In 2025, China’s transformer exports reached a record 64.6 billion yuan (approximately $9.29 billion), surging nearly 36% year-over-year. Average export prices rose about one-third to roughly 205,000 yuan per unit. Many manufacturers report order books filled through 2027, particularly for data centre applications.

While headlines often focus on rare earths or semiconductors, mundane power transformers illustrate a deeper structural reality in global supply chains. These unremarkable devices — essential for stepping voltage up or down in grids and facilities — have become a critical bottleneck. Their constraints reveal how small frictions, amplified through complex systems, can derail ambitious technological and industrial goals. Jay Forrester’s insights from Industrial Dynamics (1961) explain why these effects matter so profoundly.

The Transformer Crunch in Context

Global electricity demand is rising rapidly due to AI-driven data centres, electrification, renewables integration and grid modernisation. In the United States, data centre power consumption has grown sharply and is projected to reach significantly higher shares of total electricity use in coming years. Aggregate needs for additional firm capacity have been estimated to be in the order of 100 GW over the next few years. Large power transformer lead times now average 128 weeks (over two years), with generator step-up (GSU) units stretching to 144 weeks or even 3–5 years in extreme cases. Distribution transformer waits have extended from pre-pandemic norms of 8–12 weeks to 30–50 weeks or more.

China dominates production, holding roughly 50–60% of global transformer manufacturing capacity. It also leads in key inputs like grain-oriented electrical steel (GOES), which forms the efficient cores of transformers. China accounts for over half of global GOES output, with strong vertical integration from raw processing to finished equipment. This scale enables faster delivery and competitive pricing compared to more fragmented Western capacity.

U.S. imports of transformers and components remain substantial, even as domestic production expansions (e.g., investments by Hitachi, Siemens, GE Vernova, and others totalling nearly $2 billion in North America) are underway. New capacity, however, takes years to permit, build, qualify and ramp. Upstream constraints on materials like GOES — where U.S. domestic production is limited — compound the issue. The result is a seller’s market where Chinese suppliers hold significant scheduling power.

Forrester’s Lens: How Small Delays Become Systemic Crises

Jay Forrester’s system dynamics framework models industrial systems as interconnected stocks, flows, delays and feedback loops. His famous “bullwhip effect” shows how modest variations in downstream demand amplify dramatically upstream. Information distortions, ordering policies, and lead-time delays turn small signals into large oscillations in inventory, production, and pricing.

Applying this to transformers, we can see that delays function as system stabilisers. Inherent manufacturing and qualification times for large power transformers already span years. Administrative “paperwork” frictions — heightened inspections, certification reviews, licensing pauses, or customs holds — add weeks or months without formal bans. These are low-visibility and deniable. We then see how these delays are amplified through loops. A one-month delay on a critical shipment prompts utilities and data centre developers to over-order or seek alternatives frantically. This creates phantom demand spikes. Suppliers see inflated signals and adjust pricing or allocation. Competing projects bid against each other for limited slots, further extending queues.

These effects are reinforced through feedback that then create path dependency effects. Once timelines slip, recovery is nonlinear. A delayed substation idles downstream investments worth billions. Renewables integration slows, power prices rise and financing costs increase. Parallel AI projects compete for the same constrained pool of skilled labour, testing facilities and grid interconnection slots. Early delays lock in longer-term disadvantages.

Forrester’s simulations repeatedly demonstrated counterintuitive outcomes. Policies that ignore systemic structure often worsen problems. In today’s tight-coupled systems, repeated small frictions erode timelines for AI buildout, EV infrastructure and grid resilience far more effectively than isolated shocks. A fortnight here and a month there compound into quarters or years of slippage. In a context in which the U.S. is at least 100 GW of firm capacity short, these compounding effects can play havoc with AI scaling ambitions.

Scale and Upstream Nodes: The Determinative Advantage

China’s position stems from unmatched scale and control over upstream nodes. Transformer production depends on specialised GOES for low-loss cores, high-purity copper windings, insulators, tap changers and integrated assembly. Alternatives in Europe, Japan, South Korea, or the U.S. exist but operate at smaller scale, higher cost, and with their own constraints. Many non-Chinese producers still rely on Chinese inputs for components or raw materials.

This creates “congestion dominance.” In a seller’s market, the economic agent controlling capacity nodes decides allocation, lead times and priorities. Passive-aggressive measures — administrative delays rather than outright bans — exploit system sensitivity without crossing into overt economic warfare. The Global South benefits in this environment, gaining reliable, affordable access for its own electrification and infrastructure needs, while Western markets face premium pricing and queues.

Limited global alternatives amplify the effect. Building new GOES or transformer capacity requires massive capital, technical expertise, permitting and time; often 3–5+ years. Decades of underinvestment in heavy manufacturing in the West left thin buffers. Explosive new demand from AI has exposed the lag.

Raw Material Chokepoints: Copper and the Sulphur Connection

Even China’s advantages face limits. Copper is critical for windings and conductors. Global copper supply, in turn, depends heavily on sulphuric acid for leaching oxide ores. Sulphuric acid derives largely from sulphur, a byproduct of oil and gas processing.

Disruptions in the Strait of Hormuz — through which a large portion of global seaborne sulphur trade flows — have tightened this upstream link. Closures or blockages drive up prices and constrain acid availability. This ripples into copper smelting and refining worldwide, raising costs and potentially slowing mine output and processing. The chain is clear: Hormuz tensions → sulphur/acid constraints → copper tightness → higher costs and delays for transformer windings → further pressure on overall equipment availability. These effects interact with transformer-specific bottlenecks. A system already sensitive to delays becomes even more fragile when multiple layers face simultaneous stress.

How Transformer Bottlenecks Compound U.S. Electricity Supply Network Augmentation

The real-world impacts of these shortages are visible across U.S. electricity networks, where transformer constraints create cascading delays that slow grid modernisation, renewable integration and new load accommodation far beyond isolated project setbacks.

Nearly half (or more than half in some estimates) of U.S. data centres planned for 2026 face delays or cancellations — not due to lack of money capital (with hyperscalers committing over $650 billion in AI-related spending) but because of shortages in transformers, switchgear, related electrical equipment and availability of skilled labour. A single missing high-voltage transformer can hold up a multi-billion-dollar campus for a year or more. AI deployment cycles often target under 18 months, but transformer lead times of 2–5 years clash dramatically with that pace. Developers in regions like Silicon Valley have completed facilities only to leave them idle while awaiting grid connection equipment.

We then have delays to grid interconnection and transmission upgrades. The U.S. interconnection queue holds over 2,000–2,600 GW of proposed generation and storage — roughly double current installed capacity — with average wait times approaching five years. Transformer shortages exacerbate this with new substations and transmission lines requiring large power transformers and GSUs that utilities cannot procure quickly. Projects that clear studies still face multi-year equipment waits, leading to high attrition rates. In PJM and other RTOs, delayed network upgrades triggered by transformer scarcity inflate interconnection costs, sometimes making projects uneconomic.

Renewables developers report projects postponed 1–2 years or more due to transformer unavailability. Aging infrastructure replacement adds pressure as over half of U.S. distribution transformers are 33+ years old and nearing end-of-life. Extreme weather events, such as hurricanes knocking out hundreds of units, force utilities into desperate scrambles in an already undersupplied market. EV charging networks, heat pump adoption and industrial reshoring compete for the same limited pool, creating allocation battles that prioritise certain loads while stalling others.

Add to this the compounding effects in certain regions. In constrained grids (e.g., PJM, ERCOT or California), a delayed 500 kV substation transformer can bottleneck entire clusters of data centres or renewable farms. Costs have risen sharply — prices up 77% or more since 2019, with some reports of 4–6x increases for certain units — raising electricity rates and project financing hurdles. Utilities resort to costly workarounds like temporary diesel generators or curtailment, which undermine reliability goals. Forrester-style amplification is evident as one delay signals scarcity, prompting others to hoard or accelerate orders, further congesting factories and logistics.

These bottlenecks do not act in isolation. A transformer delay at the substation level ripples upstream to generation interconnection and downstream to end-user energisation, multiplying opportunity costs across the network. The asymmetry is stark. Software and chips scale in months, but heavy electrical infrastructure operates on multi-year physical cycles.

Strategic Implications

Transformers exemplify a broader pattern: great-power competition increasingly plays out in the “grey zone” of mature industrial supply chains. Scale, vertical integration and control over key nodes confer quiet leverage. Flashy critical minerals matter, but so do “boring” enablers like electrical steel and copper windings.

Mitigation demands structural thinking. It would involve accelerating domestic and allied capacity for GOES, transformers and related gear. To shorten qualification times, design standardisation would also be required, no tall order. Supply chain orchestration to smooth demand and deliver better supply chain visibility would be needed to buttress the establishment of reserves for long-lead items. All of this is easier said than done. And last but not least, innovation is needed in grid efficiency to stretch existing assets.

Relying on tariffs or reactive policies risks backfiring by distorting signals further. Rebuilding resilient production ecosystems for heavy electrical equipment is a multi-year endeavour. As I have discussed previously, the challenge is that all of this is pitted against a rapidly moving target. In Forrester’s world, system structure produces behaviour. The current transformer congestion — exacerbated by upstream raw material vulnerabilities — warns that America’s AI ambitions rest on fragile foundations. Without addressing these chokepoints, small frictions today will dictate constrained outcomes tomorrow. The window for meaningful correction is narrowing as demand accelerates through 2027 and beyond. Uncorrected, the overall cost disadvantage that U.S. AI systems already face will only compound. Meanwhile, strong usage doesn’t translate into immediate revenues, placing further pressure on cash flow and market valuations.

Dear Warwick Powell,

Just a quick message to say thank you. I have just read your latest book, Thermoeconomics in a Time of Monsters, and it was an absolutely marvellous read. I’m—as I think many are—struggling to make sense of an increasingly “difficult” world, and the book, despite being an intellectual challenge, was strangely calming. Not because it predicted peace on earth, of course, but because it used a very rational approach to looking at economics, energy transitions, and more—one that is not steeped in ideology or weaponized moral language.

There is a reason for the argument to avoid moral language. It is not because justice, equality, or fairness are unimportant. It is because, as the philosopher Hans-Georg Moeller argues in The Moral Fool: A Case for Amorality, significant societal transformations rarely occur through moral appeals. Morality, in Moeller’s analysis, functions less as a driver of change and more as a tool for positioning—a way for individuals and groups to assert superiority, assign blame, and reinforce existing identities. It heats up discourse while leaving structures untouched.

The Western debate about economic justice has been trapped in this dynamic for generations. The left makes moral claims: inequality is unjust, poverty is cruel, extraction is exploitative. The right responds with its own moral claims: freedom is sacred, individual effort deserves reward, redistribution is theft. Each side asserts its virtue. Neither side changes the economic logic. The moral argument becomes a ritual that substitutes for structural transformation.

This is not a call for cynicism. It is a call for clarity. The thermoeconomic argument advanced in your book does not ask anyone to become a better person. It does not appeal to compassion, solidarity, or guilt. It simply states that an economic model grounded in the laws of thermodynamics—treating energy and material flows as the foundation of social reproduction rather than commodities for private accumulation—is the only arrangement that can sustain a complex society over time. Collective stewardship of primary inputs is not more just. It is more functional. The neoclassical model is not immoral. It is entropic. It consumes its own substrate.

By moving the argument from moral justification to structural necessity, something shifts. There is no hero to admire and no villain to condemn. There is only a system architecture that works within biophysical limits, and one that cannot. The question becomes not “whose values should prevail?” but “what actually functions long-term?” And that question, unlike the moral one, has an answer that physics will enforce regardless of whether we find it ideologically congenial.

One outcome of a society practicing an economy based on thermodynamic philosophy is, I think, that it will inherently become substantively democratic. That is, it is overwhelmingly likely to lead to decisions that deliver benefits to the general population, regardless of the political system. But that is another discussion, albeit an important one. Living in Australia—a Western nation—I find it almost inconceivable that our societies will be willing or even able to adopt the thermodynamic lens, which is somewhat concerning.

Regards and Take Care

Erik Dilling

Territorial and Operational Picture

Russian forces maintain methodical pressure on the Donetsk “fortress belt,” with notable intensity around Kostiantynivka. Local group of forces command estimates, reflected in Russian reporting, indicate control of approximately 50% of the city through infiltration tactics, footholds in southern and eastern districts, and incremental urban gains. Ukrainian accounts describe heavy fighting on the outskirts and in contested urban pockets but report continued resistance efforts. Progress remains grinding and localised.

Broader Russian estimates place overall Donbas control near 90%, with ongoing pressure toward Sloviansk and Kramatorsk approaches. Northern Sumy Oblast features continued border infiltrations and buffer-zone activity. Western Zaporizhzhia sees probing. These patterns reflect localised erosion of Ukrainian defensive density rather than uniform acceleration.

Losses and Replenishment

Body exchange ratios (frequently 25–35:1 Ukrainian to Russian in recent swaps) support elevated effective Russian infliction rates (β in the 0.0018–0.0025 range). Ukrainian manpower strains are pronounced, with understrength brigades (often 40–60% infantry), high AWOL rates, recruitment shortfalls, and efforts to lower the compulsory mobilisation age further toward 23. These steps signal deepening difficulty in generating sufficient replacements to sustain force density.

Russia recruited approximately 127,000 contract soldiers in the first four months of 2026 (averaging 800–1,000+ per day early before moderating), sustaining net r_R of roughly 500–800 lethal units per day after losses, supported by stocks and foreign recruits. Fire ratios of 5–10:1 in active sectors continue to amplify Ukrainian equipment and positional losses.

Model Update, Localised Tipping and Global Timing

Current Ukrainian effective force: ~320,000–380,000 lethal units (continued drawdown). Net daily loss rate: 900–1,700 units, aligned with fire dominance and body exchange indicators. Threshold density (coherence declining toward 65–73% of prior peaks) faces acute localised pressure, especially in sectors such as Kostiantynivka.

The original July–September 2026 tipping window remains realistic. Collapse will emerge through localised failures where Ukrainian reserves cannot contain concentrated pressure, rather than a simultaneous front-wide event. Kostiantynivka illustrates this dynamic where thinning density and partial control create conditions for potential southern exploitation toward Mykolaiv if connected with Zaporizhzhia/Kherson thinning. Parallel Sumy preparations lay groundwork for northern pushes that could eventually threaten the Dnipro line and Kyiv directions. These pockets would activate the non-linear multiplier (γ ≈ 2–2.5× losses) once containment is exceeded.

Sustained localised tipping (widespread breaches and accelerated positional losses) in 1.5–5 months from May (late June–October 2026), centred on July–September, remains the probable trajectory. This timeframe aligns with several external pressures: (1) ongoing global energy market dislocations from the Strait of Hormuz disruption (blocked since late February 2026), which have driven sharp oil price increases and inflationary effects that could constrain Western aid budgets and political bandwidth; (2) mounting scrutiny of highly valued US AI stocks amid concerns over infrastructure spending sustainability and potential valuation resets; and (3) positioning approximately two months ahead of the US midterm elections on November 3, 2026, a period when policy priorities and resource allocations often face heightened domestic review.

A number of oil market analysts, including Americans Art Berman and Chris Martenson, have pointed to the July-September window being a “crunch” moment for the U.S. economy, when inventories begin to run close to bottom, and replenishments — from seaborne and domestic production — simply doesn’t arrive in time. I have also explained previously why the U.S. is not immune from the impacts of the war in the Persian Gulf.

Put directly, Q3 2026 shapes as a vector in which multiple American exposures come home to roost.

These convergences could influence r_U parameters (e.g., via aid fatigue, political backlash in the face of rising gasoline or diesel prices or competing fiscal demands) without altering the underlying replenishment imbalance. Russian recruitment moderation adds modest variance, but Ukraine’s constraints dominate the ledger. The mathematics of attrition — superior Russian replacement flows (men, munitions and machinery) versus Ukrainian sustainability limits — drive progressive territorial erosion and set conditions for localised breakthroughs where defensive density collapses first.

Time favours the side whose reservoir refills faster. Like it or not, Putin’s confidence, evinced in his recent Victory Day speech, is warranted.

In January 2026, a collaborative Chinese research team published a landmark paper in Science that quietly redrew the material boundaries of power in the 21st century. Led by Wang Jinlan of Southeast University in Nanjing, together with Xinran Wang and Taotao Li of Nanjing University and Suzhou Laboratory, the work introduced “oxy-MOCVD” — an oxygen-assisted variant of metal-organic chemical vapour deposition. By feeding controlled oxygen into the reaction chamber, the process reroutes precursor chemistry through intermediate metal oxides and active sulfur species, slashing the kinetic energy barrier that had crippled conventional MOCVD for over a decade. The outcome: uniform, single-crystalline 150mm (6-inch) MoS₂ wafers grown on miscut sapphire at growth rates more than 100 times faster than standard methods, with zero detectable carbon impurities and domain sizes orders of magnitude larger.

Field-effect transistors fabricated across these wafers delivered average electron mobilities exceeding 100cm² V⁻¹ s⁻¹, with peak values more than ten times higher than conventional material. Uniformity across entire arrays was exceptional. The paper frames the advance explicitly as the bridge from laboratory curiosity to industrial manufacturability, with 300mm (12-inch) scaling already on the roadmap.

This goes beyond being another semiconductor milestone. It is an instance of what we might term the micro materialities of geopolitics and international relations — the atomic- and nanoscale decisions in materials synthesis that cascade through supply chain systems to reshape EROEI trajectories, informational sovereignty, and the distribution of systemic surplus across nations and blocs. In an era when macro-level analyses of supply chains, alliances, and great-power competition often overlook the substrate beneath the silicon, these micro materialities are becoming decisive.

Layered upon this breakthrough are two other maturing 2D technologies — graphene and triboelectric nanogenerators (TENGs) — that together form a synergistic “power combo.” Individually impressive, their convergence creates a self-reinforcing energetic–informational system whose net returns exceed those of the incumbent silicon paradigm precisely where it matters most for multipolar resilience.

Graphene, the zero-bandgap semimetal with record carrier mobility, has long been the perfect complement to semiconducting transition-metal dichalcogenides (TMDs) such as MoS₂. Where MoS₂ provides a direct 1.8 eV bandgap, near-ideal electrostatic control, and sub-60 mV/decade subthreshold swing, graphene supplies ultra-low-resistance contacts and interconnects. Conventional metal–MoS₂ interfaces suffer from high Schottky barriers and Fermi-level pinning, producing contact resistances often above 80 kΩ·µm. Substituting lateral graphene–MoS₂ heterostructures drops that resistance to ~20 kΩ·µm or lower while lifting effective mobilities three- to ten-fold and preserving on/off ratios above 10⁷–10⁸. Graphene simultaneously acts as a tuneable work-function electrode and low-resistance conduit, enabling efficient charge injection without sacrificing the semiconductor’s bandgap advantages.

Vertical and lateral heterostructures expand the palette further: tunnelling transistors, reconfigurable photodetectors, synaptic elements for neuromorphic computing. Because both materials are now compatible with wafer-scale CVD/MOCVD toolsets, monolithic integration moves from lab curiosity to production reality. The oxy-MOCVD advance removes the last major bottleneck on the semiconductor side; graphene growth and transfer are already routine. The combined stack therefore delivers a complete conductor–semiconductor toolkit at atomic thickness — a capability silicon has never possessed.

The third element — triboelectric nanogenerators — closes the autonomy loop. TENGs convert ambient mechanical energy (vibration, wind, human motion, structural flexing) into electricity via contact electrification and electrostatic induction. MoS₂ sits near the negative end of the triboelectric series, making it an outstanding electron-acceptor layer. When incorporated as nanosheets, composites, or textured surfaces, it boosts surface charge density, restricts recombination losses, and improves mechanical durability. Optimised MoS₂–graphene or MoS₂–polymer TENGs now achieve power densities of 1.4–14.6 Wm⁻² under modest, real-world mechanical inputs (4–22 N force, low-frequency motion), with open-circuit voltages exceeding 1,000V in flexible textile formats. Graphene serves as the ideal transparent, flexible electrode, further enhancing charge collection.

Paired with MoS₂ logic and memory operating at femtojoule-to-picojoule per operation, these TENGs render entire edge systems energetically closed-loop. Ambient motion harvested from a shipping-container wall, a sensor mast, or footsteps on a floor directly powers or biases the MoS₂ circuits. Battery and grid dependency collapse.

The energetic implications of this stack are best understood through thermoeconomics — the framework that treats every economic process as an entropic dissipative metabolic system governed by energy returned on energy invested (EROEI). EROEI is not merely a metric for primary fuels; it is the master constraint on all production coefficients within an input–output matrix (in the Sraffa sense). Every inter-industry transaction carries an embodied energy cost. When that cost rises system-wide, the net surplus available for negentropic activities — education, institutional trust-building, innovation, social cohesion-related infrastructure, services and activities — contracts. Information itself is energetic: the negentropy it produces (ordered, actionable knowledge) must exceed the exergy it consumes in generation, transmission, and processing. If the energetic cost of viable information exceeds its benefits, the system slides toward higher entropy. Thus, energy is the control parameter for the extent to which information itself is entropic or negentropic.

Silicon-based compute has entered exactly this plateau. Fabrication of leading-edge nodes demands extreme ultraviolet lithography tools consuming 1–2.5MW each, multi-patterning sequences, ultra-pure chemical regimes, and cleanroom environments whose HVAC and chemical demands push energy intensity per wafer to tens of kilowatt-hours per square centimetre. Operational efficiency per transistor continues to improve, yet system-level EROEI for distributed or edge workloads stagnates because of leakage, heat and the energy penalty of shuttling data to centralised grids or batteries. The result is a thermodynamic bind: ever-greater primary energy must be invested upstream for diminishing marginal informational returns downstream. As overall EROEI declines, social surplus shrinks, manifesting in sectoral, spatial, and demographic distributional tensions.

The 2D–graphene–TENG power combo disrupts this trajectory at its root. Upstream, oxy-MOCVD employs mature, lower-energy deposition tools already widespread in LED and compound-semiconductor fabs — no high-NA EUV, no multi-patterning cascades, and no city-scale power draws per tool. Embodied energy per functional transistor or per wafer therefore falls by at least an order of magnitude once scaled. Downstream, MoS₂ devices deliver femtojoule-per-operation performance with near-ideal subthreshold swing, enabling dense neuromorphic or in-memory computing that minimises data movement — the dominant energy sink in von Neumann architectures. Graphene interconnects further reduce dynamic and leakage power. Add TENG harvesting and the marginal EROEI for edge inference, sensing, and local decision-making flips from negative to positive.

A shipping-container “AI-in-a-box” surfaced with MoS₂–graphene TENG skins can harvest its own vibrational and wind energy to power local large-language-model inference or sensor preprocessing. The information it produces — filtered, sovereign, and actionable — delivers negentropy at near-zero marginal exergy cost. The container becomes a net producer of ordered information rather than a sink. Custom smart-client devices and billion-node IoT meshes built on the same material stack operate for weeks or months on ambient energy alone, enforcing data residency without constant cloud round-trips.

This is the thermoeconomic reform at the heart of the micro materialities. By lowering the production coefficients for the informational layer of the Sraffa matrix, the combo expands the surplus available for other negentropic activities. Localised IoT meshes in agriculture, logistics, or public health preprocess data on-device or at the container hub, consuming ambient rather than grid energy. The entire stack supports flexible, transparent, or 3D-stacked form factors impossible at equivalent performance with bulk silicon.

Silicon retains clear advantages in raw density and ecosystem maturity for centralised, high-throughput training workloads where massive grid power and cooling are available. But for distributed, sovereign, low-power, or off-grid applications — precisely the domains that determine resilience in a multipolar order — the 2D combo offers superior EROEI. It decouples informational capability from the thermodynamic and geopolitical vulnerabilities of ever-more-energy-intensive silicon fabs. Nations or blocs that master this stack gain structural surplus in the very resource (viable, localised information) that modern economies treat as the ultimate production input.

This brings us then to what I have called Digital Westphalia — the deliberate construction of sovereign, nationally governed digital ecosystems that preserve data control, enable interoperability, and bake-in resilience without subordination to extraterritorial platforms or supply chains. At its core, Digital Westphalia requires three material capabilities: (1) deployable, self-contained compute nodes that can operate anywhere; (2) low-cost, customisable edge clients and sensors that scale to billions of units; and (3) energetic autonomy so that these systems do not become hostages to foreign grids, fuels or spare parts.

The killer combo supplies exactly these capabilities. Shipping-container AI nodes become sovereign inference hubs that run national models, filter local sensor data, and enforce policy-defined data flows — all while harvesting their own operational energy. Low-cost IoT meshes enable agricultural optimisation, smart infrastructure, or public-health monitoring under national governance, with raw data never leaving sovereign territory. Custom client devices deliver battery life measured in weeks or months, running local inference or acting as thin clients without constant cloud dependency.

In thermoeconomic language, Digital Westphalia becomes feasible because these micro materialities reform the EROEI trajectory of the informational sector itself. Declining system-wide EROEI no longer automatically translates into shrinking social surplus; instead, targeted investment in the 2D stack generates negentropic dividends that can be redistributed locally — to education, institutional capacity, demographic stabilisation or spatial development, for instance. The distributional consequences of energy constraint are mitigated rather than amplified.

The crescendo is therefore unmistakable. What began as a materials-science advance in Nanjing laboratories has, through complementarity with graphene and TENGs, produced a self-reinforcing energetic–informational system whose net returns exceed those of the incumbent silicon paradigm in the domains that matter most for multipolar resilience. By 2030–2035, nations that integrate this power combo into their digital infrastructure will possess a structural advantage measured not merely in transistors per watt but in negentropy per joule invested — the ultimate currency of thermoeconomic and geopolitical viability.

