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This week’s meeting of financial heavyweights made one thing clear: the war in Iran has set the world on a new energy course. But what this direction is is a matter of strong disagreement: nations are divided between redoubling their commitment to fossil fuels or accelerating renewables.
The spring meetings of the International Monetary Fund and the World Bank, which took place in Washington this week, were dominated by the impact of the war in Iran on energy markets and the global economy.
According to Fatih Birol, director of the International Energy Agency, the ongoing conflict and consequent strangulation of oil supplies from the Middle East will redesign the global energy map. “We are not going to go back to where we were”, warned Birol.
But there is no consensus regarding the direction to follow, note the .
Many of the countries most severely affected by the war say they recognize the benefits of a faster transition for renewable energy to avoid future shocks related to disruptions in oil supplies.
Others remain bullish on fossil fuels, including the United States, whose Treasury Secretary, Scott Bessantapplauded the increase in American oil and gas production and called for fewer climate policies.
Officials from the US and other countries spoke vaguely about the diversification of energy sources as a likely consequence of Iran’s closure of the Strait of Hormuz, through which 1/5 of the world’s oil and a third of fertilizers pass.
For some, This meant diverting sea routes of the Persian Gulf. For others, it meantfinding oil and gas outside the Middle East. Or explore local coal reserves. Or maybe reactivate nuclear power plants deactivated.
In many cases, it means expand renewable energy to reduce dependence on other nations in an increasingly fractured and volatile world.
“History shows us that a crisis of this magnitude It is also a catalyst“, these Masato Regionpresident of the Asian Development Bank, in a session at the Council on Foreign Relations on Wednesday.
These reflections arise in a context of gloomy economic forecasts. The IMF projects a slower growth and higher inflationeven if the war comes to a relatively quick conclusion — an outcome that is highly uncertain.
The impacts will be felt unevenlywith low-income and import-dependent countries bearing much of the burden. In a severe scenario, in which disruptions in energy supply last until next year, global growth could drop to just 2%indicated the IMF.
It’s a message that echoed through the halls of this week’s meetings. How the world’s energy map is redrawn will have profound implications for supply and demand and how new infrastructure, both fossil fuels and clean energy, will be financed, says Politico.
Import dependent countrieslike Pakistan and Thailand, took the opportunity to highlight their desire for a faster transition for renewables.
The , triggered in part by natural gas price hikes in 2022, helped cushion the impact of the current supply shock.
“We were on the right path,” he said. Muhammad Aurangzebthe country’s Finance Minister, at an IMF panel this week. “But it is clear that we feel that the route needs to be accelerated“.
Thailand’s Finance Minister, Ekniti Nitithanprapasechoed this sentiment, pointing to the rising costs of oil and gas imports. “Because of the higher price now, we are forced to transform“.
Calls for diversification have received support from the World Bank and IMF, which are urge countries to prioritize domestic resourcesinstead of paying for increasingly expensive barrels of oil denominated in dollars.
“Often, that means renewableso we are likely to see a strong push in that direction,” he said. Pierre-Olivier Gourinchaschief economist at the IMF.
For Middle Eastern oil producers, the transition appears less imminent, even as they grapple with the need to repair facilities damaged in the conflict or to resume production after prolonged shutdowns.
“People want to move away from oil and gas many years ago. They didn’t achieve it. Therefore, it will take much longer“, Qatar’s finance minister told Politico, Ali bin Ahmed Al Kuwari. “It’s so difficult at this stage, really, to have a replacement for the energies.”
A persistent need for fossil fuels It’s something the president Donald Trump tellswhile its administration positions itself as a reliable supplier of oil, gas and coal in the context of the ongoing conflict.
For now, the American crude shipments increased as countries rush to guarantee supplies, but this also brings side effects, such as rising gasoline prices.
Regardless of what each nation considers the solution, the refrain this week was that no one is immune to disruption caused by war.
“Oil-producing countries may see higher oil prices convert into higher revenues. This is totally different from oil importing countries, but it is also not a one-way street,” he said. Adebayo Olawale EdunNigeria’s finance minister and president of the G24, a group of developing countries.
“The prices of gas, fertilizers and food… on both sidesthis crisis is affecting countries“, says Edun.
John Kerryformer US Secretary of State, has long argued that they are necessary cleaner energy sources to face rising temperatures. Now, war could lead to this resultsays Kerry.
“The biggest changes in energy globally occurred when there were the greatest disturbances”, highlighted the former Secretary of State, who pointed out the example of France’s commitment to nuclear energy following the 1973 Arab oil embargo and the clean energy measures adopted by the EU following Russia’s invasion of Ukraine.
“We really need to control our energy sources,” Kerry said. “I believe that one of those moments of transformation is herenow”.
