By David Hammond • 5 min read

For years, we have been encouraged to transition to renewable energy sources to address climate change, clean up our environment, and promote a greener future. However, the conversation has recently shifted to one of necessity. The widespread reliance on non-renewable resources has resulted in countries depending on each other for energy through outdated, non-binding trade agreements.

Over the past two decades, the price of oil has been marked by significant instability. While demand and the state of the economy have historically influenced oil prices, supply has become the primary determinant in recent years. This exposes non-oil-producing countries to the risk of sudden changes in oil prices, which can lead to inflation, energy shortages, and other issues. As a result, many countries are now recognizing the risks associated with oil dependency and are turning towards achieving energy sovereignty.

The War in Ukraine

Within a week of Russia's invasion of Ukraine, global oil prices increased by 15%, as countries imposed sanctions on Russian exports. The reduction in the supply of oil resulted in a significant hike in oil prices, and its impact is still felt today. Due to oil's extensive use in manufacturing, transportation, and other sectors, inflation surged rapidly.

However, some countries were affected more severely than others. Germany, for instance, relied heavily on Russian energy as its primary fuel source. This has wreaked havoc on the German economy, particularly its manufacturing industry, which had to reduce production and resulted in significant layoffs.

OPEC

The Organization of the Petroleum Exporting Countries (OPEC) is essentially an oil cartel, evoking concern about its impact on the global economy. OPEC is known to manipulate and control the supply of oil to keep prices high. Recently, OPEC announced a reduction in oil exports by nearly 3.7 million barrels, which led to a sharp rise in oil prices.

This move by OPEC highlights the risks of relying on oil imports, as it can lead to inflation, hinder growth, and damage political treaties. As a result, countries are motivated to consider heavy investments in green energy sources to achieve energy sovereignty and reduce their dependence on oil.

Energy Sovereignty

Countries are increasingly considering renewable energy sources as a means to achieve energy independence. By developing domestic energy capabilities, nations can protect themselves from the volatility of the global oil industry, while also stimulating domestic economic growth, curbing inflation, and providing citizens with affordable energy. This will allow countries to allocate resources to other essential services such as healthcare, social security, and military.

Although green energy requires a substantial initial investment, it is more cost-effective and secure in the long run as oil prices continue to fluctuate, trending upwards. As the European Council on Foreign Relations notes, "risks can be managed more easily with renewable energies compared to oil and gas, as a despot cannot simply switch off the wind and sun."

This article aims not to diminish the role that renewable energy must play in transitioning to a carbon-neutral future but to demonstrate an alternative argument in favour of renewable energy. Recent politics have highlighted the challenges of investing in and sustaining investment in renewable energy when its primary function is to reduce greenhouse gases. This argument demonstrates that renewable energy is economically and politically beneficial to a country.

It is crucial for countries to switch to renewable resources to shield themselves from rising oil prices, oil supply shocks, negative externalities from pollution, and to grow their domestic energy sector. Further, the adoption of renewable energy sources will contribute to reducing a country's carbon footprint and promoting sustainable development.