An earlier version of this article was published on LinkedIn.
The oil market is doing what it always does under stress: hiding reality behind softer language. We’re told demand is “falling,” that the market is “rebalancing,” that prices are doing their job.
But J.P. Morgan said the quiet part out loud in its recent oil flash note. Demand destruction has already begun, it said, in part because the war in Iran and resulting Strait of Hormuz blockade means that at times physical inputs simply do not arrive. Every country is now being forced past its preferences and old habits, because price elasticity isn’t working in the face of these physical constraints. Plants are shutting down, flights are being canceled, and entire sectors are slowing because fuel or feedstocks simply aren’t available. That’s scarcity: real, immediate, and unevenly distributed.
Here’s what should command attention: Even in the face of one of the largest supply shocks in modern history, benchmark prices don’t fully reflect the strain. The system is adjusting through rationing first, not price alone. These adjustments start at the edges — emerging markets priced out, petrochemical plants cutting runs, airlines trimming routes — and then spread inward.
Countries have been planning for this moment since 2015, they just didn’t realize it at the time. They wrote down their plans for relying less heavily on fossil fuels in their Nationally Determined Contributions in the Paris Agreement’s climate negotiation process. These are now roadmaps for navigating the present market.
While the oil system rations scarcity, the climate solutions industry has spent 20 years preparing for exactly this moment. Companies have been relentlessly driving down costs, scaling manufacturing, building global supply chains, and standardizing deployment, not in anticipation of one specific crisis, but in recognition that volatility is inevitable in fuel-based systems.
China has embraced this approach better than most. China’s exports of solar, batteries, and electric vehicles surged to a record $21.9 billion in March 2026, up 70% year-on-year, 38% higher than February 2026. China didn’t just build capacity for its own transition. It built enough to supply the world. Countries that spent the last decade slow-rolling the transition with pilot projects are now desperate for solutions at scale.
The transport electrification lever
Transport electrification is the single biggest lever in the demand displacement story. Vehicle electrification had already removed roughly 1.5 million barrels per day from global oil demand in 2025, a number that would have looked like fantasy a decade ago. The world is on track to offset 6 million barrels of oil per day by 2030 — more than any other single technology or efficiency measure on the board.
We are now on track to deploy 200 million cumulative EVs on the road by 2030, each with a lifetime of 15-plus years, which will lead to permanent demand destruction. And again, China is a huge part of this story. The country’s manufacturing scale has already broken the cost barrier. Last year, China exported 2.6 million EVs; that number will double this year. This dislocation is accomplishing what years of climate policy struggled to do — and once started, no one goes back.
The efficiency imperative
Energy efficiency is the most unglamorous megaproject of the moment, and arguably the most consequential. Across buildings, transport, and industry, aggressive deployment of technologies that are already cost effective and available at scale could eliminate roughly 5 million barrels per day of oil demand. Insulation, heat exchangers, variable-speed motors, building codes: They exist, they work, and they pay for themselves.
And yet efficiency programs have been perpetually under-resourced, treated as administrative overhead rather than strategic infrastructure. There’s no ribbon-cutting moment for a retrofitted building, no geopolitical narrative around the painstaking work done on global building codes — until now.
Today efficiency is no longer about savings. It’s about the ability to make it through rationing. No country can afford to ignore its share of a 5 million barrel per day opportunity.
Rationing forces a pivot
Oil’s role in electricity generation has already been largely squeezed out — but rationing is finishing the job. That remaining slice of oil-fired power generation, which is roughly 1 million barrels per day, can be displaced by finally deploying solar and battery storage at scale.
The harder problem sits one layer deeper. Steel, cement, and chemicals — the foundational industries of the physical economy — represent another 0.5 million barrels per day of oil reliance, and they don’t yield easily.
Decarbonizing them requires rebuilding process chemistry from the ground up: electric arc furnaces, novel kiln technologies, entirely new feedstock chains. The capital cycles are long and the commercial incentives have historically been lukewarm. But rationing has a way of focusing the mind. This is where government intervention becomes not optional but essential.
When oil gets tight and starts rationing access, countries have to pivot. Oil systems require continuous inputs — extraction, transport, refining, distribution — all vulnerable to disruption at every link in the chain.
Clean energy systems, in contrast, are front-loaded. Once built, they produce energy locally, predictably, and without fuel price volatility. Sunlight doesn’t pass through the Strait of Hormuz. There’s no chokepoint for electrons generated on your own grid.
Rationing clarifies choices. If you’re a country repeatedly exposed to fuel shocks, you diversify. If you’re a business facing volatile input costs, you stabilize them. If you’re a consumer getting squeezed, alternatives stop looking optional. They become a focus of political organizing which then makes their prioritization inevitable.
Jigar Shah is the co-host of the Open Circuit and Energy Empire podcasts, as well as the co-managing partner of Multiplier. He is the former Director of the Loan Programs Office for the U.S. Department of Energy. The opinions represented in this contributed article are solely those of the author, and do not reflect the views of Latitude Media or any of its staff.
