The size and scope of the changes happening throughout the world’s energy sectors are very hard to miss. Global energy spending surpassed $3 trillion in 2024, with almost exactly $2 trillion devoted to developing clean energy technologies and infrastructure, nearly double what is currently going into fossil fuels.¹ At the same time, renewable energy is gaining an ever-stronger foothold in the marketplace. The International Renewable Energy Agency reported that 91 per cent of all newly developed utility-scale renewable projects now produce electricity at a lower cost than the least expensive fossil fuel alternative.²

The level of renewable installation globally reached historic highs in 2023, with solar photovoltaic technology accounting for most of the new capacity. In China alone, more new solar capacity was installed in one year than existed globally at the end of 2015, which illustrates the expanding economies of scale in deploying energy infrastructure.³

The driving force behind this shift is not solely government environmental policy, but structural economics, energy security, investor behaviour and technological advancement. Solar modules have fallen in price by roughly 97 per cent since 2010, while battery storage prices have dropped more than 90 per cent over the same period.⁴ Meanwhile, global electricity consumption has been growing at around 2 to 3 per cent a year, driven by industrial use, electrification and digital infrastructure such as AI-enabled data centres.

The economics have already shifted

One of the most important factors driving the energy transition is economics rather than ideology. Over the last ten years, prices for renewable energy have dropped significantly, changing how money is invested all over the world.

Capital cost reduction

The worldwide average price per kilowatt hour for electricity generated by large-scale solar was 85 per cent lower in 2022 than in 2010. Onshore wind saw a 55 per cent reduction over the same period.⁵ Offshore wind also saw cost reductions, but at a slower rate given higher infrastructure costs. In many areas, solar is now the cheapest way to generate electricity, often at less than $40 per megawatt hour.⁶

Scale and technology improvements

Those reductions were largely driven by manufacturing scale, primarily in Asia, along with improved panel efficiency, wind turbine design and optimised supply chains. Since 2010 solar capacity has grown more than twentyfold, and each doubling of installed capacity has historically brought a cost reduction of about 20 to 25 per cent.⁷

One of the most important factors driving the energy transition is economics rather than ideology.

Market competition

Many governments now find that new renewable installations are cheaper to build than new fossil fuel plants, regardless of subsidies or carbon pricing. The International Energy Agency reports that more than 90 per cent of new renewable capacity added globally is cheaper than comparable fossil fuel generation on a levelised cost basis.⁸

This shift means renewable projects are increasingly financed through long-term contracted revenue rather than exposure to fuel price movements. Investment in global clean energy is expected to be roughly double that in fossil fuels, and the total investment required to meet net zero goals is estimated at approximately $9 to $10 trillion a year by 2050.⁹

The continuing role of fuels

Despite the growth of renewables, liquid fuels remain at the core of energy systems for sectors that face structural barriers to electrification.

Energy density limitations

Aviation, shipping and heavy trucking will continue to need liquid fuels, because there are basic limits to how much energy can be packed into a given mass. Jet fuel contains roughly fifty times more usable energy per kilogram than lithium-ion batteries. Full electrification of transport may eventually become viable, but not within our planning horizon.

Infrastructure dependency

The existing fossil fuel infrastructure is vast. Alongside more than 1.4 million kilometres of pipelines, there is an equally large network of refineries, storage and logistics built out over decades.¹⁰ Replacing it would require tens or hundreds of billions of dollars and many years.

Demand persistence

Global oil demand was projected to exceed 100 million barrels a day until the middle of the decade, even in accelerated transition scenarios.¹¹ Air travel demand is projected to grow 3 to 4 per cent a year through 2030, so efficiency gains will be partly offset by growth.

Transitional fuels

Advanced biofuels and sustainable aviation fuels are developing. Sustainable aviation fuel can deliver lifecycle emissions reductions of up to 80 per cent against conventional jet fuel, depending on feedstock,¹² but represents only about 1 per cent of aviation fuel consumed today. The scale-up challenge is considerable.

