The Iran war is forcing energy-importing countries to turn inward

The month-long closure of the Strait of Hormuz reinforces an expensive geopolitical lesson about how risky it can be to rely on imported energy.

From South America to Southeast Asia, governments and private companies are being forced to look inward and take steps to use what they can at home, even if it increases upfront costs. Call it the era of self-first energy.

Guyana, a fast-growing South American oil producer that ran out of fuel this spring, is in talks to build its first refinery. Indonesia is acceleration of plans use more energy from the sun. Many other Asian countries have turned to coal to fill their energy gaps, at least for now. And in Europe, Belgium is trying to nationalize nuclear energy.

Individuals are also taking matters into their own hands, buying electric vehicles to avoid rising fuel costs or installing rooftop solar panels to lower their electricity bills. In the Philippines, which was hit particularly hard after the US-Israeli strikes on Iran began, imports of electric cars and solar equipment from China recently hit records, according to London-based research group Ember.

But countries and businesses can only do so much on their own. The world has developed an interconnected energy system primarily because it is cheaper for countries to specialize in the commodities they have and the technologies they have expertise in—and import what they lack.

Even the United States, the world’s largest producer of oil and natural gas, is not truly energy independent. It buys oil from Canada, Mexico and Venezuela while selling its own fuel to the rest of the world.

Yet every gallon of gasoline or kilowatt-hour of electricity available locally offers a much larger margin in the next war or shipping disruption.

“Countries are going to have a much more robust mix of what they generate domestically, and then a much more careful look at how they build trade relationships,” said Sarah Ladislaw, founding director of the Center for a New Energy Industrial Strategy and a former adviser to President Joseph R. Biden Jr.

How drastic these reforms will be will depend in part on how long the war with Iran lasts. The sooner it ends, the more likely people will forget the pain of higher prices and shortages.

The oil shocks of the 1970s raised fuel prices for more than a decade and reshaped energy systems around the world. Countries have invested in nuclear power, energy efficiency and greater international cooperation, including joint efforts to accumulate oil.

Later, oil prices rose for about six months around the 1991 Gulf War, but they did not reshape the global energy map, said Claudio Galimberti, chief economist at research firm Rystad Energy.

A few things suggest that a war with Iran could leave a bigger mark. First, it destroyed more supplies than any previous crisis. There are also many more alternatives to oil and gas available today than in the past. And with the upheaval coming on the heels of Russia’s 2022 invasion of Ukraine, the lesson is more likely to hold, said David Goldwyn, a former U.S. diplomat and Energy Department official.

“So many crises in such a short period of time are forcing countries to rethink their energy security strategies for economic and national security reasons,” Goldwyn said.

In the Philippines, which relied on Gulf countries for about a quarter of its imported oil and gas in 2024, the closure of Hormuz appeared to hasten the transition to renewable energy.

The value of solar equipment exported by China to the Philippines hit a record nearly $300 million in March – more than double the previous monthly record – before China’s tax break expired on April 1. Ember data shows.

China’s solar exports to the Philippines fell in April but remained higher than usual, and the value of Chinese electric vehicles sold to the Philippines hit a new high.

This growth appears to have been driven by both individual decisions and government policies, which have helped make it attractive for Filipinos to adopt newer technologies. Importantly, the Philippines does not subsidize the electricity prices it used to for residential customers the highest in Southeast Asia since March, according to Ember.

Mike de Guzman, president of Solaric, an installer of rooftop solar systems based near Manila, said his company was installing about twice as many systems each month as before the war — and not nearly enough to meet demand. “Solar is no longer seen as a cool gadget or a toy, but as a way to survive this new age,” he said.

Mr. de Guzman sources most of his solar and battery equipment from China. But unlike oil and natural gas, which you need a consistent supply of, solar panels typically last for decades, reducing the risk of dependence.

The war also made solar energy a greater national priority in neighboring Indonesia. “God willing, we will eliminate our dependence on imported fuel and save valuable foreign exchange reserves,” said the country’s president, Prabowo Subianto. he said in May.

Indonesia would follow in the footsteps of China, which has reduced its dependence on imported fuels by becoming a coal-fired and clean-energy powerhouse, while amassing huge amounts of oil — a strategy that has served it well in this crisis.

Elsewhere, many behavioral and policy changes are an extension of the latest energy shock, when Europe realized that its dependence on natural gas from Russia made it incredibly vulnerable to the whims of the country’s president, Vladimir V. Putin.

After Russia abruptly cut off gas supplies, forcing Europeans to pay much higher prices, many governments went on to embrace renewable energy sources. Gas consumption in Europe is about 16 percent lower than before Russia’s war, according to estimates by the International Energy Agency.

Now countries are doing more to conserve domestic energy resources. Belgium, which has been among Europe’s biggest buyers of natural gas from the Persian Gulf, is negotiating to buy the country’s two last operating nuclear plants and several others that have been shut down.

“Recent geopolitical events confirm a basic trend: Europe must continue to reduce the risks of excessive energy dependence on any single region or supplier, whoever it may be,” Belgian Energy Minister Mathieu Bihet said in an emailed response to questions.

The big difference between this energy shock and the last one is that the war with Iran most affected the flow of oil and fuels needed to drive and fly, while the 2022 crisis mainly affected natural gas and electricity.

Growing sales of electric cars in much of the world were among the clearest signs that the war could accelerate a shift away from oil. China, the world’s leading producer of such models, exported a record $9.1 billion worth of electric and plug-in hybrid vehicles in April, up more than 50 percent year-on-year, according to Ember. Exports to countries hard hit by the loss of oil supplies from the Persian Gulf, including Japan, Pakistan and India, were particularly strong.

According to the European Automobile Manufacturers Association, sales of battery-powered cars in Europe increased by 38 percent in April compared to the previous year.

Meanwhile, policy makers in countries such as Philippines and Pakistan are trying to build or expand their fuel reserves to better insulate themselves from the next crisis. Such efforts will be expensive, meaning that richer countries will fare better than poorer ones.

Oil producers are also preparing for changes. Kuwait, which could barely export any oil due to the closure of the Strait of Hormuz, wants to build additional storage capacities abroadoutside the place of transport. And many countries in the Middle East are exploring building or expanding pipelines that would bypass the strait.

Guyana faces a different kind of predicament. It produces more than 900,000 barrels of oil a day — enough to meet nearly 1 percent of global demand — but is unable to convert that oil into gasoline, diesel and other products. Country briefly ran out of fuel this spring.

It’s time, Guyana’s President Mohamed Irfaan Ali said in March, to revive discussions about building the country’s first oil refinery.

“We have to optimize our resources in this hemisphere, optimize the development of our resources to protect the hemisphere,” he said. he said.

Veronica Majerol contributed reporting.