Oil Price Volatility: A Never-Ending Rollercoaster
At EnviroInvest, we’re no strangers to the wild swings of the oil market. One of our founders, Elio D’Amato, is a regular voice on ABC Melbourne discussing the unpredictability of oil prices. As he often highlights, oil is a textbook example of a commodity market plagued by volatility — one where prices are just as easily driven by emotion and politics as by supply and demand.
The most recent example? The sharp spike in oil prices following Israel’s military strike on Iranian territory is a stark reminder that fossil fuel markets are tethered to global instability. For investors, this unpredictability isn’t just a nuisance. It’s a risk. And that risk brings into sharp focus the contrasting stability offered by renewable energy sources.
The Latest Flashpoint
At the time of writing, global oil prices jumped by more than 8% after reports confirmed that Israel had carried out a military strike on Iranian infrastructure in retaliation for what it says are threats to regional security. Brent crude, the global benchmark, at one point surged past $78 USD per barrel, with traders and analysts scrambling to reassess the risk premium embedded in Middle Eastern supply.
This price spike wasn’t about physical shortages. There were no tankers sunk or pipelines sabotaged. It was fear — the ever-present threat that escalations in the world’s most oil-sensitive region could flare into broader conflict, choking off supply or forcing Western powers into action.
And this isn’t new. We’ve seen it all before: the Gulf War, sanctions on Venezuela, the Arab Spring, attacks on Saudi refineries, Russia’s invasion of Ukraine, Israel’s war in Gaza. Each time, oil markets respond not with logic but with panic. Prices are volatile, often well beyond what fundamentals might justify.
Oil: A Market Held Hostage
The core problem is this: oil isn’t just an economic commodity. It’s a geopolitical chess piece.
More than 60% of the world’s proven oil reserves lie in politically unstable regions. The Organisation of the Petroleum Exporting Countries (OPEC), particularly the de facto leader Saudi Arabia, has long wielded its production quotas like a lever, tightening or loosening supply to manipulate global pricing. Add to that rogue states like Iran or Russia and the involvement of Western powers with their own interests, and you have a market that is essentially held hostage by global affairs.
Unlike consumer staples or industrial metals, oil trades on what might happen — not just on what is happening. That makes it uniquely vulnerable to headlines, diplomatic flare-ups, and in some cases, the whims of a single leader. Investors holding fossil fuel exposures are, by extension, tied to that uncertainty.
The Investor’s Dilemma
For traditional energy investors, this uncertainty has historically come with the promise of high returns — especially during supply squeezes. But that appeal is eroding. As more institutional capital incorporates climate risk, ESG mandates, and long-term sustainability goals, exposure to oil is becoming harder to justify.
In fact, investors are increasingly finding themselves stuck between two opposing forces: the potential for short-term gains during oil price spikes, and the longer-term risks of structural decline, stranded assets, and policy shifts toward decarbonisation.
Worse still, as geopolitical risk intensifies, oil’s price behaviour is becoming even less rational. You don’t need a war to move prices — you just need the threat of one.
The Case for Renewable Price Stability
Compare this with renewable energy, especially here in Australia. Once deployed, solar farms, wind turbines, and hydroelectric plants don’t rely on imported fuel. There are no tankers sailing from hostile regions. No cartel decides whether you’ll pay more this month than last. No presidential tweets are shaking the market.
Yes, the upfront capital costs for renewables are significant. But once those assets are operational, the marginal cost of production is essentially zero. That leads to a more stable, predictable pricing environment — not just for producers and operators, but also for consumers and investors.
Even better, renewables are not traded like global commodities. They’re localised, often contracted in advance, and increasingly integrated into national grids under long-term power purchase agreements (PPAs). The result is a sector far less prone to the kind of whiplash that defines the fossil fuel world.
The Economics Are Catching Up
Historically, critics of renewables pointed to cost as a major drawback. But that’s no longer true. The International Energy Agency (IEA) now consistently ranks solar and wind as the cheapest new sources of electricity in most regions globally. In Australia, we’ve seen record low bids for large-scale solar and battery projects, and new investment is flowing at pace.
Crucially, the cost stability of renewables is now being recognised by energy-intensive industries. From tech giants signing long-term renewable energy deals to utilities hedging their exposure through diversified clean energy portfolios, the trend is clear: predictability is the new premium.
What This Means for Environmental Investors
For those of us investing in a low-carbon future, the recent oil price spike is less a surprise than a confirmation. Fossil fuels are a gamble — one that’s tied to geopolitics, climate change, regulatory risk, and social backlash. Renewables, on the other hand, offer a more linear growth story. One where pricing is driven by innovation, deployment, and demand — not by war.
At EnviroInvest, we see this not just as a moral argument, but a financial one. The path to energy independence, price stability, and sustainable returns lies not through oil fields, but through wind corridors, solar plains, and smart grids.
The Bottom Line
Oil will always be volatile because the world it comes from is volatile. As long as energy security is tied to unstable regions and unpredictable regimes, price shocks will be part of the fossil fuel equation. But renewable energy offers something that oil never can — consistency. And in a world where certainty is in short supply, that’s a commodity investors should not ignore.
Important Information
EnviroInvest Pty Ltd ACN 685 107 957 (“EnviroInvest”) is an Authorised Representative of Daylight Financial Group Pty Ltd ACN 633 984 773 (“DFGPL”) which is the holder of an Australian Financial Services Licence (AFS Licence No. 521404).
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