Digital Westphalia, a conceptual framework for sovereign digital order, now rests on a concrete materials foundation. The 2D–graphene–TENG stack does not merely compete with silicon; it bypasses its EROEI plateau, enabling a parallel ecosystem in which information once again produces more order than the exergy it consumes. In an age when declining systemic EROEI threatens to tighten distributional conflicts along every sectoral, spatial and demographic axis, this micro materiality of geopolitics offers a pathway to expand the surplus rather than ration it.

That is the promise of the power combo — and the reason it stands as a cornerstone for any serious project of multipolar technological and economic autonomy.

U.S. kidnapping Venezuela’s president and securing American control of that country’s oil; increasing incidence of attacks on Russia’s Black Sea oil refineries and storage facilities; American and European piracy on the high seas; and now, the blockade of the Strait of Hormuz blockade. American triumphalists and critics of U.S. foreign policy are agreed that all these events are held together by a common thread: a grand strategy, of multiple dimensions, for the U.S. to become the world’s energy superpower, to recover and consolidate primacy and to contain China. In the end, it’s always about China, right?

The presupposition of strategic coherence — anchored by common or allied objectives — is sufficient, on these interpretations, to render American strategy complete. The ends rationalise and cohere around a set of means. Yet, this is not an entirely persuasive line of reasoning for the simple reason that coherence of objectives, even when there are associated actions, does not necessarily make a plan viable. Thus, the U.S. may well have a coherent plan but this does not mean its means-end calculus is correct. The analysis that follows shows that whatever the putative objectives, whatever the hypothesised coherence of a master plan, the reality and geography of oil and gas sector structures, resource availability, industrial capabilities, chemistry and thermoeconomic systemic flux, the means-end gambit is not at all coherent. One doesn’t have to ask whether there is or isn’t a coherent master plan; what’s needed is an analysis of the conditions of its execution. Whether or not there is a master plan, or whether the U.S. political and economic elite harbour primacy preservation ambitions, is somewhat immaterial if market and sector structural conditions don’t support the hypothesis. They may indeed have such plans, probably do, but the proof of the pudding is always in the eating.

The discussion addresses the oil and LNG sectors separately, before drawing things together.

Oil

Scale of Disruptions

The Middle East/Hormuz crisis of 2026 has produced the larger shock, with multi-million barrel per day losses at peaks and disruption of roughly 20% of global seaborne oil trade. This has driven significant price volatility. Russian refinery and export infrastructure attacks have generated more contained net effects. Russia has adapted by rerouting exports, which limits the overall global volumetric impact while accelerating eastward shifts and creating notable regional imbalances. Global oil demand stands at approximately 100–105 million barrels per day, with 2026 forecasts revised downward due to elevated prices.

Russia: Disruptions, Adaptations and Regional Effects

Much of the recent narratives point to the impact of Ukrainian attacks on Russian refineries, particularly on the Black Sea. For triumphalists, this is seen as a massive boost to America’s relative importance in global oil and for the hegemony theorists, this is accounted for as part of an orchestrated attack on non-US energy states. Even if the attacks are orchestrated and supported by U.S. intelligence, their significance in the global scheme of things should not be over-estimated.

Russia operates approximately 38–48 major refineries in addition to many smaller facilities, with total nameplate primary distillation capacity of roughly 6.3–6.8 million barrels per day. The Tuapse refinery on the Black Sea coast, has a capacity of about 240,000 barrels per day (roughly 3.5–4% of Russia’s total refining capacity). This export-oriented facility produces diesel, fuel oil and naphtha. Repeated Ukrainian strikes in 2026 have caused outages, fires and reduced operations at Tuapse and nearby ports.

Gross offline capacity has periodically reached 15–20% or higher, with some snapshots approaching 38–40% idle when maintenance is included. Net throughput fell sharply in April 2026 to approximately 4.69 million barrels per day — a 16-year low since December 2009. This represented a drop of roughly 600,000–630,000 barrels per day (around 11–12%) from typical March 2026 levels of about 5.3 million barrels per day. These reductions contributed to Russian crude production cuts of 300,000–400,000 barrels per day in April. Russia has mitigated some losses through spare idle capacity inherited from the Soviet era, increased crude exports, and repairs slowed by sanctions. Repeated targeting of the same sites has prolonged downtime.

Attacks on export terminals temporarily removed up to 40% of export capacity in March peaks before easing to around 20%. Russia has accelerated its shift toward Arctic and Pacific routes, including the Kozmino terminal via the ESPO pipeline system and the Northern Sea Route. Although these routes face bottlenecks and seasonal constraints, they have supported growing Asia-bound volumes. In the first quarter of 2026, China and India absorbed approximately 90% of Russian crude exports (China roughly 48–51%, India 37–38%), while direct EU imports remained minimal. (I will address the Arctic in more detail in a future essay.)

This eastward pivot has strengthened Russia’s position in Asia. China has consistently ranked as the top buyer, with significant year-on-year growth in imports of discounted Urals and ESPO blends. India continues large-scale processing in its refineries. Singapore has emerged as a key hub, recording sharp increases in Russian fuel oil imports for bunkering and transshipment, while Malaysia’s Petronas has negotiated direct crude purchases. Broader Southeast Asian interest from countries such as the Philippines, Indonesia, Vietnam, and Thailand has also risen. These developments enhance Russia’s economic and diplomatic ties in key growth markets, even at discounted prices.

Regional impacts remain uneven. Europe faces greater vulnerability to refined product tightness, particularly diesel and jet fuel, due to historical reliance and post-sanctions reshuffling, resulting in higher sourcing costs. Asia is better positioned to absorb discounted Russian crude and products through its own refining capacity and trading hubs. Globally, the net volumetric effect of Russian disruptions stays below 1% of world demand, largely offset by increased crude exports. Put plainly, the impacts of attacks on Russian capacity is effectively a pin-prick in terms of the global state of play.

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U.S. Export Contributions to the Global (Non-U.S.) Market

The United States satisfies most of its domestic refined product demand internally. Its exports therefore supply the rest of the world. Crude oil exports have reached record levels of 5.2–6.44 million barrels per day in recent peaks, while refined product exports average around 7 million barrels per day. This has occurred as strategic reserves have been drawn down. The U.S. is an importer of crude oil, necessary for refinery balancing to achieve the product output mix necessary for domestic requirements. Usually, the U.S. is a net importer of crude. Combined crude and product exports often total 12–14 million barrels per day or more. U.S. crude exports represent roughly 5–6.5% of global demand. These volumes provide meaningful flexibility, especially to Asia and Europe, but they remain far from dominant.

Key Constraints on U.S. Leverage

Several structural factors limit U.S. leverage.

Geologically, the Permian Basin — the main engine of recent growth — is maturing, with Tier 1 locations depleting and production shifting to lower-productivity acreage. Economically, full-cycle breakevens sit in the mid-$60s per barrel and trend higher for marginal wells, while diminishing energy return on energy invested raises the real cost of each incremental barrel. Capital discipline continues to prioritise shareholder returns over aggressive volume growth. Oil corporations in the U.S. have so far rejected or resisted political pressure to increase output. Chemically, light sweet U.S. shale crudes suit gasoline production but mismatch many global refineries configured for heavier, sourer grades from the Middle East, Russia or Venezuela.

Domestically, high pump prices (national averages of $4.06–$4.24 per gallon in April 2026; reportedly rising to as high as $8 in California and $6 in Chicago) have increased household costs and contributed to demand destruction. Middle East disruptions have also driven sharp rises in fertiliser prices (see map above), pressuring the U.S. farm sector through higher input costs and tighter margins. Reports in Forbes estimate that some 70% of American farmers cannot afford to plant their crops this year. These domestic effects generate political and economic headwinds that could offset any potential external gains. How they play out in the midterm elections (November 2026) remains to be seen.

LNG

We can now turn briefly to the situation in the LNG market.

The recent disruptions to Qatari LNG production and shipping — stemming from Iranian attacks on Ras Laffan facilities in March 2026 — have created a significant supply shock in global liquefied natural gas markets. Qatar, traditionally accounting for around 18-20% of global LNG trade (roughly 77-80 million tonnes per annum pre-disruption), saw approximately 17% of its export capacity (about 12-13 mtpa) knocked offline, with repairs potentially taking 3-5 years. Combined with effective disruptions in the Strait of Hormuz affecting broader Middle East flows (up to ~20% of global LNG), this created an immediate gap.

U.S. exporters have stepped in effectively in the short term. Between January and April 2026, U.S. LNG exports reached a record 32.15 million tonnes, up 28% year-on-year. This surge more than offset the estimated 6.93 million tonne decline from Qatar in the same period. Global seaborne LNG exports still hit a new high of just over 149 million tonnes for the period (+6% YoY), with the U.S. playing a key balancing role.

Pre-disruption, in 2025, the U.S. had already become the world’s largest LNG exporter with record volumes around 111 million tonnes, representing roughly 25% of global trade. Post-disruption, its share has risen further. In the Jan-Apr 2026 window, the U.S. accounted for a record portion of the elevated global total, with annualised run-rates and peak utilisation pushing effective market share into the 28-35% range in affected periods — approaching or hitting around one-third in some analyses. Facilities have run near or above nameplate capacity, with feed gas flows averaging ~18.9 Bcf/d year-to-date and peaking higher.

This has been a commercial boon for U.S. producers and exporters. Higher international spot prices (driven by tightness) have widened spreads versus the U.S. Henry Hub benchmark, incentivising maximum output. Europe, in particular, has absorbed a large share of US volumes — often 60%+ of US exports and up to 60% of Europe’s own LNG imports in early 2026 data — solidifying American LNG as a structural replacement for Russian pipeline gas.

However, significant constraints limit further near-term expansion and undermine notions of “global energetic hegemony.” US liquefaction capacity, while the world’s largest and most flexible, faces physical bottlenecks. Current peak export capacity sits around 18-19 Bcf/d. Terminals are already operating at very high utilisation rates (often 95%+ during peaks), leaving limited headroom without new optimisations or phased ramps.

Key limitations include:

• Maintenance and seasonal factors: Scheduled turnarounds, plus reduced efficiency during Gulf Coast summer heat (affecting cooling and operations), cap upside;

• Feed-gas and pipeline constraints: While shale production is robust, takeaway capacity from key basins (e.g., Permian) and delivery to terminals has limits; and

• Loading/unloading and shipping: Terminal berth availability, vessel scheduling, and global shipping dynamics add friction. New capacity additions in 2026 (e.g., Corpus Christi Stage 3, Golden Pass initial trains, and Plaquemines ramps) provide incremental relief but ramp gradually and won’t transform the picture overnight.

EIA forecasts for 2026 average US LNG exports around 17.0 Bcf/d — strong growth but not an unlimited surge. Projections see the U.S. share rising toward ~33% by the end of the decade with further projects, but this is incremental, not monopolistic.

Europe is the clearest area of US influence. With long-term contracts and destination-flexible cargoes, US LNG has Europe “well and truly within the control” of American exporters in the near-to-medium term. European reliance has grown substantially post-2022, and disruptions have accelerated it. However, even here, diversification persists via remaining Norwegian pipeline gas, other LNG suppliers (Australia plus rerouted volumes), and demand-side responses. Europe continues pursuing energy security through multiple avenues, not total US dependence. Whether European economies can successfully diversify remains to be seen.

Globally, the picture is far more fragmented. Asia — historically a major buyer of Qatari LNG — has felt acute pressure but sources from Australia (a steady ~19-20% supplier), Malaysia, Russia, Indonesia, and others go some way to alleviating the stress. Buyers maintain portfolios with long-term contracts and spot flexibility; they are not forced into exclusive “Buy American” arrangements. China, in particular, has geopolitical and pricing reasons to diversify away from heavy U.S. reliance. Global LNG trade remains multipolar, with Australia, a recovering Qatar (partial restarts possible), Russia, and smaller players ensuring alternatives exist. Indeed, data indicates that Russian gas exports for 2026 to date increased by 8.6% compared to the same period last year.

LNG itself is only one component of the global energy mix. Natural gas (pipeline and LNG) competes with oil, coal, renewables, nuclear and emerging alternatives. The U.S. is a top oil producer and refined products exporter, but its share of global oil trade and refined product markets remains modest (often in single digits for many categories). OPEC+, Russia, and other producers retain massive influence over crude markets. Claims of coercive power through energy dominance overlook this broader fungibility and buyer diversification strategies. Disruptions raise prices and create opportunities for flexible suppliers like the U.S., but markets adjust via rerouting, demand destruction (e.g., fuel switching in Asia), efficiency gains and new supply investments.

Overall Assessment

Perspective and proportions clearly matter. While U.S. LNG suppliers have increased global market share to around 33-35% of late, the reality is that when we render LNG and oil to the common denominator of joules we see that LNG trade energy content is approximately 9-12% of global oil consumption. Global oil consumption is on the order of ~2 × 10^20 kJ annually. Global LNG trade is roughly 2.2 × 10^19 kJ — or about 1/10th the scale. Oil markets are vastly larger in absolute energy throughput. In terms of global primary energy share on conventional measurement basis, oil comprises ~32-34%, total natural gas ~25%, with LNG as a subset of gas (~5-8% of total fossil energy or less). Put plainly, when it comes to oil and gas (and LNG as a subset), global energy is about oil far more than it is about gas.

So, firstly, disruptions to the global oil market are unlikely to enable durable U.S. energy domination.

While the United States benefits from temporary export opportunities and higher prices, multiple structural limits — including the scale of global demand, production constraints, quality mismatches, rising marginal costs and domestic pressures — prevent it from cheaply or indefinitely filling large supply voids. Russia’s successful eastward pivot, particularly deepened ties with China, India, Singapore, Malaysia and broader Southeast Asia, further diffuses power and creates new interdependencies. Impacts of attacks on Black Sea refineries are in volume terms relatively minor. Naval interdictions are also minor, and as the conflict in the Persian Gulf shows, the U.S. navy cannot act unconstrained. The truncation of the so-called Operation Freedom, after two days, also suggests limits to American naval power. China’s own de-risking over the past two decades, coupled with its central role in accelerated global electrification (see figure above, showing the spike in demand for Chinese green technology since the beginning of March), also suggests that in the medium term, oil’s relative importance in energy terms will continue to decline.

As for LNG, we can say that U.S. LNG exporters are indeed “making hay while the sun shines.” The Qatar outage has enabled record volumes, higher revenues and an elevated market share approaching one-third in the current tight environment. This demonstrates the agility of U.S. shale-linked LNG and its value as a swing supplier. Yet physical constraints — terminal utilisation nearing practical limits, maintenance, seasonal effects and gradual new capacity — mean this cannot expand dramatically in the near term. Long-term growth is expected, but even at 30-35%+ of LNG, it falls well short of global dominance, particularly in the broader context of global primary energy mix. Europe feels the strongest pull, yet even there it is not absolute. Across the wider energy landscape, US LNG leverage is real but far from hegemonic.

Narratives framing recent geopolitical events as a deliberate strategy to “force everyone to buy American gas” overreach the evidence. Commercial gains in LNG markets amid supply shocks are clear, but the data reveals a competitive, adjusting global market rather than unilateral control. Buyers retain choices, constraints bind all suppliers and energy security imperatives drive ongoing diversification. The U.S. energy export boom strengthens its position, particularly in Atlantic LNG flows, but does not deliver the coercive global dominance some claim. Markets, as always, prove more resilient and multipolar than absolutist interpretations suggest.

Triumphalist narratives overstate unilateral U.S. control and misunderstand the scale and structure of global energy systems, while “grand chessboard” theories overlook real-world frictions and unintended consequences such as stronger Russia-Asia links, elevated European energy costs and domestic U.S. pain. They also misunderstand relative scale, which ultimately dwarfs the impact of any single nation’s oil production and refining capacities. So, while it is conceivable that the U.S. is pursuing its interventions with a mind to transforming the global energy system in its favour, the reality of market size, composition, fundamental thermoeconomics and ongoing structural change simply means these plans are fantasies.

Neither the American triumphalists nor the “grand plan” critiques are persuasive. To harbour ambitions is one thing, even if the ambitions are coherent; to have access to, or be able to marshall the, relevant resources to close the ambition-outcomes / means-ends gap is another. The real world is messier and actually more fragmented. The U.S. is actually not as important in global markets, let alone omnipotent, as these analysts often presume. This does not mean that targeted nations should not be wary; I am sure they are. They aren’t without agency or capacity, and we witness this daily as well. Furthermore, this does not mean that there won’t be intensified conflict, particularly as the strategy for energy domination fails to deliver on the ambitions. Failure has a habit of leading to escalations and double down whenever it comes to Washington’s ambitions. Indeed, we are likely to see more rather than less incidence of conflict, including a rising number of dirty interventions, sabotage, terrorist attacks and such like, as the foundations of American and the political west’s dominance continue to ebb away.

These are some of the monsters of the interregnum.

The Strait of Hormuz is, right now, the world’s most commented upon 21 nautical miles. Since early March 2026, Iran has been able to throttle commercial traffic through the chokepoint that carries roughly one-fifth of global seaborne oil, a large proportion of gas and a host of other critical chemical products. What began as a wartime closure has hardened into an unfolding management system; a selective-access regime in which “coordination” with the Islamic Revolutionary Guard Corps Navy, inspections, approved corridors and de facto tolls are necessary for safe passage. Traffic today is a fraction of historic volumes. The two-week US-Iran ceasefire announced in early April has stumbled on, now into its fifth week, failing so far to deliver a decisive detente. The first round of peace talks in Pakistan ended without agreement. And then, as of 10 a.m. Eastern Time USA, 13 April, the United States moved to enforce a naval blockade of traffic entering or leaving Iranian ports in the strait. This blockade remains in place (5 May 2026). On 4 May 2026, U.S. President Donald Trump announced “Operation Freedom”, ostensibly offering vessels in the Persian Gulf coordinated and escorted safe passage. Whether this operation is conceived to involve USN escorts is unclear. Either way, Iran has responded that no such passage will be provided without Iran’s say-so. Early reports point to Iranian missile hits on a US naval vessel, though CENTCOM denies this. There are also reports of attacks on UAE infrastructure. In any case, the “fog of war” has yet to fully lift, as of the time of posting.

Doctrine

What we are observing, regardless of the veracity of these reports, is a live demonstration that international law, however elegant on paper, ultimately bends to raw power.

Some have accused Iran of breaching international law through its exercise of the Hormuz weapon and the levying of a charge. However, Iran’s legal position is more robust than many Western commentators would care to countenance, let alone admit. Tehran never ratified the United Nations Convention on the Law of the Sea (UNCLOS). Upon signing in 1982 it explicitly rejected the novel “transit passage” regime in Part III, which grants broad, non-suspendable rights of passage — including to military vessels and aircraft — through straits used for international navigation. Iran insists the older regime of “innocent passage” from the 1958 Geneva Convention applies instead. Under that narrower rule, coastal states retain greater authority to regulate traffic for security reasons. Even if one argues that transit passage has crystallised into customary international law, Iran qualifies as a persistent objector: it has objected consistently and publicly since the 1980s. In international law, persistent objection is a recognised escape hatch. Iran therefore possesses a foundational doctrinal argument that its actions are not simple piracy but sovereign regulation of waters overlapping its territorial sea. That’s the argument, though of course, not everyone would agree with it.

History shows that such doctrinal arguments, if they aren’t accepted upon promulgation, matter only when backed by power — and that exceptions to UNCLOS and such like arrangements are forged in the crucible of war. Consider the Turkish Straits. The 1936 Montreux Convention, negotiated after decades of conflict and great-power rivalry, grants Turkiye the right to regulate warship passage and to charge standardised fees for lighthouse services, pilotage, rescue and medical facilities. These are not mere “tolls for permission to exist” but cost-recovery mechanisms tied to a post-conflict bargain. The convention remains in force because Turkiye demonstrated, through geography and military posture, that it could not be ignored. Similar dynamics produced the Suez and Panama arrangements. No treaty descends from heaven; each reflects to one extent or another some sense of the balance of strength at the moment it was signed.

The Strait of Hormuz is undergoing the same process in real time. Iran’s persistent-objector doctrine provides the legal scaffolding. Its asymmetric capabilities — mines, coastal missiles, drones, fast-attack boats and fleet of mini-submarines — provide the enforcement muscle. The United States, for all its “on paper” air and naval superiority, called the test of strength and blinked. Weeks of escalation culminated in a fragile ceasefire precisely because the costs of sustained convoy operations and potential losses to swarming tactics proved prohibitive. The USS Abraham Lincoln was pushed over 1,000 km away, and the USS Gerald Forde limped away citing “laundry fires.” Washington has now opted for a blockade of Iran’s blockade, hoping to apply economic pressure to Iran and others. The message is clear: even the world’s pre-eminent air and naval power finds the price of restoring unrestricted transit via conventional military means too high. Power has spoken. New rules are being written on the water.

Hiatus

Following the April 2026 hostilities and Pakistan-mediated talks, a two-week ceasefire (since extended) holds tenuously. The US maintains a naval blockade of Iranian ports, while both sides engage in rhetoric and limited diplomatic contacts. Satellite and tracking data indicate ongoing US military build-up in the region. Imagery from the stars also confirms that tankers continue loading at Kharg Island (refer image above, courtesy of Javier Blas at Bloomberg).

The centrepiece of US strategy is economic strangulation via the blockade. Officials aim to trigger an implosion of Iran’s oil sector as storage fills, deprive the Iranian government of hard currency, and force concessions on nuclear and regional issues. The U.S. President and Secretary of the Treasury have both, on a number of occasions, claimed that Iran’s oil production, pumping and storage systems are on the verge o collapse. Meanwhile, President Trump has rejected Iranian proposals to prioritise Strait of Hormuz reopening, insisting the pressure continues until a broader deal. Claims suggest daily losses in the hundreds of millions of dollars for Iran.

This approach rests on shaky assumptions. Iran endured multi-year collapses in oil exports under prior sanctions — dropping sharply post-2012 and after 2018 JCPOA withdrawal — without governmental collapse. The Bloomberg chart shows this clearly.

Long accustomed to sanctions, Tehran has developed non-USD payment channels, barter arrangements and alternative trade networks. Overland routes mitigate maritime restrictions for essential imports. Iran reports around 85% food self-sufficiency, underscoring that it is far more than an oil-dependent state; its diversified (if challenged) economy and societal resilience have been tested by decades of hardship. This food self-sufficiency lays the bedrock for systemwide resilience; after all, a functional society must first and foremost ensure that there’s food for people.

Expert commentary from the oil industry experts, such as Robin Mills from Columbia University’s Center on Global Energy Policy, questions dramatic near-term risks to wells and pipelines from temporary shutdowns. Past resilience suggests additional weeks or months of pressure are unlikely to break either the government in Tehran or popular resolve. Meanwhile, global oil prices have spiked (Brent briefly over $126), raising costs for consumers, including in the U.S., and risking broader economic ripple effects that could rebound faster on the blockader than the target.

Meanwhile, every time Trump extends the ceasefire timelines, he signals a reluctance to re-engage kinetically; this points to deeper concerns. Retaliation risks remain high: Iran could inflict massive regional damage, targeting infrastructure in allied states (including the facilities of the UAE, which have recently exited OPEC to the applause of Washington) and disrupting global energy flows. That the U.S. was unable to defend its regional military bases, now demonstrated clearly by a recent recent report from CNN, is evidence that regional critical infrastructure is these days more vulnerable than ever. A prolonged conflict risks a quagmire — costly, inconclusive and bogging down US forces as well as draining an already depleted magazine — without a clear path to decisive victory. A wide cross-section of analysts, myself included, conclude that the war — initiated by the U.S. — has been a disaster from its perspective, to a point of being already a defeat of strategic proportions. The stasis now embodies what I have framed as the “decent interval” problem: the domestic political necessity of buying time for an exit that avoids immediate humiliation while material realities (Iran’s staying power, global pushback and economic blowback) erode the leverage of maximalist demands. Add to this millenarian apocalyptic zealotry and there’s every reason to believe that there’s little room for the Trump administration to move.

Washington’s blockade-centric pressure campaign appears premised more on hope than robust evidence of rapid Iranian capitulation. Tehran’s demonstrated endurance, adaptive economy, and credible retaliation options tilt the contest of resolve in its favour over the medium term. The standoff highlights the limits of coercive diplomacy when mismatched against a hardened, self-reliant adversary. Negotiations may yet yield a grand bargain, but only if the U.S. confronts these asymmetries and deals with Iran by recognising that Iran has emerged as a regional power, rather than doubling down on unproven levers.

For now, for the reasons I have explained in detail in a recent essay on the escalation trap, eschatological zealotry and the “decent interval” problem, the prospects of the U.S. yielding anything in the near term are remote.

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Effects

The latest escalation — that is, the US blockade of Iran’s blockade — of course compounds the disruption to global energy flows. CENTCOM insists the measure is “impartial” and will not impede vessels transiting between non-Iranian ports. In practice, however, the distinction is porous. Insurance markets have already frozen, tanker owners are diverting, and any vessel perceived as aiding Iranian exports risks boarding or worse. Oil flows will be further curtailed, and are in any case subject in part to Iranian protocols.

