Commodities
Twin Energy Shocks Accelerate Shift From Fossil Fuels, Ember Says
The twin energy shocks of the 2020s, Russia's invasion of Ukraine in 2022 and the 2026 shutdown of the Strait of Hormuz, are accelerating a structural shift away from fossil fuels and toward electrification, Ember strategists said in a note on Tuesday.Ember analysts said the closure of the Hormuz, a key crude and liquefied natural gas transit route, has removed over 10 million barrels per day of supply, making it the largest disruption on record and surpassing the oil crises of the 1970s.The latest shock follows the upheaval triggered by the war in Ukraine, which forced Europe to replace its largest fossil fuel supplier. Together, the two crises highlight growing geopolitical risks in global energy trade and expose the vulnerability of import-dependent economies.However, today's supply disruptions, unlike the oil crises of the 1970s, are unfolding alongside the rapid rise of cheaper and scalable alternatives such as solar, wind, batteries and electric vehicles.Ember analysts said renewable power and electrified technologies were becoming cost-competitive with fossil fuels even before the outbreak of the Middle East conflict. The current turmoil is widening that gap, the analysts said.Solar power paired with storage now costs less than $60 per megawatt-hour globally, while LNG-fired generation in Asia can exceed $160 per megawatt-hour at prevailing fuel prices, according to Ember estimates.EVs are also matching or undercutting internal combustion engine cars on upfront cost in major markets, while offering lower running costs.The economic advantage is projected to blunt the traditional rebound in fossil demand seen after past crises, when lower prices restored consumption."Even accounting for concentrated supply chains, electrotech is more secure than fossil fuels. Once installed, it is fuel-free: the sun cannot be sanctioned," Ember analysts said.Meanwhile, the impact of current shocks is projected to be broader than in the 1970s, due to a larger share of fossil fuels in sectors now vulnerable to electrification.Road transport accounts for about half of global oil demand, while power generation represents over a third of LNG demand. Ember said both sectors are exposed to competition from electric technologies.EVs made up about a quarter of global car sales in 2025, with higher penetration in China and growing adoption across Southeast Asia. Simultaneously, solar and wind capacity additions are outpacing growth in electricity demand.Ember analysts forecast that LNG will face a structural decline in power generation, similar to oil's retreat from the sector following the 1970s crisis.Asia is the region most exposed to the Hormuz disruption, with over 40% of its oil imports transiting the strategic waterway. The exposure is expected to accelerate the region's shift toward domestically generated electric energy."Asia's path to energy prosperity will be built on a fast-track to domestic electrotech," Ember said.The consultancy said that global fossil fuel demand may already be at or near its peak, citing plateauing consumption in sectors including industry, buildings and transport.Renewable energy growth, particularly in solar and wind, is now sufficient to meet incremental electricity demand, limiting the need for additional fossil-fuelled generation.Ember said the twin shocks will likely shorten the timeline to peak fossil demand and accelerate its subsequent decline.