“The shortfall in gas and oil is now greater than during the landmark oil crises of 1973 and 1979 – as well as the gas crisis of 2022–2023 – combined. Few people seem to have understood how much impact this will have on our lives and our economy if the war does not end,” he says.

His warning is clear: Europe has not even seen the beginning of the crisis; since the war started, the price of crude oil has risen from around $70 a barrel to over $100, but this could double from today’s already high levels. Unless the war comes to an end, wider-reaching consequences such as production stoppages, stagnation and inflation will take effect in waves over the coming weeks as the changes reach the supply chains.

“But even if peace is agreed tomorrow and we manage to avoid the worst effects, the war highlights how important it is that we break our dependence on fossil fuels – before the next crisis occurs,” he says.

Overconfidence in the market leads to a lack of alternatives

In his research, Faber has examined how Estonia has remained dependent on its shale-oil-fired power plants, which are old, unprofitable, technically obsolete and harmful to the climate.

The power plants are less than two kilometres from the Russian border and account for almost all the country’s plannable electricity generation – despite Russia being identified as the greatest threat to Estonia’s energy security. On 25 March, one plant was struck by a Ukrainian drone that was targeting Russia, illustrating just how vulnerable they are.

Estonia is not alone in building its electricity supply on a fragile foundation. According to Faber, this is one expression of a wider European pattern: overconfidence that the market will invest in and develop alternative energy sources and storage technologies. The result is that European countries are left without viable options when crisis strikes. He says that this lack of alternatives was not inevitable, instead it has resulted from the state handing over responsibility for energy security to the market.

Europe repeated the same mistake

In the wake of Russia’s full-scale invasion of Ukraine in 2022, Europe restructured its energy supply and replaced Russian gas with liquefied natural gas from the global market. In Faber’s words: we replaced one form of fossil fuel dependency with another.

Following an unusually cold winter, Europe’s gas stocks are now at a record low, which will have a severe impact on electricity prices, even in countries such as Sweden, where the electricity system is essentially fossil-free.

“In Sweden, we have not done enough to reduce our dependence on oil, particularly in the transport sector – despite there being other options,” he says.

Concerns more than oil and gas

The closure of the Strait of Hormuz has not only affected oil and gas. Two-fifths of the global trade in helium passes through the strait, and this gas is vital to semiconductor manufacturing. In addition, one third of the world’s trade in artificial fertilisers also travels through the area and, at the same time, we are in the middle of the northern hemisphere’s planting season. Faber believes there is a risk that these disruptions will have long-term effects on industrial production, harvests and food prices.

Attacks on infrastructure are delaying the recovery

Even if the war were to end tomorrow, it would still take weeks or months to get energy production in the Gulf states back up and running and to restore trade to normal. However, the US and Israel escalated the conflict by attacking Iranian infrastructure, and Iran responded by attacking energy facilities in the Gulf states. Rebuilding that kind of infrastructure is not a matter of weeks or months, but of years.

“If this continues, the consequences could therefore be even more far-reaching than the effects of the closure of the Strait of Hormuz,” says Faber.

Greatest effect on those who have the least

Energy crises always hit households on tight budgets disproportionately hard. Faber is clear about how blanket subsidies for electricity and fuel are the wrong way to go.

“Subsidising electricity and fuel is a very bad idea. It drives up consumption, exacerbates shortages and favours those who are already well-off, since they use more energy,” he writes.

Instead, he advocates general or targeted support that is inversely proportional to income. In the short term, measures to reduce consumption – such as improved public transport, lower speed limits and increased remote working – may also be necessary.

True energy security requires long-term planning

Hugo Faber’s research leads to an unswerving conclusion: true energy security cannot be achieved solely through market-based solutions. The market is short-term in nature, whereas energy security and the energy transition require long-term strategic planning.

“Countries that rely on the market become short-sighted and risk getting stuck in recurring crises, where fossil fuel subsidies – time and again – seem to be the only available option, because they have not invested in any alternatives,” he says.

He highlights China as a contrasting example, as it has made energy security a central part of its five-year plans for more than two decades – and it now dominates the markets for renewable energy, battery technology and electric vehicles. The driving force is strategic independence and realism, not ideology.

“The way forward requires a government-led industrial policy: offshore wind power, electrification, energy storage and energy efficiency. This is not a response to the crisis that is already upon us, but will free us of our dependence on fossil fuels in preparation for the next one,” says Faber.