The global energy transition is often painted
as an inevitable and harmonious shift towards
a sustainable future. However, the reality is
far more complex, involving a myriad of challenges
ranging from volatile markets and geopolitical
tensions to technological and economic hurdles.
As nations strive to combat climate change and
reduce reliance on fossil fuels, the promises
of renewable energy are vast, but so are the
risks and disruptions it brings to the established
global order. In this episode, we unravel the
tangled relationship between clean energy, geopolitics,
and the economic forces shaping our world, highlighting
the winners, losers, and unforeseen consequences
of the journey toward a cleaner, greener planet.
This is the Diplomacy and Discourse channel.
I'm AR. Thank you for listening. In Europe, the
clean energy crisis has been a stark reminder
of the continent's vulnerabilities. High electricity
prices have led to the closure of numerous businesses
and the bankruptcy of several energy firms. This
crisis stems from the EU's heavy reliance on
imported energy and the rising cost associated
with these imports. Although the EU has made
strides in investing in renewable energy sources,
these efforts have not been sufficient. to significantly
reduce reliance on imported energy and lower
electricity prices. Meanwhile, Russia's President
Vladimir Putin has been leveraging his country's
natural gas reserves to gain influence over the
EU, posing a major security risk for the EU and
its member states. China's approach to energy
security has been proactive. In September 2022,
Vice Premier Han Zhong ordered energy companies
to ensure sufficient supplies for the winter
season. As oil prices have increased, other countries,
including the US, have been urging Saudi Arabia
to boost its production. This situation has given
Riyadh more leverage in its relationship with
Washington and raised concerns about US energy
independence. In 2024, the US achieved energy
independence for the first time in 40 years,
but the ongoing geopolitical tensions and reliance
on imported materials for renewable energy technologies
continue to pose challenges. The transition to
renewable energy is often seen as a pathway to
reduce global tensions over energy resources.
By shifting to sources like solar and wind, countries
aim to lessen competition for limited fossil
fuel resources, potentially reducing conflicts
and fostering greater cooperation. However, this
transition also has significant geopolitical
implications. It affects power dynamics, alters
relationships between leading powers, and influences
the development of globalization. Implementing
a sustainable energy system is not without its
challenges. It is likely to lead to new confrontations
and competition. Governments must take decisive
actions and make difficult decisions to facilitate
this transition. Businesses need to invest in
green technology and collaborate to ensure success.
Ultimately, the transition success depends on
the collaboration and coordination between governments,
businesses, and citizens. The idea of a smooth
transition away from fossil fuels is not feasible,
as the energy system that underpins the global
economy and supports the geopolitical order will
have to be fundamentally restructured. The energy
transition is shaking up the global landscape,
and it's not as straightforward as it might seem.
Let's break it down. Investment in renewable
energy is on the rise, even amid global uncertainties.
In 2024, global investment in the energy transition
hit $2 .1 trillion, marking an 11 % increase
from the previous year. This surge is driven
by countries like China, which has heavily invested
in electrification and clean technologies to
reduce dependency on foreign oil and coal. Similarly,
the U .S. has seen growth in solar capacity,
with solar surpassing hydropower and nuclear
as the fourth largest source of installed capacity
in 2024. However, geopolitical tensions and market
volatility are likely to persist. Conflicts such
as the Russia -Ukraine War and tensions in the
Middle East have impacted energy and food security,
leading to higher prices and increased inflation
rates. Additionally, OPEC Plus's decision to
increase oil production despite weak global economic
conditions has added to market volatility. In
2024, The energy transition created both opportunities
and challenges. Renewables accounted for over
90 % of total power expansion globally, with
585 GW of capacity additions. Yet, the global
energy demand growth in emerging markets slowed,
falling to below 3%, down from nearly 4 % in
2023. Looking ahead to the rest of 2025, and
the later years, the energy transition will continue
to evolve. While investment in renewable energy
is expected to rise, challenges such as geopolitical
tensions, market volatility, and the need for
infrastructure development will persist. Countries
heavily invested in renewable energy like those
in Europe and East Asia are leading the charge,
while those reliant on fossil fuels face significant
challenges. The winners and losers of the transition
will not necessarily mirror those of the current
energy system, making it a complex and dynamic
process. Oil -rich countries often referred to
as petrostates may experience economic booms
before facing potential downturns due to their
dependence on fossil fuel exports. Their reliance
on major fossil fuel suppliers like Saudi Arabia
and Russia is expected to rise before it eventually
declines. Meanwhile, the world's poorest regions
will need to use more energy to meet their growing
needs. Despite the potential of clean energy,
its impact on the global economy and political
landscape remains uncertain. While clean energy
will eventually become a vital part of national
power supplies, it will also introduce new uncertainties
and risks. Despite widespread concerns about
climate change, these arguments are not aimed
at discouraging countries from moving toward
a clean energy future. Instead, they urge policymakers
to recognize the risks and dangers associated
with this transition. The rapid emergence and
evolution of clean energy technologies have presented
new geopolitical risks that will affect the global
economy and the energy transition in the coming
decades. Clean energy sources such as solar,
wind, and nuclear are becoming increasingly viable
alternatives to traditional fossil fuels. The
global shift towards renewable energy is reshaping
international power dynamics. Countries rich
in clean energy resources or critical minerals
like lithium, cobalt, and rare earth elements
are gaining strategic leverage. China, for instance,
has heavily invested in electrification and clean
technologies, reducing its dependency on foreign
oil and coal. Conversely, nations that have historically
relied on exporting fossil fuels such as Russia
and Saudi Arabia are facing challenges as global
demand shifts away from their primary exports.
