Once Again, Energy Is Power

At the start of this decade, optimism abounded. Environmental, social and governance issues, and net-zero dominated many government energy policy agendas, and capital markets were reorienting around decarbonization. It was broadly assumed that the world was moving beyond traditional energy security risks of the past, thanks to more abundant and diversified energy supplies and optimism about a transition away from oil and gas. In 2026, energy has reemerged as a central force shaping our world—both a geopolitical weapon and an economic fault line.

The evidence has been unmistakable in just the first months of this year. Iran has used asymmetric tactics to disrupt traffic through the Strait of Hormuz, the world’s most critical oil chokepoint, sending prices sharply higher and rattling markets worldwide. The United States has gone beyond traditional sanctions to physically interdict Venezuelan oil shipments, asserting control not just over finance, but also over the movement of energy itself. In Cuba, U.S. restrictions on fuel imports have created shortages—driven in part by constraints on Venezuelan supply—that have contributed to widespread blackouts and renewed political pressure. And in December, China imposed additional restrictions on the export of rare earths used in defense and energy technologies, signaling China’s continued willingness to weaponize its dominant position in clean energy supply chains.

These are not isolated episodes. They are part of a broader shift: the return of energy as a central instrument of geopolitical competition. What is new is not simply that energy is being used for political purposes again, but that it is happening across more actors, more tools, and more parts of the energy system than ever before. This modern era of energy competition will be broader and more persistent: the very interdependence that has made countries more energy secure over the past decades is now creating new vulnerabilities in light of the deteriorated geopolitical landscape. 

Energy, Back in Plain Sight

Energy is the foundation of modern life in ways that become visible only when it’s gone. There was a reason Bad Bunny danced atop a power pole during the Super Bowl while singing a song entitled “El Apagón,” or “The Blackout;” he sought to highlight how repeated power outages have devastated the island of Puerto Rico. Energy has always been the backbone of prosperity.

Energy is also now the key determinant of which country claims leadership in the technologies—especially artificial intelligence—that will define the future. And it is a leading source of voter angst as power prices soar in some parts of the U.S., as electricity use surges to meet rising demand for data centers and other needs. Energy use also remains the leading cause of global climate change, even if that issue seems to have receded from focus for many businesses and governments.

Despite its centrality to economic, geopolitical, and environmental concerns, for much of the past several decades—especially in advanced economies—energy was assumed to be abundant, affordable, and secure.

That complacency was understandable. The U.S. shale revolution dramatically increased the world’s supply of oil and gas, helping keep global oil prices relatively stable—and keeping U.S. natural gas prices low even when prices abroad soared. Power demand barely grew across much of the developed world, and electricity was abundant. And a broadly cooperative geopolitical environment reduced fears that energy might once again be used as a weapon, as it had been during the Arab Oil Embargo of 1973.

But that era is over.

The 2022 energy crisis, triggered by Russia’s invasion of Ukraine and its subsequent cutoff of most gas exports to Europe, marked a turning point. It exposed the fragility of even highly developed energy systems and reminded policymakers that secure access to energy is never assured. Instead, it must be protected and nurtured. Since then, a confluence of forces—rising geopolitical tensions, surging demand for electricity, and slowing growth in U.S. oil and gas supply—has pushed energy prices back to the front pages, and pushed energy back to the center of global affairs.

Energy is once again about power in every sense of the word.

From Markets to Muscle

For decades after the oil shocks of the 1970s, globalization and international cooperation helped blunt the use of energy as a geopolitical weapon. In the wake of the Arab Oil Embargo, in 1974, advanced economies came together to form the International Energy Agency (IEA) to jointly hold strategic oil reserves and to coordinate in case of emergency supply disruptions. The IEA sought to improve the quality and transparency of energy data and integrate the global oil market, enabling oil to become the most easily traded commodity in the world. 

The resulting integrated oil market brought tremendous benefits to consumers and producers. No longer were consumers limited to the oil for which they had negotiated long-term contracts with particular suppliers; an integrated global oil market created additional, more flexible options for securing oil and, as a result, helped countries cope with supply disruptions and diminished the appeal of using oil for political purposes. A country could no longer target an oil embargo at an adversary without hurting friends as well as foes; if it ceased exporting, all countries would be affected by an increase in the price of oil set in a global market. 

More recently, the growth of liquefied natural gas (LNG) has brought similar benefits to natural gas markets. Imagine the pain Europe would have experienced when Russia stopped its piped natural gas had Europe been unable to rapidly increase its consumption of sea-borne LNG. 

What has changed is not that energy is being used as a weapon—history is full of blockades, embargoes, and battles over supply—but that in a less cooperative and more conflict-prone world, the risks of interconnectedness are now rising. And today’s toolkit to weaponize energy is broader and more varied. Countries are no longer relying solely on production cuts or physical disruptions to supply. They are also using a wider array of instruments—control over infrastructure, shipping routes, financial systems, trade, and critical supply chains.

A World Upended

The resurgence of energy as a geopolitical weapon is not simply the result of opportunistic behavior by individual leaders. It reflects deeper structural changes in the international system.

The first is the return of great-power competition. Relations between the United States, China, and Russia are no longer defined by cautious cooperation but by persistent rivalry. That competition is unlikely to be resolved quickly. Instead, it will shape global politics for years to come.

At the same time, globalization is giving way to fragmentation. Trade and investment continue, but increasingly within politically defined blocs. Governments are intervening more directly in markets—through industrial policy, export controls, tariffs, and sanctions—to advance strategic goals.

This still interconnected, yet more contested, world creates new vulnerabilities. The same networks that enable efficiency also create chokepoints—points of concentration that can be exploited for leverage. The crisis today in the Strait of Hormuz reminds us how control over these key nodes can give asymmetric advantage to otherwise weak actors.

