One thought on “Monday Message Board”

1. The Hormuz energy crunch

   The blockades of shipping through the Strait of Hormuz are an unfolding economic disaster. Level-headed experts like Paul Krugman and Fatih Birol of the IEA are warning us in apocalyptic language. We need to be thinking hard about drastic war economy measures to mitigate the coming storm.

   One obvious response is to accelerate the energy transition: electrification, renewbles, storage, a smarter and tougher grid. This already made good sense before the war, so why not bring everything forward, pedal to the metal? I doodled crude scenarios for EVs and fossil gas to get a handle on what could be involved.

   EVs first. These have passed sticker price parity in China and TCO parity more or less everyhere, for superior performance. The wheels have already been invented. 21m EVs were sold in 2025. The transition is already under way. Let’s replace the Persian Gulf oil wth home-baked electrons! What would this take?

   We only need to look at world totals, as fossil fuels are highly fungible and traded globally. To a first approximation, a tonne of oil saved in Peru has the same impact on the price as a tonne in Chad, though the cost and its distributin may vary widely.

   There are 1.6 billion ICEVs on the road, burning most of the 5.2 billion tonnes of liquid fuels. Knock off 10% for shipping and aviation, and the land vehicles burn 3 tonnes each a year. The current rate of 21 million new EVs cuts gasoline and diesel by 63 mt a year – probably a bit more by the fact that new vehicles do higher mileages. Vigorous and coordinated policy changes, we can perhaps double the EV take to 42m and 150 mt of fossil fuel foregone. That’s a princely reduction of 2.8% in liquid fossil fuels, barely noticeable. To get a significant cut of 10%, half the Hormuz flow, EVs would have to grow to 180m a year, eight point something times the current rate. I strongly doubt if this is feasible in the timescale of the coming recession (though it looks much better as a pathway to net zero in the 2040s).

   Things do look better for gas. Total gas demand is 4.2 trn cubic metres a yea (tcm). Fully replacing the 20% of global gas supply from the Persian Gulf would call for 0.8 tcm of cuts. The share of power generation in all gas use is 43% in the USA, or 1.8 tcm (I can’t find a global number). Gas is 20% of all power generation. If all other demand (heating, chemicals etc) were left inchanged, our scenario would require gas power generation to fall by 44%. The EU cut its use of fossil gas by 110 bcm – 20% – in the three years after 2022, so the order of magnitude is not impossible, and should be feasible for the OECD countries acting together.

   The difference beteen gas and oil boils down to the vastly greater investment and supply chain in green power generation than in electric transporrt. Over 100 GW of grid batteres were installed in 2025. They finely targeted gas peakers, with faster response and far lower marginal running costs. It would not be difficult or even expensive to torpedo gas generation in the coming few years. That’s not counting the cut in gas heating from mass-produced heat pumps, which are also being ramped up fast.

   Fertiliser is more like EVS than gas. The energy-hogging Haber-Bosch process atill rules the industry, with electric alternative still experimental. There is a lot of scope for more efficient use by farmers, but the changes needed in farming practice are knowledge-intensive and don’t lend themselves to a simple crash programme.

   The numbers used above are drawn from Google AI with no attempt to check. But I think they are good enough to get a sense of the options,