The Strait of Hormuz carries about a fifth of the world’s oil and liquefied natural gas. Now the disruption is sending prices climbing and putting enormous strain on economies that rely on imported energy. Asia has been hit hardest because most of the oil passing through the strait is destined for the region. But the ripple effects are spreading far beyond. Europe is scrambling to cut energy demand as prices rise. Across Africa, governments are bracing for higher fuel costs and inflation. Yet this crisis is unfolding at a time when renewable energy is stronger than ever. In 2024, more than 90 per cent of new renewable power projects worldwide were cheaper than fossil fuel alternatives, according to the International Renewable Energy Agency. Still, oil remains essential to many industries. It is used not only for electricity but also in fertiliser production, plastics manufacturing and other sectors. That means most countries are feeling the pain. Still, nations that invested more heavily in renewable energy are proving more insulated because they rely on domestic sources like sun and wind rather than imported fuels. “These crises regularly occur,” said James Bowen of the consultancy ReMap Research. He argues disruptions are “a feature, not a bug, of a fossil fuel-based energy system.” The contrast is stark in Asia’s two giants. China and India both face the enormous task of powering economies serving more than a billion people. Both have expanded renewable energy. But China has done so on a far larger scale. China now leads the world in renewable energy. About one in 10 cars in the country are electric, according to the International Energy Agency. The nation still imports huge amounts of oil and remains the largest buyer of Iranian crude. But electrifying parts of its economy has reduced its dependence on imported fuel. Without that transition, 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 benefits from strategic reserves built when prices were low. Its factories can switch between coal and oil as fuel when necessary. India has also pushed into clean energy, especially solar power. But the expansion has been slower and supported by less government investment in manufacturing and grid connections. After Russia invaded Ukraine in 2022, India focused heavily on energy security. It bought discounted Russian oil and increased coal production. At the same time it expanded solar and wind power. Those steps helped cushion disruptions but did not eliminate them, said Duttatreya Das of the think tank Ember. India is now facing shortages of cooking gas. The situation has triggered a rush to buy induction cooktops and raised fears that restaurants could shut down. Other industries may also suffer. Fertiliser and ceramics producers are expected to feel the pressure. Meanwhile, wealthy nations in Europe are grappling with their own energy dilemmas. After Russia invaded Ukraine in 2022, many governments vowed to cut fossil fuel dependence. But the immediate response was different. Several countries rushed to secure alternative fossil fuel supplies instead. Germany, for example, built new LNG terminals to replace Russian gas with shipments mainly from the United States. Meanwhile the broader transition to cleaner energy slowed. Europe’s extra spending on fossil fuels since the Russia-Ukraine war equalled roughly 40 per cent of the investment needed to fully transition its power system to clean energy, according to a 2023 study. “In Europe, we learned the wrong lesson,” said Pauline Heinrichs of King’s College London. Japan has followed a similar pattern. Policy responses to energy shocks have largely focused on diversifying fossil fuel imports rather than boosting domestic renewable power, said Ayumi Fukakusa of Friends of the Earth Japan. Solar and wind provide just 11 per cent of Japan’s energy production. That is similar to India but far behind China’s 18 per cent, according to Ember. The crisis dominated talks this week between Japanese Prime Minister Sanae Takaichi and US President Donald Trump. Trump has urged allies like Japan to help secure the Strait of Hormuz. South Korean President Lee Jae-myung suggested the turmoil could be “a good opportunity” to accelerate the shift toward renewable energy. But the biggest dangers may lie in poorer nations. Countries across Africa and Asia are now competing with wealthy economies and major buyers like China and India for limited gas supplies. Import-dependent nations such as Benin and Zambia in Africa, and Bangladesh and Thailand in Asia, could face severe shocks. Rising fuel costs drive up transport and food prices while limited foreign-exchange reserves make imports harder to afford. Africa may be particularly vulnerable because many countries rely heavily on imported oil for transport and supply chains. Some governments are responding by doubling down on renewable energy. Ethiopia, which banned gasoline and diesel cars in 2024 to encourage electric vehicles, is one example. Others are heading the opposite way. South Africa is considering an LNG import terminal and new gas-fired power plants. Renewables are already helping some countries weather the storm. Pakistan’s solar expansion has avoided more than $12 billion in fossil fuel imports since 2020, according to research by Renewables First and the Centre for Research on Energy and Clean Air. Vietnam’s solar generation is also expected to save hundreds of millions of euros in potential coal and gas imports in the coming year, according to Zero Carbon Analytics. Elsewhere, governments are scrambling to cope with shortages. Bangladesh has closed universities to conserve electricity and begun rationing fuel after panic buying at petrol stations. Thailand has suspended petroleum exports and increased gas production while drawing on reserves. But analysts warn the situation could worsen. If the conflict drags into April, Thailand’s reserves and subsidy budget could run out. That would send prices soaring even higher. ‘Europe learned the wrong lesson’ by doubling down on fossil fuels while India and China went green
