Morning Energy is a syndicated note I publish through Enverus Intelligence. My contributions will also be distributed here. Please note that links frequently lead to content available only to subscribers of Enverus solutions. Please reach out if you have any questions. Thanks! - Ian.
Pain is temporary. Glory lasts forever. That was the locker room wisdom in The Replacements. It might also be the lesson of the Strait of Hormuz.
Not long ago, glory was supposed to come from the energy transition toolkit: emissions policy, renewables subsidies, carbon taxes, all designed to push consumption away from oil and toward low carbon substitutes. That era already feels distant, replaced by a focus on energy security, independence and affordability. Iran’s closure of Hormuz puts a finer point on the argument.
With higher oil and LNG prices, a familiar set of incentives has returned, just wearing different jerseys. Consider this lens, one I first encountered from our friends at the ARC Energy Institute: translate the change in commodity prices into an equivalent carbon tax. By our math, a $10/bbl increase in oil implies roughly $23/t CO2. A $1/MMBtu move in natural gas translates to about $19/t. Global oil and European gas prices have moved by ~$35/bbl and ~$6/MMBtu respectively, implying carbon taxes of ~$80/t and ~$113/t. Call it a “conflict carbon tax,” though one that is far from equitable across sources and locations (Henry Hub has been quiet in comparison).
Incentives work. Reprice oil and natural gas higher and substitutes become attractive, especially those that offer security, independence and affordability. So who are the replacements, and will they bring glory?
For oil, electrification and EVs find a new tailwind. For gas, especially in markets tied to LNG, the answer is predictable: coal. The grizzled veteran is unglamorous, dependable, and suddenly more competitive with fuels meant to replace it. Renewables offer independence where grids can absorb them. Geothermal is coming in hot. Nuclear is energized, but the mood feels more like regret for what has been lost than acceleration of what comes next.
But the Strait of Hormuz has reminded everyone that concentrated supply chains are not strategy. They are vulnerability. And that applies as much to transformers (Korea and Japan), chips (Taiwan), and critical minerals (China) as it does to crude. In energy, the winners are rarely the cleanest story on paper. They are the assets that can actually take the field when the starter goes down.
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I’m here for the replacements quotes