BBVA Research States That Geopolitical Crises Drive Energy Diversification When Viable Technological Alternatives Exist

BBVA Research has published the report ‘Geopolitically Driven Energy Crises and Low-Carbon Diversification’, which examines how geopolitical tensions affect the global energy system. The report analyzes the relationship between geopolitical crises, oil prices, and structural shifts in the energy mix.

According to the report’s authors, “geopolitical crises do not automatically trigger energy transitions; they accelerate diversification only when economically viable substitutes exist.” The analysis adds that “price spikes alone are insufficient; transition dynamics are shaped by shifts in perceived supply risk, technological readiness, and policy responses.

BBVA Research notes that oil prices have risen sharply during geopolitical crises such as the 1973-74 oil embargo, the 1979 Iranian revolution and the 1990 Gulf War. According to the study, these episodes reflect shifts in the global energy risk environment.

“It is not the spot oil price level that appears to drive structural diversification, but the perception of sustained supply risk,” the authors note. Crisis episodes raise the expected probability of future disruptions and reshape long-term investment incentives for alternative technologies.

The report also looks at the historical development of the energy system. Despite recurring crises, fossil fuels have remained structurally dominant in global primary energy supply. According to the report, this persistence reflects the capital- and infrastructure-intensive nature of energy systems, which therefore change only very slowly.

The analysis identifies two sustained periods of decline in the fossil fuel share: after the crises of the late 1970s and since the mid-2000s. In the first case, the shift was driven mainly by the expansion of nuclear power. In the second, the growth of renewables has been supported by falling costs for technologies such as solar and wind.

“When alternative technologies are sufficiently developed and scalable, heightened fossil-fuel risk accelerates their diffusion; when they are not, diversification remains limited,” the report’s authors note.

The study identifies three channels through which geopolitical episodes affect the energy system: greater uncertainty and perceived supply risk; the redirection of innovation and investment toward substitute technologies; and public policies aimed at strengthening energy security and diversifying energy sources.