The Ukraine War is resulting in the biggest shock to the global energy system since the 1973 crisis.
In the aftermath of the humiliating Yom Kippur War, the Arab nations decided the time was finally right to deploy its most powerful weapon: oil. In 1973, Saudi Arabia had just replaced the U.S. as the world’s oil producer of last resort, which meant that even at 100% production capacity, the U.S. would be powerless to replace Saudi Arabian supply in the event it was cut off. OPEC announced an oil embargo on supporters of Israel in the October of that year, and the energy world would never be the same again.
The ensuing shortages and rationing led Western nations, especially the U.S., to ramp up production. President Richard Nixon launched Project Independence, an initiative that called for the United States to achieve energy independence by developing alternative energy sources and building 1,000 nuclear power plants. The initiative failed as fears surrounding nuclear energy grew and renewable energy technology of the time proved inefficient. However, it led to the creation of the Department of Energy and funding of the research that was essential to the development of our modern renewable energy systems. Its fruits include electric vehicle batteries and the fracking technology that enabled the U.S. to beat OPEC, helping it reclaim its crown as the largest producer of oil and gas in the world. Today, the US accounts for 20 percent of global output and is a net exporter. Oil is a valuable weapon, but one that can backfire on those who use it.
The Ukraine War is resulting in the biggest shock to the global energy system since the 1973 crisis. Two changes are already evident: The first is that Russian gas is being replaced as quickly as possible with liquified natural gas (LNG), supplied primarily by the U.S., Australia, and Qatar. The second is an acceleration of the transition to clean energy, mainly wind and solar, as no Western country has reintroduced nuclear energy at scale.