The energy shock caused by the Middle East war was a “Covid moment” for many businesses in forcing them to rethink how they power their operations, the head of global financial services group State Street said.
“We don’t know what is going to happen in Iran and the Gulf at this point,” said State Street chief executive Ron O’Hanley. “But from an energy perspective, many companies, many countries are facing what is in effect a Covid moment — a fundamental breakage in the supply chain.”
“The one prediction I’m going to make is that as we get to the other end of this, no one is going to leave themselves exposed like that again,” he added.
After days of volatility in the energy market, his sentiment was echoed by executives at a Sustainable Markets Initiative event, supported by King Charles.
Companies had no choice but to “think about alternative sources now”, agreed Saker Nusseibeh, chief executive of the international arm of asset manager Federated Hermes. But he believed the response would vary by region.
“If you are going to build in Europe, would you want to build a gas-reliant manufacturing facility without a backup? What happens if another war happens?” Nusseibeh said.
The two-day SMI event at Hampton Court Palace drew a wide range of attendees, including John Kerry, the former US secretary of state now co-executive chair at green investor Galvanize Climate Solutions.
The Middle East hostilities were prompting a bigger focus on “energy independence”, Kerry told the FT, and would spur both companies and countries to build out renewable sources.
“In the near term there is going to be a scarcity premium that is going to be paid,” he added. “But that is going to renew that awareness . . . about energy independence. Very quickly it will dawn on people that in order to have more energy now in the short term, renewables are going to be the fastest and most economical [source].”
Others were more cautious about the short-term response, based on an anticipated rise in the cost of new infrastructure as a result of the economic and supply chain disruption caused by the Middle East war.
Sumant Sinha, chief executive of ReNew, the Indian renewable energy company, said the war would “speed up the transition in the long term”, but in the short term renewable projects could be affected if interest rates were to rise.
Still, the energy crisis would reinforce the need for the major economies of Europe, China and India — which all relied heavily on imported fossil fuels — to make their energy supplies more secure, he said.
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