Pacific energy crisis looms amid Middle East war
War in the Middle East threatens to derail diesel-dependent Pacific island economies; a country faces fuel import bills equal to three times its annual health budget.
Analysis shows Fiji’s annual import fuel costs could increase by 115 per cent to around US$670 million ($A978 million) from 2025 levels if oil remains at post-shock prices.
This huge increase represents almost three times Fiji’s annual healthcare budget, according to Zero Carbon Analytics.
Energy and climate researchers have found that Vanuatu’s refined oil import costs could rise by US$120 million ($A175 million), accounting for around 11 per cent of GDP.
Brent crude oil prices have surpassed US$100 ($A146) per barrel following the US-Israeli invasion of Iran and subsequent shipping disruptions in the Strait of Hormuz.
Conflict is squeezing economies around the world, but the pressures are particularly acute for small island nations that rely heavily on diesel to generate electricity.
Skyrocketing fuel costs are depleting foreign exchange reserves and risk driving countries into high levels of debt, making them vulnerable to future shocks and more dependent on foreign aid.
The crisis has accelerated the push for local clean energy production, as 80 percent of regional energy is currently dependent on imported oil.
While reducing emissions is a factor, energy security is the primary driver for these countries, which are responsible for only 0.03 percent of global conditions.
Sivendra Michael, Permanent Secretary for Environment and Climate Change of the Republic of Fiji, said clean energy will provide cheap and reliable energy.
“When our energy comes from solar, wind and other domestic energy sources, no one can cut off our supply and our exposure to oil price fluctuations and the effects of a war on the other side of the world are minimized,” Dr Michael said.
“We need our partners to support our commitment to a low-carbon transition.”
Australia, a key foreign aid and security partner of many Pacific countries, is investing $75 million in renewable energy for rural and remote communities in the Pacific and Timor-Leste.
Australia and the Pacific are set to play a key role in the 2026 United Nations climate talks; the larger country is conducting multilateral negotiations and pre-meeting leadership events in Fiji and Tuvalu.
Amy Kong, energy transition researcher at Zero Carbon Analytics, said small economies already spend large proportions of GDP on fuel imports.
“The Iranian oil crisis has exposed the fragility of small island states and their dependence on diesel,” he said.
“These are the countries that can least absorb the volatility of the market.”
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