This transition isn't without its tensions. As
demand for clean energy technologies increases,
so does competition for the necessary resources.
This competition can lead to geopolitical conflicts,
especially in regions where these resources are
abundant but governance is weak. For example,
the reliance on critical minerals sourced from
politically sensitive regions has raised concerns
about supply chain vulnerabilities. In 2024,
these dynamics were already evident. The Russia
-Ukraine conflict highlighted Europe's dependence
on Russian energy, prompting a push for diversification
and investment in renewables. China's advancements
in clean technology manufacturing further solidified
its position in global supply chains. However,
these shifts also led to market volatility and
highlighted the complexities of transitioning
to a new energy paradigm. So looking into 2025,
investment in renewable energy continues to rise,
driven by both environmental goals and the desire
for energy independence. Yet, geopolitical tensions
and market volatility persist. The competition
for critical minerals, the restructuring of global
energy trade routes, and the varying pace of
transition among nations contribute to an unpredictable
landscape. Policymakers are grappling with these
challenges, often underestimating the unintended
consequences of the energy transition. As we
move toward 2026 and beyond, the energy transition
is expected to accelerate. However, without comprehensive
strategies that address both the opportunities
and challenges, including geopolitical risks
and market instabilities, the path forward may
remain fraught with complexities. If people believe
that plans to address climate change endanger
the affordability or reliability of energy supply,
the transition to clean energy may be slower.
This is because people are likely to oppose strategies
and policies seen as detrimental to their own
economic well -being. As a result, they may be
less likely to support plans that could increase
energy bills or result in power shortages. Fossil
fuels may eventually disappear, but politics
and geopolitical factors will not. This means
that even if renewable energy sources are available,
they may not be economically viable or politically
popular, making it difficult to completely transition
away from fossil fuels. Oil became a strategic
commodity during World War I. The Allied powers,
mainly Britain, France, Russia and the United
States, were able to win the war through a wave
of oil. From then on, British security depended
more on oil from Persia than coal as energy became
a vital source of national power. The importance
of oil was further cemented after World War II,
when the United States and the Soviet Union competed
to develop and control oil producing regions.
Today, oil remains one of the most important
commodities in the international market. with
countries all around the world vying to control
the resource. Countries blessed with natural
gas and oil resources developed their economies
and expanded their influence in the international
system. Saudi Arabia is a prime example of a
country that has benefited from its access to
oil resources. The country is one of the largest
producers of oil in the world, with its oil industry
accounting for a large portion of its GDP. Another
prominent oil producing nation is Venezuela,
which has the world's largest oil reserves. Venezuela
relies heavily on its oil industry for economic
growth and has used its access to oil to gain
influence in the international system. Those
that were unable to meet oil demands were forced
to change their foreign policies. This has led
to a shift in power dynamics between nations.
as those with access to oil have been able to
make use of its economic advantages and increase
their influence in the international system.