Yet the impact will not be evenly distributed. Chinese-bound or Chinese-flagged tankers are likely to be partially insulated. Beijing has already secured pragmatic understandings with Tehran; its vessels enjoy a certain degree of preferential access, though this isn’t unfettered or unconditional by all accounts. China’s Foreign Minister, Wang Yi, for instance recently remarked that China had some 70 tankers still upstream, yet to be able to come through the Strait (that’s about 8.5 days of oil for China, by the way, or 2.3% of annual demand, to keep things in context).

Other nations have done the same. Any American attempt to interdict Chinese ships would risk direct confrontation with China — the one direct kinetic escalation Washington, one presumes — trepidatiously, I might add — wishes to avoid. Chinese response through supply-chain strangulation, rare-earth export bans or financial retaliation is a lever the US would be reluctant to lightly trigger. That said, the U.S. is increasingly “trigger happy” and the possibilities of U.S. initiated escalations are both real and slowly rising.

As for American sanctions on Chinese firms buying Iranian oil, these have elicited a direct response from Beijing: sanctioned companies have been instructed to ignore the unilateral declarations of the Americans. Financial mitigations domestically have been guaranteed in the event of losses, but the significance of this response lies elsewhere — it is an explicit drawing of a line, laying the groundwork for a potential maritime encounter. The announcement from Beijing also puts foreign entities on notice: acceding to U.S. sanctions in ways that countermand international law or which adversely impact Chinese sovereignty may well run foul of China’s laws. For companies whose revenues and profitability depend on business with China, they will be watching this space very closely.

Meanwhile, there are reports that at least 34 vessels have slipped the U.S. cordon as of 21 April 2026, with other reports indicating that a further 70 vessels have slipped the blockade since. The result is porosity with Iran’s “friendly countries” — and others, like Japan, to boot — benefiting while others continue to scramble. The short take-out of this situation is straightforward, insofar as immediate implications are concerned: total global oil supplies will fall compared to pre-28 February levels; the U.S. blockade won’t be 100% effective; and modest offsets from increased crude supplies from Russia and the U.S. will partly compensate reductions in flows from the Persian Gulf. Losing in net terms somewhere in the order of 10 to 12 million barrels a day, perhaps a little more, in aggregate terms, when total pre-war global demand was in the order of 105m bpd, isn’t a mosquito bite. Chris Martinsen’s excellent interview on Deep Dive with Daniel Davis is recommended viewing, on this front.

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Nowhere is this scramble more acute than in Singapore, with flow-on implications for those national economies tethered to Singaporean refiners. The city-state’s three main refineries on Jurong Island — ExxonMobil, Singapore Refining Company and the integrated petrochemical complexes — were built for a diet of Middle Eastern light-sour crudes. These barrels possess exactly the API gravity, sulfur content and contaminant profile that maximise yields in the complex hydrocrackers, reformers and desulfurisation units that define Singapore’s competitive edge. Talk of “simply sourcing more crude from the U.S.” ignores basic chemistry and engineering. It also ignores the reality that the U.S. is a net importer of crude in normal conditions, as I have discussed elsewhere, with present exports taking place through draw-downs in the nation’s strategic reserves.

American shale crudes are typically lighter and sweeter; heavier Venezuelan or Brazilian alternatives bring different contaminants and require costly process tweaks. Refineries running at 50–60% utilisation — already the reported reality — are operating below stable turndown thresholds. Distillation towers suffer poor fractionation, vacuum units coke prematurely and downstream units see cascading instability. Blending mismatched crudes accelerates fouling and corrosion. Catalyst life shortens. Yields of high-value products — naphtha for petrochemicals, jet fuel and ultra-low-sulfur diesel — fall. Fixed costs are spread over fewer barrels. The economics turn ugly fast.

Singapore is not an isolated victim. It is the pivot of Asia’s downstream supply chain. The island refines and exports gasoline, diesel, jet fuel, bunker oil and chemical feedstocks that keep planes flying, ships bunkering and factories running from Southeast Asia to Australia and beyond. When Singapore runs short, regional prices spike, availability thins and supply chains fracture. Australia, which sources roughly one-fifth of its refined products from Singapore, feels the pain immediately. But so do Thailand, Malaysia, Indonesia, the Philippines and India’s coastal markets. There are no quick substitutes. New tankers take weeks to arrive; alternative crudes require months of trial-and-error reconfiguration; and no other Asian hub possesses Singapore’s scale and integration.

And in this short essay, we haven’t even looked at all the other products affected — fertilisers (see chart below), sulphur, naphtha, natural gas, helium and other assorted industrial chemicals and the like. These create mounting pressures globally, as well as in the U.S. where mid-term elections are sure to test the electorate’s patience and capacity to absorb economic pain.

Outlook

A protracted blockage — whether Iran’s selective choke or the new US-Iran layered restrictions — will not stop at higher pump prices. It will trigger demand destruction on a global scale, though in uneven ways. Oil at sustained triple-digit price levels accelerates inflation, squeezes margins across manufacturing and transport and forces central banks — through the prism of their dominant conceptual frames — into an impossible trade-off between growth and price stability. Industries already teetering, like petrochemicals, aviation and long-haul logistics, will likely see curtailed or suspended operations, and eventual closures. Demand destruction will keep a lid on inflation, of course. Further, shipping lines may well reroute permanently around the Cape, adding thousands of miles and millions in costs. This will drive further transformations in global ship manufacturing, in which China occupies prime position. Refiners worldwide will idle capacity or retool at enormous expense.

There is, of course, a deeper lesson; and that is structural. For decades the world has treated cheap, reliable Middle Eastern oil as a given. That assumption is now shattered. A prolonged crisis will compel painful restructuring: accelerated investment in electrification, hydrogen and nuclear, massive efficiency gains in transport and industry, strategic stockpiling on a scale never before attempted, and diversification of supply chains away from single chokepoints. Nations that treat this as a temporary inconvenience will pay a heavier price. Those that accept the new reality — that power, not parchment, ultimately governs the oceans — will begin the hard work of de-risking their oil dependency now. This transition can be partly cushioned by expanded Russian supplies particularly into the Asian markets, even as Russian refineries on the Black Sea are disrupted by Ukrainian attacks. (I will publish another piece in the near future addressing these dynamics.)

In time, the settlement of a new power structure will deliver ballast to the new rules defined by parchment; but for now, things are in flux. And oil will continue for decades to come to be an important part of the global energy mix.

The Strait of Hormuz has always been more than a waterway. It is a mirror. In it we see the limits of the so-called rules-based order enforced by American unipolar hegemony when the rules collide with geography, capability and will. Iran has demonstrated that a determined coastal state, armed with both legal cover and credible force, can rewrite the terms of passage when compelled to. The United States has shown that even a superpower cannot always enforce the old terms without unacceptable cost.

The rest of us — whether they be Singapore’s refiners, Asia’s manufacturers, Australia’s motorists, Europe’s chemical plants, American farmers and households across many parts of the world — are left to adapt to the new map being drawn in real time. American crude suppliers are exporting to capitalise on higher prices, by dipping into the nation’s strategic reserves. Monetary signals mask depleting real available inventories, not to mention declining EROEI at a structural level.

History tells us that the global economic system will adapt; value flows inevitably do. Moves to innure industries and nations from oil shock risks will intensify. Electrification will accelerate; Chinese technical capability and production capacity is key. Some are better placed than others in this scenario. Prospects of returning to the status quo ante are, however, zero. America’s attack on Iran and Iran’s response have changed reality forever. The only question is how much pain we endure, and who endures it the most, before we begin the structural transformations that these new circumstances call for. The issue isn’t confined to a question of nation-v-nation; ultimately, the effects also are domestically distributional — who within each national economy will be impacted the most and who will make-off as they exploit and manipulate paper markets and plunder desperate firms and households.

In geopolitics, the question of class is never ever far away.

Three decades and some of American post Cold War unipolarity coincided with the entrenchment of political and economic discourse in the political west, and in global institutions dominated by the west, framed by the nostrums of mainstream neoclassical economics and the unquestioned superiority of parliamentary democracy as the finality of the political form. Perfecting markets and some idealised notion of a multiparty plebiscitarian institutional construct became the benchmarks against which “reform” economically and politically would be judged. Both promised the nirvana of Reason’s “cunning” — the apotheosis of the unfolding of “freedom” as History found its most advanced embodiment in western economic and political civilisation. Yet, as we enter the second quarter of the 21st century, such promises have faltered and we are witnessing what can perhaps be called liberalism’s denouement.

The political battles that defined the latter half of the 19th century and the first few decades of the 20th — liberalism, socialism and fascism — seemed like a distant, almost imagined, memory. When in late 1918 / early 1919 Rosa Luxemburg spoke of the choice between “barbarism and socialism,” she crystallised and distilled the politics of friend-enemy that would later swirl through Europe with the emergence of the monsters of Gramsci’s interregnum. On the other side of the political fence, Carl Schmitt in his The Crisis of Parliamentary Democracy (1923) and other writings laid bare the fragilities and limitations of bourgeois parliamentarism as he argued the legal and philosophical case for the National Socialists’ usurpation of power in Germany. Meanwhile, the German SDP - at the time, arguably, western Europe’s most cohesive and arguably successful socialist party organisation - itself had become paralysed by unresolved internal debates about whether adherence to parliamentary politics was sufficient to advance the political and economic cause of socialism.

The debate between Eduard Bernstein and Karl Kautsky within the German SPD in the early 1900s epitomised the political, strategic and theoretical conundrums that ultimately conditioned the ways in which post-war socialism became embedded into the fabric of liberal parliamentarism.

Bernstein, the revisionist, argued that Marx’s predicted immiseration had not materialised; instead, rising living standards, trade union gains and universal suffrage meant socialism could be achieved ethically and gradually through parliamentary democracy, rendering the revolutionary final goal secondary to the movement itself. Kautsky, a orthodox Marxist, countered that the bourgeois state remained a class instrument — reforms could improve workers’ lives but could never transcend capitalism without a revolutionary break. Yet Kautsky was no Leninist: he still saw parliament as a tactical arena to strengthen the proletariat until the final crisis, not as a path to socialism itself. The SPD never formally chose between them. Its Erfurt Programme remained rhetorically revolutionary, but its daily practice — massive electoral machinery, trade union networks and a focus on cooperatives — drifted steadily toward Bernstein’s reformism.

By 1914, the party’s vote for war credits sealed Bernstein’s de facto victory. The ambiguity persisted: revolutionary language at conferences, but with parliamentary action on the ground. This unresolved synthesis — revolutionary in form, reformist in substance — would later prove fateful. When the Nazis rose to power, adherence to parliamentarism offered the SPD no protection; its leaders were rounded up, killed, or driven into suicide and exile.

After 1945, the West German SPD drew a different lesson. In the 1959 Godesberg Program, it formally abandoned Marxism, embraced the social market economy, and declared itself a Volkspartei of liberal capitalism. The Bernsteinian path, once a heretical revisionism, became the uncontested foundation of postwar social democracy — embedding socialism into parliamentarism not as its antagonist, but as its loyal left wing.

Elsewhere the end of the Second World War saw the consolidation of a moderated capitalism — ordoliberalism, Keynesian-welfarism, social democratic mixed-economies — in the political west, buttressed by an international political economy that preserved the extractive substrate of pre-war imperialism but, this time, dressed up with a de-colonialisation gloss. The Bretton Woods settlement reflected the dominance of war’s victors; the IMF and World Bank did little to alleviate global imbalances. They often made them worse, usually compounding poverty in developing countries rather than alleviating it, and prosecuting policies and prescriptions that amplified western-cum-American power.

Until the Oil Shock 1.0 of the early 1970s national and global capitalism appeared to have been stabilised. The brutality of unbridled markets had been offset by welfarist interventions, and so-called Keynesian macro-economic policy. Labour’s claim on total value add in the advanced economies had risen to historically unprecedented levels; and income inequality within western nations had compressed concomitantly. So much is clear from detailed studies by many scholars, crescendoing with Picketty’s 2014 Capital in the 21st Century. Internationally, Bretton Woods strictures coupled with neocolonial arrangements (eg., French financial control of west Africa via the African Franc; American global capital expansion exploiting low cost labour across Asia while claiming profits; first world dominance of raw materials supply chains etc.) ensured pre-war inequalities and imbalances globally remained largely in place. It’s no wonder that so called third world debt problems have never been solved (see for example James O’Connor’s 1973 The Fiscal Crisis of the State and for a more recent treatment Ann Pettifor’s work for example).

The new political and economic settlement to emerge post Oil Shock 1.0 coincided for the most part with the tail end of the USSR (1975-89), the eventual dismantling of the Soviet Union and the rise of American unipolarity (1990-). We can argue about the nuances to which unipolarity was absolute or not, as Radhika Desai (2013) in Geopolitical economy : after US hegemony, globalisation and empire reminds us, but this should not be read as implying that somehow the U.S. did not straddle the globe like a modern day colossus or leviathan. No system of power is absolute, and all power relations imply opposition or resistance, for sure, but the U.S. was, for a period, floating on the sugar highs of unipolarity. It largely did as it pleased, and launched more military intervention on average per year than it had ever done (see Duffy Toft and Kushi 2023 Dying by the Sword, which I reviewed here).

The political economy of the New Right emerged as a salve to stagflation. Thatcher and Reagan epitomised the shift; Milton Friedman’s monetarism was the new doctrine. As Graeme Thompson’s 1986 The Political Economy of the New Right documents beautifully, however, the practice of new right economics wasn’t always about doctrinal purity; far from it in fact, but politically it successfully unwound the political-social settlement that defined much of the post war period leading up to the Oil Shock. Labour’s gains in share of total value add were eaten away, as organised labour was routed. The hollowing out of industry accelerated, on the back of expansive privatisation programs — particularly in the UK — as Fordism and its social accoutrements were dismantled. Boyer and others from the Regulationist School spoke of a post-Fordist regime of accumulation, while Ernest Mandel argued the case for “late capitalism.” Lash and Urry would point to the emergence of “disorganised capitalism” while Piore and Sabel looked for silver linings by way of a “second industrial divide” and what they dubbed “flexible specialisation.” Whatever one’s school of thought, there was no doubt that change was afoot. (See also the excellent 1989 collection edited by Jonathan Zeitlin and Paul Hirst Reversing Industrial Decline?, for details and experiences across multiple western economies.)

The dismantling of the Soviet Union also dismantled a left — in the political west at least — that could think questions of political democracy beyond the limits of parliamentarism. Narrow parliamentary systems became de rigeur the democratic touchstone, beyond question or critique. When former eastern bloc nations raced to embrace parliamentarism western style, the jury had — at that moment in history, at least — delivered a verdict. Efforts by some in the western left to provoke a more radical rethink - amongst others, British associationalism (Paul Hirst) / European associationalist socialism (Roberto Bobbio) / American communitarianism (Amitai Etzioni) in particular - gained limited to little practical organisational traction in this environment. Things appeared settled, once and for all.

Yet, the post Cold War economic and social settlement was not settled; domestically in the political west or internationally. History didn’t end, so to speak; it barely rested.

The Asian Financial Crisis of 1997 and the Global Financial Crisis of 2007–08 exposed the fragility of this supposedly settled order, revealing that financialised capitalism had not abolished crises at all. Studies of U.S. industry show that across virtually every sector — manufacturing, retail, telecommunications, media, finance, agribusiness — ownership has consolidated into fewer and fewer hands, while Germany’s storied Mittelstand, once the backbone of that economy, has been steadily eroded by global competition, private equity absorption, and succession failures.

Simultaneously, stock ownership in the United States, as Federal Reserve data confirms, has concentrated sharply: the wealthiest 10% now hold well over 90% of corporate equities and mutual fund shares, leaving the bottom half of households with negligible direct stake in the equity of those listed firms their labour sustains. Financialisation and manufacturing’s hollowing out proceeded as two halves of the same process: finance demanded liquid, short-term returns, while offshoring offered cheap labour and regulatory arbitrage. As I have documented elsewhere, the former actively drove the latter, with shareholder value logic penalising long-term industrial investment.

Global outsourcing became the default corporate strategy, creating what John Urry termed the “global outsourcing regime” — supply chains stretched across continents, invisible to consumers but exquisitely vulnerable to pandemic, war, or political shock. Widening economic inequality followed mechanically. Real wages flatlined across the OECD from the 1980s onward even as productivity doubled and tripled. Households, as Johanna Montgomerie and her collaborators have shown, responded not by reducing consumption but by borrowing, trapped under the “tyranny of earned income” — the cruel arithmetic whereby stagnant wages meet rising costs for housing, healthcare and education, with debt the only available shock absorber. Private debt was sold as liberation from this “tyranny” as wage earners and consumers were reconstituted as “financially literate” agents.

Political alienation and anomie spread alongside private indebtedness. Disenfranchisement took both formal and informal forms: voter turnout declined, party membership collapsed, and a new class of the permanently precarious emerged, unrepresented by legacy institutions of left and right alike. Drug addiction, homelessness and suicide have all increased in the U.S. and elsewhere in the political west.

Geopolitically, the post-Cold War settlement unravelled on multiple fronts. NATO’s eastward expansion — however much it was ostensibly justified on security grounds to its architects — was read in Moscow as strategic encirclement, a breach of assurances allegedly given in 1990. China’s emergence as a global manufacturing and technological power radically disrupted global value flows, undermining the uneven distributional architecture of neocolonialism that had enriched Western capitals while extracting surplus from the Global South. The Belt and Road Initiative, developmental lending, and industrial policy created the conditions for a revitalised Global South, no longer content with primary commodity roles in a Western-dominated division of labour.

Russia’s own renaissance defied the post-1991 script. Despite efforts in the 1990s and early 2000s to reach a post-Cold War détente with the political West — seeking partnership with NATO, joining the G7, accommodating Western investors — Moscow was repeatedly rebuffed, from Kosovo’s independence to missile defence to the broken promises of a pan-European security architecture and the debacle of Ukraine. The reemergence of Eurasianism within Russian political and economic discourse followed as a consequence. As Richard Sakwa has argued, Russia did not choose confrontation from a position of strength but from a perception of existential vulnerability; and as Glenn Diesen has traced, the intellectual shift toward Eurasianism has transformed not only Russian foreign policy but the very contours of global geopolitical economics and thermoeconomics — the politics of energy flows, pipelines, Arctic routes and the material infrastructure of power.

So now, in the present moment, against the backdrop of the thirty-plus-year conjuncture of American unipolar hegemony and its accelerating decline — manifested in growing economic fragility, income precarity, supply-side shocks occasioned by Oil Shock 2.0 initiated by the U.S. attack on Iran on 28 February 2026, undergirding the risk of stagflation, and the prevalence of rising geopolitical tensions and wars — the ghosts of pre-WW2 dynamics return to haunt national politics in the West, and global politics more broadly.

Among the most potent of these returning ghosts is the rise of right-wing nationalism across the Western world — not as a fringe phenomenon but as a mainstream political force reshaping governments from Budapest to Rome, across Germany and France, through to The Hague and onwards to Washington. This is a politics of national revival and nostalgia: the promise to restore a mythologised past of cultural homogeneity, industrial dignity and sovereign control, against the perceived depredations of globalisation, mass migration and cosmopolitan elites. Yet beneath the surface of restorationist rhetoric lies a deeper, more volatile current: millenarian apocalyptic energies, wherein the nation is cast as besieged, in terminal decline, and ultimately redeemable only through purifying crisis.

These movements draw on what the historian Eric Hobsbawm called the “invention of tradition” — but the invention now is not of Victorian pageantry but of civilisational last stands. Post-liberalism, as a self-conscious intellectual current, argues that classical liberalism has exhausted itself, producing only rootless individualism, demographic collapse and cultural decay. Its political vehicles — whether France’s National Rally, Germany’s Alternative für Deutschland, Italy’s Fratelli d’Italia, or a transformed Republican Party under Trump — are not simply conservative but proto-fascist in their structures: the cult of the leader, the demonisation of an internal enemy (migrants, leftists and the “deep state”), the celebration of violence as political purification, and the systematic undermining of the erstwhile institutions of the liberal settlement: independent courts, free media and electoral integrity. They are a reaction, and self-consciously so, to the perceived failures of the post-Cold War political economy to deliver on its promises: flatlined wages, deindustrialised landscapes, precarious labour, housing unaffordability and a political class that offered managerial neoliberalism as the only horizon of possibility.

Sound familiar?

The interwar period witnessed a not dissimilar conjunction: economic crisis, humiliated national pride, elite delegitimisation, and the seduction of authoritarian solutions dressed as national rebirth. Then, as now, centrist and liberal parties and movements proved disastrously slow to recognise the danger, mistaking fascist movements for protest votes that would fade once prosperity returned. But there is a crucial twenty-first-century difference. The emergence of the Global South — economically empowered by China’s rise, demographically youthful and politically self-confident — adds a wholly new dimension compared to the interwar period. Then, the European empires could still extract colonial resources to soften domestic class conflict; today, the extractive architecture of neocolonialism is fraying. The Global South no longer automatically defers to Western financial institutions, media narratives or military alliances. BRICS expands; dollar hegemony is contested; the SCO consolidates; African states court multiple partners; many across Latin America and Asia hedge.

This creates a double pressure on the political West: internally, the old post-war social contract — which rested in part on super-exploitation of the periphery — cannot be restored; externally, the West can no longer project power as a unified bloc commanding automatic deference.

The ghosts of the 1930s return, but they return to a world where the stage is crowded with new actors who remember colonialism and intend to write their own futures. Whether the Western left can marshal a meaningful anti-fascist politics based on a defence of liberal parliamentarism without the material legitimacy it has squandered — and without falling into the very authoritarian traps it claims to oppose — remains the open question of this terrifying start to the 21st century.

Threats to parliamentarism have been growing because these institutions are palpably failing; they now symbolise the shortcomings rather than function as beacons of a new social settlement; the mainstream left’s tepid response in the west is to seek to mollify markets à la the 1950s and 1960s with its own version of nostalgia but in truth, none of this is viable in a polity dominated by finance and technology capital and a political elite that remains wedded to or constrained by the discourses of neoclassical economics. Political fragmentation and the progressive decline in major parties’ popular support are symptomatic of a diminished legitimacy of parliamentarism. Yet, as I have argued elsewhere, these new rightist-verging on-fascist reactions to liberalism’s failures do not offer a viable program of genuine social and economic renewal. They are a mirror image of liberalism’s limitation, not a means of its transcendence.

An anti-fascist politics is needed. But, an anti-fascist politics cannot be viably created if the aim is to somehow return to a status quo ante within the parameters of existing economic settlements, parliamentary institutions and prevailing coalitions of political constituencies. The rise of fascism is precisely against the institutions of the status quo ante. Old political coalitions are fragmenting. New constituencies need to be defined and curated.

Berstein may well have won the battle a century and a bit ago, but Kautsky’s counterpoint is back, because the battle did not define the war. Liberal parliamentarism has run up against its limits. Schmitt’s diagnosis of parliamentarism’s inherent fragility was prescient and sharp, regardless of one’s political affiliations; and, as with the passing of time, was Kautsky’s critique from an entirely different counterpoint. Fascism’s answer appealed to Schmitt’s sensibilities and clearly appeals to a growing body of public opinion today.

The question is whether a new left relevant to contemporary conditions, not afflicted by a nostalgia for the days when it became comfortable as part of the status quo, can emerge from the ashes of the Bersteinesque compromise, discover something in Kautsky, so as to give effect to a “rupture” that Walter Benjamin may recognise. Otherwise, that rupture may well belong to fascism. Again.

In response to Iran’s demonstration of the Hormuz weapon, whereby ship movements through the Strait must now be authorised by Iran, the U.S. moved to impose its own blockade. A “blockade of blockades,” so to speak. In part, this was part of intensified armed bargaining, after the first round of failed peace negotiations in Islamabad, Pakistan, as the U.S. and Iran sought to intensify pressure on the other to make concessions. As things have panned out, so far (as of 30 April 2026), Iran’s proposals to open the Strait on the proviso that the U.S. ceases its blockade have been rebuffed by Trump. Reports indicate that Trump is preparing to commit to a long-term blockade, which we can understand through the rubric of the escalation trap and associated dynamics (which I have discussed previously). Despite the blockades, there are growing reports that Iran permits ships to pass safely, and many now manage to evade the American blockade. The Financial Times reported that at least 34 ships secured passage out to the Indian Ocean (23 April 2026) and more recent reports, of 29 April 2026, indicate that over 52 Iranian ships have made safe passage within the previous 72 hours. The U.S. blockade is porous as tankers adopt assorted tactics to slip through.

In this context, eyes have turned to China. China has accumulate substantial reserves, which continue to hold it in good stead to cope with the disruptions to oil traffic. Two questions, at least, arise deserving of some attention.

The first goes to how it is that we can interpret and understand China’s accumulation of reserves. Some commentators have suggested that the accumulation can be understood not as part of some strategic approach of the Chinese state, but as a desire by Chinese financial authorities to hide the growing accumulation of foreign exchange. This essay addresses this in some detail, by demonstrating that oil reserves accumulation is actually a part of a wider set of strategic initiatives launched a couple of decades ago, to inure China from exogenous energy risks. This goes back to the now famous observation by then President Hu Jintao about the “Malacca Dilemma.” That China’s state over the millennia has a demonstrated track record of reserves hoarding to enable the state to manage commodities prices, sets the longue duree stage for this strategic disposition. As such, the idea that oil reserves accumulation is not due to strategic considerations but is a function of nefarious efforts to conceal foreign exchange is palpably nonsensical.

