The Iran war has pushed US diesel to $5.90 a gallon, its highest level on record, according to the AAA. The resulting supply squeeze is accelerating the shift toward electric vehicles, solar power and other alternatives to fossil fuels, from Africa to East Asia.
Diesel hits a record as the Iran war drags on
US diesel has reached $5.90 a gallon, its highest level yet, according to the AAA. With no end to the Iran war in sight, fuel prices look set to stay elevated for some time. According to the International Energy Agency, disruptions to supply from Iran to Russia cut demand for crude oil by roughly 5 million barrels a day — around 5% — in the second quarter.
Much of that drop should reverse once mothballed plants, airline routes and broader economic activity return to normal as the disruptions ease. But price shocks can also leave a lasting mark on consumer habits: the oil shock of the 1970s helped make Toyota and Honda's smaller, fuel-efficient cars popular worldwide.
China's clean-tech exports pick up speed
A clearer sign of lasting change shows up in China's exports of clean-tech products such as solar cells, panels, batteries and EVs. Solar exports in the first half of this year rose almost a quarter year on year, according to the China Photovoltaic Industry Association, while the IEA reckons EV exports more than doubled over the same period. The trend predates the current oil shock, driven by China's manufacturing scale and soft domestic demand, but pricier fossil fuels have made clean technology more competitive still.
In Africa, where renewables often replace diesel generators, Chinese solar panels imported over the past twelve months cost $2.4 billion, according to Ember analysis — displacing diesel that would cost roughly four times as much, about $10 billion a year, at current prices. That gap helps explain why African solar installations are forecast to grow 45% this year, per Ember. In the UK, meanwhile, the all-in cost of buying and running an electric vehicle now beats that of comparable combustion-engine models.
Gas importers turn away from LNG
Consumers of natural gas have felt a similar squeeze from the Hormuz crisis, the second such disruption after Russia's 2022 invasion of Ukraine. Countries that rely on imported LNG, including South Korea, Thailand and Pakistan, are increasingly turning to alternatives such as nuclear power and renewables.
The shift is good news for global carbon emissions and shows the world adapting to what may be a longer disruption to oil supply than hoped. For now, though, the oil market is making ends meet by drawing down inventories and stocks — a cushion that will not last if the situation fails to normalize.
Source: Financial Times
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