Energy security has been redefined

Energy security was historically about availability and cost. After the volatility of recent years, the definition has widened.

Reliability of supply

The period from 2021 to 2023 saw historic volatility in energy markets, and the resulting price shocks were among the most significant contributors to global inflation. European natural gas prices rose by more than 300 per cent at their peak.¹³

Flexibility of the system

Modern systems require better forecasting of renewable availability, greater flexible dispatch capability and integrated approaches to grid operations.

Ability to adapt infrastructure

Global investment in grid upgrades is projected to grow from about $330 billion a year today to over $600 billion a year by 2030,¹⁴ and storage capacity is expected to grow more than tenfold by 2030 under existing policy commitments.

Technology as a practical enabler

Operational efficiency

Predictive maintenance is estimated to deliver cost savings of up to 25 per cent and to reduce industrial downtime by up to 50 per cent.¹⁵

Monitoring of systems

Digital technologies enable real-time emissions tracking, automated reporting and greater supply chain transparency, capabilities that will be increasingly required as regulation grows.

Optimisation of costs

Annual savings potential for the global energy system from digitalisation could reach approximately 5 per cent, mostly from improved efficiency and better coordinated operations.¹⁶

A more demanding environment for investment

Global assets tied to environmental, social and governance criteria were forecast to exceed $50 trillion by 2025, more than a third of all professionally managed assets,¹⁷ and almost 80 per cent of institutional investors now use such risk assessments in their investment decisions.¹⁸ Investors increasingly require disclosure of baseline emissions, of how capital will be allocated towards transition goals, and audited reporting aligned with emerging international standards.

Evolving relationships with clients

Regulation is requiring clients to report their own emissions in detail, including across supply chains. As a result the role of an energy supplier has expanded well beyond selling energy: suppliers now help clients meet reporting obligations, identify opportunities to reduce consumption, and switch to cleaner sources where it makes commercial sense. The relationship is moving from commodity seller to strategic partner, particularly in energy-intensive industries.

Constraints and the reality of progress

Grid connection capacity

The volume of solar and wind seeking grid access has caused congestion, delaying deployment in several countries. Developers may wait more than five years for a large-scale connection.

Long-duration storage

Battery prices have fallen sharply, but technology for storing electricity over extended periods remains underdeveloped, which is a barrier to reliable renewable-based systems.

Investment required

Annual investment across the global energy system must reach at least $4 to $5 trillion a year through 2030 to stay consistent with net zero targets.¹⁹

Regulatory disparity

Differences in policy between jurisdictions continue to send inconsistent investment signals, particularly on carbon pricing and permitting.

Execution defines leadership

A new reality has emerged as the world enters an era of unprecedented growth and investment in renewable energy and decarbonisation. It may be too early to name winners and losers, but the companies that execute their strategies successfully will lead one of the largest structural investment shifts in modern economic history.

For companies in fuel supply and energy distribution, success will depend on demonstrating operational reliability and commercial discipline while integrating sustainability into every part of the business.

References

1. International Energy Agency, World Energy Investment 2024.
2. IRENA, Renewable Power Generation Costs 2024.
3. International Energy Agency, Renewables 2024.
4. Our World in Data, solar and battery cost declines.
5. IRENA, Renewable Power Generation Costs 2022.
6. Lazard, Levelized Cost of Energy Analysis.
7. International Energy Agency, Solar PV learning curves.
8. International Energy Agency, clean energy competitiveness.
9. McKinsey, The Net Zero Transition.
10. BP Statistical Review of World Energy and IEA infrastructure data.
11. International Energy Agency, Oil Market Report 2023.
12. United States Department of Energy, sustainable aviation fuels.
13. World Bank, Commodity Markets Outlook.
14. International Energy Agency, Electricity Grids and Secure Energy Transitions.
15. Deloitte, predictive maintenance insights.
16. International Energy Agency, Digitalisation and Energy.
17. Bloomberg Intelligence, ESG assets forecast.
18. PwC, Global Investor Survey.
19. International Energy Agency, Net Zero Roadmap update.

