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Hello readers,
The transition to a cleaner energy system was first driven by climate concerns, but that only got us so far within legacy structures of vested interests and the allure of fossil fuel money. More recently, the shift simply made economic sense after China drove down the cost of key technologies. Now, almost overnight, moving on from the era of coal, oil and gas is seen as an energy security imperative.
This is arguably the strongest tailwind of the lot. The security agenda, forged in the worst energy crisis in history, overcomes institutional inertia and forces decision-makers to take decisive action. The phenomenon whereby change happens “gradually, then suddenly” clearly applies to the colossal global energy system as well.
Ironically, some of the biggest proponents of fossil fuels – including US president Donald Trump – appear to have sparked the latest rush for cleantech. Oil and gas groups are profiting handsomely from the crisis that is pushing up living costs across the planet, but they may well be worse off over the long run.
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Thanks,
Nick Hedley
Oil and gas in the transition
No end in sight
While Trump initially said the Iran war would only last a couple of weeks, there is still no end in sight more than two months down the line. The longer the conflict drags on, the greater the damage to the fossil fuel industry’s claim that it provides a reliable source of energy. Already, consumers and businesses are adopting clean technologies en masse.
In March, electric vehicle (EV) sales in France, Germany and the UK surged 44% from the year before, while in South Korea, sales more than doubled. In Italy, an electrification laggard, there was a 67% jump.
Meanwhile, China’s solar exports reached a record 68 GW in March, double the previous month, as high energy prices spurred demand and as manufacturers prepared for changes to tax rebates. Battery exports were up 44% from the previous month.
The scramble for technologies that allow households and businesses to harness domestic energy resources may accelerate further. If the Strait of Hormuz remains shut for another two months, Brent oil prices could rise to USD 125 per barrel, according to analysts at Kpler (though oil already temporarily rose past that level in late April, showing how hard it is to predict these things amid the chaos). Gas prices would also remain elevated should the narrow waterway be blocked for much longer.
“Those who’ve fought to keep the world hooked on fossil fuels are inadvertently supercharging the global renewables boom,” UN climate change executive secretary Simon Stiell said at the opening of the COP31-IEA High-Level Energy Transition Dialogue in Paris.
Cracks in the deeply entrenched fossil fuel industry are starting to show. In late April, the UAE announced that it was leaving the world’s oil cartel, OPEC, amid the advent of what it called a “new energy age.” The shock move “is ultimately about the twilight of the oil age,” Bloomberg reported.
At the same time, 57 countries gathered in Colombia to discuss ways to speed up the energy transition. “At a time of increasing volatility in the fossil fuel market, there is no better time to begin the transition away from fossil fuels, reducing climate impact, strengthening energy independence, and boosting green economic growth,” Stientje van Veldhoven, the Netherlands’ minister of climate and green growth, said in a statement.
Bumper profits, for now
Oil and gas majors are benefiting from the turmoil in global energy markets. BP’s profits more than doubled in the first quarter of 2026, compared to a year before, thanks to a surge in earnings from its oil trading division. Despite production shutdowns in the Middle East, TotalEnergies reported adjusted net income of USD 5.39 billion for the three-month period, up 29% year-on-year. As a result, it boosted investor returns in the form of higher share repurchases and dividends. The company expects oil prices to remain high for at least the next few months, saying it would take up to three months to restart production facilities in the Middle East. Other commodity traders, including Vitol Group, also reaped “a fresh profit bonanza,” as Bloomberg put it.
At a time when ordinary citizens are struggling under the weight of surging energy costs and inflation, these growing profits have drawn some criticism. France’s opposition Socialist Party has called for a tax on windfall profits. In the UK, energy secretary Ed Miliband said BP’s earnings boost was “morally and economically wrong” as he defended the nation’s own windfall tax framework.
Meanwhile, some analysts expect the fossil fuel price spikes to reduce long-term demand. Relative to its base-case forecasts for 2050, oil demand could fall 20% and gas demand by 10%, according to Wood Mackenzie.
Energy transition strategies
Oil and gas companies continue to double down on their traditional operations. TotalEnergies has started up a new oil facility in Brazil and reopened one in Libya in March, while also announcing two hydrocarbon discoveries in Congo. Unlike many of its peers, the French multinational is still developing its renewable energy business, with 8 gigawatts of new capacity commissioned over the past 12 months. The company’s Q1 results also reported its methane emissions were down 33% from a year before, thanks partly to a reduction in flaring.
While delivering her first set of financial results since joining the company, BP’s new CEO, Meg O’Neill said, without a hint of irony, that the oil and gas industry is “playing a vital role in keeping energy flowing” amid a period of “conflict and complexity.” The company announced new hydrocarbon discoveries off the coast of Egypt and Angola and said it “was the apparent highest bidder” on three blocks in a lease sale off the US coast in the first quarter of the year. In April it announced further investments in exploration activities in Namibia. Meanwhile, BP’s capital expenditure on low-carbon energy sources more than halved in the first quarter as the group pivots back to fossil fuels.
But BP faced pushback from shareholders. At its AGM, investors rejected a proposal that would have allowed it to water down its climate disclosures.
Elsewhere, Shell agreed to buy Canadian fossil fuel company ARC Resources in a USD 16.4 billion deal that will boost its production growth. This comes as the company faces a new court case brought by Friends of the Earth Netherlands, which wants to stop Shell from bringing new oil and gas fields into production.
Chevron, meanwhile, announced a new oil discovery off the US coast, alongside fresh deals in Venezuela.
Clean energy investments
TotalEnergies has started installing a 440-megawatt solar power plant in the Philippines. The company has also secured financing for a 1-gigawatt onshore wind farm and 600-megawatt-hour battery storage project in Kazakhstan.
TotalEnergies also announced that it and the UAE’s Masdar will merge their onshore renewables businesses in nine countries across Asia. The joint venture will have a 3-gigawatt portfolio of operational assets, with another 6 gigawatts expected to be online by 2030.
Meanwhile, ExxonMobil and Shell are reportedly considering a carbon dioxide storage site off the coast of Germany.
Chevron chairman and CEO Mike Wirth made his priorities clear, saying the world should invest heavily in all energy technologies, rather than shifting from dirty to clean sources. “This is energy addition, not transition,” Wirth said. “Energy abundance underpins long-term success.”
From Zero Carbon Analytics
In Europe, the Iran war has significantly accelerated consumer and government interest in clean energy, according to a new ZCA report. Google searches for electric cars and other low-carbon technologies have surged since the start of the conflict.
Small Pacific island countries are particularly exposed to the impacts of the Middle East war as they rely on imports for the vast majority of their energy needs, our analysis shows. For example, Fiji’s annual refined fuel import bill could rise by USD 670 million, a 115% increase from 2025 levels, if oil product prices remain at post-shock levels. The increased bill equates to nearly three times Fiji’s annual healthcare budget.
