Strait of Hormuz: Decarbonization Means Breaking Free from Oil and Gas

The climate emergency is no longer the sole driver of the ecological transition. Even though the consequences of climate change are becoming increasingly apparent, what affects us much more in the short term is the sudden spike in gas prices caused by a disruption in oil supplies from the Strait of Hormuz.

Decarbonization is good for the climate and our energy independence

The use of fossil fuels (coal, natural gas, and oil) accounts for 75% of global greenhouse gas emissions [1].

Furthermore, these fossil fuels account for 70% of the European Union’s energy mix, and the vast majority is imported: some from allied countries like Norway, but mostly from countries with shifting geopolitical interests, such as Trump’s United States, Putin’s Russia, Kazakhstan, etc. ; which creates a burden a significant risk.

Sources: Eurostat, SolarPower Europe, Bruegel, World Bank

Phasing out these fossil fuels is therefore key both to preventing the climate system from spiraling out of control and to avoiding the impact of shortages and/or skyrocketing oil and gas prices every time a geopolitical crisis occurs.

In other words, decarbonization offers a twofold economic benefit: fewer climate-related costs (e.g., losses in agricultural yields) and energy-related costs (e.g., gas prices exceeding €2 per liter), and a lower risk of shortages—which also result in production losses and, consequently, additional costs.

Reducing our reliance on fossil fuels also means rethinking our dependence on fossil-based materials

Oil is not just a fuel: it is the raw material for most plastics, synthetic fibers, detergents, solvents, paints, adhesives, cosmetics, medicines, lubricants, etc.

Similarly, natural gas is not used solely for heating. Nitrogen fertilizers, which are widely used in conventional agriculture, are produced from natural gas. Helium, which is essential for MRI scans and semiconductor manufacturing, is a byproduct of natural gas processing.

All economic sectors are affected. For a company, an energy shock has a ripple effect throughout its entire energy-consuming value chain, but it also impacts the consumption of fossil-based materials.

Energy-geopolitical conflicts are bound to recur

The era of sustained growth in oil production is behind us. Globally, conventional oil production irreversibly peaked in 2008.[2]. Nearly half of the oil fields currently producing oil are in structural decline[3]. And they are often the ones who supply Europe.

On the demand side, countries—particularly emerging economies—in the Asia-Pacific region and Africa are seeking a growing share of a pie that is no longer getting any bigger. As a result, Europe has been consuming less and less oil for the past two decades. Whether through deliberate policy (e.g., a ban on new oil-fired boilers) or by necessity (e.g., reduced travel), the trend is similar for natural gas, where European consumption fell by 20% between 2021 and 2024.[4].

In a market that is structurally under severe strain, even the slightest shock can trigger an economic crisis. For example, following the 2022 shock caused by the war in Ukraine, Germany paid a heavy price for its dependence on Russian gas, suffering two years of recession.

Businesses, let's move toward economic and energy resilience!

Moving away from fossil fuels is no longer just a climate imperative—it is an act of economic sovereignty: for your suppliers, for your direct costs, and for your customers.

And the good news is, there are solutions.

In the very short term, focus on simplicity. Rethinking how we work to use less energy can happen very quickly[5]. For example, bringing employees closer to their workplace, as the company proposes 1 km on foot, with the added benefit of improving workplace well-being. Or, for example, organizing an internal energy-saving competition focused on commercial buildings, similar to the program CUBE. On average, energy savings of 13% are achieved. In 2022, some French factories managed to reduce their energy consumption by 20% while maintaining the same level of production.

In the longer term, eco-design products and processes to consume fewer resources. When it comes to mobility, the an initiative led by ADEME The goal of developing mid-sized vehicles that are 10 times lighter, simpler, and more fuel-efficient is inspiring. Furthermore, the growth of electric technologies (electric cars, heat pumps, batteries, renewable energy) is now widespread because they are competitive. The investment in a heat pump pays for itself compared to a gas furnace in 8 years without subsidies, and in 2 years with subsidies.[6]. As for electric vehicles, sales in France have risen by 48% since the beginning of the year, despite an overall market decline[7].

The question is no longer when the next clash will take place, but are you ready?

• Which direct and indirect hydrocarbon dependencies in your supply chains have you assessed and mapped?
• What actions have you identified, costed, and prioritized? How are you implementing them?
• How do your strategic scenarios incorporate future constraints on energy and raw material supplies?

With 20 years of experience in these areas across all industries, Carbone 4 can help you save valuable time so you can take action quickly.