As the phased implementation of European Union sustainability and governance reforms progresses, the direction of travel is becoming clearer. Some rules are already in effect, while others are only beginning to bite. Early impacts are now being felt across the maritime sector, not uniformly, but noticeably.

For shipping and bunkering businesses operating from the United Arab Emirates and the wider Middle East region, these developments are more than background noise. They are changing how voyages are planned, how contracts are written, and how risk is assessed. Compliance is essential, but the key differentiator lies in how proactively firms respond, and how clearly that preparedness is conveyed to clients and stakeholders across multiple jurisdictions.

Carbon costs are now real

The expansion of the EU Emissions Trading System to cover maritime transport has moved from policy to practice. Since January 2024, shipping companies have been required to account for a portion of emissions on voyages linked to the European Union. That share increased to 70 per cent this year and will rise again in 2026. At the same time, the FuelEU Maritime Regulation came into force in January 2025, requiring ships to progressively reduce greenhouse gas intensity, starting with a 2 per cent cut and with further tightening to follow.

For operators based in the Middle East, particularly those calling at European ports or bunkering through Fujairah, the implications are immediate. Fuel strategies are evolving, allowance costs are reshaping voyage economics, charterparty clauses are under review, and carbon cost-sharing is emerging as a commercial discussion point.

These regional rules build on a wider regulatory baseline. The International Maritime Organisation already requires global compliance with the Carbon Intensity Indicator and the Energy Efficiency Existing Ship Index, and is working towards a new fuel standard and pricing mechanism for carbon emissions later this decade.

But while the International Maritime Organisation sets the floor, the European Union is now setting the ceiling, with rules that create direct cost exposure, apply extraterritorially based on voyage activity rather than flag, and advance on a faster timeline. As a result, operators trading into Europe face a clear shift from technical compliance to regulatory cost management.

Carbon borders: tighter rules, rising risk

The Carbon Border Adjustment Mechanism remains in its transitional phase, but emissions reporting obligations are already live for importers of certain high-emission goods such as steel, fertilisers and aluminium, with financial charges taking effect from 2026.

While the mechanism does not regulate shipping services directly, maritime firms in the region involved in logistics or customs are increasingly exposed. Those handling or clearing affected goods into the European Union must navigate new documentation, emissions declarations and authorised importer procedures, including emissions registration and reporting protocols.

Even minor delays in emissions reporting can cause hold-ups at the border. Enforcement rests with individual customs authorities, and implementation to date has been uneven. For firms in the United Arab Emirates operating from free zones or acting as intermediaries, strong internal processes will be key to avoiding disruption.

Sustainability reporting is no longer optional

The Corporate Sustainability Reporting Directive now applies to large European businesses. Its companion, the Corporate Sustainability Due Diligence Directive, is pending but will require member states to establish national supervisory frameworks, and is expected to apply to large non-European companies with significant turnover in the bloc.

Maritime operators in the region are already seeing the commercial impact. Sustainability clauses are increasingly common in charterparties, procurement contracts and financing agreements, while due diligence expectations are now shaped as much by client and lender standards as by regulation. This shift is particularly visible in tenders, requests for proposal and refinancing mandates involving operations that face Europe.

For operators and service providers with clients in Europe, demonstrating structured governance is fast becoming essential. That includes emissions monitoring, labour standards oversight and supply chain risk mapping, where proactive documentation can offer a competitive edge.

Sanctions: a moving target

The sanctions regime continues to expand in response to geopolitical developments, especially the conflict between Russia and Ukraine, and further measures are expected, focusing on shadow fleets, transhipment practices and circumvention strategies.