Oil importing nations have had to adjust their
foreign policies to ensure access to needed resources,
while those who export oil have been able to
use their access to oil as a lever in international
negotiations. Saudi Arabia has not yet achieved
a state where its revenues are entirely independent
of oil. However, the nation has made significant
strides in diversifying its economy, marking
a pivotal shift in its financial landscape. In
2024, Saudi Arabia's non -oil exports reached
an unprecedented SR515 billion or $135 billion
representing a 113 % increase since the launch
of Vision 2030. This surge underscores the country's
commitment to reducing its dependence on oil
revenues. Furthermore, the non -oil sector's
contribution to the Gross Domestic Product, or
GDP, has seen notable growth. In the third quarter
of 2024, non -oil GDP increased by 4 .3 % year
on year, outpacing the oil sector's growth. This
trend indicates a successful implementation of
economic diversification strategies. These developments
are part of Saudi Arabia's broader Vision 2030
initiative, which aims to transform the economy
by investing in sectors such as tourism, entertainment,
and technology. Projects like the Red Sea Luxury
Resorts and the Neom City are emblematic of this
transformative vision. While oil remains a significant
source of revenue, these advancements signify
a proactive approach to economic diversification.
The progress made thus far suggests a promising
trajectory towards a more balanced and sustainable
economic future. In 2025, Saudi Arabia is intensifying
its efforts to diversify its economy beyond oil,
building up the momentum gained in 2024. The
non -oil sector continues to expand, with non
-oil GDP growing by 4 .2 % in the first quarter
of 2025, outpacing overall GDP growth of 2 .7
% during the same period. This growth is driven
by robust performance in sectors such as finance,
insurance, business services, and utilities,
which are projected to see growth rates between
5 % and 6%. Saudi Arabia is also making significant
strides in expanding its non -oil exports. Re
-exports have surged to SR 90 billion, marking
a 205 % increase since the launch of Vision 2030.
Services exports have reached an all -time high
of SR 207 billion. reflecting a 14 % year -on
-year increase and a substantial 220 % rise since
the inception of Vision 2030. To further diversify
its energy sources and reduce domestic oil consumption,
Saudi Arabia is pursuing a civil nuclear agreement
with the United States. This initiative aims
to support the country's energy needs for electricity
generation and water desalination. aligning with
the goals of Vision 2030. In the mining sector,
Saudi Arabia is engaging in discussions with
the United States to establish cooperation in
mining and mineral resources. The country has
nearly doubled its estimated mineral reserves
to $2 .5 trillion and is seeking partnerships
to develop its mining industry, which is a key
component of its economic diversification strategy.
Tourism remains a focal point of Saudi Arabia's
diversification efforts. The Amalab project,
a luxury tourism destination along the Red Sea,
is set to open its first phase in 2025, reaching
multiple resorts and wellness centers. Similarly,
the Red Sea project is progressing, with several
resorts expected to open in 2025. enhancing the
country's appeal as a global tourism hub. While
these initiatives demonstrate Saudi Arabia's
commitment to reducing its reliance on oil, challenges
remain. The International Monetary Fund has adjusted
the country's GDP growth forecast for 2025 to
3%, citing a slower rebound in oil prices. Nonetheless,
the continued growth of the non -oil sector and
strategic investments in various industries indicate
a promising trajectory towards a more diversified
and sustainable economic future. The world's
shift away from fossil fuels will have a profound
impact on society. However, discussions about
the future of energy often fail to address the
most critical details. Despite global efforts
to achieve net zero emissions, fossil fuels will
continue to exist. In 2021, the International
Energy Agency released a report estimating that
to avoid dangerous levels of greenhouse gas emissions,
the world should aim to reach net zero by 2050.
This means the world would still use around half
as much natural gas and one quarter as much oil.
A Princeton University study revealed that even
if the U .S. stopped using fossil fuels by 2050,
it would still use around one quarter to half
as much oil and gas as it does today. Despite
this, energy producers could still enjoy tremendous
advantages from their geological resources. The
fluctuation of oil prices is expected to continue
as the world transitions to a more sustainable
energy system. This is why traditional suppliers
can benefit from the uncertainty surrounding
the future of oil. As renewable energy sources
become more affordable and widely available,
the demand for oil is expected to decline. This
has led to the speculation in the market, causing
oil prices to be volatile. This volatility creates
opportunities for traditional suppliers to take
advantage of the uncertainty and make profits
from short term speculation. However, the combination
of investor pressure and the lack of clarity
about the future of oil could lead to a significant
decline in investment levels. This could result
in companies reducing their production, which
in turn would cause a decrease in supply and
an increase in prices. Furthermore, as the cost
of renewable energy sources continues to decline,
the demand for oil could gradually diminish.