The second issue goes to U.S. “grand strategy.” In short, so the argument goes, everything that we are witnessing today — from the war in Ukraine, the destruction of Nord Stream, the capture of Venezuela and now the war against Iran — is all in the aid of a wider American ambition to contain China. That much, and arguably the overwhelming proportion, of American foreign policy is in some respect connected with American hostilities towards China goes without saying. One only has to listen to the utterances of American politicians or read the various reports coming out of Congress or the plethora of think tank papers over the years, which provide the talking points, to realise that China “lives rent free” inside the heads of those inside the Beltway. Yet, this observation — and the plethora of “grand strategy” or “secret plan” elaborations we now see — doesn’t provide analysis so much as it affirms the permanent presence of a China psychosis. Whether or not there is strategic intent or ambition is somewhat by the by; let’s say there is. The issue of interest and concern is whether the means-end dynamics are grounded in reality or not. The American security state may have certain ideas, many well-known, but they aren’t the only ones that get to play. This essay strongly suggests that on question of choking China’s access to oil from the Persian Gulf — either by way of interdictions in the Gulf of Oman, or by some proposed blockade of the Strait of Malacca — that horse has already bolted. When President Hu observed the “Malacca Dilemma” almost a quarter of a century ago, it was in effect a call to action. And action there has been.

Addressing these two issues is done through a dispassionate analysis of the economic and energy security implications of a potential full curtailment of Persian Gulf (Middle East) crude oil flows to China, incorporating primary energy accounting methods, import diversification, inventories and substitution trends. The key conclusion is that a complete loss of Persian Gulf-origin oil would directly affect between ~5–7% of China’s primary energy supply under conventional metrics (even less under substitution accounting) today, and that the impact diminishes in the out-years. Large strategic and commercial inventories (~100–130+ days of import coverage at a minimum), Russian overland/pipeline capacity, and accelerated domestic electrification/substitution limit impacts to a short-term inconvenience — manageable price volatility, refinery adjustments and localised friction — rather than systemic economic damage. China’s preparations over the past two decades (diversification, stockpiling, electrification, renewables scale-up) have demonstrably paid off.

This assessment draws on EIA, IEA, CNPC-linked forecasts, customs/Kpler data, and recent statements. Numbers can shift with exact disruption scope or policy responses; real-world outcomes would also depend on global market reactions and diplomacy. However, based on reasonable assumptions, the probability of the accuracy of the conclusions drawn from the analysis below is high.

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Current Oil Position in China’s Energy Mix

China’s total primary energy consumption is approximately 160–162 quads (or ~6 billion tonnes coal equivalent), with fossils still dominant but non-fossils rising rapidly. Using the Direct Equivalent Method (standard international/EIA/IEA approach, fossils counted on gross input basis, primary electricity on output basis):

• Coal: ~58–62%;

• Oil (petroleum and other liquids): ~17–19% (Sinopec-linked forecasts ~17.2% for 2025; broader estimates ~19%);

• Natural gas: ~8–9%; and

• Non-fossil (hydro, nuclear, wind, solar, etc.): ~19–21% (recently edging past oil in some metrics).

This methodology has ain interesting quirk; it classifies coal, oil and natural gas as inputs, whereas electricity from non-fossil fuels is classified as electricity outputs. This means that we are not actually comparing apples with apples, the effect of which tends to overstate the proportionate role of fossil fuels in China’s energy mix and understate the role played by non-fossil fuels.

A corrective is to adopt the Substitution (or Partial Substitution) Method, whereby renewables/primary electricity are credited with the fossil (typically coal) input they displace, using ~38–40% average thermal efficiency for China’s coal fleet. This multiplies the non-fossil contribution by ~2.5×, enlarges the total primary energy denominator, and reduces relative fossil shares (including oil and coal). Oil’s effective share falls into the mid-teens percent range or lower as electrification accelerates and wind/solar/hydro/nuclear displace thermal generation. This method better reflects “apples-to-apples” displacement of chemical energy inputs and aligns with your earlier point on consistent treatment of capacity/generation.

In terms of China’s oil demand the data indicates that it was ~16.5–16.7 million barrels per day (mb/d) in 2025 (~760–765 million metric tons), with CNPC forecasting a peak/plateau around 2025 (some projections extend modest stability into 2027–2030 before gradual decline). IEA sees demand largely flat at ~16.7–16.9 mb/d through 2030, driven by petrochemical feedstocks offsetting sharp contractions in gasoline/diesel (already peaked or near-peak due to EVs and LNG trucks).

It is estimated that ~70–75% of crude is imported. Total crude imports reached a record ~11.6 mb/d in 2025. Domestic production stabilised near 4.2–4.3 mb/d. Of this, Middle East/Persian Gulf’s share is estimated to be ~45–55% of crude imports (Saudi ~14%, Iraq ~9–11%, Iran ~12–14% often rerouted via Malaysia/Indonesia, plus UAE/Oman/Kuwait). Roughly 35–45% of total crude supply (imports + domestic) traces to Hormuz-linked flows in recent periods, with trackers noting a declining share due to Russian increases.

We can thus undertake a foundational vulnerability calculation, which shows:

• Oil ≈ 18% of primary energy (mid-range direct method);

• 73% imported × 50% Persian Gulf/Middle East average ≈ 36.5% of total oil supply vulnerable;

• 18% × 0.365 ≈ 6.6% of primary energy; and

• On the substitution method basis, we can estimated that oil’s share is closer to 15% oil share, meaning that its share of primary energy is closer to ~5.5%.

Thus, prima facie, we can estimate that China has between ~5–7.5% of primary energy directly exposed. Under substitution accounting, this percentage shrinks further as the non-fossil denominator grows. By 2030, with oil demand plateauing/declining modestly while total energy and GDP grow, and non-fossil electricity penetration rising (electricity already ~32%+ of final energy and increasing), the proportional exposure falls into the low single digits.

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Diversification and Rerouting Capacity (Russia & Central Asia)

Russia is China’s top crude supplier (~18–20% of imports in 2025, with volumes ~2.0–2.2+ mb/d including seaborne and pipeline). A significant and growing portion arrives via the ESPO pipeline (capacity ~700,000 b/d to Mohe, with spur lines; this route is expandable) and other overland/rail routes that fully bypass Hormuz and Malacca. Additional flows via Kazakhstan-China pipelines (~200,000 b/d from Rosneft) and Russian Far East ports add resilience.

Central Asia provides incremental overland options (e.g., Kazakhstan routes), though smaller than Russian volumes. These pipelines avoid maritime chokepoints entirely.

In this context, we can note the comment of Russian foreign minister Sergei Lavrov during his Beijing visit, where he explicitly stated that Russia has the capability to “make up for the resource shortfall” or “fill any energy resource gap” China might face from Middle East disruptions, citing existing reserve and planned capacities. This aligns with deepening Russia-China energy ties (ESPO expansions, Power of Siberia gas lines, discounted barrels). While not an unlimited instantaneous offset, Russia’s ability to redirect volumes (especially overland) provides a credible partial-to-substantial hedge for Gulf losses in a crisis, supplemented by Brazil, Angola, and other sources. We can note that Urals crude has similar chemistry properties to Gulf crude, making it more or less a direct substitute.

In a Malacca blockade scenario, rerouting via longer Cape routes (if feasible/insured) or increased Russian/Central Asian overland flows could offset 20–40%+ of a Gulf shortfall over months, depending on logistics and pricing.

Buffers: Inventories and Operational Flexibility

China entered any potential disruption with exceptionally strong buffers. Note the following:

• Total strategic + commercial inventories are estimated to be ~1.4 billion barrels as of end-2025 (EIA estimate), with government-held SPR ~360 million barrels and commercial/refinery stocks ~1 billion barrels. Aggressive builds averaged ~1.1 mb/d added in 2025. Some trackers put total storage near 1.4–1.5 billion barrels, with capacity headroom toward 2 billion;

• These reserves provide coverage of roughly 100–130+ days of import protection (exceeding IEA’s 90-day benchmark). This is equivalent to 3–4+ months of breathing room for drawdowns, rerouting, and adjustments at full truncation of Gulf flows; and

• China has the ability to govern oil consumption to adjust for shifting priorities: Teapot refineries, bonded/floating storage, prioritised allocation to military/essential uses, demand suppression (non-essential transport), and accelerated substitution (EVs, LNG trucks, industrial electrification) enhance resilience. Petrochemical feedstocks (growing share of oil use) are less time-critical than transport fuels.

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Implications of Hormuz/Malacca Blockade

Within the public domain, there’s been a bit of excitement around the recent U.S.-Indonesia defence agreement, with many observers rushing to claim that this represented a key “chess piece move” enabling the U.S. to contain China via blockage of the Strait of Malacca. I won’t examine the military dimensions of such a blockade; this can wait for another day.

For now, we can note that disruption at one chokepoint largely nullifies the other for Gulf-to-China flows: no oil exits Hormuz to reach Malacca (with some flows going via the Cape, perhaps), and a blocked/risky Malacca removes incentive for Gulf departures to Asia. A sustained blockade event would spike global and domestic prices, raise insurance/logistics costs, and force refinery adjustments.

So, what are the economic impacts, insofar as China is concerned, likely to be of prolonged blockages to flows of Persian Gulf oil?

In direct terms, assuming full cessation of flows (demonstrably implausible given the porosity of the blockades, noted above), the direct energy impact on China would be in the order of ~5–7% of primary energy, with impacts concentrated in transport fuels and petrochemicals, with obvious propagation implications through supply chain networks.

In the short term, we could expect some price volatility and friction (logistics, and certain manufacturing sectors would be impacted). Inventories help buffer against these volatilities. Time is on China’s side, in this context, as inventories enable mitigations to be put into place. The 3–4+ months of stocks buy time for Russian rerouting (Lavrov offer), overland scaling, Cape alternatives (in the event of a Malacca blockade), and ongoing demand-side shifts. Accelerated domestic substitution (EVs, renewables-powered industry, and increased efficiency) would be catalyed, further decoupling oil from growth.

In the longer term, say by 2030, oil’s plateau/decline + electrification/renewables growth shrinks the relative slice even more. Substitution accounting makes the decoupling appear faster. Overall, therefore, it’s reasonable to conclude that the effects would be a short-term inconvenience at worst — somewhat painful but non-existential. There is no threat to core economic functioning.

Strategic Context and Payoff from Preparations

Hu Jintao’s 2003 reference to the “Malacca Dilemma” highlighted vulnerability to maritime chokepoints. Since then, China has systematically reduced exposure through a range of measures:

• Diversification (Russia as top supplier with overland routes; broader sourcing);

• Massive stockpiling (now among the world’s largest inventories);

• Electrification and renewables buildout (wind/solar capacity surging; electricity penetration rising; non-fossil share growing); and

• Domestic production stability and refinery flexibility.

These measures, combined with substitution accounting revealing faster fossil decoupling, have transformed the risk profile. A Gulf disruption today tests resilience rather than threatening foundations. Russia’s willingness to offset (per Lavrov) further underscores the strategic partnership buffer. The bottom line is that China’s ~5–7% primary energy exposure (which is declining), robust ~100–130+ day inventories, Russian/Central Asian rerouting capacity, and ongoing electrification/renewables substitution render a Hormuz/Malacca-driven Gulf oil curtailment manageable and arguably anachronistic. Impacts would be contained to short-term volatility and adjustment costs. Post-2003 preparations have demonstrably strengthened energy security, aligning with your thesis.

Incidentally, this preparation should put the kibosh on arguments about China’s supposed “over investment” in areas such as EVs and electrification. It is precisely these “over investments” that have put China in a position where it can cope with major disruptions — caused either by “natural events” or by geopolitical interventions. As for U.S. “grand strategy,” what we can say is this: if, in fact, these wars are part of a wider “it’s all about containing China” strategy, then the evidence on the ground suggests that the foundational assumptions underpinning American means-ends calculus are flawed; they are empirically falsifiable. This does not discount American motivations and subsequently actions, but does indicate that such interventions are unlikely to work; they may even backfire. Recent experience in the field of semiconductor restrictions should remind us that American policy making is often blind to evidence, and is driven by a psychosis of exceptionalism.

The situation in Iran would appear to fit this pattern. China, so it would seem, has been ready.

This essay focuses on the Nigerian shea butter supply chain, where my colleagues at Smart Trade Networks and I have been retained to provide strategic enabling assistance to deliver long-term transformations.

Nigeria stands as the world’s largest producer of shea nuts, contributing nearly 40% (and in some estimates up to 45%) of global output with annual production between 350,000 and 500,000 metric tonnes. Yet despite this dominance, the country captures less than 1% of the estimated $6.5 billion global shea market. Official export earnings from raw shea nuts have often hovered around or below $65 million annually, while the potential for value-added processing could generate hundreds of millions - and ultimately billions - in revenue through shea butter and derivatives used in cosmetics, food, and pharmaceuticals. This stark disparity exemplifies postcolonial economic structures that lock developing nations into raw commodity exports while foreign-owned processors, brands and retailers downstream capture the lion’s share of value. As economist Fadhel Kaboub has powerfully documented in his analyses of “cocoa colonies” and Tunisian olives, these patterns are not accidental but systemic features of global value chains shaped by colonialism, unequal trade rules, and concentrated corporate power.

The Commodities Development Initiative (CDI) of Nigeria, working in tandem with government policy, is spearheading reforms to shift this dynamic. A key pillar is digitalisation: platforms enabling coordinated “single-desk” selling through the Nigeria Commodity Exchange (NCX), enhanced traceability for buyers and financiers, and better producer bargaining power. Recent policies, including the 2025 ban on raw shea nut exports (extended through 2027), mandate that all shea trade routes through the NCX, aiming to curb informal cross-border losses and force domestic processing. This essay examines the challenges and opportunities of reforming Nigeria’s shea sector, situating it within the broader struggles of agricultural commodities in the developing world - cocoa in West Africa, olives in Tunisia, and coffee in East Africa to name but a few. While formidable barriers remain, strategic digitalisation, industrial policy, and regional solidarity offer pathways to greater local value creation and economic sovereignty.

The current state of Nigeria’s shea industry reveals deep structural weaknesses rooted in its upstream position in the global chain. Shea trees grow wild across a vast belt spanning over five million hectares in 20+ states, primarily harvested by rural women collectors who gather fallen nuts seasonally. Production remains fragmented among millions of smallholders with minimal organisation, leading to inconsistent quality, high post-harvest losses (up to 90,000 tonnes lost annually to informal trade), and vulnerability to middlemen. Domestic processing capacity stands at around 160,000 tonnes but operates at only 35-50% utilisation due to unreliable power, poor infrastructure, inadequate technology, and limited access to finance. Most nuts are exported raw to Europe and Asia for refining into shea butter (which commands 10-20 times the price of raw kernels), where multinational firms control fractionation into stearin and olein for high-margin applications.

The 2025 export ban, while visionary in intent, exposed immediate challenges: nut prices plunged by up to 33% initially, disrupting established trade networks and hitting women collectors hardest. Processors lacked capacity to absorb the surplus, underscoring the gap between policy ambition and implementation readiness. Broader issues include meeting international standards for cosmetics and food-grade products, climate variability affecting tree yields, and gender dynamics - shea is often a critical income source for women yet receives little investment in training or credit. These mirror systemic postcolonial traps: capital and technology remain concentrated abroad, while producers bear price volatility and environmental risks.

Kaboub’s framework illuminates why such imbalances persist across commodities. In Tunisia - the world’s second-largest olive oil producer in good years (up to 500,000 tonnes) - producers export the vast majority in bulk to EU countries like Spain and Italy. European firms (Deoleo, Sovena, and Acesur) blend, bottle, brand, and distribute under premium labels, capturing value in marketing and retail while Tunisia earns commodity prices. EU quotas (e.g., 56,700 tonnes duty-free annually, often exhausted quickly) enforce “managed access” rather than free trade, locking Tunisia at the bottom of the hierarchy despite producing the raw value. This is no market failure but a “well-oiled colonial machine” of global value chains.

Cocoa offers an even starker parallel. West Africa produces 71-74% of global beans, with Côte d’Ivoire and Ghana dominant. Yet farmers receive less than 9% of the final chocolate bar’s value; supermarkets in Europe capture ~42%, while multinationals like Barry Callebaut, Cargill, Olam (grinding), and Hershey, Mondelez, Nestlé (branding) reap high margins (17-26% operating profits). Even local grinding capacity - now ~30-50% in these countries - often remains foreign-controlled, with profits repatriated. Price risks and climate impacts (e.g., swollen shoot virus) fall on smallholders. Kaboub terms this “cocoa colonies versus chocolate empires.”

Coffee in Ethiopia and Uganda follows suit: 1.7-1.8 million smallholders dominate production, yet quality premiums rarely reach farmers due to fragmented aggregation, weak cooperatives, and buyer-driven chains controlled by global traders. Local roasting and branding remain limited; most value accrues in consuming countries through roasting, packaging, and retail. Common threads across shea, cocoa, olives, and coffee include tariff escalation (higher duties on processed goods), sanitary-phytosanitary barriers, and corporate concentration that stifles upstream bargaining. Colonialism - introduced cash crops, extractive trade pacts, and lack of downstream infrastructure - perpetuates dependency.

Reforming these sectors faces multifaceted challenges. Economically, scaling processing requires massive capital for factories, energy and logistics - Nigeria’s installed shea capacity illustrates the underutilisation trap. Politically, policy consistency is elusive; the shea ban’s short-term disruptions sparked calls for review amid livelihood concerns. Socially, organising millions of dispersed smallholders (especially women) for collective action is difficult amid low literacy and trust deficits. Technically, achieving traceability and certifications (e.g., for EU deforestation rules or organic claims) demands technology many lack. Globally, entrenched buyer power and competition from established processors resist change. Climate change exacerbates vulnerabilities across all crops: erratic rains for shea and olives, pests for cocoa, and shifting suitability for coffee. In Kaboub’s view, incremental reforms (larger quotas, niche branding) fail without confronting the structural hierarchy.

Yet opportunities abound, particularly through digitalisation and coordinated policy. Nigeria’s NCX mandate for shea exports creates a de facto single-desk mechanism, enabling price discovery, warehouse receipts, grading, and aggregation that strengthen producer negotiation. Digital platforms - to be advanced via the CDI - facilitate traceability from farm to fork using blockchain or mobile apps, delivering the transparency buyers and financiers demand for premiums. This leapfrogging technology reduces middlemen, links smallholders directly to markets, and unlocks credit against verified stocks. Local value addition to shea butter could multiply earnings while creating jobs, especially for women, in refining, cosmetics formulation, and packaging. The ban, paired with government financing schemes and industrial incentives, aims to expand capacity rapidly.

Broader lessons from peers are instructive. Ghana has modestly increased cocoa processing shares and shea exports through targeted support; Ethiopia’s coffee cooperatives demonstrate how organisation improves quality premiums. Tunisia could pivot via AfCFTA to intra-African and South-South markets, bypassing EU quotas. Kaboub advocates regional blocs for collective bargaining, sovereign development finance for downstream plants, and strategic industrial policy to own grinding, bottling, and branding. For shea, Nigeria could target cosmetics giants with certified, traceable supply while building domestic and regional demand for shea-based products. Sustainability angles - biodiversity in shea parklands, ethical sourcing - align with global “clean label” trends, commanding premiums.

Digitalisation is transformative across commodities: coffee traceability apps in Uganda, cocoa blockchain pilots in Côte d’Ivoire, and olive oil platforms in Tunisia all enhance coordination and value capture. In Nigeria, integrating NCX with farmer apps and CDI support could coordinate selling at scale, attract investment with certainty, and enable financing innovations. Combined with the export ban’s push for processing and AfCFTA market access, this positions shea as a model for decolonising commodity chains.

In conclusion, reforming Nigeria’s shea sector is fraught with challenges embedded in postcolonial structures - fragmentation, capacity gaps, and foreign dominance - but the opportunities are profound. Through CDI-led initiatives, digital single-desk platforms, traceability, and value-addition policies, Nigeria can move from raw exporter to processed powerhouse, potentially multiplying earnings from tens to hundreds of millions (and beyond). Parallels with cocoa, olives and coffee underscore that success requires more than isolated reforms: sustained political will, gender-inclusive organising, climate resilience, and Global South solidarity to reconfigure value chains. As Kaboub argues, true sovereignty demands repositioning from colonies to empires of one’s own making. Nigeria’s shea renaissance, if realised inclusively, could inspire a broader agricultural transformation across the developing world, fostering jobs, forex stability and equitable development in an era of global economic rebalancing.

As the April 2026 ceasefire in the Iran conflict frays beneath a fully implemented US naval blockade of the Persian Gulf, renewed troop surges, and Iranian counter-threats to widen disruptions across the Strait of Hormuz, two rival frameworks dominate analysis of the present moment. Robert Pape’s “escalation trap” diagnoses American horizontal escalation as a self-defeating gift to a resilient adversary. Analyst Anusar Farooqui (otherwise known popularly as @policytensor) counters that these same moves constitute armed bargaining aimed at a grand bargain that acknowledges Iran’s structural victory. Both perspectives are focused on the short-term “event.” To set this debate within context I mobilise Fernand Braudel’s tripartite historical method and add a thermoeconomics edge: the event (the war’s immediate kinetics), the conjuncture (medium-term cycles of power transition), and the longue durée (deep structural and biophysical rhythms). Only by nesting the event within these deeper layers does the open question crystallise: can material reality force rationality faster than zealotry and fear of humiliation can prolong the “decent interval”?

Pape’s escalation trap, honed through decades of studying coercion from Vietnam to Kosovo, identifies a recurring pattern. A superior power’s incremental escalation — decapitation strikes, precision campaigns, naval interdiction etc. — fails to extract decisive political concessions while inviting the weaker side to broaden scope and duration. Tactical wins become strategic liabilities. In the 2026 Iran war, the February 28 US-Israeli opening strikes were meant to reset the regional balance; instead, Iranian retaliation horizontalised the theatre to the Gulf chokepoint and proxies. The stumbling Islamabad talks (April 11–13) and subsequent blockade enforcement exemplify the trap: each new lever of pressure merely raises the stakes, generates blowback in oil markets (which are manipulated via announcements and Treasury interventions), and erodes the very credibility Washington seeks to restore.

Farooqui offers a bargaining-theoretic alternative. This is not entrapment but coercive diplomacy under duress. Iran’s “Hormuz weapon” cannot be disarmed at acceptable cost; its low-cost asymmetric arsenal grants it endurance dominance. Blockade and deployments are leverage-generation moves intended to extract a security consolidating grand bargain — non-aggression assurances, sanctions relief, and formalised energy-flow arrangements — while both sides acknowledge Iran as a confirmed regional great power. Rationality, he implies, will eventually prevail because the material ledger is unforgiving. The U.S. cannot win and must therefore cut a deal.

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The debate is consequential. It determines whether the United States can still steer multipolarity on its own terms or whether it must accept the limits of hegemony. Yet the parameters of discussion remain limited by its event-level focus. Braudel insisted that surface events only become intelligible when situated within the conjuncture — the medium-term rhythms of economic cycles, geopolitical alignments, and power transitions — and ultimately within the longue durée of geography, climate, demography, and biophysical constraints.

The conjuncture here is the closing act of the thirty-year post-Cold War unipolar moment. From 1991 until roughly the mid-2010s, the United States enjoyed unprecedented freedom of action: no peer competitor, a dollar-centric financial system, and the ability to project power into the Middle East with minimal external restraint. US-Israeli strategic ambitions in the region — securing energy corridors, neutralising the “axis of resistance,” and preventing any single actor from dominating the Gulf — operated within this permissive environment. The 2003 Iraq invasion, the containment of Iran, and repeated Israeli operations against Hezbollah and Hamas were all expressions of unipolar overmatch. Some would go so far as to argue that this strategic map, articulated in think tank strategic reports like those of Brookings Institute’s Paths to Persian (2009), aims ultimately at neutering regional rivals so as to clear the way for the creation of a greater Israel. In this frame, Iran remains the final roadblock.

That era has now visibly decayed. China’s rise — economic, technological, and military — has redrawn the global correlation of forces. Beijing’s Belt and Road infrastructure, its dominance in critical minerals and renewables supply chains, and its deepening partnership with Russia have created alternative poles that the Global South increasingly orbits. Russia’s re-emergence, accelerated by the 2022 Ukraine conflict, has further eroded the post-Cold War settlement: energy markets are no longer a Western monopoly, and military-technical cooperation with Iran (drones, missiles, satellites etc) has measurably strengthened Tehran’s asymmetric capabilities. The 2026 Iran war is therefore not an isolated crisis but a conjunctural test of whether the United States can reassert hegemony over global oil flows and the petrodollar architecture in the face of this broader multipolar drift. Russian foreign minister Sergei Lavrov’s repeated characterisation of the campaign as an attempt to punish the “World Majority” for choosing BRICS-led alternatives captures the stakes precisely. The event is the latest chapter in a thirty-year arc of unipolar over-extension meeting structural counter-pressure.

Beneath the conjuncture lies the longue durée: the thermoeconomics of financialisation and the secular decline in relative energy return on energy invested (EROEI) in the U.S.. Since the 1970s, advanced capitalism has undergone a profound shift from industrial production to financialisation — rent-seeking, asset inflation, and the detachment of monetary claims from underlying energy and material throughput. This has hollowed out the industrial base required for sustained high-intensity conflict. Parallel to this is the biophysical reality of declining EROEI in the U.S.. Conventional oil fields that once yielded 30:1 or 100:1 net energy ratios have matured; unconventional sources (shale, deep-water and tar sands) deliver far lower returns once extraction, refining, and infrastructure costs are subtracted. The same logic applies to the broader energy system supporting military power projection: precision munitions, satellite constellations, carrier strike groups, and global logistics chains all rest on an eroding net-energy foundation. Financialisation masks the problem temporarily through debt and monetary expansion, but it cannot repeal the second law of thermodynamics. Wars, in this longue durée view, are ultimately contests over who can sustain energy-and-materials throughput longer.