While sanctions regulations have direct effect across the bloc, enforcement is the responsibility of individual member states, so scrutiny and follow-through still vary by port and jurisdiction. A directive adopted in April 2024, which member states must implement by May 2025, aims to bring greater consistency by introducing minimum criminal penalties for serious breaches.

For fleet managers and bunkering providers in the Middle East, particularly in key transhipment hubs such as Fujairah, Sohar and Jeddah, vigilance is essential. Contractual clarity around sanctions compliance should now be boilerplate across charterparties and fuel contracts. Screening systems must be robust and up to date, supported by clear internal protocols and documented audit trails. The question is no longer whether regulators will act, but how soon.

Supply chain risks

Two further measures are increasing scrutiny over supply chain inputs. The Deforestation Regulation, in effect since December 2024, prohibits market access for goods linked to deforestation. A separate regulation banning products associated with forced labour is expected to take effect in 2027 and to establish an authority empowered to block goods at borders.

While neither law directly targets maritime services, both carry real implications for operators in the region. Carriers or ports handling non-compliant goods may face delay, disruption or reputational risk if scrutiny is triggered at entry points.

Where cargo is consolidated in Middle East ports, firms should consider upstream due diligence, declarations of compliance, and embedding sustainability terms into standard trading documentation. Enforcement increasingly targets entire supply chains, not just importers.

Oakfield outlook

The European regulatory agenda is far-reaching, but it remains uneven in both implementation and enforcement. For shipping and bunkering firms in the region, this is a time for measured readiness. Strengthening internal systems, reassessing contractual allocations of risk and building competence in sustainability reporting will help meet rising expectations, and distinguish compliant operators as credible partners.

The first half of 2025 has tested regulatory awareness; the second will challenge operational response, where compliance is not just required, but expected.

Market commentary on Hormuz disruption typically defaults to commodity narratives: geopolitical risk, supply displacement, pricing adjustments. These frame the problem as if it were a logistics challenge amenable to routing solutions. But that framing misses the actual point of vulnerability. When chokepoint disruption forces extended voyage cycles, the market does not face a supply problem. It faces a credit problem. And credit problems, unlike supply problems, do not resolve through alternative routes or hedging positions.

The mechanics of credit deterioration

Extended voyage cycles alter the fundamental credit structures that enable maritime commerce. A 50-day passage instead of 35 does not simply add fifteen days to a business model, it fractures the assumptions underlying working capital arrangements. For participants whose credit is priced around voyage-level turnover, this creates a structural disconnect. The financier who extended credit assuming a 40-day receivable collection window now faces a 55-day exposure. That is not a marginal adjustment, it is a fundamental breach in the credit envelope.

Bunker suppliers operating as informal financiers experience this acutely. Their business model has never relied on formal credit analysis or collateral structures. Instead, they have relied on velocity and confidence. Same-day credit extension to known counterparties works when the credit window is predictable and tight. When voyages extend by weeks, velocity collapses and that informal credit structure becomes untenable. Suppliers do not become conservative because they are risk-averse. They become conservative because the model that allowed them to provide credit no longer functions.

The practical consequence is that credit lines do not simply become more expensive, they close. More selective. The secondary effect, however, is where genuine stress emerges. Smaller operators and those operating in under-served routes suddenly find themselves without access to the informal credit that has enabled their participation in maritime commerce. They are not insolvent, they are simply cut off from working capital at the moment when they most need it. Some will discuss forbearance or restructuring. Others will adjust operations in ways that compromise maintenance, crew welfare, or safety. The market did not price this vulnerability because it assumed credit would remain available.

Where contractual clarity meets market reality

The maritime industry has invested considerable effort into contractual frameworks designed to allocate geopolitical risk. War clauses, force majeure provisions, general average procedures and deviation rights all exist to provide legal mechanisms for managing disruption. These frameworks matter. Clarity around contractual protections, notice procedures and cost allocation mechanisms provides a necessary foundation for orderly market function. A well-drafted war clause gives an owner the contractual right to refuse orders, seek deviation costs and recover additional expenses. Force majeure provisions establish procedural pathways for suspension of performance. General average structures distribute extraordinary sacrifices across interested parties. In principle, clear contractual allocation should enable the market to absorb geopolitical shock.