leading to a further decrease in prices. The
uncertainty surrounding the future of oil prices
could lead to frequent shortages causing higher
and more volatile prices. This could also boost
the power of the Organization of Petroleum Exporting
Countries, OPEC. Its members, such as Saudi Arabia,
have sufficient capacity to increase or decrease
global production. OPEC's ability to influence
the global oil market gives it considerable power
and the uncertainty surrounding future prices
could give it an even greater ability to control
the market. This could lead to OPEC manipulating
prices to its own benefit, resulting in shortages
and higher prices. The shift toward a more sustainable
energy system will also increase the influence
of gas and oil exporters. While the demand for
oil is expected to decline, it will still remain
substantial for a long time. This is because
renewable energy sources such as wind and solar
are intermittent and require a backup system
to provide reliable energy. This backup system
is most often provided by natural gas and oil,
which will still be in high demand for the foreseeable
future. High cost producers such as Russia's
Arctic Territory, and Canada could be forced
out of the market as oil prices go down. These
regions are considered high cost producers due
to the higher costs associated with extracting
oil. As the demand for oil decreases and renewable
energy sources become more competitive, these
higher costs could make it difficult for these
producers to remain competitive. If oil prices
decline, they may be unable to remain profitable
and could be forced out of the markets. Some
oil -producing nations that are seeking to be
leaders in the fight against climate change,
such as the US, Norway, and the UK, could restrict
their domestic production in response to public
pressure and the need to hasten the shift to
low -carbon energy sources. These countries could
set emission reduction targets, establish clean
energy and efficiency standards, and incentivize
the shift to renewable energy sources. They could
also set limits on domestic production such as
through taxes or quotas to reduce their emissions
and encourage the transition to cleaner fuel
sources. As a result of the reduction in financial
institutions dependence on oil, Gulf states could
grow their market shares. This could help them
diversify their economies and make them more
resilient to future economic shocks. Additionally,
By setting emissions reduction targets, they
could reduce their exposure to climate change
risks, such as water scarcity, extreme temperatures,
and flooding. The world's nations would gain
more geopolitical clout if they supplied all
of the oil that the world consumes. For instance,
countries such as the U .S. and Argentina, which
have large deposits of shale oil, can quickly
bring their resources online. Shale oil is a
type of oil extracted from shale rock formations
using fracking. It is a relatively new source
of petroleum and has been increasing in production
in recent years. This can attract investors looking
for faster payback periods. However, due to uncertainty
about the long -term outlook for oil, investors
may shy away from investing in the sector. The
cost of extracting shale oil is high. and there
is no guarantee of profitability in the long
run. Additionally, the extraction process involves
environmental risks such as water contamination,
air pollution, and seismic activity. These risks
can make investors wary of investing in the sector.
In the natural gas market, small producers that
can offer the cleanest and cheapest supply of
gas will be able to increase their market shares.
As the world starts using less gas, the cost
of production will rise. Companies that can produce
gas more cheaply and with less environmental
impact will have a competitive edge. Consumers
and businesses are increasingly aware of the
environmental costs of burning gas and are looking
for alternatives. This creates opportunities
for smaller producers that can provide cleaner
and cheaper gas. If countries follow through
with climate action and reduce production, this
could grow their market shares. This will lead
to an increase in Europe's reliance on Russian
gas, as the Nord Stream 2 pipeline which connects
Germany to Russia will boost the country's gas
consumption. The pipeline provides a direct route
for Russian gas to reach Germany, bypassing existing
pipelines through Ukraine. This reduces the amount
of transit fees Ukraine receives, leaving it
with fewer resources to invest in its own energy
sector. European lawmakers have urged Moscow
to increase gas production to avoid an energy
crisis this winter, highlighting Russia's growing
importance to the region's energy security. However,
Russia has been reluctant to increase gas production,
fearing lower prices for its exports. This has
led to concerns about the reliability of Russian
gas supplies and the overall energy security
of Europe. The uncertainty has caused energy
prices to rise, putting a strain on businesses
and households in Europe and increasing tensions
between Russia and the European Union. Understanding
the geopolitical implications of a world transitioning
away from fossil fuels is key to influencing
decisions that affect the planet. Renewable energy
sources require significant investments in infrastructure
and technology. Political cooperation between
countries is essential to ensure this investment
occurs and that the planet is protected from
climate change. Governments must prioritize long
-term planning and investments in renewable energy
and infrastructure. The reality is different
from what most people believe, and the transition
will be very different from what most governments
have planned. Governments must recognize that
this transition requires planning and investment,
and they will need to work in partnership with
other countries to ensure the necessary resources
and technology are available. Furthermore, this
transition will not be quick and it will require
long -term planning and investment. In the long
term, cheap capital and innovation will determine
which countries dominate the clean energy revolution.
