oxfordenergy.org
By increasing the volatility and cost of fossil fuels, the conflict strengthens the economic case for shifting from molecules to electrons. Electric technologies—EVs, heat pumps, and electric industrial processes—offer more stable and predictable operating costs.
European gas contracts of the period contained oil-indexation clauses, meaning that gas prices rose in tandem with oil, amplifying the aggregate impact on utility generation costs beyond what oil's share of the generation mix alone would predict.
The current war will only deepen the existing geopolitical fractures, impacting oil market volatility, the structure of oil markets, and trade flows, oil relations, and investment decisions.
LNG disruptions flowing from Hormuz will tighten European gas markets and, through the merit-order mechanism, transmit rapidly and substantially into wholesale electricity prices.
Electricity can be generated domestically from a variety of sources, reducing exposure to geopolitical risks and supply disruptions associated with globally traded fuels.
By increasing the volatility and cost of fossil fuels, the conflict strengthens the economic case for shifting from molecules to electrons.
Global electrification rates have been on a gentle upward trajectory. But the Hormuz crisis is likely to give them an immediate boost.