The “decent interval” problem, which I have previously discussed in the context of the unfold war in Ukraine, slots directly into this layered analysis. Many, though by no means all, elites in Washington and allied capitals understand, at the conjunctural level, that unipolar dominance has passed. This is the source of great displacement anxiety. They further comprehend that a ground war to disarm Iran would require over one million troops — an expeditionary commitment politically and logistically challenging if not impossible. Farooqui, among others, have estimated that such numbers are inconceivable, even with a politically controversial draft. Yet the optics of accepting Iranian terms — lifting sanctions, tolerating enrichment under oversight, formalising a non-aggression pact, accepting Iranian control over the Strait of Hormuz and removal of American bases from the Persian Gulf etc. — would crystallise the narrative of imperial retreat. Domestic political incentives, international alliance management and the need to project strength toward China all demand that defeat be deferred. The interval therefore stretches: more blockade enforcement, more rhetorical escalation and more performative deployments.

Zealotry intensifies the distortion. Segments of the American foreign-policy elite are animated by a millenarian exceptionalism that frames every conflict as existential and every setback as apocalyptic. This is not mere nationalism; it is a civilisational theology in which the United States is history’s indispensable actor, and retreat is tantamount to moral failure. Millenarian exceptionalism — framing the conflict as an existential civilisational struggle or a biblical war in some versions rather than a conjunctural adjustment — converts the decent interval into a moral crusade. Apocalyptic language about the survival of the “rules-based order” or the imperatives of scripture short-circuits the feedback between material signals and policy. It is easier to stoke the fires than to admit that the unipolar conjuncture has closed and that the longue durée now constrains American options more tightly than at any time since 1945. The same rhetorical register that once cast Saddam Hussein or the Taliban as existential threats now casts Iran as the linchpin of an axis that must be shattered to preserve the “rules-based order.” Zealotry short-circuits the feedback loop between battlefield reality and policy adjustment. It converts the decent interval from a tactical delay into a moral crusade, making rational off-ramps politically radioactive.

The ultimate discipline, however, arrives through the thermoeconomics of war sustenance — the point where longue durée meets event. The United States entered this campaign with magazine depths already stressed by Ukraine and Indo-Pacific commitments. Hundreds of Tomahawk cruise missiles and JASSM-ER standoff weapons were expended in the opening phase; annual production rates remain in the low dozens to low hundreds. THAAD and Patriot interceptors have been drawn down at rates that will take years to restore. Supply-chain bottlenecks in rare-earths, propellants and microelectronics compound the problem. Iran, by contrast, fights on the low-EROEI side of the ledger that now favours the defender: its Shahed-class drones and ballistic missiles are cheap to produce, resilient to dispersal, and quick to reconstitute. It has absorbed initial strikes, maintained launch cadence, and forced the far more expensive US arsenal to burn itself out in defence.

The Hormuz weapon remains the decisive structural fact. Closing or even threatening the Strait imposes immediate global energy shocks that the United States cannot neutralise without a ground commitment of staggering scale. Short term market manipulations through Trump’s late Friday and early Monday signalling, coupled with Treasury market interventions, don’t resolve the problem of diminishing global stocks as flows diminish. Rising prices and demand destruction are two sides of the one coin, which speak to significant economic pain. Disarming Iran’s coastal missile batteries, mine-laying capabilities, and proxy forces would require not surgical strikes but sustained occupation of key terrain — an operation that military analysts estimate would demand over one million troops, years of logistics, and acceptance of casualties and costs that dwarf anything seen since Vietnam. Reportedly, Trump is balking at the prospects of such losses. Even then, success is not guaranteed: history is littered with great-power expeditions that foundered on local resilience and asymmetric tactics. The Hormuz weapon exists as long as Iran retains sovereignty over its coastline and the political will to use it. No amount of escalation short of that commitment can disarm it.

This is where thermoeconomics becomes the final arbiter. Wars end not when one side achieves a Clausewitzian “decisive battle” but when one side’s sustainment curve collapses relative to the other’s. The United States can impose pain but it cannot do so indefinitely without cannibalising its own strategic reserves and causing major global economic disruptions with feedback loop effects on its own economic vitality and viability. Oil prices volatility, inflation rippling through global markets, and mounting opportunity costs vis-a-vis China all place pressures on American calculus, and those of erstwhile allies. Iran, betting on attrition and endurance, is playing the same game the Vietnamese, Afghans and Iraqis played before: outlast the stronger power’s political clock.

In Braudelian terms, the event (blockade, stumbling talks and expanded troop movements) is epiphenomenal. The conjuncture (unipolar decline, China’s ascent, Russia’s re-emergence and US-Israeli regional ambitions colliding with multipolarity) sets the parameters of possible outcomes. The longue durée (financialisation’s erosion of industrial capacity, and secular decline in relative EROEI) supplies the biophysical ceiling that neither ideology nor coercion can breach. Material depletion — already visible in precision-munitions burn rates — will eventually force “rationality.” The only variable is the length of the decent interval that zealotry can extract before exhaustion imposes the new settlement or the trap snaps shut. The decent interval may stretch months or years, zealotry may keep the rhetorical fires burning, but the material ledger is merciless. Depletion rates, replenishment timelines and the irreducible geography of the Gulf impose a hard stop that no exceptionalist narrative can repeal.

History suggests the interval can be dangerously long when shame aversion and hegemonic nostalgia dominate. The monsters of the interregnum are on the loose. Yet biophysical systems do not negotiate with ideology. The thermoeconomic ledger is already written in the declining net-energy yields of the industrial base, the fragility of financialised supply chains and the geography of the Gulf.

The open question, therefore, is temporal and I restate it: can material reality force rationality faster than zealotry can prolong the interval? If the blockade’s economic ripple effects, the visible drawdown of precision stocks, and the sustained Iranian counter-pressure concentrate minds in Washington toward a grand bargain, the United States may yet extract a face-saving exit before the trap fully snaps shut. If hubris and shame aversion prevail, the decent interval becomes a longer, costlier demonstration of why Pape’s warning has proven durable across decades of conflict. Either way, the thermoeconomic verdict is already in: Iran cannot be coerced on American terms without costs the American-led system itself cannot bear indefinitely. The only variable left is how much pain American elites are willing to impose on their own society — and those of allies, to the extent that they even feature in Belting thinking — before acknowledging the limits that geography, industrial capacity and physics have already imposed.

Whether Washington recognises this faster than the fires can be stoked will determine if the 2026 Iran war becomes a manageable conjunctural adjustment or the latest chapter in a longue durée story of imperial overreach meeting material limits. The fires may rage, but the fuel — both literal and metaphorical — is finite.

There are moments when a society stops merely adapting to history and begins, instead, to make history in a new way. It does not just respond to inherited constraints; it reorganises the material conditions of life so that new possibilities become thinkable, practical and eventually normal. My proposition is that China, especially over the past decade and a half, has been doing precisely this. It has been building the future in plain sight.

I do not mean “the future” in the glossy, trivial sense of gadget fetishism or techno-utopian fantasy. I mean something more grounded and more consequential: the patient construction of a new energetic basis for economic life. In the language I have developed in my book, China has increasingly behaved as a thermodynamic state. That is to say, it has approached development not simply as a matter of GDP growth or industrial output, but as a long-term project of energetic renewal: improving the efficiency with which energy is produced, transformed, circulated, stored and used across the whole social metabolism.

Over many years, and especially since the global financial crisis, China has been engaged in a multi-dimensional reorganisation of its productive system around higher energetic efficiency. It has sought to harness more of the energy latent in nature, apply human knowledge and technical capacity to that potential, and transform it into lower-cost, higher-throughput, more socially enabling systems. When Chinese policymakers speak of “new productive forces” or “dual circulation,” they are not only talking about industrial upgrading or domestic demand. At a deeper level, they are describing a civilisational effort to lift the energetic return on economic organisation itself.

Electrification

The clearest expression of this is accelerated electrification.

This electrification story begins, obviously, with generation. Here China’s achievements are now so large that even critics who resent them cannot ignore them. Wind and solar are the headline sectors, and rightly so. China has not merely installed large quantities of renewable capacity; it has built dense, interlinked ecosystems of production around them. The panels, turbines, inverters, rare earth processing, battery inputs, transmission equipment, engineering know-how, financing institutions, and the logistical capacity: these aren’t isolated achievements. They form a system.

That matters. A country can import technologies. It can subsidise adoption. It can even produce impressive targets on paper. But it is something else entirely to create a living industrial ecology capable of reproducing and improving those technologies at scale. China has done that. It has made clean energy not a decorative adjunct to an oil civilisation, but the basis of an alternative developmental trajectory. China’s government expects that China’s peak oil consumption will be reached during the 15th Five Year Plan (2026-2030); and with the unfolding challenges arising from the US war against Iran, greater effort is likely to be made to accelerate this trend.

And crucially, this is not a story of naive substitution; of one fuel type for another in some one dimensional “transition” narrative. China’s development strategy has been far more sober and more dialectical than many of its critics allow. Coal has not disappeared. Rather, its role has been progressively altered. Cleaner and more efficient coal technologies have improved the performance of legacy systems, while in many cases coal has shifted away from the old ideal of permanent baseload dominance toward a more contingent standby function within a broader and increasingly renewable-heavy mix. Nuclear, too, has continued to develop, not as an ideological badge but as part of a pragmatic portfolio approach to energy security, decarbonisation and long-term reliability. And on the horizon sits fusion research, where China is again positioning itself not simply to catch up, but to help define what comes after the current renewables revolution.

This is worth pausing over. Too often, Western commentary on China swings between caricatures: either China is portrayed as a polluting relic because it still uses coal (and a lot of it), or as an industrial predator because it has become too good at producing the technologies needed for decarbonisation. The contradiction is revealing. What unsettles many critics is not merely China’s emissions profile, but the fact that China is increasingly shaping the material architecture of a post-oil future.

Yet generation is only one part of the story. Energy must be stored, moved and used. And here, too, China’s transformation has been profound.

It is one thing to harvest electricity. It is another to distribute it across enormous territories, between cities and regions, into factories and homes, across varying demand conditions, and with sufficient resilience to support a modern economy of extraordinary scale. China’s electricity network, the largest in the world, is not simply vast; it has become increasingly intelligent, distributed and efficient. In parallel, advances in battery technologies have widened the scope of what electrification can actually do.

We have already seen successive waves of development: from early lithium-ion systems to more advanced lithium chemistries, then onward toward solid-state and sodium-ion possibilities. Each step matters because storage is not a technical footnote. It is the hinge upon which electrification turns from aspiration into lived reality. Storage makes intermittent generation more manageable. It makes remote delivery more viable. It enables micro-grids and distributed energy systems. It supports resilience in places once considered too marginal, too distant or too expensive to serve well. It makes the grid not merely bigger, but more socially productive.

And of course it underpins the rise of electric vehicles, which have become one of the most visible symbols of China’s ability to bring future systems into the present. In China today, electrified mobility no longer feels experimental. It feels normal. That is the key point. The future is not really “the future” once a society has built the infrastructure, industrial base and consumer ecosystems that allow it to become routine.

I have travelled through Chinese cities and smaller urban centres over the years, and in recent weeks, and have repeatedly been struck by this quality of normalisation. What appears to outsiders as futuristic often appears to ordinary Chinese people as mundane. Electric vehicles, app-based mobility, digitally integrated logistics, automated warehousing, cashless payments, rapid delivery and platform-mediated services: these are not dazzling novelties in everyday China. They are simply how life increasingly works. And that, perhaps, is the surest sign that a society has moved ahead of its critics. It is no longer debating whether the future is possible. It is already living inside parts of it.

This same dynamic is now opening into hydrogen. If solar and wind continue to fall in effective cost, and if hydrocarbon fuels become structurally more expensive and geopolitically insecure, the economics of green hydrogen change. Here the broader geopolitical environment matters. The war against Iran, and Iran’s response with the Hormuz Weapon, has heightened awareness of the fragility and cost of gas-dependent systems. In that context, the possibility of lower-cost green hydrogen takes on real strategic significance. Hydrogen is not a silver bullet, but it can become an important part of a broader electrified and post-oil circulation regime, especially in hard-to-abate sectors and long-distance transport.

That matters for road and rail, but also for maritime systems and increasingly for aerial platforms, including drones. Circulation is not a secondary matter in political economy. How goods, services, information and people move determines the effective metabolism of an economy. China’s electrification push is therefore not just about cleaner generation; it is about reorganising circulation itself.

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Digitalisation

This brings us to digitalisation, which is often discussed as though it floats above material reality, as though “the digital” were somehow immaterial. It is not. Digital systems are energetic systems. They depend on power, transmission, storage, processing, cooling, minerals, materials and physical infrastructures. Their expansion depends, in no small part, on whether a society can lower the energetic cost of capturing, processing and acting on data.

China’s digital transformation has been made possible by this energetic foundation. For ordinary people, that shows up as convenience: cashless transactions, on-demand services, seamless e-commerce, the ability to transact and organise “anywhere, anytime.” For firms, it shows up as a reduction in friction: better logistics, more automated production, more efficient inventory management, better agricultural yields, smarter routing, new service platforms, improved customer matching, lower operating costs.

But the real significance lies deeper still. As the energetic costs of data systems fall, data can play a genuinely negentropic role. It can reduce disorder in production and circulation. It can coordinate dispersed activities with less waste. It can make possible a denser informational mesh across an economy, where decision-making is pushed closer to the edge, closer to where real processes are unfolding.

Pushing Frontiers

This is where frontier developments become especially interesting. China is not only scaling established technologies; it is pushing into new areas that may further lower the energetic and material costs of digital civilisation. Triboelectric nanogenerators, advanced materials including graphene, and breakthroughs in areas such as ferroelectric field-effect transistors all point toward a future in which sensing, computation and connectivity become more distributed, more efficient and more embedded in ordinary environments. The more that data capture and processing can occur at the edge, the more communities, enterprises and networks can act with local intelligence while remaining connected to wider systems.

The implications are enormous. Entire regions previously marginal to high-value digital flows can be brought into the main game. Smaller cities and towns need not remain peripheral. Spatial enablement becomes possible. New incomes can be generated beyond the old metropolitan cores. Economic participation widens. Shared prosperity becomes less of a slogan and more of a material possibility.

This is one of the least appreciated aspects of China’s developmental experience. Western observers often see scale and imagine centralisation alone. But the deeper achievement is that scale has been used to enable proliferation. Large systems have helped generate the conditions under which distributed participation becomes more viable. That is not accidental. It reflects a developmental logic in which infrastructure, industry, state capacity and technological learning are aligned toward widening the field of practical possibility.

Global Capacity; Pricing People In Through Abundance

It is also why the familiar Western complaint about Chinese “overcapacity” misses the point so badly. The accusation rests on a parochial assumption: that productive capacity should be judged against the purchasing patterns and profit expectations of the existing world economy, rather than against what humanity actually needs. But humanity does not need less capacity in solar, batteries, electric vehicles, grids, power electronics, transmission systems and low-carbon industrial equipment. It needs dramatically more.

What critics call overcapacity is often better understood as civilisational surplus capacity in the making: the productive base required to accelerate a transition away from oil dependence, carbon lock-in and geopolitical vulnerability. The world’s problem is not that China can make too much of the machinery of energetic renewal. The problem is that too many other countries still cannot.

This is why China’s experience matters beyond China.

The lesson is not that every country can or should mechanically copy the Chinese model. Historical trajectories are different. Social structures are different. Resource endowments are different. Political traditions are different. But the larger lesson is transferable: modernisation in the twenty-first century must increasingly be understood as a question of energetic reorganisation. Nations that fail to build higher-EROEI systems of production, circulation and use will remain trapped in low-efficiency, high-cost, externally vulnerable development paths. Nations that can progressively electrify, digitalise and upgrade their energetic metabolism will possess greater room to raise real living standards, widen opportunity and reduce dependence on volatile hydrocarbon chokepoints.

That is why the stakes are so high in the emerging era of Oil Shock 2.0. As oil and gas insecurities deepen, the need for practical alternatives becomes urgent. China’s modernisation lessons are therefore not just of domestic relevance. They are globally enabling. They offer the Global South, in particular, something precious: not a sermon, not an austerity lecture, not a fantasy of degrowth imposed by the already-developed, but a set of practical clues about how to build prosperity on a different energetic basis.

That, in the end, is what is most striking. China has not waited for a perfect future to arrive. It has been assembling it, piece by piece, inside the present. It has done so through factories and grids, via new batteries and platforms, expanding rail and renewables, and developing logistics systems and digital services, through materials science and statecraft. It has done so unevenly, imperfectly, and with contradictions, of course. No real historical process is otherwise. But the direction of travel is unmistakable.

China has been creating the future today: a future less organised around the combustion of ancient sunlight stored in oil, and more around the direct harnessing of contemporary flows from sun, wind and atom; a future in which data, infrastructure and energy form a more efficient web of life; a future in which development is not the privilege of a few core economies but can become more widely shared.

Others do not need to admire China uncritically to learn from this. They simply need the confidence to see what is already there. The future is no longer a distant abstraction. In important respects, it is already under construction. And China, more than any other country, has been showing what that construction looks like.

Introduction

Oil functions as a basic commodity in the Sraffian sense - it enters directly or indirectly into the production of every other commodity. A sharp, sustained increase in its effective cost (via physical scarcity or scarcity rent) therefore propagates through the entire price system and, via demand destruction, through the quantity system. Within a thermoeconomics frame, the economy is understood as an open dissipative structure that maintains order by continuously dissipating high-quality energy (exergy). Oil’s unique combination of high energy density, portability, and historically favourable energy-return-on-energy-invested (EROEI) has allowed complex, energy-intensive supply chains to proliferate. When this flow is disrupted, the system must either reconfigure its technical coefficients, shed low-viability activities, or contract. The following sections formalise this process and explore its differential expression across four heuristic ideal-type economies, with special emphasis on how financial feedbacks can paradoxically entrench legacy structures.

Theoretical Framework

The thermoeconomic approach views production as a transformation of energy and matter governed by the laws of thermodynamics. Economic activity is not merely a circular flow of value but a set of irreversible processes that degrade exergy while generating useful work and structure. Oil, as a concentrated, high-power-density exergy carrier, occupies a privileged position: it enables activities that electricity or other carriers cannot easily replicate at the same scale and cost without substantial capital embodiment.

As discussed in more detail in my Thermoeconomics in a Time of Monsters (Part 1), Piero Sraffa’s Production of Commodities by Means of Commodities supplies the base structural scaffolding. The price system is given by

p = (1 + r)pA + wl,

where (p) is the price vector, (r) the uniform rate of profit, (A) the matrix of production coefficients, (w) the wage (numeraire), and (l) the direct labour vector. An oil shock enters as an exogenous increase in the primary/value-added component of the oil sector (or an effective inflation of the oil row of (A).

The quantity side is simultaneously determined via the Leontief inverse:

x = (I - A)^-1d

where x is gross output and d final demand. Demand destruction appears as threshold reductions in (d_j): at certain price levels, specific activities become thermodynamically and economically unviable (marginal exergy benefit falls below exergy cost), causing abrupt rather than smooth contraction.

Crucially, producers respond to the new relative prices and compressed profit rate by selecting cost-minimising techniques. At each sector (j), the column (a_j) is replaced by an alternative (a_j*) if

p . a_j* + wl_j < p . a_j + wl_j.

This endogenous change in (A) triggers second- and higher-order propagations through both price and quantity systems. The “absorb–swap–kill” taxonomy emerges naturally: margins absorb part of the shock; viable swaps (e.g., electrification) rewrite coefficients; non-viable activities are killed, reducing d and x.

Financial feedbacks introduce a further layer: elevated exchange values (spot prices, export arbitrage, valuations) can redirect capital toward sustaining upstream hydrocarbon activities, even as biophysical use values (net exergy surplus) erode due to declining EROEI. This can delay or dampen technique switching, reinforcing high oil/gas coefficients in A.

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The Model and Heuristic Ideal Types

The analysis uses a stylised four-sector closed system (Oil/Gas, Electricity, Transport, Industry) whose baseline A matrices differ markedly across four ideal-type economies. The shock is a large exogenous rise in oil’s primary cost, calibrated to mimic sustained major-supply disruption. Adaptation occurs via partial or full technique switches (primarily electrification of transport and distributed power) once relative prices cross profitability thresholds. Demand destruction is modelled as kinked reductions in final demand once sectoral prices exceed viability thresholds derived from thermodynamic and economic minima.

1. Type 1 – Oil-intensive with limited electrification: High baseline oil/gas coefficients, especially in transport and industry; legacy infrastructure and upstream extraction lock in liquid- and gaseous-fuel dependence.

2. Type 2 – Highly electrified: Low oil/gas coefficients already achieved through widespread electrification of transport and industry; electricity / renewables form a larger share of the matrix.

3. Type 3 – Low-energy-intensity greenfield: Minimal overall energy coefficients; modern, low-exergy-intensity techniques adopted from the outset.

4. Type 4 – Oil-dependent distributed generation: Heavy reliance on diesel generators for electricity (high oil coefficient in the Electricity sector itself); transport also oil-intensive. However, generation is modular and geographically dispersed, lowering the capital barrier to microgrid substitution (solar + storage).

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Cascading Effects Across Ideal Types

Short-term (price percolation and first-round demand destruction)

In all types the oil price surge raises downstream costs in proportion to direct and indirect coefficients. Type 1 experiences the largest absolute and relative price increases in Transport and Industry, pushing marginal activities across viability thresholds and triggering 15–30% contractions in final demand for those sectors. Type 4 sees pronounced effects in Electricity (diesel gensets) and Transport, but the distributed nature limits immediate systemic collapse. Types 2 and 3 exhibit far smaller downstream price movements and correspondingly modest demand destruction.

Medium-term (technique choice and second-round propagation, including financial feedbacks and upstream lock-in)

Rising p_oil/gas / p_elec and compressed r would normally induce technique switches where alternatives exist. However, a key paradox arises, particularly in Type 1 baselines: elevated exchange values from the shock (higher spot prices, LNG export arbitrage opportunities, and associated financial windfalls) can channel capital and policy attention back into upstream hydrocarbon activities. This reinforces or even temporarily expands oil/gas coefficients in A, delaying the profit-rate threshold for switching to electric or other low-exergy-intensity techniques.

In Type 1 economies, this upstream lock-in plays out as follows. High prices generate surplus margins and fictitious capital (credit expansion tied to valuations and export revenues), lowering the immediate hurdle for sustaining or modestly expanding extraction, liquefaction and midstream infrastructure - even in maturing plays with declining EROEI. Capital is preferentially allocated to drilling, LNG terminals and related services rather than to costly electrification retrofits or grid upgrades. Downstream sectors still face viability thresholds and demand destruction (e.g., marginal freight routes or energy-intensive manufacturing become unviable), yet the reinforced upstream matrix partially offsets quantity contraction in x by maintaining intermediate demand for oil/gas services. The net result is maladaptive absorption: short-term stabilisation of certain gross flows at the expense of accumulating system-wide entropy (higher energy intensity required for the same net output). Second-round propagations are thus muted or perverse - new interdependencies within the fossil matrix (e.g., gas-fired backup or LNG infrastructure) crowd out resources for viable swaps, prolonging overall demand destruction and raising the eventual cost of reconfiguration. The divergence between exchange values (monetary signals) and use values (net exergy available for reproduction) becomes pronounced, subsidising a depletion treadmill rather than enabling negentropic reconfiguration. I explore this divergence in the case of the US LNG sector in a separate essay.

Type 2, already near the electric frontier, is far less susceptible to this lock-in dynamic; upstream hydrocarbon nodes are small, so price signals primarily reinforce existing electricity-sector expansion without major disruption. Technique switching remains incremental and positive for system stability.

Type 3, with negligible baseline dependence on hydrocarbons, largely sidesteps upstream feedbacks. Any minor cost increases pass through without triggering significant capital reallocation toward legacy activities, preserving resources for non-energy expansion.

Type 4 benefits from modularity despite initial oil dependence. High prices accelerate the economic case for microgrid substitution (distributed solar + battery storage), as the distributed nature of diesel systems imposes lower retrofit barriers than centralised or large-scale hydrocarbon infrastructure. The Electricity column can be rewritten relatively rapidly, converting the shock into an acceleration of decentralised renewable deployment. Second-round effects here tend to be mildly expansionary: lower long-run energy costs support broader activity rather than entrenching contraction.

Longer-term divergence

The four types diverge structurally. Types 1 and (to a lesser extent) 4 undergo the most visible “creative destruction,” but in Type 1 the process is retarded by upstream lock-in: obsolescence of some downstream activities occurs, yet legacy coefficients persist longer, compressing feasible r and widening the competitiveness gap. Types 2 and 3, already closer to the post-shock optimum, experience less turbulence and gain relative advantage. Leapfrogging is most pronounced in Type 3 (greenfield) and Type 4 (modular distributed), where the absence or modularity of sunk-cost infrastructure allows immediate selection of thermodynamically superior techniques. Overall, the shock can widen global divergence between legacy oil-intensive structures (vulnerable to lock-in) and those able to reconfigure rapidly.