As we navigate through the rest of 2025, the
global energy landscape is marked by a complex
interplay of economic, geopolitical, and technological
factors. In the United States, the administration's
protectionist trade policies, including the imposition
of tariffs, have led to economic uncertainties.
These measures have impacted investor confidence
and slowed down new drilling activities, particularly
in the oil and gas sectors. The resulting economic
contradiction in the first quarter of 2025 has
further complicated the energy outlook. Trade
tensions have contributed to a decrease in oil
demand growth. The International Energy Agency,
IEA, has revised its 2025 global oil demand growth
forecast to 730 ,000 barrels per day, citing
escalation trade tensions and a slowdown in economic
activity. These factors have led to a more cautious
approach among energy producers and investors.
Despite these challenges, there has been significant
progress in renewable energy adoption. The United
States has seen renewables outpace coal in electricity
production, with wind and solar generating more
power than coal for the first time. This shift
indicates a positive trend towards cleaner energy
sources. However, the transition is not without
its hurdles. The global goal of achieving net
-zero emissions by 2050 faces significant challenges,
including the vast scale of transforming the
current $115 trillion global energy system. The
transition from fossil fuels to renewables such
as wind, solar, and hydrogen is progressing slower
and more unevenly than expected. Political, economic,
and infrastructural limitations especially in
developing countries, complicate progress. As
we move into the latter half of 2025 and beyond,
the energy sector is expected to continue grappling
with these multifaceted challenges. The balance
between advancing renewable energy initiatives
and managing economic and geopolitical complexities
will be crucial. Stakeholders across the globe
will need to collaborate and innovate to navigate
this transitional period effectively. In summary,
2025 has been a year of both progress and setbacks
in the global energy transition. While strides
have been made in renewable energy adoption,
economic and geopolitical factors have introduced
new challenges. The path forward will require
concerted efforts to address these issues and
accelerate the shift towards a more sustainable
energy future. But before we conclude this episode,
let's consider another perspective. Some argue
that fossil fuels might be more beneficial for
our planet than we realize. Without fossil fuels,
we might have resorted to cutting down all the
trees for energy. Additionally, fossil fuels
have saved whales. as we previously relied on
whale oil for various products before fossil
fuels became prevalent. Therefore, those who
want to save the whales might appreciate our
use of fossil fuels. However, is transitioning
away from fossil fuels an unrealistic goal? Many
climate change issues revolve around controlling
our energy resources. If we move away from fossil
fuels and rely entirely on electricity, We must
consider that the necessary minerals for this
transition are often mined under harsh conditions.
Many of these minerals are extracted by laborers
in countries with authoritarian regimes, where
exploitation is rampant. These regimes exploit
their citizens, making it challenging to view
this as a viable alternative to fossil fuels.
Fossil fuels generate revenue by extracting resources
from the ground which involve less exploitation
compared to forced labor. There is also a debate
about the motivations behind climate change research.
Some claim that scientists who affirm climate
change receive grant money while those who dissent
face budget cuts and black listing. This has
led to a significant movement to change our energy
resources. Changing our energy sources could
shift global power dynamics. Looking ahead, we
must balance the environmental benefits of reducing
fossil fuel use with the ethical implications
of alternative energy sources. Developing sustainable
and ethical energy solutions is crucial. This
includes investing in renewable energy technologies,
improving mining practices, and ensuring fair
labor conditions. By addressing these challenges,
We can work towards a future where our energy
resources are both environmentally friendly and
ethically sourced. An approach that emphasizes
the diversity of human experiences and the need
to assimilate them is needed. We should also
regularly draw conclusions and make comparisons.
While we must be careful not to predict the future,
we should always be humble. Despite the various
factors that can affect the world's operations,
geopolitics still reflects the importance of
acknowledging limits. Through careful analysis,
we can gain a deeper understanding of how the
world functions in a certain way. The transition
to a sustainable energy future is not merely
an environmental necessity but a geopolitical
and economic revolution. While the world grapples
with climate change, The move away from fossil
fuels reveals a landscape fraught with challenges
and opportunities. Countries must navigate shifting
alliances, market volatility, and technological
uncertainties as they work toward a greener future.
As we've discussed, the journey is complex, and
its success hinges on collaboration, innovation,
and a recognition of the diverse impacts this
shift will have globally. Thank you for joining
us, and stay tuned for more episodes that explore
the critical intersections of diplomacy, energy,
and international relations.