The Iran War Handed the World Its Best Chance to Quit Fossil Fuels — and Half the Planet Is Throwing It Away

For almost six months, the Strait of Hormuz — the narrow maritime throat through which a huge share of the world’s oil must pass — has been effectively severed. The war in Iran has strangled one of the planet’s most important oil-producing regions and the trade routes that run through it, knocking out between 12 and 15 million barrels per day, roughly 11 to 14 percent of everything the world consumes daily, and sending gas prices soaring. By the logic of every previous energy crisis, a shock of this magnitude should have been devastating: fuel lines, rationing, crude racing past 200 dollars a barrel. Instead, the global economy has absorbed one of the largest supply disruptions ever recorded without breaking. And that, argues Paasha Mahdavi, a political scientist at the University of California, Santa Barbara, and affiliated faculty at the university’s Bren School, is precisely why this moment matters. For the first time in half a century, the world has the structural strength to walk away from oil — if its governments allow it.

The pattern Mahdavi describes is one of the most frustrating loops in modern economic history. Every oil shock since the 1973 oil embargo, up to the 2022 invasion of Ukraine, was a chance to pivot away from fossil fuels toward renewables — and every time, the world ultimately failed. Prices spiked, politicians promised independence, efficiency and alternative energy enjoyed a brief moment in the sun, and then markets loosened and old habits reasserted themselves. The aftermaths followed a script: strategic reserves filled, efficiency standards announced, and then, as prices retreated, the deeper transformation — cities built around the car, power systems built on coal and gas — left untouched. The reason was structural. In earlier decades, oil was woven into nearly every dollar of global output; economies simply could not function without it, so when the shock passed, so did the will to change. Fossil fuels were not merely an energy choice — they were the operating system of prosperity itself, and no crisis, however severe, seemed able to crash it.

This shock is different, and the difference is measurable. The world today is far less economically reliant on fossil fuels than it was during any previous crisis. Decades of efficiency gains mean economies can grow with fewer barrels of oil and fewer tons of coal for each dollar of GDP — a decoupling that would have been unthinkable in 1973, when an embargoed barrel brought industry to its knees. At the same time, the alternatives have crossed a decisive threshold. Solar and wind are now cheaper and more scalable than at any point in history, and battery storage, together with the electrification of transport, heating and industry, has created genuine substitutes for combustion rather than distant promises. Renewables also offer something oil never can: long-term energy independence, because sunlight and wind cannot be embargoed, blockaded or bombed. That combination — reduced dependence on one side, cheaper and more secure substitutes on the other — explains a striking anomaly. Despite one of the largest supply shocks in history, with 12 to 15 million barrels per day missing from the market for almost six months, the world is not living with 200-dollar oil. Demand is no longer hostage to a single chokepoint.

Yet just as the physics and economics of the transition finally aligned, politics is pulling violently in the opposite direction. In a recent editorial in the journal Science, Mahdavi and a colleague document a troubling counter-current: despite society’s astonishing advancement in clean energy technologies, nearly half of the world’s governments have responded to the Iran war by enacting emergency measures that effectively subsidize fossil fuels at home. The menu is depressingly familiar. Some countries have declared fuel tax holidays, suspending the excise duties that ordinarily form part of the pump price. Others have expanded consumer subsidies already in place on everyday fuels like gasoline, diesel and kerosene, capping retail prices below what the market would otherwise dictate and forcing the treasury to absorb the difference. The measures are popular, fast and politically inexpensive in the short run — which is exactly what makes them so costly in the long run. Every one of these interventions does the same thing: it makes fossil fuels artificially cheaper than the market would set them, and makes the switch to renewables that much harder.

Mahdavi does not mince words about the consequences. Fuel subsidies, he argues, are the worst kind of energy policy, and the mechanics of their failure are straightforward. They drain government budgets at the precise moment when fiscal space is most precious, and they steer that money toward the most polluting forms of energy while discouraging investment in renewables. Worse still, they are politically almost irreversible. A decade of research by Mahdavi and his collaborators shows that fuel subsidies are exceptionally hard to unwind, because the moment a government attempts repeal, prices jump and the backlash can topple ministers and destabilize states. What begins as a temporary shield against wartime inflation quickly acquires constituencies, budget lines and a political life of its own. The danger, then, is not simply that public money is being redirected today, away from public health, education or the clean-energy economy. It is that the emergency measures adopted during the war will calcify into permanent policy, burdening budgets and entrenching pollution for years to come.