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Discussion and Implications

Within the thermoeconomic frame, the oil shock is not merely a price event but a test of the economy’s exergy metabolism. Activities whose marginal EROEI falls below the system’s reproduction threshold are shed; surviving processes must operate at higher overall efficiency. Electrification emerges as the dominant viable swap because it substitutes a versatile, high-exergy carrier (electricity) for a portable but increasingly expensive one (oil), albeit at the cost of new infrastructure that itself embodies past energy.

The heuristic ideal types, particularly the detailed dynamics in Type 1, demonstrate that baseline technical structure and financial feedbacks determine both the severity of demand destruction and the speed of adaptation. Where electrification infrastructure is already embedded or can be added modularly (Types 2, 3, 4), the shock catalyses transition rather than paralysis. Where legacy coefficients are deeply entrenched and reinforced by upstream windfalls (Type 1), short-term contraction may be accompanied by delayed adaptation, prolonging dissipative losses. Second- and higher-order propagations - new inter-industry linkages, shifts in profit-rate viability, changes in final-demand composition and capital misallocation - amplify these differences, producing path-dependent structural divergence.

From a policy and investment perspective, the framework underscores the value of maintaining optionality in technique choice and mitigating lock-in mechanisms (e.g., through targeted incentives for swaps that realign exchange and use values). Economies that preserve flexibility in their production matrices (modular generation, scalable storage and adaptable transport) are thermodynamically and economically more resilient to basic-commodity shocks. The analysis also highlights why sustained high oil and gas prices may not deliver uniform acceleration of transition - they can subsidise entropy in vulnerable baselines while rewarding reconfiguration elsewhere.

By integrating Sraffa’s structural price–quantity system with a thermoeconomics understanding of the economy as a dissipative structure, and by explicitly accounting for financial feedbacks that can entrench upstream lock-in, this essay offers a rigorous yet accessible lens for tracing the full cascade of an oil shock. The four heuristic ideal types illustrate that the same exogenous disturbance produces markedly different outcomes depending on initial technical coefficients, the feasibility of profit-rate-guided substitution, and the interaction between price signals and capital allocation. The ultimate implication is unmistakable: in a world of recurrent basic-commodity stress, structural preparedness - measured by the flexibility of nested supply chains, the exergy efficiency of available techniques, and the alignment of exchange and use values - determines not only short-term resilience but long-term competitive position. This conceptual scaffold equips analysts and decision-makers to discuss the possible implications of major energy shocks in terms that respect both economic interdependence and thermodynamic reality.

Building on the systemic analysis in my previous discussion of graphene’s industrial transformation, an intriguing downstream implication emerges in the realm of energy conduction. Graphene’s superior electrical conductivity - up to 100 MS/m compared to copper’s 58 MS/m - positions it as a potential substitute in wiring, cables, and interconnects. While my 2024 co-authored paper focused on graphene’s tactile sensing capabilities, its conductive prowess could reshape material hierarchies in power transmission, electronics, and electrification. This essay explores the flow-on effects on the copper market, emphasising the 10-20 year horizon (2036-2046). Drawing from Sraffa’s supply chain framework, I examine how graphene’s integration as an input could cascade through interdependent sectors, potentially leading to divergent outcomes: accelerated efficiency gains in high-adoption scenarios versus sustained copper dominance if scaling barriers persist.

The Copper Market: Current State and Near-Term Projections

Copper has long been the backbone of electrical conduction, accounting for about 60% of global usage in wires, cables, and electronics. In 2025, refined copper demand stood at approximately 25-27 million metric tons (Mt), driven by traditional sectors like construction and consumer goods. However, the energy transition - encompassing electric vehicles (EVs), renewables, AI data centres and grid infrastructure - has supercharged growth. Projections indicate demand surging to 42 Mt by 2040 and potentially 49-53 Mt by 2050, a near-doubling from current levels. This represents a compound annual growth rate (CAGR) of 2.2-3.1% through 2035, with energy transition sectors contributing 20% of demand by then, up from 10% today.

Supply constraints exacerbate this trajectory. Global production is expected to peak at 33 Mt around 2030 before plateauing or declining due to aging mines, declining ore grades (down 40% since 1990), and extended development timelines (now averaging 16 years). Recycling will double to 10 Mt by 2040, but deficits could reach 10 Mt annually by then, creating a 24% supply gap. Prices have already hit records in 2025, with forecasts for $10,000-12,500 per ton in 2026, potentially climbing to US$15,000 by 2035. In the next five years, copper remains bullish, fuelled by an “electrification super-cycle” that graphene itself may initially accelerate by enabling more efficient systems.

Yet, this demand surge sets the stage for substitution pressures. Traditional alternatives like aluminum (already twice as conductive as copper by weight in transmission lines) have capped copper’s dominance, with substitution thresholds kicking in when copper prices exceed 3.5-4 times aluminum’s. Graphene introduces a more disruptive vector, particularly in high-performance applications where conductivity, weight, and thermal management are paramount.

Graphene’s Advantages in Energy Conduction

Graphene’s properties outstrip copper’s: it offers 70% higher conductivity (up to 100 MS/m), 200 times the strength, and superior thermal dissipation (5,300 W/m·K vs. copper’s 400 W/m·K). By weight, graphene is 5.8 times more conductive, making it ideal for lightweight applications in EVs, aerospace, and power grids. Innovations like graphene-copper composites enhance copper’s performance: adding trace graphene (18 parts per million) reduces resistance by 11% without compromising conductivity, enabling 1% efficiency gains in EV motors. More advanced composites achieve 41% higher conductivity and 450% greater current-carrying capacity.

Aluminum-graphene (Al-Gr) hybrids pose an even greater threat, combining aluminum’s cost and weight advantages with graphene’s conductivity boost. These could displace copper in power lines, building wiring, and automotive components, offering massive efficiency and material savings. Production advancements, such as flash Joule heating, have made graphene more scalable, with costs dropping and green methods reducing environmental impacts. While current applications are niche (e.g., IC interconnects below 20 nm), broader adoption in conductors is projected as costs fall below copper’s in high-volume scenarios.

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Substitution Timelines and Market Impacts

In the next 5-10 years (to 2036), graphene’s impact on copper will be limited. Scalability remains a hurdle: graphene production is still in tons, not the millions needed for global wiring. Copper demand will peak amid electrification, with deficits driving prices higher and incentivising recycling and minor substitutions (e.g., aluminum in grids). Hybrids like ultraconductive copper-graphene may even bolster copper usage initially, extending its role in motors and transmission.

The 10-20 year horizon (2036-2046) marks a potential inflection. As graphene matures down the cost curve, annual demand destruction for copper could exceed EV market growth. Projections suggest graphene could capture 15-30% of copper’s conductive market share by 2040, particularly in EVs (lighter wiring reduces battery needs) and grids (higher efficiency cuts losses). This substitution could shave 2-5 Mt off annual copper demand by 2045, turning structural deficits into surpluses in optimistic scenarios.

Impacts include:

• Cost and Price Dynamics: Copper prices may peak in the 2030s ($15,000/ton) before declining 20-30% as substitutes proliferate, easing mining investments but hurting producers;

• Efficiency and Speed: Graphene enables faster transmission (higher electron mobility) and lighter systems (50% weight reduction), boosting EV range by 10-15% and grid efficiency by 5-10%;

• Environmental Effects: Lower material use reduces mining footprints (copper extraction is water-intensive), but graphene production must scale sustainably to avoid new bottlenecks; and

• Supply Chain Shifts: China, dominating both copper refining (47% by 2030) and graphene patents, could leverage this for geopolitical advantage. Mining nations like Chile and Peru face revenue drops, prompting diversification.

Sraffa-Inspired Systemic Cascades and Divergent Paths

Through Sraffa’s lens, graphene acts as a transformative input, altering technical coefficients across chains. In electronics, reduced copper needs lower input costs, cascading to cheaper EVs and renewables, amplifying output in transport (GDP +1-2% via multipliers). Divergences arise: In a “fast-adoption” path (graphene scales by 2035 via policies like China’s innovation centers), copper faces obsolescence, with mining countries suffering economic shocks (e.g., 10-20% GDP hit in Chile). A “slow-adoption” scenario (barriers like regulation delay to 2045) sustains copper bulls, but risks energy transition stalls due to shortages.

Geopolitically, this could fragment chains: Western reshoring vs. China’s dominance. Environmentally, it aids decarbonisation but risks “reswitching” to dirtier alternatives if graphene falters. Socially, job shifts from mining to advanced manufacturing could widen inequalities.

Conclusion

Graphene’s conductive applications herald a paradigm shift for copper, transitioning from short-term symbiosis to long-term rivalry. By 2036-2046, substitutions could erode copper’s market, capping prices and reshaping chains, with Sraffian cascades driving efficiency or disruption. Policymakers must foster hybrid innovations and recycling to balance these flows, ensuring the energy transition’s resilience.

In the escalating arena of geopolitical resource competition, tungsten has become a stark emblem of Western vulnerability. Once a niche metal valued for its unmatched hardness and heat resistance, tungsten now commands record prices amid severe shortages, with Western manufacturers - particularly in civilian sectors - bearing the brunt. As of early 2026, prices for key intermediates like ammonium paratungstate (APT) have surged over 200%, hitting $1,350 per metric ton unit in Europe. This isn’t mere market fluctuation; it’s in part the result of China’s export controls, which have slashed global supplies by up to 40% while prioritising domestic industries. Western defence sectors and a number of civilian applications, accounting for over 60% of global demand, are reeling from higher costs, extended lead times, and production bottlenecks. More alarmingly, for the west, there is a dawning realisation that the American “war machine runs on Tungsten,” as recently put by Foreign Policy magazine.

Drawing on Piero Sraffa’s framework in Production of Commodities by Means of Commodities, this crisis underscores the intricate interdependencies of modern economies. Sraffa posited that prices and outputs emerge from a web of production inputs, where disruptions in foundational commodities ripple system-wide, altering the entire structure. Tungsten, as a “basic” input entering nearly all industrial processes, exemplifies this: shortages don’t isolate; they propagate constraints, inflating costs across sectors and triggering a reverse “Dutch Disease” effect. Here, resource scarcity forces reallocations that crowd out non-essential activities, leading to congestion, inflationary cascades and long-term deindustrialisation.

The West’s predicament is acute - insufficient time and resources to diversify supply without exacerbating these dynamics. At the core lies a vicious cycle: shortages drive price surges as defence outbids civilians, only to inflate exploration costs and hamper the very alternatives needed to escape the trap. Compounding this, policy responses themselves act as a “sink,” drawing scarce manpower, equipment, and capital away from other critical minerals, propagating Dutch Disease feedbacks system-wide. This essay examines tungsten’s civilian downstream impacts, focuses on how shortages elevate costs in manufacturing and mining exploration, dissects this self-perpetuating loop, explores the policy sink’s broader implications, and maps the ensuing Dutch Disease effects.

The Tungsten Crisis Unfolded

China dominates tungsten production, controlling 80-83% of global mine output and over 90% of processing. In 2025, mining quotas were slashed by 6.5%, declining ore grades raised extraction costs, and export licenses for “dual-use” items like APT and carbide powders were tightly rationed. Exports plummeted 40% year-on-year, funnelling supply inward to meet China’s surging demand from semiconductors, EVs, and precision tools - now absorbing 35,000-40,000 tonnes annually. Global demand is poised to exceed 95,000-130,000 metric tons in 2026, with deficits of 16-19% projected.

Western buyers face premiums of 30-100% and frequent unavailability, with lead times stretching months. This asymmetry allows China to capture economic rents while forcing the West into scramble mode. New mines outside China, like Kazakhstan’s Bakuta or Canada’s Mactung, are delayed until 2026 or later, offering scant relief. Recycling covers only 5-20% of needs, and substitutes like molybdenum are often inferior.

Civilian Downstream Activities at Risk

While defence applications - munitions, aerospace components - consume about 10,000-11,000 tonnes in the U.S. alone, civilian sectors dominate, using tungsten in forms like carbide for tools and alloys for high-performance parts. Over 60% of demand stems from EVs, renewable energy, and precision manufacturing, with growth rates of 5-10% annually. Shortages are inflating costs by 20-50% in these areas, leading to delays and reduced outputs. Consider the following:

• Manufacturing and Machining Tools: Cemented carbide tools - drills, mills, blades - account for 50-60% of tungsten use. Price spikes have doubled costs from $340 to mid-$600 per MTU, forcing manufacturers to pass on 20-50% hikes. In automotive and electronics assembly, this delays lines by 10-20%, raising vehicle and device prices by 5-15%. Small enterprises, without stockpiles, risk shutdowns, contributing 1-2% to inflation in goods.

• Electronics and Semiconductors: Tungsten’s role in interconnects and sputtering targets is critical. Shortages extend fab tool replacement by 30-50%, inflating operational costs and potentially hiking consumer electronics prices by 5-15%. R&D in solid-state batteries faces 6-12 month delays.

• Renewable Energy: Solar production relies on tungsten for wire saws and components; costs up 10-20% could cut 2026 installations by 5-10%, hindering energy transitions and raising electricity rates.

• Agriculture and Medical: Farm machinery wear parts see 10-15% cost rises, pressuring food prices. Medical devices like X-ray tubes face similar hikes, increasing healthcare expenses by 5-10%.

All of this is causing consternation in the American political ecosystem.

Feeding Back into Mining Exploration and Manufacturing Costs: The Vicious Cycle Emerges

The shortage’s self-reinforcing nature is evident in mining and manufacturing feedback loops, creating a vicious cycle that entrenches dependency. Mining consumes 30-31% of tungsten for carbide drill bits, crushers, and excavation tools. With tool costs doubling, exploration expenses rise 20-30%, slowing new projects for commodities like copper and gold. This perpetuates broader mineral deficits, as delayed mines mean less supply of inputs for other industries. In oil and gas, higher drilling costs could add $0.05-0.10 per gallon to fuel.

This cycle begins with the initial shortage and price surge, driven by China’s quotas and environmental curbs, with ore grades as low as 0.28% inflating extraction costs. Global demand surges 5-10% annually from EVs, semiconductors, and defence, but with exports squeezed, Western prices hit $1,350 per MTU, up 200% from early 2025. Defence contractors, backed by vast budgets, outbid civilians, paying 30-100% premiums under initiatives like the U.S. Defence Production Act to secure stockpiles for munitions and aerospace. This crowds out sectors like tools and renewables, extending lead times to 6-12 months and forcing production cuts or inferior substitutes.

Critically, these inflated prices feed back into exploration costs, sabotaging long-term alternatives. Tungsten comprises up to 75% of drillbit costs in mining; with prices at 210% annual peaks, exploration ROI plummets, deterring investments in new tungsten mines or recycling facilities. Projects like Canada’s Mactung or Kazakhstan’s Bakuta, already on 3-5 year timelines, face further delays amid broader mining inflation of 6.25% for operations. Supply growth lags at 2.5% CAGR versus 7-8% demand, locking in deficits. Defence’s short-term hoarding thus undermines resilience, perpetuating the cycle: shortages beget outbidding, which sustains high prices, inflating development costs and delaying escapes.

In manufacturing, elevated tool costs cascade similarly: An EV factory’s machining expenses rise, delaying output and inflating prices, which ripple to logistics and consumer goods. Environmental regulations and energy costs amplify extraction hurdles, pushing per-ton costs over 100,000 yuan in China.

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The Policy Sink: Drawing Resources and Propagating Dutch Disease Across Critical Minerals

Policy responses, while well-intentioned, often exacerbate the bind by acting as a “sink” that draws finite resources - manpower, equipment, capital, and time - away from other critical minerals, creating feedback loops akin to Dutch Disease across the broader ecosystem. Initiatives like the U.S. Defence Production Act invocations, $12 billion stockpiles (e.g., Project Vault), and tariffs on Chinese tungsten aim to secure supply but inadvertently pull expertise and funding from REEs, copper, lithium, and others. The EU’s Critical Raw Materials Act and similar frameworks face parallel issues, stretching thin across multiple minerals.

Manpower shortages are acute: The mining sector anticipates over 221,000 retirements by 2029, with mining-related degrees down 40% since 2016, shrinking the talent pipeline for engineers, geologists, and specialists. Prioritising tungsten diverts skilled workers from copper or lithium projects, where demand surges 30-500% by 2040 but supply lags due to labor gaps. Equipment constraints compound this: Supply chain vulnerabilities and inflation (6.25% in operations) mean tools and machinery for tungsten exploration are bid up, leaving less for other minerals. Time lags - 3-7 years for permitting and development - ensure that focusing on one mineral delays others, as regulatory bandwidth is finite.

Throwing money at tungsten - via subsidies or stockpiles - propagates problems: It inflates non-tradable sectors (e.g., services), appreciates real exchange rates, and crowds out investment in non-priority minerals, mirroring Dutch Disease in resource-scarce contexts. For instance, U.S. efforts to quadruple missile production divert resources from EV battery minerals, risking deficits in lithium (22,000-80,000 tonnes) or copper (330,000 tonnes in 2026). This zero-sum dynamic underscores that the West can’t “do it all, all at once.” Policy sinks create systemic congestion, where gains in one area amplify vulnerabilities elsewhere.

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A Sraffa-Inspired Lens: Interdependencies and Propagation

Sraffa’s model views the economy as a circular system where basics like tungsten underpin a large proportion of production. A shortage alters technical coefficients, reshaping prices and outputs. Tungsten deficits hike tool costs, which feed into manufacturing, then consumer prices - a chain where unresolved constraints reduce viability across nodes. This isn’t equilibrium adjustment; it’s persistent disequilibrium, with outputs contracting and distribution skewed toward resource holders.

The vicious cycle and policy sink exemplify Sraffian propagation: Defence outbidding and targeted subsidies distort the price vector, embedding higher costs system-wide. Mining cost increases slow commodity supply, raising inputs for electronics, which delays renewables, inflating energy costs back to manufacturing. Western economies, reliant on imports, face amplified effects, with no quick fixes due to 3-7 year lags in new facilities. Meanwhile, the rest of the world isn’t sitting idly by.

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The Twin Crunches: Time and Resource Insufficiency

Diversification demands billions - U.S. initiatives like stockpile programs cost $12 billion - but stretch thin across sectors. Time is the bind: new capacity won’t scale until 2027-2030, leaving years of deficits. This congestion bids up scarce resources, cascading costs to non-essentials like consumer durables, while the cycle’s feedback - defence priorities inflating exploration - further delays alternatives. The policy sink amplifies this, as investments in tungsten exacerbate manpower and equipment shortages in parallel mineral efforts.

Classic Dutch Disease sees resource booms appreciating currencies and crowding out tradables. Here, shortages invert it: “reverse Dutch Disease,” where constraints reallocate resources, inflating non-essentials while deindustrialising. The vicious cycle and policy sink supercharge this.

1. Resource Movement Effect: Capital and labour shift to priority areas (e.g., defence tools and tungsten mining), starving civilian manufacturing and other minerals. Tool shortages contract tradable by 10-20%, reducing outputs in autos and electronics. Defence outbidding and policy sinks accelerate this, hoarding supplies and perpetuating civilian squeezes.

2. Spending Effect: Government subsidies for alternatives inflate non-tradables (services), appreciating real exchange rates and eroding competitiveness. SMEs shutter, widening inequality, as cycle-driven costs and policy sinks compound.

3. Propagation to Non-Essentials: Mining cost hikes raise commodity prices, feeding into logistics and food - agriculture up 10-15% - creating consumer inflation. The feedback loop and policy sink ensure these cascades persist, as hampered exploration delays relief across minerals. This is all the more acute as fertiliser costs rise, as a result of the war against Iran.

4. Long-Term Deindustrialisation: Foregone productivity in manufacturing slows growth 0.5-1% annually, widening trade deficits. The cycle’s entrenchment and policy sinks risk a decade of Chinese dominance.

5. Vicious Cycle Reinforcement: Shortages beget outbidding and higher costs, demanding more resources, deepening deficits and strategic vulnerabilities. Policy sinks propagate this, as tungsten focus starves other minerals, fuelling inequality, rent-seeking, and potential conflict.

Breaking the Trap? Western Policy Imperatives

To escape, the conventional response from the West is to disrupt the cycle and mitigate policy sinks. Thus, we see subsidised exploration via grants under acts like the U.S. Critical Minerals Policy to offset inflated costs. The challenge is to do this while, at the same time, allocating support holistically across minerals to avoid zero-sum trade-offs. The west speaks of accelerating processing through partnerships, imposing tariffs to nurture industries, and mandating recycling / R&D. Alliances like the Minerals Security Partnership ostensibly aim to diversify sources, while workforce programs address talent gaps through education incentives.

The problem is multifold, and multidimensional. Reacting to perceived challenges in one or a set of materials is likely to catalyse shortages and bottlenecks elsewhere. When this happens, the result is a “whack a mole” approach that accelerates production system unravelling and constraints propagated across more supply chains. The problems emerged as a result of a half-century’s shift in economic focus to the development of hyper-financialisation. They aren’t resolved through more of the same.

In March 2026, Iranian strikes on Qatar’s Ras Laffan and Mesaieed facilities triggered force majeure, halting roughly 17% of global LNG capacity for an estimated 3–5 years. The immediate beneficiary is obviously American liquefied natural gas exporters. U.S. terminals redirected flexible cargoes to premium European and Asian markets, driving spot prices higher and delivering windfall revenues to operators such as Cheniere, ExxonMobil and Venture Global. Yet this financial boon, measured in exchange-value terms - stock prices, export earnings, and GDP contributions - masks a deeper biophysical reality: the secular decline in Energy Return on Energy Invested (EROEI) across U.S. shale gas plays that underpin LNG. As reserves deplete and production shifts to lower-quality rock, the “stock” of gas can sustain gross flows into the early 2030s, but net-energy surplus erodes. By around 2035, many analysts project EROEI thresholds that render continued large-scale extraction energetically marginal.

This paradox is not an anomaly; it is a textbook illustration of the divergence between exchange values (monetary claims and market prices) and use values (energetic and material capacities that sustain metabolic reproduction). As developed in my book Thermoeconomics in a Time of Monsters: Rethinking Theory, China and International Geopolitical Economy (available now on Amazon), economies are fundamentally energetic systems engaged in a perpetual struggle against entropy. Systemic Exchange Value (SEV) integrates three circuits: the material-energetic loop (use values), the monetary-financial loop (exchange-value claims), and the informational loop (coordination that reduces waste). When these circuits decouple, fictitious capital inflates claims on future energy far beyond real biophysical capacity. The U.S. shale-LNG episode demonstrates precisely this misalignment: short-term exchange-value gains accelerate entropy by raising downstream costs across global supply chains while deferring investment in higher-EROEI alternatives.

The contrast with China’s energy model sharpens the point. While the U.S. financialised hydrocarbon system chases marginal shale gains amid the Iran-induced disruptions, China’s coordinated, supply-chain-coherent approach - centred on rapid electrification and the strategic ramp-up of green hydrogen, amongst other things, under the 15th Five-Year Plan (2026–2030) - positions it structurally to weather (and even leverage) global oil and gas shocks. This is reflects a thermoeconomic alignment of circuits that augments use-value surplus and energy sovereignty. As I argued in “When Hydrogen Gets Cheap” (27 September 2025), the arrival of cheap green hydrogen marks an abundance shock that accelerates decarbonisation, redistributes industrial power and detaches economies from volatile fossil markets; this is precisely the trajectory China is engineering.

The Qatari Shock and the Exchange-Value Boom

Qatar had been one of the world’s top three LNG exporters, supplying roughly 20% of traded volumes alongside the United States and Australia. The Iranian attacks - in response to US-Israeli attacks - damaged key liquefaction trains, erasing the anticipated 2026 global surplus and tightening markets. European TTF prices and Asian JKM benchmarks spiked; U.S. exporters, unbound by destination-specific contracts, captured the arbitrage. Capacity expansions already underway (Plaquemines, Golden Pass, and others) accelerated, with U.S. LNG exports projected to approach 28–35 Bcf/d by 2029–2031.

Financial metrics tell a compelling story. Higher netback prices improved margins on spot and short-term cargoes, reduced cancellation risks, and lifted valuations for midstream and upstream players. Wall Street analysts projected multi-year revenue tailwinds, reinforcing America’s self-image as the “swing supplier” of global energy security. In SEV terms, this is pure exchange-value expansion: endogenous credit and futures markets mobilised capital to drill more wells and build more terminals, generating paper claims on future production. Yet the underlying use-value foundation - net energy delivered after subtracting extraction, processing and liquefaction energy costs - continued its long-term erosion.

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EROEI Decline and the Depletion Treadmill

Natural gas EROEI has declined historically as conventional reservoirs gave way to unconventional shale. Early 20th-century conventional gas yielded returns exceeding 100:1; by the 2010s, U.S. shale plays operated closer to 10–15:1 at the wellhead, with full LNG-chain figures (including liquefaction’s 8–12% energy penalty) even lower. Recent field-level data confirm the trend. Shale gas, now ~79% of U.S. dry gas output, exhibits steep decline curves: horizontal wells lose 60–80% of output in the first 1–3 years. Sweet spots in the Marcellus, Utica, Haynesville and Permian-associated plays are maturing rapidly; estimated ultimate recoveries (EURs) per well have fallen 17–31% in newer versus legacy developments.

