The military offensive launched by the United States and Israel against Iran is reverberating in the energy sphere, with strong effects on the future configuration of the market. The escalation of the conflict and Iran’s threat over the Strait of Hormuz—a strategic geographic chokepoint for global oil trade—has paralyzed maritime traffic in the region. In addition, Iranian attacks on refineries in Saudi Arabia, the United Arab Emirates, and Qatar directly affect supply. If the conflict persists, the rise in fuel prices could become even more pronounced, triggering a new wave of global inflation.
In contrast to the bleak outlook facing Middle Eastern producers, oil and gas exporters could benefit from the conflict. In Argentina, Southern Energy (a consortium made up of YPF, Pan American Energy, Pampa Energía, Harbour Energy, and Golar LNG) has just signed a liquefied natural gas supply contract with the German company SEFE.
The increase in oil prices generates a favorable price effect on the external front—an improvement that could mean between 1.3 and 1.7 billion dollars in additional annual revenue for the Milei administration. Moreover, Transportadora de Gas del Sur (TGS) has recently presented a project with a three-billion-dollar investment, expected to generate annual revenues exceeding 1.2 billion.
These benefits highlight the growing relevance of the Vaca Muerta field, which allows the country to obtain dollars after the drain of foreign currency that each rise in oil prices had implied in the past. However, such enthusiasm should not influence the evaluation of new investments, as these should also take into account the decisions adopted by (current or potential) buyers.
The dispute in the Middle East has not only brought greater uncertainty to markets. It has also underscored the deep dependence entailed by the use of fossil fuels—linking energy supply to geopolitics. So-called energy security continues to generate tensions and frame disputes that affect the very sovereignty of producing countries. One need only look at the case of Venezuela.
But security does not necessarily have to be tied to the fate of the oil complex. Supply based on clean sources does not create any kind of dependence, as no country controls the intensity of the sun or the speed of the wind. Green energy expands the sovereign’s room for decision-making.
This is the reading being made by importing countries, which are now assessing the cost of relying on traditional energy sources. For Asia-Pacific countries, the conflict not only confronts them with higher prices; disruptions in contracts are forcing them to reconsider issues of energy security, as a prolonged conflict entails serious risks of shortages.
The situation also exposes the vulnerability that the European Union still shows in energy matters. The invasion of Ukraine forced a rethinking of these countries’ heavy dependence on Russian gas, and since then the region has embarked on a strategy of diversifying supply and accelerating the transformation of its energy matrix.
Although, in recent years, the European Union has made significant investments in renewable energy, the urgency of replacing Russian hydrocarbons has led European authorities to seek alternative sources of supply. However, partners have proven unreliable (Trump) or have become entangled in conflict (Qatar).
Even if new partners can be added, the logical course would be for Europe and Asia to double down on renewables. Observing the current context, the British Secretary of Energy, Ed Miliband, emphasized the importance of advancing the transition as the only path to ensuring energy supply and guaranteeing that these decisions are made sovereignly.
Similar remarks have been heard in various centers of power in Asia, a region where the conflict is beginning to be seen as a turning point in energy security. The conflict is reshaping the concept of energy security in Asia-Pacific: every kilowatt generated from renewable sources represents greater strategic autonomy.
With declining costs, continuous technological improvements, and enhanced strategic autonomy, the bet on renewables represents a safe option for countries seeking to minimize their exposure to risk. From a strategic perspective, committing to the transition is the most logical path; otherwise, energy security will remain tied to the ups and downs of geopolitical disputes.
In this context, Latin American countries should consider that continuing to expand hydrocarbon exploitation will increase financial risk, as oil projects currently under construction may ultimately fail to amortize. Ultimately, the present moment poses fundamental questions: either we remain tied to oil—whose demand is not guaranteed while the climate problem worsens—or we invest in renewables to gain autonomy and begin to reverse the rise in the planet’s temperature.
Autor
Associate Researcher at the Center for the Study of State and Society - CEDES (Buenos Aires). Author of "Latin America Global Insertion, Energy Transition, and Sustainable Development", Cambridge University Press, 2020.