To understand why governments keep reaching for this particular lever, Mahdavi says, you have to appreciate the strange cultural power of the fuel price. There is no other product in the market whose price is as visible and as ubiquitous as gasoline. It ranks alongside staples like milk and bread as one of the few commodities nearly everyone consumes in some form — but milk and bread prices are not plastered around town in three-foot-tall letters. Fuel prices glow in bright neon red on practically every corner, an inescapable daily referendum on the state of the nation. Mahdavi, who has driven an electric vehicle for nearly a decade, still passes gas stations on his way to campus and cannot escape the numbers. The salience runs deeper than signage. Because gasoline and diesel prices feed directly into the cost of transporting and shipping nearly all material goods, the public treats them as a key indicator of inflation and the cost of living. When they spike — especially in countries where prices had been artificially low — people blame politicians, and the result is protest and, in a few instances, revolution.

The encouraging part of the story is that an alternative playbook exists, and it has been tested. The best way to tackle high energy prices, Mahdavi’s research has found, is not through fossil fuel subsidies or tax holidays but through deep and sustained investments in clean energy, public transportation, and urban and rural planning. Some of these measures are long-term: building new bike paths, rolling out EV charging networks, laying new intercity trains. Others are emergency tools designed for exactly this kind of crisis: cash transfers and targeted assistance for low-income households, and subsidies that keep public transportation affordable. The crucial difference lies in what each approach does to the price signal. Subsidies hide the true cost of fuel, erase the incentive to conserve and lock consumers to the pump. Cash transfers protect household purchasing power while leaving market prices — and therefore the incentive to electrify, insulate and switch — fully intact.

The playbook is not theoretical. In response to the Iran war, countries including Pakistan, Indonesia, Egypt and the Philippines are already pursuing versions of this strategy, cushioning consumers directly while steering their economies away from oil dependence rather than deeper into it. The sequencing, Mahdavi argues, is everything. Reform fails when it begins with the price instead of the alternatives. Governments that first reduce demand for fossil fuels — through efficiency, electrification and genuine options to driving — can then remove the subsidies underneath them without triggering the political explosion that repeal normally invites. Demand reduction, in other words, is not merely climate policy. It is the political lubricant that makes subsidy removal survivable, transforming the most feared act in energy politics into an achievable one.

Underlying all of this is a distortion of staggering scale. According to the IMF, governments spent a record 1 trillion dollars subsidizing fossil fuel consumption in 2022 alone — public money that dwarfs most of the support ever extended to wind, solar or batteries. For Mahdavi, that figure demolishes the most common argument marshaled against renewables: that they are pampered technologies which should stand or fall in the free market. What free market, he asks, are we talking about? The playing field on which clean energy is asked to compete has never been level. It has been tilted toward oil, gas and coal by a century of public expenditure, and the war in Iran is now deepening that tilt at precisely the moment the world should be reversing it. Most people, he observes, simply do not realize how unbalanced the contest has been, and continues to be.

The tragedy and the opportunity have arrived together. The current conflict, Mahdavi believes, could serve as a genuine turning point in the transition away from fossil fuels — the first great oil shock to strike a world that finally possesses the tools to answer it. The war is, in effect, doing what a thousand green initiatives could not: driving people away from fossil fuels. Every previous crisis ended the same way, with a burst of panic spending on the old system followed by a decade of regret. This time the choice is starker. Governments can spend their budgets making a dying system artificially cheap, entrenching pollution and fiscal burdens for years, or they can spend it making the replacement inevitable — wires, rails, batteries and cash transfers that shield citizens from the shock without re-anchoring them to the pump. One of the largest supply shocks in history has already demonstrated what a world weaning itself off oil looks like. What remains to be seen is whether, for once, governments build on the lesson instead of subsidizing their way out of it.