U.S. dry gas production reached a record ~118.5 Bcf/d in 2025, but non-associated shale plays posted their first annual decline since tracking began. The Energy Information Administration (EIA) forecasts modest growth or plateau into the early 2030s, driven by LNG export pull, before potential inflection. Independent assessments that adjust for overstated reserves and hyperbolic decline curves are more pessimistic. By the mid-2030s, Tier 1 inventory exhaustion will force operators into lower-quality rock, requiring greater energy and capital inputs per unit of output. Analyses suggest marginal supply costs will rise sharply post-2035, pushing effective EROEI below societally “acceptable” thresholds (often cited around 5–10:1 net, where surpluses become too thin to support complex industrial metabolism without massive subsidies).

This is not “running out” of gas in volumetric terms. Proved reserves hover near 600 Tcf, with technically recoverable resources in the thousands of Tcf. The stock - existing wells, infrastructure and price incentives - can sustain flows for years. Yet the quality of that stock deteriorates. More energy is diverted upstream (fracking fluids, longer laterals, sand and water treatment) and downstream (liquefaction and marine transport), shrinking the net surplus available for power generation, manufacturing and export. In thermoeconomic language, this is entropy accumulation: the system expends ever-greater effort merely to maintain gross output while net available energy in potential (AEP) contracts.

Thermoeconomic Analysis: The Misalignment of Exchange and Use Values

Classical political economy distinguished use value (utility derived from a good’s material properties) from exchange value (its market price). Thermoeconomics reframes this biophysical: use values are energetic and material forms that enable societal reproduction - heat, motive power and chemical feedstocks - while exchange values are monetary claims that allocate those flows. SEV reveals how these circuits interact. High-EROEI systems produce abundant, cheap use values that support low prices; declining EROEI systems generate scarcity that inflates exchange values, even as real energetic return falls.

The U.S. shale-LNG case exemplifies divergence. Elevated global prices - driven by the Qatari outage - boost exchange-value metrics: revenues, share prices and export earnings. Financial markets treat LNG as a high-margin growth story. Yet the biophysical ledger shows rising energy intensity. More rigs, more diesel for drilling, more electricity for compression and more gas consumed in liquefaction; these all reduce net use value delivered to end-users. This gap widens via fictitious capital: futures contracts, leveraged infrastructure financing and ESG-tinted investment vehicles create claims on future energy far exceeding probable net output. As I argue in Thermoeconomics in a Time of Monsters, such decoupling is not market failure but an endogenous feature of mature, financialised hydrocarbon systems. Price signals that appear to reward efficiency actually subsidise entropy by incentivising marginal drilling rather than systemic redesign. This is also the basis of my argument that price caps are an insufficient - and potentially a wrong-headed response - to rising fuel costs.

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Rippling Costs Across Domestic and Global Supply Chains

The exchange-value boom does not remain contained. Higher wellhead and LNG prices transmit upstream and downstream. Domestically, U.S. industrial users - chemicals, fertilisers, glass and steel - face elevated feedstock costs. This flows through to downstream users. Power generators, already competing with renewables, see gas-fired margins squeezed or passed through in wholesale electricity prices. Households confront higher heating and electricity bills, compressing real wages and consumption. These cost ripples amplify inflation in energy-sensitive sectors, eroding competitiveness. The income for one is, after all, the cost for another.

Globally, the effect is amplified. Europe, desperate to replace Russian pipeline gas, locks in long-term U.S. LNG contracts at premium prices, embedding higher energy costs into manufacturing and transport. Asian importers (Japan, South Korea and China) divert cargoes, tightening regional balances and raising petrochemical and power costs. Supply-chain fragmentation follows. Just-in-time models that assumed cheap, abundant energy become fragile. The very flexibility that benefits U.S. exporters imposes volatility elsewhere, catalysing secondary effects - deindustrialization pressures in Europe, accelerated debates in Asia about reshoring and energetic structural change, and heightened geopolitical tensions over energy corridors.

In SEV terms, this is informational and energetic waste. Markets generate “noise” (speculative trading and hedging instruments) that consumes resources without augmenting use-value coherence. The result is higher systemic entropy, slower metabolic reproduction and reduced resilience. What’s good for the LNG sector isn’t necessary good for anyone else in the U.S. or elsewhere.

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Deferral of Higher-EROEI Alternatives

Perhaps the most counter-productive outcome is temporal: the financial success of shale-LNG defers the expansion of alternatives with superior long-term EROEI profiles. Renewables (solar and wind) plus storage and electrification already demonstrate rising EROEI trajectories in manufacturing and grid integration, especially when designed with supply-chain coherence (as in China’s model of deliberate industrial policy). Nuclear, geothermal, and advanced biofuels offer high-density, low-entropy pathways. Yet elevated gas prices and revenues create lock-in: capital flows preferentially to proven LNG infrastructure rather than the notionally riskier, longer-payback transition technologies. Policy distortions compound the effect; subsidies, permitting fast-tracks, and national-security framing prioritise hydrocarbons in the west.

As detailed in my analysis, mature energy systems exhibit institutional and political inertia. Fictitious capital in real estate and finance threatened contagion in 2008; today, shale-LNG plays an analogous role, sustaining GDP optics while widening the gap between monetary claims and biophysical reality. The U.S. financialised model thus traps itself in a declining-EROEI loop, contrasting with systems that prioritise energetic augmentation through electrification and circular supply chains. The Qatar-induced LNG boom buys political and economic breathing room in certain respects, yet at the cost of accelerating the very entropy it seeks to outrun. Inflation’s effects are uneven, and those benefiting from rapidly rising prices do so at the expense of those being forced for pay these prices.

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China’s Thermoeconomic Advantage: Electrification, Green Hydrogen and Disruption Resilience

Where the U.S. model reveals entropy accumulation through fictitious capital and declining net-energy returns, China’s approach demonstrates negentropic coherence. The 15th Five-Year Plan (2026–2030), adopted in early 2026, elevates green hydrogen to a “core new industry lever” and “future industry with national growth potential”. It is one of the 109 major engineering projects alongside new-type batteries, nuclear fusion and embodied AI. It explicitly targets industrial-scale breakthroughs: scaling renewable-powered electrolysis equipment, accelerating safe large-scale storage and transport, optimising hydrogen infrastructure layouts, and extending the value chain into green ammonia, methanol and sustainable aviation fuels. Applications are prioritised in transportation (hydrogen refuelling stations alongside battery swapping), power generation and hard-to-abate industry. The plan envisions ~100 zero-carbon industrial parks and 10,000 km of zero-carbon transport corridors, where direct clean electricity and green hydrogen supply decarbonised manufacturing clusters. Regional self-sufficiency in renewable and low-carbon hydrogen is a stated goal, treating green fuels as an explicit energy-security hedge amid global disruptions.

This builds on, and accelerates, China’s prior decade of electrification. EVs now dominate new vehicle sales; smart grids and flexible loads integrate electricity with data and industrial operations; and a “new-type energy system” prioritises system-level coherence over siloed fuels. Non-fossil energy is targeted to reach 25% of total consumption by 2030, with massive west-to-east clean-power transmission (420 GW capacity), offshore wind (>100 GW), and nuclear expansion. Renewables already deliver higher EROEI trajectories (solar 10–30:1, onshore wind up to 50:1) than maturing shale, and once installed, they require no ongoing fuel imports, shrinking exposure to chokepoints like the Strait of Hormuz.

The Iran conflict (and associated Qatari LNG outage) tests, and validates, this model in real time. China imports significant oil and LNG via the Strait, yet it is structurally far better placed than Europe, Japan or South Korea, as I argued last June and more recently here. Domestic coal provides a buffer; pipeline imports from Russia (Power of Siberia and expansions) offer overland alternatives insulated from maritime risks; stockpiles built over the past year cushion short-term shocks. Crucially, electrification has slowed oil-demand growth, while domestic gas production has surged >150% since 2010. China’s consumption of diesel peaked in 2024. Analysts note that prolonged LNG tightness could even benefit China relative to regional rivals, as its diversified portfolio (renewables + pipelines + coal) and green-fuel push reduce long-term vulnerability. Green hydrogen is framed explicitly as a security tool. It is not a climate add-on, but a hedge against fossil volatility.

In SEV terms, China’s strategy aligns the three circuits. Use values expand via higher-EROEI renewables and green hydrogen (as detailed in “When Hydrogen Gets Cheap”: cheap H2 triggers an abundance shock, enabling distributed industrial decarbonisation and negentropic surplus). Exchange values are subordinated to biophysical planning - state coordination minimises informational waste (speculative arbitrage and hedging noise) and channels fictitious capital into real infrastructure rather than marginal shale drilling. The result is enhanced energy sovereignty, reduced entropy, and resilience that turns global disruptions into strategic opportunity. As the war against Iran squeezes fossil markets, China doubles down on the very transition that augments net-energy surplus and detaches growth from import dependence.

Toward Thermoeconomic Realism

The U.S. LNG “boon” buys time in a declining-EROEI treadmill: exchange-value metrics glow while use-value quality erodes, rippling costs domestically and globally, and locking in low-surplus infrastructure. China, by contrast, leverages the same disruptions to accelerate a higher-EROEI pathway. Electrification plus green hydrogen (per the 15th FYP and my analysis in “When Hydrogen Gets Cheap”) creates self-reinforcing coherence. Cheaper renewables lower electrolysis costs, enabling cheap hydrogen that further displaces oil/gas in industry and transport. This is thermoeconomic realism where monetary claims track energetic reality rather than diverging from it. The outcome is not just lower emissions but greater systemic resilience, industrial competitiveness and geopolitical leverage.

The U.S. shale-LNG largesse amid Qatari disruption is real in exchange-value terms. Yet thermoeconomics demands we interrogate the use-value ledger. Declining EROEI by 2035 in shale-LNG renders net returns unacceptable without ever-greater subsidies. China’s model - electrification and green-hydrogen ramp-up under the 15th FYP - offers the counter-example: coordinated alignment that turns shocks into surplus. As I concluded in “When Hydrogen Gets Cheap,” abundance arrives not through more drilling but through cheaper, higher-quality energy vectors. The monsters of our interregnum are thermodynamic. Only by prioritising use-value coherence over exchange-value arbitrage can societies sustain metabolic reproduction. The shale-LNG episode does not refute transition; paired with China’s trajectory, it reveals its urgency and feasibility. Gross flows may persist in the U.S., but net-energy quality - and strategic foresight - will ultimately govern what civilisations endure.

Introduction

In 2024, I co-authored a paper titled “Exploring the State of Graphene-Based Tactile Sensors,” published in Sensors and Actuators A: Physical. This work delved into the burgeoning potential of graphene as a material for advanced tactile sensing technologies, highlighting its exceptional properties such as high electrical conductivity, mechanical strength and flexibility. Graphene was an “accidental discovery” that transformed a “worthless: piece of used laboratory waste into a Nobel Prize-winning wonder material. In 2004, physicists Andre Geim and Konstantin Novoselov at the University of Manchester isolated the first single-atom-thick, 2D sheet of carbon by repeatedly peeling layers from graphite using ordinary Scotch tape - a technique now affectionately known as the “Scotch tape method.”

In our paper, we examined how graphene’s atomic structure enables sensitive detection of mechanical stimuli, making it ideal for applications in robotics, prosthetics, and human-machine interfaces. At the time, graphene was transitioning from laboratory curiosity to prototype-stage innovation, with challenges in scalable production and integration limiting its widespread adoption. Our analysis underscored the material’s promise in enhancing sensor performance, reducing energy consumption, and enabling miniaturisation, but it also called for further research into cost-effective manufacturing and environmental sustainability.

Fast-forward to January 2026, and the graphene landscape has evolved dramatically. What was once a niche research focus has matured into a cornerstone of industrial strategy, particularly in China, where state-driven initiatives have propelled it to the forefront of global production. The global graphene market, valued at around US$200-280 million in 2024, is now projected to surge to US$2.5 billion by 2032, with a compound annual growth rate (CAGR) of approximately 36%. Cumulative investments have exceeded US$1.2 billion, fuelled by breakthroughs in production scalability and application diversity. In China, the market has ballooned to over US$2 billion, capturing more than 60% of global capacity through vertically integrated supply chains and over 50,000 patents.

This essay builds on our 2024 paper as a foundational lens, updating the state of play while expanding into emerging applications, process innovations, substitutions and their multifaceted impacts. I then apply a supply chain perspective to explore how graphene’s integration could trigger divergent cascading effects across economic systems. My approach to supply chains emphasises the interdependence of production processes and the role of inputs in determining prices and outputs, provides a robust tool for analysing how a disruptive material like graphene reshapes industrial ecosystems, potentially leading to profound downstream implications in efficiency, geopolitics, and sustainability.

The Evolving State of Graphene: Global and Chinese Perspectives

Globally, graphene’s trajectory since 2024 reflects a shift from R&D to commercialisation. Key regions include Asia-Pacific (33% market share), driven by electronics giants in Japan and South Korea, and emerging hubs in North America and Europe. Companies like the UK’s Paragraf have secured $55 million in funding for wafer-scale production, enabling high-quality graphene films for semiconductors. Events such as Graphene Week 2026 continue to showcase innovations, from quantum devices to wearable tech. Applications now span electronics (transistors and displays), energy storage (batteries and supercapacitors), composites (aerospace and construction), coatings (anti-corrosion), and biomedicine (drug delivery and sensors).

China, however, stands out as the epicentre of graphene industrialisation. With annual production capacity exceeding 1,000 tons - over 70% of the global total - China leverages its dominance in raw materials like graphite (95% of battery-grade supply) to achieve cost advantages of 40-50% over Western competitors. Government programs under “Made in China 2025” and institutions like the National Graphene Innovation Center in Ningbo have accelerated this lead, fostering innovations such as graphene-enhanced EV batteries that charge in five minutes. Firms like Tunghsu Optoelectronic are prototyping graphene slurries for ultra-fast charging, integrating them into domestic supply chains for electric vehicles and infrastructure. This dominance extends to critical minerals, with China controlling 90% of rare earth elements (REEs), 85% of manganese, and vast graphite reserves, enabling self-sufficient ecosystems.

These advantages partially stem from China’s high Energy Return on Energy Invested (EROEI) system, where efficient, large-scale manufacturing minimises energy waste. While EROEI is traditionally applied to energy sources, its principles align with China’s industrial model: low-input, high-output processes like flash Joule heating (FJH) reduce energy consumption by 90% compared to traditional methods. This efficiency, powered by renewables, amplifies graphene’s scalability, contrasting with fragmented Western supply chains reliant on imports.

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New Processes and Improvements Enabled by Graphene

Graphene’s core properties - 200 times stronger than steel, 100 times more conductive than copper, and atomically thin - continue to drive process innovations. Building on our 2024 tactile sensor focus, where graphene improved sensitivity and response times, recent advancements emphasise scalability and sustainability.

In production, chemical vapour deposition (CVD) costs have plummeted to US$30-50 per square meter from US$100 in 2023, facilitating large-area films for flexible electronics. Green alternatives like electrochemical exfoliation and laser-induced graphene supplant acid-based methods, enhancing yields while curbing pollution. FJH, converting biomass or coal into graphene in seconds, slashes energy use and emissions by 90%, making it viable for industrial volumes. Roll-to-roll manufacturing now functionalises graphene for specific uses, such as doping for enhanced conductivity.

In applications, graphene enables transformative improvements. In energy storage, it boosts battery charging to five minutes and extends cycle life to 3,500 cycles, far surpassing lithium-ion’s 800. Supercapacitors gain higher energy density for hybrid systems. Electronics benefit from graphene semiconductors outperforming silicon in speed and efficiency, with electron mobility enabling faster transistors. In materials, composites gain ultra-strength and lightness for aerospace, while coatings provide electromagnetic interference (EMI) shielding and thermal management. Biomedical sensors, extending our paper’s work, now detect quantum friction in layered structures, advancing diagnostics and wearables. Environmental tech sees graphene membranes for efficient water desalination and hydrophobic coatings reducing industrial water use by 30%.

These processes not only enhance performance but also align with circular economy principles, recycling waste into high-value materials.

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Substitutions and Their Multifaceted Impacts

Graphene boasts exceptional electrical conductivity, significantly higher than copper. Its single layer of carbon atoms enables electrons to move at near-light speed with almost no resistance, exhibiting high charge mobility and low resistivity. This makes it a promising material for advanced electronics, energy storage and transparent conductive film. Graphene’s versatility allows it to substitute traditional materials, yielding significant impacts on cost, speed, efficiency, and the environment. In batteries, it replaces graphite anodes and REEs, increasing energy density fourfold and improving safety. Costs drop (FJH graphene at one-fifth the price), charging accelerates to minutes, efficiency rises with longer lifespans, and environmental footprints shrink by 90% through carbon-neutral production.

Graphene is being developed to replace silver in solar PVs. By offering high conductivity, lower costs and better sustainability, companies are actively developing graphene electrodes comparable with industrial processes like screen printing for perovskite and silicon cells. All of this is aimed at creating cheaper, more efficient, and environmentally friendlier solar panels. Scalability is manufacturing is seen as one of the key advantages, allowing graphene to be applied using existing industrial techniques like slot-die coating and inkjet printing, enabling reasonably efficient integration.

In composites, graphene supplants carbon fibre or metals, reducing weight by 50% for lighter vehicles and structures. This cuts costs via resource savings, boosts efficiency in transport (lower fuel use), and mitigates emissions. Electronics see silicon and copper replaced, enabling faster processing and higher conductivity, with durable devices reducing e-waste. (This, by the way, is particularly important should global shortages in sulphur (necessary for the production of copper) continue for the indefinite future, as a result of blockages to shipment through the Straits of Hormuz.) In remediation, graphene adsorbs contaminants better than REE-based filters, offering cost-effective, recyclable solutions.

Overall, these substitutions alleviate scarcity pressures - particularly REEs, where China holds 90% control - while hybrid materials minimise impacts. Green processes cut energy use 15-fold, fostering sustainability. However, challenges like standardisation persist, potentially inflating initial costs.

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A Supply Chain Lens on Graphene

Let us now turn to a supply chain focus on graphene. Viewing production as an interdependent system where commodities produce commodities through inputs like labor, capital, and materials, we can adapt Sraffa’s input-output tables to reveal how changes in one sector’s technology or costs ripple through the economy, altering prices, wages, and outputs. Applying this to graphene illuminates its role as a “basic commodity” - one used in producing others - potentially reshaping entire supply chains.

In Sraffa’s terms, graphene enters as an input in sectors like energy and electronics, reducing the “technical coefficients” (input quantities per output unit). For instance, in battery production, substituting graphene lowers material and energy inputs, decreasing the sector’s cost structure. This cascades: cheaper batteries reduce EV manufacturing costs, lowering transport sector inputs, which in turn affects logistics, agriculture, and consumer goods. Input-output models, extended from Sraffa via Leontief’s work, quantify these multipliers; a 10% cost reduction in graphene could amplify GDP growth by 1-2% in dependent economies, per analogous studies on nanomaterials.

Divergent effects emerge based on adoption contexts. In high-EROEI systems like China’s, integrated chains amplify benefits: lower inputs enhance EROEI further, enabling export surpluses and geopolitical leverage. Conversely, in fragmented markets like the US, supply disruptions (e.g., REE dependencies) could exacerbate inequalities, with cascading inflation in downstream industries. Environmentally, graphene’s low-footprint production reduces aggregate resource use, but if scaled unsustainably, it might strain graphite supplies, triggering Sraffian “reswitching” - where higher wages or regulations revert to older technologies.

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Downstream Implications: Cascading Effects at System Levels

The downstream implications of graphene are profound and multifaceted, with cascading effects rippling through economic, geopolitical, environmental, and social systems. Economically, its integration could catalyse a “graphene revolution” akin to silicon’s in computing. In EVs, five-minute charging disrupts oil-dependent transport, potentially slashing global oil demand by 20% by 2035 and boosting renewable energy sectors. This cascades to job creation in green manufacturing (millions in China alone) but job losses in fossil fuels, exacerbating regional disparities.

Geopolitically, China’s dominance fosters asymmetry. Controlling graphene supply chains, Beijing could wield influence similar to its REE dominance. Divergent paths are, consequently, conceivable: cooperative standards might spur global innovation, but trade barriers could fragment markets, with Europe investing in alternatives like 2D materials to counterbalance.

Environmentally, graphene’s efficiencies promise decarbonisation - e.g., lighter composites cut aviation emissions by 15% - but cascading risks include mining pollution if demand surges. System-level effects could reverberate in water-scarce regions, with desalination membranes alleviating crises, enabling agricultural booms; yet over-reliance might deplete aquifers elsewhere.

Socially, enhanced sensors from our 2024 paper evolve into ubiquitous AI interfaces, improving healthcare (e.g., real-time diagnostics) but raising privacy concerns. Cascades could widen digital divides, with affluent nations benefiting first, unless China’s developments in this area accelerate scale, cost reductions and affordability globally.

These implications highlight “systemic interdependence”: a single material’s shift alters the “standard system” of production, potentially leading to equitable growth or entrenched inequalities. Policymakers must navigate these divergences through inclusive supply chain strategies.

Conclusion

From the tactile sensors explored in our 2024 paper to today’s industrial juggernaut, graphene exemplifies material science’s transformative power. Updates reveal a China-led surge in production and applications, with innovations enabling substitutions that enhance cost, speed, efficiency, and sustainability. Through a Sraffa-inspired lens, we see how these changes cascade across supply chains, yielding divergent system-level effects - from economic booms to geopolitical tensions. As graphene matures, its implications underscore the need for balanced global collaboration to harness benefits while mitigating risks. Ultimately, this material not only substitutes inputs but redefines the production paradigm, showing again just how interconnected economic systems are.

Geopolitical conflict is usually narrated in the language of strategy, ideology or national interest. Wars are explained through security dilemmas, miscalculation or the ambitions of leaders. Yet such explanations, while not wrong, often remain at the level of appearances. Beneath them lies a more fundamental dynamic: the energetic conditions that make complex industrial societies possible in the first place.

A thermoeconomic perspective begins from a simple premise. Modern economies are not primarily monetary systems, nor even production systems in the abstract. They are energy transformation systems. Industrial civilisation depends upon continuous flows of high-density energy to sustain production, logistics, agriculture and the vast infrastructures of everyday life. For over a century, this system has been organised around hydrocarbons - oil and gas - as its dominant energetic foundation.

Within this framework, geopolitical tensions - including those surrounding Iran - can be understood as expressions of deeper structural pressures within what might be called systems of energetic valorisation. These systems do not merely allocate resources; they organise the very conditions under which economic activity can reproduce itself over time.

At the heart of the current moment lies a quiet but profound shift: the gradual decline in the Energy Returned on Energy Invested (EROEI) of incumbent hydrocarbon systems. Early oil extraction yielded extraordinary energy surpluses. Today, the picture is different. The most accessible reserves have largely been depleted, and new production increasingly relies on more complex, capital-intensive and energetically costly methods.

This does not mean that hydrocarbons are disappearing. On the contrary, global production remains substantial. But it does mean that the energetic surplus available to sustain the broader system is under pressure. More energy - and more capital - must be reinvested simply to maintain existing levels of output. The margin for expansion narrows. Fragility increases.

Crucially, this dynamic does not need to be consciously recognised in order to exert its effects. Here, an unexpected philosophical parallel becomes useful.

In the work of G. W. F. Hegel, history advances through what he called the “cunning of reason”: individuals pursue their own particular interests, yet unwittingly realise a broader rational process. Marx famously inverted this idea. For Marx, it is not Reason that guides history, but material conditions - especially the organisation of production - that assert themselves “behind the backs” of social actors.

Thermoeconomics extends this inversion further still. What we observe today is not the cunning of reason, but something closer to a cunning of entropy.

There is no need for policymakers, executives or citizens to think in terms of EROEI or thermodynamic limits. Declining energetic returns translate themselves into economic and political pressures regardless. Rising extraction costs appear as inflationary tendencies. Tighter energy margins manifest as declining profitability or increased reliance on credit expansion. Supply constraints emerge as geopolitical “risks”.

Actors respond to these pressures, but they do not control their underlying logic. The system moves, as it were, as a fundamental substrate in which human agency is connected and intrinsically embedded. That’s nature at work.

As these pressures intensify, systems of accumulation tend to respond in two broad ways. The first is internal: attempting to reorganise production, invest in new technologies, and build alternative energetic infrastructures. There are distributional dimensions to this, which create either entropy acceleration feedback loops or which can prolong things by way of effective negentropic mediation. The second is external: securing access to higher-quality energy resources elsewhere while limiting rivals’ access to the same.

It is this second dynamic that brings Iran into focus.

Iran possesses some of the world’s largest conventional hydrocarbon reserves, including vast oil deposits and the South Pars gas field. These resources remain relatively attractive in energetic terms compared with many newer, more complex sources of supply. But Iran’s significance is not only geological. It is also geographical.

Situated at the crossroads of Eurasia, Iran is a potential hub in emerging continental energy and trade networks. Its integration into institutions such as the Shanghai Cooperation Organisation and BRICS signals the possibility of deeper alignment with a Eurasian economic system increasingly centred on infrastructure connectivity and industrial coordination.

Such an integration would have far-reaching implications. For decades, global energy flows have been structured around maritime routes, with strategic control exercised through naval dominance and chokepoints. A more integrated Eurasian system, with Iran as a key node, could gradually reconfigure these patterns toward continental corridors less dependent on maritime control.

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From a thermoeconomic standpoint, the persistent pressure placed on Iran can thus be interpreted not merely as a matter of regional politics or nuclear concerns, but as part of a broader effort to shape the architecture of energy flows in a period of systemic transition.

