The war in the Persian Gulf is a stark reminder that oil and gas still power the global economy. Paradoxically, the economic impact could both accelerate the transition to a more diversified energy system and drive countries to stockpile more oil or delay shutting down coal or gas plants.
Fossil fuels (oil, coal and natural gas) still dominate, supplying approximately 80% of global energy consumption and energy demand continues to rise. So when oil spikes we feel it first at the pump and then almost everywhere else as trucking, aviation and shipping companies start passing along rising costs to businesses and consumers.
Renewables are booming
Renewables like solar and wind power were already growing rapidly before the current conflict. The economic fallout from it will likely spur even more development of clean energy. And consumer demand is already shifting; sales of solar panels in the UK climbed more than 50% in March from a month earlier as the cost of heating oil soared. [1]
Last year was notable because while electricity generated by solar and wind increased globally there was no change in the amount produced by fossil fuels. For the first time in the modern era, renewables (33.8%) surpassed coal (33.0%) in the global power generation mix.[2] It was also the first year since 2020 without more growth in electricity generation from fossil fuels. Oil demand is slowing in developed countries but continues to grow in emerging markets.
Electrifying the future
The world is using more electricity because it’s a cleaner and more efficient than fossil fuels. But electricity is a secondary energy source created by converting forms of primary energy. Primary energy consumption is the total amount of energy extracted from nature before it is transformed into an end use power source. Primary includes everything we extract from the earth or capture from the atmosphere, including:
The amount of primary energy we harvest is always much more than what we use because of conversion losses. For example, when you burn coal to make electricity, about two-thirds of that primary energy is lost as waste heat at the power plant and through transmission lines. Renewables are more efficient for power generation than fossil fuels because they lose much less heat through combustion. The goal is to shrink primary energy consumption, specifically fossil fuels, as we electrify, even as the amount of end use energy remains the same or grows.
China and India embrace solar
In 2025 both China and India, historically the biggest contributors to the global increase in fossil based power, reported falling fossil power generation. They achieved that by adding record levels of clean power that outpaced their overall energy demand growth. China led, posting more than half of the global increase in both solar capacity and solar generation in 2025. As a result, net global growth in fossil powered energy generation was flat for the year.
Rapidly falling costs are also boosting solar energy. Solar panels keep getting cheaper and batteries, which are critically important for storing what is an intermittent power source (the sun doesn’t always shine), are also getting cheaper. According to energy think-tank Ember battery costs dropped 20% in 2024 and then 45% in 2025. And deployed battery capacity rose 46% in 2025, which allows 14% of new solar generation to be shifted from midday to other hours of the day.[3]
Huge parts of the global economy remain heavily dependent on fossil fuels. But what is increasingly possible is the steady growth of renewables could at least cap – like 2025 – fossil fuel growth while the world navigates a decades long transition to cleaner and more efficient renewable energy sources.
Canada
We already have a relatively clean energy grid thanks to lots of hydropower (Quebec and B.C. are big producers). Unfortunately, lower water flows due to drought resulted in slightly less hydropower production than expected in 2025. Hydro accounts for 50% of our national power generation and fossil fuels produce 23%. In contrast, 57% of electrical power in the U.S. comes from fossil fuels.
Solar and wind account for just under 9% of electricity generation in Canada, far less than the G7 average of 19%. But Quebec, B.C. and Ontario recently solicited proposals for significantly expanding their solar and wind capacity. Oil-rich Alberta has actually been leading in renewable development and has Canada’s biggest solar farms. However, the provincial government has tapped the breaks on new solar and several projects were shelved as a result. [4]
The bottom line
Conflict in the Persian Gulf has reminded the world of the geopolitical risks in our current energy system. The global energy mix is shifting towards cleaner sources, but not in a straight line. Fossil fuels, especially oil and gas, remain deeply embedded. Solar energy (and necessary battery storage) is growing fast as costs drop sharply. Some of the world’s largest economies are leading the charge to diversify the sources of power needed to run our world.
[1] Global solar and wind power surges despite US green cuts under Trump
[2] https://ember-energy.org/latest-insights/global-electricity-review-2026/#executive-summary
[3] https://ember-energy.org/latest-insights/global-electricity-review-2026/#executive-summary
[4] The future of electricity is wind and solar, new report says. Canada is lagging behind | CBC News
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