Trump, Energy Crisis, and the Green Revolution: How the War with Iran Impacted Global Energy

Donald Trump, the former President of the United States, has garnered attention for his staunch opposition to electric vehicles and wind turbines, actively seeking to ban green energy initiatives across the country while promoting the oil industry. However, his policies may unintentionally pave the way for green energy to triumph over conventional oil and gas resources globally, as highlighted by Alexey Kalmykov in a recent article for BBC.

The catalyst for this shift is Trump's conflict with Iran, which has sparked a new energy crisis that could surpass all previous ones. Countries that learned from the earlier crisis triggered by Russia's invasion of Ukraine and invested in electric vehicles and solar energy are currently weathering this crisis far better than others.

China and the European Union have emerged as leaders in what is being termed the 'green revolution.' China, as a major global manufacturer, relies heavily on energy imports and is striving for energy independence to bolster its position in the global economic competition against the United States, the world's largest producer of oil and gas.

Meanwhile, the European Union has lost its primary energy supplier, Russia, which has begun using oil and gas supplies as a tool for political and economic pressure in the context of the Ukraine conflict.

Following the U.S. attack on Iran, gas prices in Europe surged from 30 to 50 euros per megawatt-hour, while prices soared to 300 euros after the Russian invasion of Ukraine. In contrast, China is not only avoiding overpaying for gas and oil but is also reselling Russian liquefied gas shipments to Japan at three times the price, thanks to its sufficient energy resources despite the global crisis.

This situation has been made possible by advancements in renewable energy sources, such as solar panels, wind turbines, and hydroelectric power stations, as well as a revolution in automotive transport. China is actively transitioning to electric vehicles and has become the world's leading exporter of such technology. Last year, electric vehicle sales in China quadrupled compared to 2021, surpassing total global sales.

The electrification of transport is directly linked to the oil crisis. According to analysts at BloombergNEF, the global shift to electric vehicles saved 2.7 million barrels of oil per day in 2022, with projections indicating that this savings could double over the next four years. In comparison, due to the blockade of the Strait of Hormuz by Iran, the world lost 10-12 million barrels from the 105 million it consumed before the war.

If the conflict with Iran had occurred simultaneously with Russia's aggression against Ukraine, the oil deficit would have been even greater, and prices would have surged further. In response to the oil shock, Western countries opted for an unprecedented release of oil from strategic reserves, announcing intervention volumes of approximately 3 million barrels per day over a span of four to five months. Without electric vehicles, the need for sales would have been twice as high, a physical impossibility given the limitations of export infrastructure.

China is actively implementing electric vehicles and developing solar energy projects in the Gobi Desert to reduce its dependence on oil imports from the Middle East, as well as from Russia, Australia, and the United States. Europe is also taking steps to decrease its reliance on Russian energy resources.

However, geopolitical considerations are gradually yielding to economic ones: renewable energy sources are becoming cheaper and more accessible. Even without subsidies, wind turbines, batteries, and electric vehicles have proven to be more attractive options. Since the energy crisis triggered by Russia in 2021-2022, prices for solar panels and wind turbines have dropped by more than 20%, while their efficiency has increased.

It has now become easier, faster, and cheaper to build and commission renewable energy sources than traditional coal, gas, hydro, or nuclear power plants. Initially, wind turbines and solar panels were viewed as symbols of the fight against climate change, leading most countries to hesitate in transitioning to renewable sources, planning instead to use natural gas as a bridging fuel.

However, the new conflict in the Middle East has called this strategy into question. Iran has closed the Strait of Hormuz, through which Qatar supplied approximately 20% of the world's natural gas. Former consumers of Qatari gas are now beginning to revert to coal, as it is the only resource abundantly available domestically without the need for imports.

Nonetheless, the overall strategy for transitioning to renewable energy remains unchanged; only the tactics have shifted. Experts believe that the current energy crisis has the potential to overshadow the oil shock of the 1970s, which acted as a catalyst for the shift to new energy sources. Countries that have replaced gas generation with renewables are now less vulnerable to rising oil and gas prices.

However, as soon as 'green' technologies became economically attractive, governments began to roll back subsidies, and the pace of transition to renewable energy sources has slowed. The rise in gas prices in 2022 and 2023 led to an increase in the sale of heat pumps, but from 2024 onwards, growth rates have decelerated, and the European Commission has scaled back its heat pump installation plan. The new war in the Middle East has once again brought the issue of government support for green technologies to the forefront.