The New Dark Age

One of the most blatant of these was the peak oil community’s inability to accept the realities of fracking even when it was presented to a peak oil conference in Brussels and then as tight oil and gas production just kept increasing. Another was when I did the research for my book “Energy & The Financial System” and came to the conclusion that there was absolutely no shortage of coal at levels of energy return on investment (EROI) that could support modern industrial economies. Then it also became apparent that there was absolutely no shortage of natural gas at levels of EROI able to support modern industrial societies. Then along came transport electrification in China, now increasingly active in personal vehicle, commercial transport and even industrial vehicle (e.g. tractors and excavators) fleets. Oil usage is very predominantly for transport, with limited uses in other areas that cannot be substituted for with coal and natural gas.

The electrification of transport transfers demand from oil (gasoline and diesel) to plentiful coal, natural gas, hydroelectricity, nuclear, wind and solar. We will see this flexibility played out by China during the current crisis, as it removes its LNG import requirements by switching electricity generation from natural gas to coal and other sources. We will see the same substitution in nations from Thailand, to India to Germany. The latter having committed the quite colossal errors of shutting down its nuclear electricity generating fleet and cutting itself off from cheap pipeline natural gas from Russia, while allowing its car industry to drag its feet with respect to electric vehicles. China is 81% self-sufficient in energy with its own oil (27% of domestic consumption levels), natural gas (60% of domestic consumption levels) and coal (self-sufficient) production augmented by both hydroelectricity and a very rapidly growing production of electricity from renewables. Together with oil imports and pipeline gas from Russia and Central Asia. Powering electrified trains, trams, subways, buses, taxis and already one in eight personal vehicles. With a government that thinks strategically and has built a large capacity to both produce and store such things as oil, critical minerals, and fertilizers. Allied with a Russia and Central Asia that possesses a cornucopia of fossil fuels and the ability to transform those fuels into gasoline, diesel, helium and fertilizer etc.

In a recent article I pointed out that the Middle East is only responsible for 12% of the world’s fertilizer production, and that much of that production is in countries such as Oman and Egypt that are not locked inside the Gulf. Even Iran has the ability to export fertilizer via its ground transport connections to Russia, Central Asia and China. So the “fertilizer shock” will be substantially less than stated in the shock news headlines and breathless YouTube videos; perhaps 8% or less of global production. Both Russia and China have announced a block on exports of fertilizers, but it is not in their interests to see their neighbours and allies in the Asian “safe space” go without. I see these announced blocks as actually providing the ability of each nation to control who gets access to their fertilizer exports; Central Asia, ASEAN, North Korea, and quite possibly Brazil and Africa yes while it may very well be a no for Europe, South Korea, Japan, Australia. We may see the same measures taken by Belarus. Armenia, Azerbaijan and Turkey may find out that it is not clever to bite the hand that provides fertilizer imports; a definite variable in their actions with respect to the US war of aggression.

That US war of aggression on Iran is not producing any incipient enforced global “power down” but rather very specific impacts dependent upon the embedded global supply chains and local production capabilities. North America is self sufficient in fossil fuels, in fact having a substantial surplus that can be exported. Brazil uses sugar cane based ethanol for transportation, hydroelectricity for its grid, and is self sufficient in oil while also receiving its natural gas imports through pipelines from Bolivia and Argentina. Its issue is not a scarcity of fossil fuels but the incompetence of its government in not building the refining capacity required to produce oil products such as fertilizers. Thankfully for Brazil, its main planting season is much later in the year (late September through November) and it is very much in the interests of China that it gets enough fertilizer. Colombia is self-sufficient, and in fact an exporter, of oil and coal while still having a high level of self sufficiency in natural gas. Any problems in the Western Hemisphere will tend not to be ones of a shortage of fossil fuels, but a shortage of the refining capacity required to make such things as gasoline, diesel, fertilizers and plastics.

Global demand for crude oil rose only 5% between 2019 and 2025, and the world was well supplied at relatively low prices. With China rapidly accelerating the move of both its personal and commercial vehicle fleets from oil to electricity, while also transforming its electricity generation toward greater and greater levels of wind and solar. This crisis will tend to drive that transition, and the transition in other nations, even faster. The crisis itself has removed about a net 9 mbpd of oil out of 105 mbpd, as long as the Saudi pipeline to the Red Sea still operates; 8.6%. About 20% of global LNG production is locked in the Gulf, with some operations experiencing significant long-term damage. BUT only 17% of global natural gas supply was delivered as LNG in 2024, so only 3.4% of global natural gas supplies are affected by the US war of aggression. There is also a large increase in US LNG exports planned for the next few years, which will tend to counter-balance any long-term damage to Gulf production.

The biggest importer of LNG is China, the very nation that can very significantly increase its coal-fired electricity generation to remove the need for LNG imports. The next is a European Union that cut itself off from cheap Russian pipeline gas and will now bear the consequences, while probably burning as much coal as it is still able. The next is a Japan which has idled nuclear power capacity and some spare coal capacity, and a South Korea that has idle coal capacity. There will be specific shortages because of self-harming government policies (Europe) and a lack of specific processing capacities (e.g. for fertilizer) but there is no real large hit to global natural gas supplies. The lesson learnt should be that pipelines are much better for natural gas supply security, with LNG always being less secure. And also that nuclear is a viable low carbon alternative, especially if not built by the incompetent French EDF and in the US.

In the short term the global demand for oil is quite inelastic and therefore relatively small reductions in supply can produce very significant leaps in price. We must also remember that an oil price of US$100 in 2026 is the equivalent of only US$18 in 1976, not much more than the actual oil price in the latter year. While the efficiency with which we use that oil is many times greater. Real natural gas prices peaked in about 1982, with the recent European issues created by policy errors not shortages of available supply. In real terms, coal prices have remained relatively stable for decades. Our greatest energy system issue is not a shortage of fossil fuels, it is the greenhouse gases produced by the extraction, transportation and burning of those fossil fuels. The US war of aggression upon Iran has, and will, produce painful consequences within the oil and gas supply chain but it is not a presager of any enforced power down. It will also intensify the move away from fossil fuels, most especially in transportation. With China easily the biggest economic winner from this acceleration, as it dominates the “green” industries. While Europe may well be the most painful loser, due to its US vassal leaders and their self-harming incompetence.