The scarcity of fossil fuels created with the blockade of the Strait of Hormuz, after the attacks by Israel and the United States on Iran, it generated an asymmetric crisis, where some gain (a lot) and others lose purchasing power, energy and capacity to make the energy transition and become more resilient. This new reality, which no one knows how long it will last, will have an influence on negotiations at the Fossil Fuel Transition Conference that Colombia will host, in the city of Santa Marta, between April 24th and 29th.
Portugal and Spain are highlighted as good examples, for having invested in renewable energybut that doesn’t explain everything. Spain has greater budgetary leverage, explains economist Laura Carvalho, director of Economic and Climate Prosperity at the Open Society Foundations, and professor at the University of São Paulo, in an interview from Washington DC, where she participated in the spring meeting between the World Bank and the International Monetary Fund.
How will the fuel crisis, created by the blockage of the Strait of Hormuz, influence the dialogue at the Fossil Fuel Transition Conference in Colombia?
It is very relevant that the conference takes place in the middle of this crisis. Who supports the climate agendapressures producing countries to stop exploring oil now. But I think this is losing momentum, as we are in the middle of a crisis in which those who do not produce fossil fuels are being most affected.
It’s going to be very difficult to convince developing countries that produce oil to commit to stopping producing, isn’t it?
On the other hand, this crisis has made it much clearer that the most resilient countries are those that have already decided to invest in renewable energy. This opens space for the discussion that links oil revenues and investment in the transition.
This topic has been blocked, because there is great tension between those who want exploration to stop and those who defend the use of the resources they have to be able to make the energy transition later. But the current crisis calls for a more balanced position, which understands that even in countries that wish to carry out the transition, it is difficult to access loans that make it possible.
Therefore, there are opportunities in taxing extraordinary corporate profits of fossil fuels (windfall taxes), as something that, in addition to helping to absorb the shock in the short term, could help States invest in a more diversified energy strategy…
Is it important to tax extraordinary profits then?
Yes, even for countries with state oil companies. I will mention the example of Petrobras in Brazil, which I know more about: it is making much more profit than it had projected this year, but these extraordinary profits give more space for Petrobras to accelerate investment in a business plan that involves renewable energydiversification into biofuels and sustainable aviation fuels, to gain greater resilience and not depend solely on the price of oil.
Ultimately, this is a moment to take advantage of for the energy transition and national security. There is a gain in narrative, countries realize that this dependence on fossil fuels makes them vulnerable.
Did the crisis demonstrate that investment in renewable energy made countries less vulnerable to the Strait of Hormuz crisis?
There is no doubt that net fossil fuel importing countries are the most vulnerable in this crisis, and we have seen this dramatically in Asian and African countries.
But it has been shown that the impact is much smaller in countries that have made structural investments in renewable sources, such as Spain, Portugal and, differently, Brazil, which decided to invest in biofuels many decades ago. Or China, which also greatly increased renewables.
They have been rewarded with the possibility of absorbing much of this shock and preventing the increase in the price of fossil fuels from affecting families so much.
But what are the decisive factors for a country to resist inflationary pressures related to the scarcity of fossil fuels? Because Portugal has a lot of renewable energy (68% of consumption in 2025according to REN), but it has a different fuel tax policy than Spain…
Portugal and Spain are benefiting from lower electricity prices than other European countries (in March, the price of fuel for private transport rose 12.2% in Portugal, below the European average of 12.9%, while in Germany, for example, it rose 19.8%, according to the Eurostat), more dependent on natural gas. But of course that is not the only factor of resilience.
Portugal is more exposed than Spain, which not only has more scale – and nuclear energywhich is another factor – as it has more budgetary space for subsidies and other mechanisms to deal with the effects of a short-term crisis.
There are four factors that are determining shock resilience. Firstly, the low dependence on the import of fossil fuels. Second, have an electrical infrastructure with a high percentage of renewables, including transmission lines and batteries to store energy.
Thirdly, there must be budgetary margin to absorb the shock and invest in countercyclical measures. I think this is where Spain and Portugal differ most. (The Portuguese Government has already assumed that in 2026, with the additional budgetary pressure brought by the storm train and the war in Iran, it will be able to there is a deficit).
A fourth category is inflation. The Strait of Hormuz crisis has secondary effects on fertilizers and food prices, which we are not yet fully observing. Countries with greater agricultural autonomy and local food production are better positioned.
And what policies should international financial institutions (International Monetary Fund, World Bank…) be designing to respond to this turnaround in the global economy?
There is great uncertainty in this crisis, due to two factors. One is that we cannot predict its duration. Another is that it is a crisis initiated by the largest shareholder in these international financial institutions…
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The United States.
Yes. This may be delaying an ambitious response to the crisis. Let’s hope there is no timidity in the response because the crisis was generated by a country with enormous decision-making power in these institutions.
So the fact that this crisis was started by the USA will make it difficult to create mechanisms to overcome it, is that it?
I think it can make it difficult, although it is still difficult to measure this. Of course, there is a huge gain in extraordinary profits from oil-related sectors in the US, which could be used to invest in the transition to renewable energy in the US itself.
But the fact that President Donald Trump started to treat renewable energy as an ideological issue, associated with climate changetakes away opportunities for the North American economy to take advantage of this extraordinary profit.
Energy security is today closely linked to national security. It is very difficult to separate national security objectives from those of energy security and climate. This attempt to isolate the climate, as something, I don’t know, just of an ideological nature, takes away opportunities for the other two objectives.
And what are your expectations regarding the European Union? What role should it play in supporting the transition?
When faced with this crisis, with the role that the USA is playing, and with its own vulnerabilities, it has become clearer that growth in public spending on defense in Europe must be complemented by investment in electrification infrastructure, renewable energy, to increase resilience, in association with the security strategy.
This perception already existed, but it was not being complemented by sufficient investment in energy infrastructure. More massive investments are expected to occur in the energy sector, including in the interconnection of the electricity grid between countries.
Open Society Foundations
A second part is the global climate agenda: Europe and China have taken on a leading role, with the United States abandoning it. This crisis gives Europe even more opportunity to assume its leading role, not only with its investments, but also through its stance towards the rest of the world and developing countries.
Europe is expected to play its role in multilateral institutions to facilitate the transition in other countries, and not just through the import of European technologies.
