Energy Dependence Exposed: Global Markets Reel from Iran Conflict

The ongoing Iran conflict has exposed the world's vulnerability to energy disruptions. The war, launched by the US and Israel on February 28, effectively closed the Strait of Hormuz, which previously carried about 20% of global crude, refined products, and liquefied natural gas (LNG). This is not a new crisis; Russia's invasion of Ukraine in 2022 caused similar price spikes due to fears that exports from Russia would be curtailed.

Australia, the world's leading diesel importer, relies on imports for about 80% of its liquid fuel needs. With only two refineries remaining, one solution is to build a new oil refinery in Western Australia. However, this comes with significant costs, a similar-sized plant being built in Ghana is estimated to cost around $12 billion.

Some argue that it's better to encourage mining companies and farmers to electrify their operations. Fortescue Metals Group, for instance, has adopted electric mining vehicles and renewable electricity generation, providing a net annual benefit of over A$1.2 billion compared to using diesel and natural gas power generation. Sales of EVs have also surged in Australia, with consumers responding to fuel-security concerns.