The Energy Crunch (The Iran Attacks and Green Energy)
The neo-con attack by the USA and Israel on Iran has once again shown the links between sustainable energy and a sustainable planet. 25% of the world oil supply and 20% of Liquefied Natural Gas (LNG) passes through the Straits of Hormuz, which Iran is well-placed to disrupt. Indeed since the 1979 revolution, this strategic location has been a running sore in the Western Hegemony. Territorial waters of Iran and Oman cover the entire width leaving no international waters under maritime law. Although at 104 miles it is five times the width of the English Channel, due to the draught of the tankers using it, there is only a six-mile navigable passage comprising three lanes of equal 2 miles width: eastbound (outward), westbound (inbound), and a neutral safety zone.
Petro-dollars remain the biggest underpinning factor of US economic dominance. The USA with its huge trading deficits, does not command dollars to purchase American-made goods, rather it relies on other mechanisms to bolster the price of dollars. One of these is the petrodollar system wherein oil producers agree to denominate their oil in dollars. If Liberia wishes to buy oil from its neighbours, Ghana, Cote d’Ivoire or Nigeria, it pays in dollars, which it must source from currency markets. This artificial demand keeps the price of dollars higher than justified by economics, enabling the USA to maintain an artificially stronger economy through cheaper imports. This is threatened by the BRICS bloc (originally Brazil, Russia, India, China, South Africa; now including Iran, Egypt, Ethiopia, UAE and Indonesia.) The BRICS bloc price oil in non-dollar currencies in trades between themselves, directly threatening the petrodollar. Since January 20th 2025, the USA has already attacked Venezuela, Syria, Iraq, Colombia, Nigeria, Yemen and Somalia; Israel has been securing northern Gaza with its access to offshore gas fields; and, an as-yet unidentified operator severed three of four pipelines of the Nord Stream across the Baltic.
It is at times like these that we understand that Energy Policy is not driven by Energy Considerations. It is certainly not driven by Environmental Considerations.
The price of oil is rising and is likely to rise further. In the UK electricity generation prices are determined by the most expensive option on the spot (30 minute delivery) market. This is usually gas. This often results in e.g. wind turbines being feathered to enable supply from more expensive gas. With supplies of both oil and gas being restricted, the effects will soon be appearing in our energy bills. This is the point at which past attempts to stifle renewable energy supplies come back to bite. The current price-fixing mechanism needs to penalise fossil fuel use as a last resort, e.g. by fixing the price at only 90% of the most expensive option. This will automatically make the most expensive option loss-making and incentivise its gradual withdrawal from the supply mix.
The World Economy still remains highly dependent on fossil fuels, of which oil is the most important. It is no longer the case of green issues versus economic issues. Despots cannot catch the wind, stop the sun shining or turn back the tide. The green transition needs to be accelerated both to reduce climate change and other environmental damage, to ease the energy burden on UK consumers, and reduce the risk of war. If we had done this already we could be looking at the present situation and shaking our heads sadly. As it is we can resolve never again, and look to reduce the risk of war by reducing our dependency on non-renewable fuels.
Green energy means energy security.