Disruptions to global oil and gas shipping during the Iran conflict are intensifying pressure on regions that sharply reduced domestic fossil fuel production.
By yourNEWS Media Newsroom
The ongoing war involving Iran is sending shockwaves through global energy markets, highlighting vulnerabilities in regions that pursued aggressive transitions away from fossil fuels, according to a Just the News report.
European nations and the U.S. state of California have both adopted policies designed to accelerate the shift away from oil and natural gas. As global petroleum supplies tighten due to the conflict, analysts say those policy decisions are now being tested by supply disruptions and rising fuel prices.
The conflict has disrupted oil and gas shipping routes and strained petroleum supplies worldwide. In California, where regulations and declining refinery capacity have reduced local production, the resulting price increases could further elevate already high fuel costs.
California plays an outsized role in the American economy. The state hosts three major container ports, numerous military installations, and produces nearly 15 percent of the nation’s gross domestic product. Analysts warn that energy supply challenges in the state could carry broader national implications.
“California is not just an energy basket case, it’s also evolved now into a national security risk for the United States,” energy analyst David Blackmon, author of the Energy Absurdities Substack newsletter, told Just the News.
Oil prices climbed above $100 per barrel on Sunday as markets reacted to the growing instability in the Middle East. At the same time, gasoline prices in California were reported as high as $8 per gallon in some areas.
Global competition for energy supplies is also intensifying. Russian President Vladimir Putin recently suggested that Russia could stop selling natural gas to European markets, according to a Reuters report.
Putin said expanding markets in Asia could make it more profitable to redirect energy exports away from Europe, which he described as an unreliable partner due to its energy policies.
Meanwhile, the conflict has directly disrupted liquefied natural gas production in the Middle East. Iran reportedly attacked oil and gas infrastructure at Ras Laffan in Qatar, a major LNG hub operated by QatarEnergy. The company subsequently announced it was halting LNG production.
Qatar is the world’s third-largest exporter of liquefied natural gas. According to energy analysis firm Woods Mackenzie, roughly 20 percent of global LNG shipments move through the Strait of Hormuz, most of it originating from Qatar and destined for Asian markets.
If LNG shipments remain disrupted, analysts say Russia could gain a stronger foothold in Asian energy markets as supply shortages deepen.
Energy economists have also begun questioning assumptions underlying the global transition to renewable energy. A recent white paper from multinational banking firm Barclays concluded that renewable energy investments are currently supplementing traditional energy sources rather than replacing them.
The report warned that because baseline power generation from fossil fuels has not expanded enough to match demand, some renewable investments could risk becoming stranded assets if energy supply shortages intensify.
Earlier academic research had predicted the opposite outcome, suggesting oil and gas investments would become stranded assets during the energy transition. Studies exploring that concept are documented in research analyzing how oil and gas infrastructure could become stranded assets.
European governments adopted aggressive decarbonization strategies in recent years. Germany went further than most by shutting down its final nuclear power plants in April 2023. The country later softened its stance when the government under Chancellor Friedrich Merz moved to recognize nuclear energy as equivalent to renewable sources within European Union climate policy, according to information from the World Nuclear Association.
While policymakers expected fossil fuel demand to decline rapidly, global consumption of oil, coal, and natural gas has continued to grow.
The Iran conflict has also begun affecting maritime trade. Iran has attacked ships traveling through the Strait of Hormuz, a narrow waterway through which approximately 15 million barrels of crude oil and four million barrels of refined petroleum products pass daily.
Insurance disruptions have compounded the shipping risks. The International Group of Protection and Indemnity Clubs announced it was terminating war-risk insurance coverage for vessels operating in the Persian Gulf, according to a report documenting how insurers suspended coverage for ships in the region.
Without insurance, shipping companies face major obstacles to operating in the area, effectively creating a partial blockade of one of the world’s most important energy transit routes.
Energy analytics firm Enverus Intelligence Research estimates that geopolitical instability has already added a $10 to $15 per barrel risk premium to oil prices, according to an analysis of global energy market impacts.
Benchmark Brent crude prices had been forecast to average about $63 per barrel this year, based on projections tracked by Trading Economics, but prices climbed to $92 by the end of last week.
The United States has considered steps to stabilize shipping through the Strait of Hormuz. President Donald Trump said the U.S. Navy could escort vessels traveling through the region and directed the U.S. International Development Finance Corporation to provide insurance and financial guarantees for maritime shipping, according to a Reuters report.
In California, the impact of rising energy costs may be particularly severe.
The state has significant proven oil reserves, according to federal data showing California’s petroleum reserves, but oil production has fallen to roughly one-quarter of what it was during the 1980s, according to federal records documenting declines in California oil production.
As refinery capacity shrinks, California increasingly relies on imports to meet gasoline demand, as shown in federal statistics tracking how the state now satisfies its fuel needs through petroleum imports.
Much of the crude oil imported into California originates from Iraq, Saudi Arabia, and the United Arab Emirates—countries whose shipments depend on passage through the Strait of Hormuz.
Fuel prices in parts of California were already exceeding $4.50 per gallon this week, according to data from the nationwide gasoline price tracker GasBuddy.
Despite the rising costs, state leaders continue to pursue policies aimed at accelerating the transition away from fossil fuels.
California Gov. Gavin Newsom blamed the Trump administration for recent fuel price increases during remarks to reporters, according to a report by Politico.
Energy companies have warned that new regulations could worsen the situation. Chevron executive Andy Walz, the company’s president of downstream operations, outlined those concerns in a letter to state officials and Governor Newsom. Walz cautioned that the proposed “cap-and-invest” program under consideration in the legislature could undermine the viability of the state’s remaining refineries, according to a letter referenced in reporting and associated with a public statement shared on X.
“The proposed regulation will cripple the survivability of the state’s remaining refineries, which will result in California losing the entire industry to this misguided program,” Walz wrote.
California’s energy policies could also affect national logistics and defense. In 2020, waterborne trade passing through California’s ports was valued at $416 billion, according to data from the California Association of Port Authorities.
The state also hosts more than 30 military installations that rely heavily on locally produced fuels, according to information about defense infrastructure in California.
Analysts say those factors make California’s energy infrastructure a matter of national concern.
Even if state policymakers reversed course, rebuilding local oil production and refinery capacity would likely take years. The state had been exploring increased gasoline imports to meet demand as refinery output declines, including potential shipments from China.
However, that option may now be limited. Chinese authorities have reportedly instructed refineries to halt fuel exports in order to prioritize domestic demand amid the Middle East conflict, according to a Reuters report.
How long the conflict in Iran will last remains uncertain. The United States, currently the world’s largest producer of oil and natural gas, may be partially shielded from the disruption. However, analysts say the consequences of the conflict are already being felt across global energy markets and are exposing vulnerabilities in regions that reduced domestic fossil fuel production before secure alternatives were fully established.
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