But contractual clarity does not eliminate the underlying problem. An owner with solid contractual protections but no working capital cannot execute those protections. A bunker supplier with well-drafted credit terms still faces a broken business model when voyage cycles extend beyond the velocity that enables their operation. A smaller operator with force majeure provisions still cannot operate without access to trade finance. The legal mechanisms address risk allocation at the contractual level, but they do not address the market-level failure that emerges when credit infrastructure becomes the binding constraint. A participant can possess technically perfect contractual rights and still be cut off from the market because credit providers have withdrawn access. In that scenario, contractual clarity becomes almost irrelevant.

A participant can possess technically perfect contractual rights and still be cut off from the market.

The confidence question

Vitol and Trafigura offer competing market views, but both speak to the same underlying reality. Vitol argues that the market underprices operational stress on smaller operators. Trafigura argues that sophisticated participants can extract value from dislocation. Both are correct. The tension between these observations reveals the actual problem: the market does not face a binary choice between disruption and adaptation. It faces a confidence gradient. Well-capitalised traders with direct bank relationships can absorb extended cycles and will navigate the contractual and operational landscape effectively. Smaller operators relying on informal credit cannot. The Strait event does not create equivalent stress across market participants, it creates differentiated access to the credit that enables operations.

Viewed from that perspective, the operational costs are secondary. War risk premiums, crew danger pay and route deviations are all real costs. But they affect all participants. The differentiator is credit access. Participants with secure funding arrange for expensive operations. Participants without secure funding retreat from the market or accept distressed terms. That dynamic is not captured in price discussions because it reflects a structural feature of the market, not a cyclical adjustment.

What resilience actually requires

Maritime industry resilience is often measured by its capacity to route around obstacles. The Suez blockage, Russian sanctions and major trading house collapses have all been absorbed by the industry. This adaptive capacity is real. But it conceals an assumption that tends to break under genuine stress: that credit infrastructure will remain stable as operational parameters shift. That assumption has no foundation. Credit is forward-looking. When uncertainty spreads about whether counterparties will collect receivables within expected timeframes, credit contracts. Not because risk has necessarily increased, but because visibility has deteriorated. Banks retreat. Suppliers become selective. The informal financial structures that enable smaller participants to function simply stop functioning.

True resilience would require that credit providers maintain commitment to the market through operational turbulence. But maintaining that commitment requires confidence that the disruption is temporary and manageable. When uncertainty becomes structural rather than cyclical, confidence erodes. And confidence, once eroded, takes time to rebuild. In the interim, the market does not cease to function, but it functions at a different level. Smaller participants are squeezed out or forced into restructuring. Pricing reflects not the physical disruption but the credit differentiation that emerges from it.

The market structure implication

The most consequential outcome of extended Hormuz disruption would not be the displacement of barrels. It would be the permanent shift in credit structures that govern maritime finance. If informal credit provision becomes unreliable during periods of uncertainty, the market will adjust by shifting toward more formalised, collateralised arrangements. This typically means consolidation. Smaller operators become dependent on larger players. Participation becomes concentrated among those with access to institutional funding. The industry adapts, but it adapts into a different structure.

In maritime, market disruption typically manifests as an operational challenge. But viewed through the lens of credit and confidence, the real disruption is structural. The commodity will move. What is at risk is the architecture through which it moves. Contractual frameworks provide necessary guardrails, but they cannot substitute for functional credit markets. Preserve confidence in that architecture, and the market adjusts to almost any operational constraint. Lose it, and no amount of alternative routing or contractual protection prevents the emergence of genuine market dislocation.