The "stress test" of the Strait of Hormuz: The energy crisis accelerates global transformation

The ongoing tension in the Strait of Hormuz is conducting a severe stress test on the global energy system. The disruption of this "throat passage" for global energy not only sharply tightens the supply of oil and liquefied natural gas, but also makes energy once again the core carrier of geopolitical shockwaves spreading to the global economy.

The International Energy Agency's report in March indicated that shipping volume in the Strait has plummeted to an extremely low level compared to before the conflict, with the daily crude oil production of Gulf oil-producing countries reduced by over 10 million barrels. It is expected that the global daily supply of crude oil will drop to approximately 8 million barrels that month. This has led to Brent crude oil futures prices approaching $120 per barrel, and global liquefied natural gas exports falling to a six-month low. The rapid rise in energy prices has sharply increased the costs of aviation, shipping, and logistics, while the increase in the price of crude oil, as a key raw material, is squeezing the profit margins of energy-intensive industries such as petrochemicals, plastics, fertilizers, and automobiles from the cost end. If the Strait transportation remains blocked for a long time, global inflation expectations will further rise, liquidity will face tightening pressure, and even financial market turmoil may be triggered.

Manufacturing is the first to be affected. Asia and Europe are particularly prominent. Japan relies on the Strait for about 90% of its oil imports, and South Korea for about 80%. Europe is already deeply trapped in the energy predicament caused by the Russia-Ukraine conflict, and the chaos in the Middle East has made its manufacturing sector even worse.

During the crisis, the opportunity for transformation is also emerging. The soaring oil prices have driven the sales of electric vehicles in many countries, such as Australia and Vietnam. As pointed out by Han Wenxiu, the deputy director in charge of daily work of the Office of the Central Committee for Financial and Economic Affairs at the China Development Forum, oil and gas, which often rely on imports and international transportation, are fossil fuels, while wind, solar, and other new energy sources are local resources that do not require long-distance transportation. This judgment not only applies to China but also has profound implications for many economies around the world that rely on fossil energy imports.

The core of energy security is shifting from "ensuring supply chain security" to "getting rid of reliance on imported fossil energy". The blockade of the Strait has proved in an extreme way that any energy structure based on a geopolitically sensitive region is inherently vulnerable. Wind power, solar power, nuclear power, and hydrogen energy, due to their local, distributed, and sustainable characteristics, are becoming key forces to fill the gaps in energy security.

For the United States, energy transformation is also an important strategic choice. In the short term, the increase in oil prices has brought high profits to domestic traditional energy enterprises and provided impetus for them to promote oil extraction and investment in Venezuela. However, in the long term, the continuous escalation of chaos in the Middle East will push up inflation expectations in the United States and compress the space for the Fed to cut interest rates. As a fossil energy power, if the United States overly relies on military power to maintain energy channels, it is equivalent to drinking poison to quench thirst. Accelerating energy structure transformation and reducing reliance on the oil economy are the fundamental solutions for regaining strategic initiative.

This crisis has pointed out a clear direction for global energy transformation and energy security construction. First, energy sovereignty depends on the energy structure. Countries that rely on imported fossil energy, regardless of their economic size, are prone to being in a passive position in sudden geopolitical conflicts. Accelerating the development and utilization of local clean energy such as wind, solar, nuclear, and hydrogen is not only a global consensus on addressing climate change but also a strategic necessity for maintaining energy security. Second, energy transformation is the cornerstone of economic resilience. The impact of sharp fluctuations in energy prices on manufacturing is reshaping the global industrial landscape. Countries and regions that can provide stable, cheap, and clean energy will gain an advantage in the new round of industrial competition; while economies with high dependence on imports and slow transformation will face the dual pressures of manufacturing outflow and high inflation. Third, the energy and currency landscapes are gradually decoupling. The oil dollar system is built on the cycle of "oil exports from the Gulf - settlement in US dollars - US security guarantees". The crisis in the Strait of Hormuz not only tests the United States' ability to ensure the safety of shipping lanes, but also creates a historic opportunity for other currencies to participate in energy settlements. The trend of de-dollarization in energy trade is evolving concurrently with the trend of energy structure moving away from "fossil fuels".

Crisis often serves as a catalyst for change. This round of energy crisis is pressing the "accelerator" for global energy transformation. The tense situation in the Strait of Hormuz is sending a non-negligible signal to the world: Energy transformation is not only a long-term vision for the future, but also directly determines the current survival choices.