High fossil fuel prices push global shift to renewables, benefiting China

Soaring prices for gasoline, diesel and natural gas are accelerating a global shift toward renewable power and electric vehicles, strengthening China's position as the world leader in those industries. The price surge began after the United States and Israel attacked Iran on Feb. 28, prompting Iran to close the Strait of Hormuz. According to the AAA Fuel Prices monitor, the average price for a gallon of diesel in the U.S. has risen to US$6.33 from US$3.65 a year ago, while regular gasoline now costs US$4.33, up from US$3.05. These increases have driven up inflation and government bond yields and hurt the U.S. Republicans' popularity ahead of the midterm elections.

The high energy prices are pushing industries, businesses and consumers toward electrical power, particularly from renewable sources. This shift has a historical precedent from the 1973 Arab oil embargo, which sent oil prices up nearly fourfold and changed consumer vehicle choices. Today, the crisis is benefiting China, which dominates the global market for wind turbines, solar panels and electric vehicles. Chinese automaker BYD is now the world's leading producer of EVs, surpassing Tesla, and its models are common worldwide except in the United States, where 100 percent tariffs apply.

Global sales of new gasoline-powered cars fell below 50 percent for the first time in the first half of 2026, according to a Nikkei Asia report. Just five years ago, they accounted for almost three-quarters of the new-car market. The international benchmark Brent crude traded at US$106 a barrel on Friday, a 73 percent increase over the past 12 months. Electric vehicle sales in the European Union, Britain, Switzerland and Norway rose 52 percent in August compared to a year earlier, and surged 75 percent in Germany where gasoline reached the equivalent of US$10 a gallon.

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Chinese EV sales are growing rapidly in export markets, capturing 70 percent of the Mexican EV market, for instance. China also controls about 70 percent of the global market for wind-power equipment and about 80 percent for photovoltaic modules, according to the China Electric Power Planning and Engineering Institute. Under former president Donald Trump, the United States rolled back federal support for renewables and electric vehicles while easing regulations for fossil fuels. Emissions constraints were removed and millions of hectares of federal land were opened for drilling, and funding for EV charging points was cut.

The United States solidified its role as the world's largest oil producer and a net energy exporter under those policies. However, EV sales in the country now represent less than 7 percent of total sales. Trump's opposition to wind farms continues, and clean-energy talent is increasingly moving to China, as well as to South Korea and Europe. Analysts say it will be difficult for any future U.S. president to gain a leadership position in zero-emissions products like electric vehicles now.

With files from The Globe and Mail