The Uncomfortable Reality of Fossil Fuels

Recent geopolitical escalations in the Middle East, as well as disruptions to key trade routes such as the Strait of Hormuz, have once again made it clear to the global public just how heavily the global economy continues to depend on petroleum products. When shipping routes are threatened and oil prices spike, markets around the world react accordingly.

At the same time, cheap oil—driven, for example, by the accelerated expansion of U.S. production under Donald Trump—proves to be a double-edged sword. On the one hand, it could boost the economy and ease the burden on consumers. On the other hand, it acts as an economic brake on the expansion of alternative energies: The cheaper gasoline and fossil fuels are, the lower the financial incentive for consumers and industry is likely to be to switch to more environmentally friendly, yet often investment-intensive technologies.

The Illusion of a Pure Electricity Transition

Even if the political will were there, could alternative energies currently fully meet humanity’s enormous energy needs? Media coverage focuses almost exclusively on wind turbines, solar farms, and electricity generation—renewables accounted for 32% of electricity generation in 2024 and are expected to continue growing, according to the International Energy Agency (IEA) (Source: IEA, April 17, 2026). In reality, however, electricity accounts for only about 21 percent of total final energy consumption globally (Source: IEA, April 17, 2026). What is decisive, however, is this primary energy demand—that is, the actual total energy demand—which worldwide continues to be met predominantly by fossil fuels (coal, oil, gas).

This physical discrepancy explains why Europe is still not energy-independent despite extensive investments of billions in renewable energy and grid expansion. European heavy industry remains deeply tied to fossil fuels. Furthermore, Europe has scaled back its domestic production of fossil fuels in recent years at a much faster rate than actual demand has declined. The resulting gap inevitably had to be covered by imports. In 2024, for example, Germany had to import 68 percent of its energy needs, according to the Working Group on Energy Balances (AGEB) (Source: AGEB, April 17, 2026).

Where does this enormous appetite for energy come from?

Globally, energy demand continues to grow rapidly. The drivers are diverse: on the one hand, strong economic growth in developing and emerging economies, particularly in Asia (especially China and India), which account for the majority of the global increase in demand. On the other hand, there are new, highly complex technologies in industrialized nations, such as the substantial electricity requirements of data centers and artificial intelligence.

To meet this immense and, above all, reliable (base-load capable) demand, nuclear energy is currently experiencing a renaissance. It is increasingly coming into focus as a CO₂-free alternative—not least due to technology companies like Amazon, Google, and Microsoft, which are specifically investing in startups for small modular reactors (SMRs) to operate their AI data centers independently of weather fluctuations.

Implications for Investors

This complex situation highlights a fundamental, often uncomfortable truth: Global dependence on fossil fuels will persist for a long time to come, despite the ambitious energy transition. Highly industrialized but resource-poor regions such as Europe and large parts of Asia remain structurally vulnerable.

Recent geopolitical crises have revealed just how dependent the global economy is on fossil fuels from the Middle East. If conflicts escalate in these primary export regions and transport routes are threatened, this directly impacts import-dependent countries in the form of rising costs, imported inflation, and economic losses.

Even countries like the United States, which have now risen to become net energy exporters and the world’s largest oil producers, cannot completely escape these price dynamics. While the U.S. economy is physically more resilient to direct supply bottlenecks due to its extensive domestic production, oil remains a global commodity. If world market prices rise as a result of shocks in the Middle East, these higher prices will have an immediate impact on fuel costs and thus on U.S. inflation. This shows that a complete decoupling from the price cycles of global fossil fuel markets remains illusory even for self-sufficient nations.

For investors, this means one thing above all: patience and a willingness to stick to a long-term investment strategy are required. The reality is that global oil dependence is likely to remain just as persistent and enduring as the unresolved, deep-rooted conflicts in the Middle East.

This is a marketing communication from Kathrein Privatbank Aktiengesellschaft within the meaning of the Securities Supervision Act 2018 and is provided for informational purposes only. This information is intended to provide a general overview of current market data and Kathrein’s market opinion and does not constitute a direct or indirect recommendation for a specific investment strategy in the sense of a financial analysis. When investing in securities, price fluctuations due to market changes are possible at any time. Information and representations regarding past performance do not allow for reliable conclusions about future results. Despite careful research and compilation, no liability or guarantee can be assumed for the accuracy of the data.