Geopolitical Crisis Shatters Renewable Energy Transition Illusions as US, Norway, and Canada Ramp Up Fossil Fuel Investments

The war clouds over the Strait of Hormuz are reshaping the global energy landscape.

The US-Iran conflict has exposed the global economy's deep dependence on fossil fuel supply chains. The rapid decarbonization route long promoted by Western governments is facing a reality check. Major oil-producing countries such as the United States, Norway, and Canada are competing to increase oil and gas investments, and the pace of the renewable energy transition is facing a fundamental reassessment.

US shale oil producers have significantly increased capital expenditures. The US Energy Information Administration (EIA) expects US crude oil production to rise to a record 14.21 million barrels per day by the end of next year. Norway has announced the restart of three North Sea natural gas fields that have been closed for nearly thirty years, with state-owned company Equinor committing to invest $6 billion annually to maintain production. The Canadian federal government and the province of Alberta have reached an agreement on energy policy, significantly improving the investment environment for the oil and gas industry.

Behind these moves lies a common logic: the priority of energy security is overriding climate goals. Any supply disruption in the Strait of Hormuz would quickly transmit to global oil prices, inflation, and energy costs. This structural vulnerability has led governments to realize that renewable energy alone cannot guarantee energy security.

US Shale Oil: From Contraction to Aggressive Expansion

The shift in the US shale oil industry has been the most dramatic. Earlier this year, as oil prices fell below $60 per barrel, Continental Resources once planned to suspend new drilling operations in North Dakota. However, the situation has completely reversed as oil prices soared.

Harold Hamm, owner of Continental Resources and a veteran oil and gas operator, told the Financial Times that he plans to increase capital expenditures for 2026 by approximately $300 million to $2.8 billion. "We do not believe oil prices will return to pre-Iran war levels," Hamm stated. Several companies, including Diamondback Energy and Continental Resources, are expanding drilling operations.

Data from energy consulting firm Enverus shows that listed US shale oil producers raised their capital expenditure forecasts in their first-quarter earnings reports by nearly $500 million compared to expectations from three months prior. EIA data indicates that low oil prices at the beginning of the year caused US production in the first quarter to slip to 13.53 million barrels per day. However, with prices recovering significantly, production is expected to climb to a historical peak of 14.21 million barrels per day by the end of next year.

Norway: Climate Advocate Pivots to Production Expansion

Norway's transformation is particularly striking. As one of the countries most actively advocating for climate policies and renewable energy globally, the Norwegian government recently announced plans to restart three North Sea gas fields—Albuskjell, Vest Ekofisk, and Tommeliten Gamma—by 2028. These three fields have been shut down for nearly thirty years.

Norwegian Minister of Petroleum and Energy Terje Aasland recently stated clearly: "We will develop rather than dismantle activities on the continental shelf." Equinor plans to invest $6 billion annually before 2035 to maintain production and prevent output declines. Data shows that Norway's daily oil equivalent production in the first quarter of this year reached 2.31 million barrels, a year-on-year increase of nearly 9%.

This policy shift has sparked criticism domestically. Lars Haltbrekken of Norway's Socialist Left Party condemned the move as "outright greenwashing," arguing that it undermines Norway's climate goals and will delay Europe's departure from fossil fuels.

Canada: Policy Easing Reignites Investment Confidence

Canada has also benefited from this global reassessment of energy security. Rising global oil prices, the expansion of export infrastructure such as the Trans Mountain Pipeline, and the agreement between the federal government and Alberta on carbon pricing and energy policy have jointly driven the recovery of investment in Canada's oil and gas industry.

According to Reuters, Nick McKenna, President of ConocoPhillips Canada, stated that the agreement between the federal government and Alberta has significantly improved the risk profile for oil and gas investment in Canada. For a long time, oil and gas companies have criticized federal regulatory and environmental policies for constraining industry development. This agreement is cautiously viewed by the industry as a positive signal.

Canada holds the third-largest proven oil reserves in the world, after Venezuela and Saudi Arabia. Against the backdrop of escalating geopolitical tensions, its vast resource reserves and political stability are becoming increasingly important. Major producers are actively returning capital to shareholders through dividends and stock buybacks, and the discount of West Canadian Select crude relative to US West Texas Intermediate crude is narrowing.

The policy shifts in these three countries reflect a deeper structural reality: the global economy's dependence on fossil fuels is far more entrenched than the transition narrative suggests. Once the supply risks in the Strait of Hormuz materialize, their impact on global oil prices, inflation, and energy costs will be immediate and widespread, causing a significant shift in the balance between energy security and climate goals for governments worldwide.