if you want to reduce the risk to energy security.” Jaller-Makarewicz said. “Let’s also work on reducing gas consumption,” by dialing down heating and cooling by as little as one degree while shifting from gas to heat pumps.
E3G’s Pastukhova agreed that higher prices “absolutely” make the case for a faster energy transition. “Energy price volatility reinforces the value of reducing structural dependence on imported fossil fuels, and the only way to do this without undermining the economy… is to boost energy efficiency measures in most dependent sectors,” she told The Mix.
“Higher energy prices can also contribute to inflation and tighter financial conditions, which may raise the cost of capital in the short term,” she added. But “volatility strengthens the long-term strategic case for clean energy, even if short-term financing conditions fluctuate.”
David Hostert, global head of economics and modeling at BloombergNEF, warned that higher inflation triggered by rising fossil energy prices could complicate the picture, prompting central banks to set higher interest rates that make clean energy projects more expensive. That risk could make the regional crisis in the Middle East “a bit of a Rorschach test of what you want to see,” he told Bloomberg. “If you’re an oil and gas producing country, you might say ‘Oh this is the reason why we should fall back on our domestic resources.’ And for others it might be ‘Okay, this is why we should cut dependence on fossil fuel imports and electrify our economy with renewables.’”
But Dan Woynillowicz, Victoria, B.C.-based principal of Polaris Strategy + Insight, said central bankers have different choices in response to a new round of “fossilflation”.
We’ve been to this rodeo before,” he wrote on LinkedIn. “In the last go-round, the emphasis was on alignment with climate objectives. While this rationale holds today, it’s less politically salient. However, an emphasis on energy security—which is far more salient—now leads to the same conclusion: central banks shouldn’t allow clean energy (and the energy and climate security they offer) to fall victim to the economic volatility and insecurity that accompanies fossil fuel price spikes and ensuing inflation.”