Yet the deeper logic lies not in strategy alone, but in constraint. As domestic energetic systems in the U.S. face declining returns, and as institutional and political conditions complicate rapid internal transformation, entropic pressures build. Reorganising an entire energy system - shifting1 from hydrocarbons to renewables, electrifying transport, rebuilding grids and industrial processes - is an immense undertaking. It requires time, all sorts of resources, coordination and social stability.

Where such negentropic preparation is insufficient or blocked, systems seek relief elsewhere.

This is what might be called thermodynamic imperialism: the externalisation of energetic constraints through the securing of resources, the restructuring of global flows, and, in its most extreme forms, coercion and conflict. It is not necessarily driven by conscious design. Rather, it emerges as the path of least resistance for systems unable to fully reorganise internally under conditions of stress.

History offers many precedents. Control over energy resources has long been intertwined with geopolitical power. But under contemporary conditions, the dynamic becomes more acute. The global resource frontier is tightening. The energy transition is underway but incomplete. Financial systems, through credit expansion, can temporarily mask underlying energetic constraints, but cannot eliminate them.

The result is a system in which tensions accumulate.

Importantly, this process tends to become more brutal where domestic renewal proves most difficult. Political fragmentation, institutional inertia and entrenched interests can slow the relative expansion of alternative energy systems. In such contexts, externalisation intensifies. Securing access to resources abroad, or preventing others from doing so, becomes a substitute for internal transformation.

Violence, in this sense, is not simply a failure of diplomacy. It can be an emergent property of systems under thermodynamic strain.

This brings us to the defining challenge of the present: managing the transition from one energetic regime to another without triggering systemic breakdown.

Renewable energy systems - solar, wind and associated electrified infrastructure - offer a pathway toward a different energetic configuration. But building this system requires enormous upfront investment and, paradoxically, continued reliance on hydrocarbons during the transition. The old system must, in a sense, resource and energise the construction of the new.

This creates a narrow corridor for successful transformation. Energy flows must remain sufficiently stable to support the transition, even as the long-term trajectory shifts away from hydrocarbons. Disruptions, whether through conflict, underinvestment or geopolitical fragmentation, risk destabilising both regimes simultaneously.

Different societies are navigating this challenge in different ways. Among major economies, China has pursued an aggressive strategy of building renewable capacity, electrifying transport and developing advanced manufacturing ecosystems tied to the new energy economy. These efforts can be understood as a systematic attempt to accumulate negentropic capacity, so as to prepare materially for a post-hydrocarbon world. There are many drivers for this policy orientation, including energy security, energy cost efficiency, a commitment to decarbonisation, a need to reduce air pollution and the like.

Others remain more deeply entangled in the incumbent system, facing greater difficulty in reorganising their domestic energy and industrial structures. For them, the temptation - or compulsion - to externalise pressures may be stronger. The tensions surrounding Iran thus illuminate more than a regional conflict. They reveal the contours of a broader thermoeconomic transformation. The struggle is not only over resources, but over the timing, structure and control of the transition itself.

In this light, the analogy with Hegel’s “cunning of reason” returns in a transformed guise. History is still moving through the actions of individuals and states pursuing what they frame to be their own interests. But there is no guarantee of rational resolution, no hidden teleology guiding events toward harmony.

Instead, there is the cunning of entropy: the quiet, persistent pressure of energetic constraints reshaping the behaviour of systems, often without their full awareness, and sometimes with violent consequences. And on the other side, human social organisations’ attempts at negentropic intervention to sustain complexity, maintain order and realise system reproduction. The central question of our time is whether societies can recognise these dynamics sufficiently to act ahead of them; to invest, reorganise and cooperate in ways that reduce the need for externalisation, or whether they will continue to respond after the fact, allowing thermodynamic pressures to express themselves through conflict.

Piero Sraffa’s framework, as outlined in Production of Commodities by Means of Commodities, emphasises intersectoral dependencies through input-output analysis, where commodities are produced using other commodities in a circular, interdependent system. This “Sraffa lens” reveals how technological shifts in one sector generate direct effects (e.g., substituting inputs) and indirect effects (e.g., altering prices, demands, and outputs across linked sectors), potentially “leaping” to unrelated industries via supply chain ripple effects. Unlike Leontief’s empirical matrices, Sraffa’s model highlights systemic vulnerabilities, such as how reduced demand for one input (e.g., batteries) cascades to raw material suppliers, labour markets and even geopolitical trade dynamics.

Applying this to triboelectric nanogenerators (TENGs), we see TENGs as a disruptive input that harvests ambient mechanical energy, potentially displacing traditional energy sources and enabling self-powered systems. This could reshape supply chains by reducing reliance on finite resources like lithium, while indirectly boosting sectors like nanomaterials and IoT manufacturing.

Supply Chain Dynamics and Intersectoral “Leaps”

In Sraffian terms, TENGs introduce a low-cost, material-diverse input that converts “high-entropy” mechanical energy (e.g., vibrations, waves) into electricity, disrupting the energy production subsystem. Direct implications include substituting batteries and micro-generators in IoT devices, wearables, and sensors, where TENGs’ flexibility and scalability lower assembly costs. This reduces demand for battery-grade materials (e.g., lithium, cobalt and graphite), directly impacting mining and refining sectors - China’s dominance in these (e.g., 82% of global graphite) could amplify price volatility or export controls, affecting global electronics chains.

Indirect effects “leap” sectors: Lower battery demand could depress mining outputs, leading to surplus labor and capital in extractive industries, potentially redirecting investments to nanomaterials (e.g., graphene, CNTs) for TENG enhancements. In recycling, reduced e-waste from batteries might shrink that sector, while TENGs’ biodegradable variants (e.g., bioresorbable TENGs) spur growth in sustainable materials, intersecting with agriculture (e.g., biomass-derived carbons).

Broader leaps include energy-intensive industries: TENGs in smart grids could displace fossil fuel backups, indirectly reducing oil/gas demands and leaping to transportation (e.g., fewer EV batteries needed for auxiliary systems). In data centres, TENGs harvesting vibrations could cut cooling energy, leaping to ICT and reducing PUE (power usage effectiveness), potentially displacing traditional HVAC systems. These cascades highlight Sraffian interdependencies: TENG adoption alters relative prices (e.g., cheaper self-powered IoT lowers electronics costs), redistributing surplus across sectors and potentially exacerbating inequalities if concentrated in China-led chains.

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Displacements in Marine, Terrestrial and Airborne Environments

TENGs’ ability to harvest low-frequency mechanical energy positions them to displace inefficient, battery-dependent technologies across environments, with Sraffian leaps amplifying disruptions (e.g., reduced battery production affects global shipping chains).

• Marine Environments: TENGs displace traditional batteries in buoys and sensors for wave energy harvesting, enabling self-powered ocean monitoring (e.g., water quality, salinity etc). Rolling-mode TENGs achieve 185.4 W/m³·Hz, replacing diesel generators in marine ranches and leaping to fisheries (reduced IUU fishing tech costs). Indirectly, this displaces cabling in subsea infrastructure, leaping to offshore oil/gas (less maintenance) and environmental sectors (e.g., pollution sensors reduce chemical cleanup demands). Bioresorbable TENGs could displace invasive marine probes, minimising ecological disruption.

• Terrestrial Environments: In agriculture and infrastructure, TENGs displace batteries in soil/plant sensors for precision farming (e.g., humidity, vibration monitoring), harvesting wind/vibrations for net-negative CO₂ emissions (-43,400 kg/m³ over 10 years). This leaps to pesticides (TENG-stimulated germination reduces chemical use) and waste management (biowaste-integrated TENGs repurpose farm waste). In urban settings, cement-based TENGs on pavements displace grid power for smart infrastructure monitoring, leaping to construction (less wiring) and transportation (vibration-harvesting in rails reduces fossil backups). Human motion TENGs in wearables displace health trackers’ batteries, leaping to textiles and medical supply chains.

• Airborne Environments: TENGs in drones displace batteries by harvesting rotational energy from propellers (e.g., drone rotational TENGs for RPM sensing), enabling longer flights and self-powered actuators. This leaps to aviation (reduced fuel in UAVs for monitoring) and space (TENGs for Mars rovers harvesting wind/vibrations, displacing solar panels in dusty environments). Flying seed-inspired TENG sensors for aerial dispersal displace ground-based environmental probes, leaping to precision agriculture (e.g., humidity/gas monitoring from air). Indirectly, this reduces drone manufacturing’s battery dependency, leaping to logistics and defence sectors.

In summary, TENGs could displace up to 30-50% of low-power battery applications by 2030, per market projections, with Sraffian leaps potentially contracting mining by 10-20% while expanding nanomaterials by 25%+. This systemic shift favors sustainable chains but risks monopolies if China-led, underscoring the need for diversified inputs.

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Applying Sraffa’s Price Theory to the Emergence of Triboelectric Nanogenerators (TENGs)

Sraffa’s price theory is rooted in a classical, surplus-based framework that determines relative prices and the distribution of surplus (profits/wages) endogenously through intersectoral interdependencies - without relying on marginalist supply-demand mechanisms or subjective utility. Prices emerge from the physical requirements of production (inputs needed to produce outputs) and the uniform rate of profit, reflecting the “reproduction” of the economy as a circular system of commodity production using commodities.

In this Sraffa-inspired view, TENGs represent a transformative technological change that alters the technical coefficients of production (the input-output matrix A), particularly in energy-intensive sectors. TENGs harvest ambient mechanical energy (e.g., vibrations, waves and motion) via contact electrification and electrostatic induction, enabling self-powered or low-power devices without traditional batteries or grid connections. This shifts the economy’s production conditions, potentially lowering the “surplus” extracted from certain sectors while redistributing it to others. In what remains of this short paper, I explore these implications through direct and indirect price effects, drawing on Sraffa’s emphasis on how innovations affect relative prices, input requirements, and intersectoral relations.

Core Sraffian Mechanics in the Context of TENGs

Sraffa’s model uses a square matrix of technical coefficients (A) where each column represents the inputs required per unit output of a commodity. Technological progress reduces these coefficients (e.g., less energy input per unit of output), which can lower prices in affected sectors and propagate through the system. TENGs act as a “basic commodity” enhancer: they reduce the need for non-basic energy inputs (e.g., battery-derived electricity) in downstream production processes.

• Direct Price Effects: TENGs displace or substitute high-cost, finite energy inputs like lithium-ion batteries in low-power applications (IoT sensors, wearables, remote monitoring). Batteries require critical materials (lithium, cobalt, nickel, graphite) with high extraction and processing costs. By harvesting “free” ambient energy, TENGs lower the effective input coefficients for electricity in these uses, potentially driving down prices of affected goods (e.g., self-powered sensors become cheaper to produce and deploy). In Sraffian terms, this reduces the labor and material “dated” requirements for reproduction, allowing a higher uniform rate of profit or lower prices in dependent sectors.

• Indirect and Systemic Price Propagation: Changes in one sector’s coefficients ripple across the economy via the inverse Leontief matrix (I - A)^(-1), which Sraffa uses to trace full interdependencies. Reduced demand for batteries contracts upstream mining/refining (e.g., lithium and cobalt extraction), lowering their prices and potentially releasing surplus capital/labor for reallocation to nanomaterials (graphene, CNTs) essential for TENGs. This “leap” effect could depress prices in extractive sectors while elevating them in advanced materials, redistributing surplus toward innovation-driven industries.

Sectoral Disruptions and Price Reconfigurations

TENGs could alter the relative prices of energy commodities, favoring decentralised, ambient-harvesting over centralised storage:

• Energy Storage Sector: Batteries, as a major input in electronics and renewables, face substitution in low-power niches. Sraffa’s theory predicts a fall in battery prices if demand drops, as surplus production capacity emerges. This could cascade to mining sectors, reducing the price of lithium/cobalt relative to graphene/CNTs (TENG enablers). Indirectly, lower energy costs for IoT could cheapen data-driven goods, boosting surplus in digital sectors.

• Renewable and Grid Energy: TENGs complement intermittency in solar/wind by providing localised power, reducing reliance on grid-scale storage. This lowers the “dated labor” embodied in energy production, potentially decreasing electricity prices and redistributing surplus from fossil/nuclear to ambient-harvesting tech.

• Nanomaterials and Advanced Manufacturing: Increased TENG adoption boosts demand for carbon allotropes, raising their relative prices initially (scarcity premium) but eventually lowering them through scale. This creates a virtuous cycle: cheaper TENGs → more adoption → more demand for inputs → innovation in production → lower coefficients.

Broader Implications for Surplus Distribution and Economic Structure

In Sraffa’s framework, technological change is neutral regarding distribution unless it affects basic commodities or the standard commodity. TENGs, by reducing dependence on scarce critical materials (e.g., cobalt in batteries), could democratise energy access, potentially increasing the wage share if surplus grows from efficiency gains. However, if concentrated in supply chains (e.g., China’s dominance in graphene/CNTs), it might reinforce uneven development, with profits accruing to upstream controllers.

Challenges remain: TENGs’ low output (μW-mW range) limits them to niche applications, so full displacement requires hybrids. Yet, as efficiencies rise (e.g., >1 W/m² in hybrids), Sraffian price theory suggests a tipping point where relative prices shift decisively toward self-powered systems, reshaping the economy’s reproduction schema.

In summary, through a Sraffa lens, TENGs are not merely an incremental innovation but a structural shift that reconfigures input-output relations, lowers prices in battery-dependent sectors, and redistributes surplus toward sustainable, decentralised energy production. This could foster a more resilient, less extractive economic reproduction—provided global supply chains adapt equitably.

The first part of Thermoeconomics in a Time of Monsters seeks to flesh out the conceptual scaffold for how we can anchor an understanding of socio-economic system change through the frame of thermodynamics, and describes the elements of what I have called Systemic Exchange Value (SEV). Chapter 8 pulls together the threads of SEV into a coherent summary of the economic metabolism - the living circuit of energy, finance, information and fictitious capital that either sustains order or accelerates disorder. At its heart is a simple and straightforward proposition: crises are not external shocks or policy errors per se. They are endogenous - baked into the system’s own dynamics once EROEI begins to degrade.

The economic metabolism is a triple circuit; visualise it as a triple helix, perhaps. First, there is the material-energetic loop: energy is captured, deployed, transformed through supply chains into use values (goods, services, machinery, infrastructure etc.), and dissipated in reproduction and consumption - that is, validation. Second is the monetary-financial loop: endogenous credit creates exchange-value claims that mobilise resources today in anticipation of future use-value realisation. These two circuits must remain roughly aligned for the system to reproduce itself without debilitating rupture. A third circuit - information - intersects these and to some extent binds them together. Information itself is an energetic artifact, while also playing a key role in enabling each of the other circuits to work and to interact.

When EROEI degrades - whether from geological depletion, geopolitical disruption, political retardation of enhancements or technological lock-in - the material circuit delivers less surplus energy per unit invested. The system’s capacity to generate new use values contracts. Yet the monetary circuit does not automatically slow. On the contrary, it accelerates.

Liquidity and fictitious capital expansion becomes the short-order “rational” response of validation constraints. Faced with slowing real growth and validation constraints, agents (firms, households and states) issue more claims on future value to keep the circuit turning today. Debt rises, asset prices inflate and derivatives multiply. This is not irrational exuberance or moral failure; it is a logical, system-preserving move in the short run. More liquidity is injected to bridge the growing gap between what the real economy can actually deliver and what the claims promise.

But every round of expanded liquidity injection and accelerated fictitious capital widens the very gap it is meant to close. Claims on use value outpace the energetic-material capacity to validate them. The divergence grows. Balance sheets swell (they are a measure of exchange value) while the underlying metabolic substrate frays. The system becomes increasingly fragile.

Informational noise makes the problem worse. In an SEV world, information is not costless or inherently negentropic. It is an energetic artefact. Viable information reduces turnover time, improves coordination and raises overall EROEI across production nodes and in supply chain networks. But when fictitious capital dominates, the informational environment floods with unviable noise: speculative narratives, hype cycles, mispriced risk signals and algorithmic echo chambers. This noise consumes energy (data centres, trading infrastructure and mass media) while actively degrading coordination. It distorts price signals, misallocates liquidity and accelerates the decoupling between claims and reality.

The result is an endogenous crisis mechanism. Degrading EROEI is the root cause. Accelerated fictitious capital is the short-term palliative that becomes the long-term poison. Informational noise is the accelerant. Together they produce a self-reinforcing loop:

Degrading EROEI → slower real surplus growth → liquidity gap → fictitious capital expansion → wider claims–delivery gap → more noise → further degradation of coordination and EROEI → deeper crisis.

This is why crises feel both inevitable and surprising. They are not random. They are the predictable outcome of a system that has substituted financial claims for energetic renewal. When the claims can no longer be validated through real transformation, the circuit ruptures in the form of financial crashes, inflation spikes, supply-chain breakdowns or social reproduction crises.

Chapter 8 of the book shows this is not a pathology of capitalism alone. It is a thermodynamic feature of any monetary production system once EROEI begins its secular decline and negentropic interventions are too weak or misdirected. The autumn phase of Arrighi’s hegemonic cycles is precisely this moment: material expansion gives way to financial expansion, fictitious capital becomes dominant, and the gap between exchange value and use value widens until the system can no longer paper it over.

The antidote is not moral restraint or better regulation alone. It is deliberate, systemic negentropic renewal: raising EROEI through new energy systems and production coefficients, pruning unviable informational noise, and managing liquidity so that fictitious capital serves renewal rather than postponing it. Societies that achieve this coherence - China’s deliberate EROEI-augmenting path is the clearest contemporary example - can climb to higher plateaus of surplus potential. Those that cannot descend into accelerating entropy.

This is the summary architecture of the economic metabolism presented in Chapter 8. It is not a counsel of despair. It is a diagnostic map. Once you see crises as endogenous outcomes of degrading EROEI and the short-term rationality of fictitious capital expansion, the path to renewal becomes visible: align the monetary circuit with the energetic one, prune noise, and invest in genuine negentropic augmentation.

The monsters of our time - financial fragility, energetic shocks and informational overload - are not mysterious. They are the visible symptoms of a metabolic system whose internal dynamics have tipped toward entropy. Understanding that mechanism is the first step toward mastering it.

The problem lies not so much in the diagnosis as in the horizon of the remedy. Weber and Semieniuk propose measures such as releasing reserves, capping margins and coordinating multilateral wholesale price caps in order to contain the distributive fallout from energy and commodity shocks. These are politically humane proposals. They are motivated by a serious concern to protect households and productive firms from predatory escalation, and they stand well above the familiar orthodoxy that answers every inflationary episode with interest-rate punishment. But they remain lodged within a social-democratic politics of capitalist management: the aim is to stabilise the existing system, to help it limp through crisis, rather than to use crisis as the lever for structural transformation. In that sense, the framework is redistributive without being reconstructive. It addresses the price expression of scarcity without reorganising the material conditions that produce scarcity and vulnerability in the first place.

That limitation matters because the present conjuncture is not just another cyclical inflation scare. It is the expression of a deeper thermodynamic problem. From a thermoeconomics perspective, as I have argued in Thermoeconomics in a Time of Monsters, economic life is not an abstract dance of prices and preferences but a process of organising energy and material throughput. Production, circulation and everyday social reproduction all depend on access to reliable energetic flows. Hydrocarbon systems once offered dense, transportable and highly flexible energy, and modern capitalism was built around those characteristics. But this very dependence now manifests as structural exposure. The issue is not simply that oil and gas prices are volatile. It is that an entire socio-technical order remains tied to fuels whose extraction, transport and geopolitical management generate recurrent bottlenecks, conflict and rentier power. In this setting, inflation is not only a monetary or distributive event. It is a symptom of strain within the underlying energy regime.

Seen this way, seller’s inflation is real, but it is not the whole story. It names an important mechanism of shock propagation under concentrated capitalism, yet it does not by itself provide an adequate theory of energetic transition. The upstream hydrocarbon shock is not just an opportunity for powerful firms to widen margins. It is also a warning that the energetic basis of the existing system is increasingly brittle. The bottleneck is not merely market structure; it is the dependence of market structure on a fossil metabolism. If that is the case, then policies that merely dampen price spikes while preserving fossil dependence risk becoming conservative in the most literal sense: they conserve the old order at the very moment when renewal is required.

This is the core problem with reserve releases and emergency price caps as a strategic response. They may well be justified as temporary protections. Nobody should romanticise price signals while households are being smashed and firms that actually make useful things are being strangled by upstream costs. But unless such interventions are explicitly subordinated to a rapid substitution strategy, they can mute the social visibility of physical constraint. Consumers and businesses experience less pain at the meter or checkout, while the underlying decline in available cheap fossil flow remains hidden from view. The appearance of normality is politically restored even as the real energetic basis of normality erodes. In practice, that can weaken the urgency of electrification, efficiency upgrades and industrial conversion. The shock is administered rather than transcended.

That last point is crucial. In liberal and social-democratic crisis management, the state often steps in to socialise losses so that market society can keep functioning. Sometimes that is necessary; often it is preferable to the barbarism of non-intervention. But in the energy domain this logic can become a trap. Public authorities cushion hydrocarbon volatility, absorb social discontent and prevent breakdown, yet leave intact the infrastructural commitments and corporate power relations that guarantee another shock later. One gets a politics of permanent triage, which mask systemic gangrene. Each crisis is met with a new patch: release reserves, subsidise bills, cap margins, negotiate temporary relief, then wait for markets to “settle.” The result is not transition but managed stagnation, with the public effectively paying to defer a reckoning.

Thermoeconomics suggests a different framing. The question is not merely how to distribute the costs of an energy shock more fairly, though that obviously matters. The deeper question is how to recompose the economy around a superior energetic basis. A rational response to hydrocarbon scarcity is not to preserve hydrocarbon normality for as long as possible. It is to accelerate the migration of end uses away from combustion and toward electrified systems powered by increasingly diverse and domestically controllable sources. In households, that means electric heating, heat pumps, induction cooking and improved building efficiency. In transport, it means EVs, electrified freight where possible, and strong public transit. In industry, it means electrified process heat where technically feasible, alongside grid upgrades, storage and strategic industrial planning. The point is to reduce exposure to fossil fuel bottlenecks, not merely to make those bottlenecks more bearable.

This is where the subsidy question becomes politically sharp. Every dollar spent propping up fossil consumption without reducing fossil dependence is, in strategic terms, a dollar spent preserving the problem. Fossil fuel subsidies and crisis relief mechanisms are often defended in the name of affordability, but affordability severed from transition quickly becomes a defence of inertia. A thermoeconomic approach would redirect public spending toward shortening the distance between the old energy regime and the new one. Instead of using fiscal capacity primarily to hold down the social costs of hydrocarbons, governments should use it to finance the capital stock turnover that makes hydrocarbons progressively less central. That means public support for electrification infrastructure, domestic manufacturing capability, grid resilience, storage, charging networks and the reorganisation of industrial supply chains around non-combustion energy forms. The task is not to make fossil dependence cheaper. It is to decentre it.

There is also a structural power issue here that Weber’s framework only partly captures. Seller’s inflation usefully highlights the role of concentrated firms in exploiting emergencies. But the deeper asymmetry is not only firm-level market power; it is the systemic leverage conferred by control over energy-dense upstream inputs in a fossil economy. Hydrocarbon systems generate rents because they occupy commanding heights in the material reproduction of society. Whoever controls those chokepoints enjoys not just pricing power but political power. Reserve releases and margin caps may discipline the expression of that power at the edges, but they do not dissolve its foundations. Electrification, by contrast, potentially changes the geometry of power itself. It can reduce dependence on imported fuels, weaken the geopolitical centrality of oil transit corridors, diversify generation sources and shift more energy use into systems that can be provisioned domestically and managed through public infrastructure. In other words, transition is not simply an environmental preference. It is a reorganisation of material sovereignty.

That is why the present moment should be read as one of accelerated renewal rather than merely disciplined restraint. We should not treat the crisis mainly as a problem of inflation governance, when it is equally and more fundamentally a problem of civilisational energy transition. To stabilise prices without transforming energy systems is to confuse the symptom for the disease. One can suppress the immediate distributive violence of the shock and still leave intact the hydrocarbon dependency that makes the next shock all but inevitable.

A more adequate policy program would therefore braid protection and transformation together. Yes, households and productive firms need shielding from predatory price escalation. To be sure, emergency measures may be necessary to prevent distributive collapse. But those protections should be temporary, conditional and nested inside a larger strategy of forced transition. Any reserve release should be paired with accelerated investment in electrified alternatives. Margin caps should sit alongside public investment mandates and industrial conversion programs. Subsidies for bills should be tied, where practical, to household retrofits, appliance replacement, EV uptake, public transport expansion or industrial efficiency upgrades. The principle should be simple: crisis relief must reduce future exposure, not simply underwrite present dependence.

Weber et al are right about the mechanism, but too narrow about the horizon. The account of seller’s inflation is a valuable contribution to understanding how concentrated capital transmits and amplifies upstream energy shocks. The proposed remedies are humane and, in the narrow sense, sensible. But they remain politically and thermodynamically inadequate to the scale of the challenge. They belong to a tradition that seeks to manage capitalism’s crises more fairly, not to reconstruct the energetic basis of social reproduction. Today, I suggest, that is not enough. We are not merely trying to get through another price spike. We are living through the exhaustion of a hydrocarbon-centred regime and the opening of a struggle over what comes next. In that setting, the priority should not be to subsidise fossil normality, even in softened form. It should be to use every available lever to hasten electrification, reduce hydrocarbon exposure and build a more resilient energetic order.

Politically humane crisis management is welcome, arguably necessary to alleviate short-term crises, but without thermoeconomic renewal it risks becoming a subsidy for energetic renewal inertia.