When Oil Prices Surge, Regions Cannot Afford to Stand Still

States and regions, whether they are producing or importing fossil fuels, are where the realities of the energy system are felt most directly. They host extraction sites, refineries, power infrastructure, workers, supply chains, and communities. They also carry many of the consequences when fossil fuel markets become volatile: higher costs, pressure on public budgets, uncertainty for households and businesses, and growing exposure to economic shocks. That is why today’s context does not weaken the case for transition. It strengthens it. 

For fuel-importing regions, oil and gas price spikes can quickly translate into higher energy costs, supply pressure, and political demands for emergency subsidies. That makes the case for cleaner, more secure, and more locally rooted energy systems more compelling. 

Subnational governments do not control everything, but many do have influence over planning, infrastructure, industrial development, public transport, electrification, and support for renewable deployment. These are not abstract climate actions. They are central components of economic resilience and energy security.

For fossil fuel-producing regions, the challenge looks different but is no less urgent. Price surges may bring temporary revenue gains, but windfalls are not the same thing as long-term stability. 

Regions that depend heavily on fossil fuel production still face the risk of future decline in demand, fiscal overdependence, and economic disruption if they do not use periods of strength to prepare for change. 

 

The question is not whether a boom feels comfortable in the moment. It is whether a more resilient and sustainable future is being built. Some subnational governments are already showing what this can look like. Scotland has established a Just Transition Fund to support communities and projects linked to the net-zero transition. East Kalimantan in Indonesia has created a Regional Consultation Forum bringing together government, workers, companies, academia, media, and civil society to help shape transition planning. In Brazil, states including Paraná, Entre Rios and Santa Catarina have moved to restrict fracking. Quebec has banned oil and gas exploration and production entirely. In India, Uttar Pradesh’s solar policy has helped accelerate rural solar uptake, showing how subnational energy policy can support a different development path.

These examples are not identical, nor should they be. States and regions start from very different places. Some are trying to reduce dependence on imported fossil fuels. Others are trying to reduce dependence on producing them. Some are already moving. Others are only beginning. But they are all confronting the same underlying reality: fossil fuel dependence leaves regions exposed, and that exposure is becoming harder to ignore.

This transition is not without challenges. One of the hardest issues is economic diversification in regions that depend on fossil fuel revenues and jobs. There are still too few strong examples of success, especially for subnational governments working with limited powers and fiscal mobility. That is precisely why the issue needs more practical attention.

National governments and international agreements remain essential. But they are not sufficient on their own. 

The success of the transition will depend on whether the regions at the centre of energy systems can anticipate risks, seize opportunities, and act early enough to shape their own futures. 

 

That is why the Under2 Coalition and the International Institute for Sustainable Development have developed a toolkit for subnational governments on transitioning away from fossil fuel production. It is not a formula, and it does not pretend that every region faces the same choices. But it is meant to support first movers — those already asking what practical steps they can take now.

High oil prices do not remove the case for transition. They sharpen it. For regions that import fossil fuels, they underline the value of cleaner and more secure alternatives. For regions that produce them, they are a reminder that temporary windfalls should be used wisely. In both cases, the message is clear: the most resilient regions will be those that use today’s instability to build tomorrow’s security.