The global oil and petrochemical industry is gathering in Houston this week.

The global oil and petrochemical industry is gathering in Houston this week. Unsurprisingly, the war in the Middle East is shaping the debate. The sense of unease is growing.

Yes, market shares are shifting. Producers outside the Gulf region – including in the United States – stand to benefit. The profit potential is enormous.

And yet, there is little sense of optimism.

Because the more important point is this: the system is becoming more fragile.

This is where another effect comes in – one that is being discussed in Houston, even if often indirectly: demand destruction.

Industry and governments are reacting to uncertainty. Alternatives become more attractive when fossil energy turns into a risk.

This creates a countervailing dynamic:

The crisis supports demand today and drives up revenues.
At the same time, it sets in motion forces that will undermine that demand tomorrow.

The more uncertain fossil energy becomes, the stronger the incentive to replace it.