According to the economist, the conflict causes instability in the oil market, which accelerates the search for alternative energy sources and puts China in a privileged position as a leader in the production of renewable technologies.
From the beginning of the conflict, Paul Krugman was skeptical about its impact on the world economy, pointing to the risk of stagflation in the event of prolonged hostilities. On his Substack blog, the Nobel Prize winner emphasized that China can significantly benefit from the current events in the Persian Gulf region. In his opinion, China's dominance in the production of infrastructure related to renewable energy sources makes the country able to meet the growing demand for clean energy in countries becoming independent of fossil fuels.
“The biggest geopolitical winner of Trump's reluctance to embrace the energy revolution will be China, which dominates the production of renewable energy infrastructure,” Krugman wrote. “Moreover, the energy future created by China will come faster thanks to the disaster in Iran,” he said on his blog.
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The oil market crisis is accelerating the energy transformation
The war with Iran and the blockade of the Strait of Hormuz, a key transport route for oil, led to a sharp increase in the price of this raw material. Experts predict that these events will accelerate the energy transformation, forcing countries to invest more intensively in renewable energy sources.
Krugman drew attention to the growing interest in technologies related to solar and wind energy and energy storage in batteries. According to the economist, China is a leader in these fields thanks to its consistent industrial policy, which has made the country a manufacturing power. “While China is strong in many industries, in electrical engineering – which includes solar panels, wind turbines, batteries and electric vehicles, the heart of the energy revolution – it has an unrivaled position.” Krugman emphasized.
Chinese dominance in clean energy
The Nobel Prize winner also drew attention to China's effectiveness in implementing new technologies in the field of renewable energy, which gives local companies an advantage on international markets. He also addressed the allegations that China only produces and exports renewable energy technologies, but does not use them itself. The economist denied these claims, pointing to the dynamic growth in clean energy consumption in China.
“Thanks to its current dominance in electrical engineering, China is gaining experience and knowledge, and in this area no other country can match it“- noted Krugman.
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The war with Iran and the role of the USA
President Donald Trump has repeatedly emphasized that the United States should maintain its position as the world's economic leader, overtaking China. According to Krugman, however, a war with Iran could have the opposite effect, weakening trust in the US and driving international partners towards the Chinese market.
“Once America frees itself – if at all – from its obsession with fossil fuels, China's lead in renewable energy production will be impossible to make up.” – summed up the Nobel Prize winner in economics.
The above text is a translation from American edition of Business Insider
