The Oil Crisis Is a Reality Check for Renewable Energy Plans

In a way, the effects of the current tensions with Iran and the ensuing oil crisis should be an object lesson for those who insist our economy can simply run on renewable energy.

To those down the back, it won’t work. Not yet.

Our entire Western economy still runs on the assumption that fossil fuels will take up the slack when the wind doesn’t blow and the sun doesn’t shine.

And crucially it’s not just about power generation. Oil sits under a huge chunk of modern life. From crayons, cosmetics and carpeting to fabrics, fertilizers and pharmaceuticals, around 70,000 everyday products are made with “petrochemicals” produced from fossil fuels. These products are so ubiquitous that many oil and gas companies are betting on chemical production to stay in business even as fossil fuel use in energy, heating and transport declines. [source]

Key Everyday Products Derived from Fossil Fuels:

• Plastics: Packaging, bottles, toys, and credit cards.
• Clothing & Textiles: Synthetic fibers like polyester, nylon, acrylic, and spandex.
• Personal Care & Health: Cosmetics, shampoo, toothpaste, and pharmaceuticals.
• Household Items: Detergents, cleaners, soaps, and furniture cushions.
• Transportation & Safety: Tires, asphalt for roads, car parts, and eyeglasses.
• Agriculture: Fertilizers and pesticides.

We’ve already seen what happens when policy outruns reality. Sri Lanka tried to go fully organic in 2021, banning synthetic fertilisers and pesticides overnight. It sounded admirable. It wasn’t. Rice production dropped by about 20 percent, tea exports collapsed, and the country ended up importing food at high cost. The policy helped trigger a broader economic crisis and had to be reversed within months.

As the Guardian reported at the time, “If things go on like this, in the future it will be hard to find a farmer left in Sri Lanka,” said Niluka Dilrukshi, 34, a rice paddy farmer.

Good intentions don’t keep people fed.

Here’s another one. A week after the Americans started their war with Iran we were due to leave for Europe, flying Emirates through Dubai. Naturally, that didn’t happen. We managed to get tickets to Europe via Singapore. But at a much higher cost, and with the oil crisis, prices have risen ever since. We won’t think about going OS for a while.

But it goes further than that. We wanted to go on a long driving holiday later this year, going through country areas in Australia. The price of petrol/diesel put a dampener on that. But more important, service stations were running out of fuel. We didn’t fancy being stuck somewhere with nowhere to go because (to mangle the famous song) ‘the servo’s got no fuel’. It will be more than that, though. If the trucks don’t arrive the town won’t have food, and maybe even the famous song – the pub’s got no beer – will be a reality.

Think about all those little towns, caravan parks, tourist attractions out beyond the capital cities. How will they cope?

Which brings us closer to home.

We’re well into planting season for most farmers and there are three things they need to make a living: fertilizer, diesel, and rain. We can’t do much about the rain.

Australia is a perfect example of how messy the real energy system is. There’s plenty of oil and gas in Australia. We export the vast majority of the crude oil we produce, around 96 percent in recent years, because it’s better suited to overseas refineries. At the same time, we’ve shut down most of our own refining capacity. We’re down to two refineries, where we once had seven.

So we sell raw oil overseas, then buy back the finished fuel.

Around 90 percent of our petrol, diesel, and jet fuel is imported. We are, in effect, dependent on other countries to turn our own resources into the products we actually use.

It gets more interesting. We’re also a major exporter of LNG, shipping massive volumes of processed gas to Asian markets, and we export far more LPG than we consume domestically. Energy flows out of the country in raw or semi-processed form, then flows back in as the refined products we rely on every day.

That’s not a system you can just switch off.

None of this means renewables are a bad idea. Far from it. But the idea that we can flip a switch and run a complex, industrial economy without fossil fuels is wishful thinking.

A smarter path is to phase the transition. Keep the system stable, keep people fed, keep industry moving, and invest in better technology as it becomes viable.

Because if there’s one thing history keeps teaching us, it’s this. Policy isn’t about what sounds good. It’s about what actually works.

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