Interview: Does the ongoing conflict affect the clean tech transition?
How could ongoing conflicts in the Middle East affect global oil supplies, and what are the implications that this might have on the pace of green energy transition regionally and globally? The Israel-Hamas war is bad news for the energy market. Oil supply is already tight, driven by Saudi, Russia, and Iraq recent supply cuts. In part these cuts were done to keep prices high as these countries have geopolitics ambitions that require high oil and gas prices. The conflict will lead to more oil price volatility with potential medium-term trend bring the prices back towards 100–110$ a barrel. High oil prices will continue to keep inflation high eroding family purchasing powers particularly in lower income households in the MENA region. On the positive front, unless there is a regional conflict escalation resulting in a military strike against Iran (the 9th largest oil producer) there will not be a severe spike in crude oil.
On the other hand, the war will affect some of the global climate negotiations, as national priorities take the center stage during times of crisis, and country may shelve ambitious decarbonization targets. Some positive momentum will be lost, and climate investment towards MENA vulnerable countries will be delayed but the overall transition towards “green-growth” cannot be stopped nor slowed significantly. In fact, conflict may accelerate the Net-Zero transition, as countries shift to renewable energy in order to become more energy secure and less dependent on unstable energy supply actors. Europe is the perfect example that has embarked in a dramatic renewable energy transition since Russia (which supplied over 30% of natural gas to Europe) was embargoed to supply to Europe following its invasion of Ukraine in February 2022.
Is the war likely to accelerate or decelerate global efforts towards achieving climate change goals due to changes in oil prices? An expansion of the Israel/Palestine conflict would affect both oil prices and economic growth. However, since the Levant is not a large oil producing region, the war is unlikely to impact oil supply in the short term. If a regionalization of the conflict takes place, we will see more oil price volatility and upward pressure towards the 100$ a barrel or higher.