Control over shipping lanes, processing capacity, or critical inputs can be turned into strategic advantage. U.S. dominance of the global financial system to enforce sanctions is a familiar feature of the international system, but it is now expanding to include a greater American willingness to use military force to advance energy-related national security agendas, as seen with the U.S. operation in Venezuela. It is not only the United States using energy this way: Beijing is leveraging its dominance in energy supply chains by restricting exports of rare earths and other critical minerals to its competitors, including the U.S., Europe, and Japan, which depend on the materials for energy, automotive, and defense technologies. 

Energy sits at the center of this shift because it is indispensable. Every economy depends on it. Every military requires it. Every advanced technology—from semiconductors to artificial intelligence—relies on it.

The Price of Disruption

Today’s tensions have pushed oil prices well over $100 per barrel from around $70 before the crisis; gasoline has climbed over $4 per gallon. As painful as these prices are for consumers, oil prices will rise far more if the Strait of Hormuz remains largely shuttered for an extended period or if the conflict widens and puts other chokepoints at risk. At least 10 million barrels per day of global oil supply is currently disrupted, and there are no policy responses sufficient to cope with a supply loss that large. 

IEA countries agreed March 11 to the largest ever release of strategic oil stocks, 400 million barrels, but the release rate is only two to three million per day. Unless transit through the Strait of Hormuz resumes, oil prices will continue marching upward until enough consumers, businesses, and governments are motivated to change their behavior, idle factories, and otherwise curb economic activity sufficiently to bring supply and demand back into balance. Moreover, if there is more lasting damage to the Gulf’s core production and export infrastructure, a crisis now measured in weeks or months could extend years. 

Households in the U.S. may feel bewildered and misled by the pain at the pump since they were told that America was now “energy independent.” Thanks to innovations unlocking massive increases in shale oil and gas production, the U.S. has shifted from importing 60% of its oil use two decades ago to exporting more than 3 million barrels per day on a net basis. It is now the world’s largest oil producer and largest exporter of LNG. 

Yet even though the United States produces far more crude and oil products than it consumes, America is still very much connected to the global market. As a result, the price spikes created due to the disruption in the far-off Strait of Hormuz reverberate throughout the American economy. Oil is priced in a global market, and gasoline and diesel prices in the United States respond to global supply disruptions regardless of whether the country is a net importer or exporter.

In a more positive sense, higher oil prices no longer primarily represent a transfer of wealth from the United States to foreign producers. But they do redistribute income within America from consumers to producers. This shift means the overall hit to GDP is lessened, even as households and energy-intensive industries still suffer from higher fuel costs.

New Vulnerabilities

History suggests that the return of energy insecurity may accelerate the transition to cleaner energy systems. The oil crises of the 1970s triggered a wave of policy responses aimed at reducing dependence on imported oil. At the time, oil generated roughly one-fifth of U.S. electricity, and cars were far less efficient than today. In response, governments improved fuel economy, built strategic reserves, shifted power generation away from oil toward coal, nuclear, and natural gas, and invested in alternatives. 

Such measures have helped the United States manage this current crisis. But if today’s crisis worsens, the consequences could still be profound. A deeper, more prolonged disruption—one that meaningfully constrains global supply—could trigger the same kind of structural response seen in the 1970s. Faced with sustained volatility and risk, countries would accelerate efforts to reduce exposure: improving efficiency, electrifying transport and industry, and expanding domestic sources of energy, from renewables to nuclear. 

Many are optimistic such a rethink could accelerate the transition to clean energy. Energy security—not climate policy—could become the most powerful driver of transformation. But there is a catch. For many countries, especially in the developing world, a secure and affordable alternative to oil or gas is often coal. And even where countries pursue clean energy, they encounter a new set of dependencies and geopolitical exposure. The supply chains for critical minerals—lithium, cobalt, nickel, rare earths—used in clean energy are highly concentrated, with China playing an outsized role especially in processing and manufacturing. China likewise dominates production of solar components, parts of wind turbines, batteries, and electric vehicles.

This creates a paradox. Efforts to reduce dependence on oil and gas can increase dependence on new forms of supply chain concentration. The shift toward electrification also introduces new forms of risk beyond supply chain concentration. Grids, pipelines, and other infrastructure are increasingly digital and becoming a prime target for cyberattacks. Because electricity powers not just homes and factories, but also data centers and communications networks, disruptions can cascade across entire economies.

The New Energy Reality 

The events of just the past three months in Venezuela, Cuba, and Iran illustrate a simple but unsettling reality: energy is once again shaping not just markets, but determining who has leverage, who bears costs, and who is left exposed.

Crises like today tend to leave a mark. Today’s disruptions are likely to prompt a new round of strategic reassessments. For developing countries, the lesson may be the dangers of dependence—on a single supplier, a single fuel, or a single geopolitical partner. For advanced economies, it may be the limits of assuming that markets alone can deliver security in an increasingly contested world.

In the United States, the implications may be especially far-reaching. The current moment could accelerate a shift toward a more pragmatic energy strategy—one that leans into the country’s strength as a major oil and gas producer, reinforcing the push for “energy dominance,” while also recognizing that resilience requires more than hydrocarbons alone. The same forces that are driving renewed investment in fossil fuels are also underscoring the need for diversification across renewables, nuclear, critical minerals, and the infrastructure that ties them together.

Whatever the outcome, one thing is certain. Energy is back in the driver’s seat, shaping outcomes, motivating strategies, and empowering new actors. Ignoring this reality—or assuming that the playbook of the 1970s offers ready-made solutions—is folly. Tackling it without energy ideologies or preconceived ideas is the only way to manage this new, more contested energy system—one in which access, control, and reliability are increasingly determined by politics as well as markets.