01/04/2026
There are moments in the global energy market when shifts happen quietly—almost unnoticed—until suddenly they are impossible to ignore. This is one of those moments.
In the weeks leading up to April, the last cargoes of liquefied natural gas (LNG) from the Gulf began arriving at their destinations. They had left before tensions escalated into direct conflict involving the United States, Israel, and Iran. Since then, a crucial supply line—one that accounts for roughly a fifth of global LNG production—has effectively gone still.
For countries that rely heavily on LNG, especially for electricity generation, the consequences are now unfolding in real time.
The immediate reaction has been a scramble. Wealthier economies are doing what they typically do in times of scarcity: paying more. Utilities across developed Asia and parts of Europe are securing whatever supply they can, even at significantly elevated prices. The logic is simple—higher costs are preferable to power shortages.
But elsewhere, the response has been far less manageable.
In several developing economies, governments are being forced into difficult trade-offs. Schools are shortening their hours. Businesses are being asked to reduce operating days. In some cases, electricity itself is being rationed. These are not policy choices made lightly—they are symptoms of a system under strain.
What makes this moment particularly striking is the direction in which many countries are now turning.
Coal, long treated as the fuel of the past, is making a comeback.
In recent days, countries that had been actively phasing it out are reversing course. Japan and South Korea have relaxed restrictions on older coal-fired power plants—facilities that were meant to be retired as part of broader decarbonization efforts. Elsewhere, demand for coal has surged as countries look for alternatives that are immediately available and relatively stable.
The market has responded quickly. Prices for benchmark coal exports from Australia have risen sharply—up about 25% since late February. What was once a declining commodity is now, once again, in demand.
The reason is not ideological. It is practical.
When LNG becomes scarce or too expensive, power systems fall back on what they can access. Coal, despite its environmental cost, remains one of the most dependable options in terms of supply and infrastructure. In moments like this, reliability tends to outweigh long-term considerations.
Still, the implications go beyond energy alone.
Higher fuel costs feed directly into electricity prices, and from there into the broader economy. Manufacturing becomes more expensive. Logistics costs rise. Inflationary pressure builds. What begins as a disruption in one part of the energy system gradually spreads outward.
At the same time, this shift exposes a deeper tension that has been building for years.
The global energy transition has been framed as a steady, forward movement—away from coal, toward cleaner alternatives. LNG has often been positioned as a bridge in that transition. But bridges depend on stability. When geopolitical risk interrupts supply, that pathway becomes less certain.
What is happening now suggests that energy security still sits above everything else.
When supply is threatened, countries do not necessarily choose the cleanest option. They choose the one that keeps the lights on.
That raises a broader question about what comes next.
If disruptions of this scale become more frequent, the structure of global energy markets may begin to change. Countries could move toward greater self-reliance, diversify their energy sources more aggressively, or maintain backup systems—like coal—that they had intended to phase out.
Whether this moment proves temporary or more lasting is still unclear. Energy markets have a history of reacting sharply in the short term, only to stabilize later. But they also have a tendency to remember shocks. Policy decisions made during crises often outlive the crises themselves.
For now, the picture is relatively clear.
A key supply of LNG has been disrupted. Prices are rising. Coal is filling the gap. And the balance between climate goals and energy security is being tested once again.
It is a reminder that the global energy system, for all its complexity, remains highly sensitive to geopolitical events—and that when those events occur, the transition to a cleaner future can slow, stall, or even briefly reverse.
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Source:
The Economist – “Coal is back in fashion” (March 31, 2026)
An LNG crunch is good news for the world’s dirtiest fuel
