The Revenge of Geography

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For years, the West enjoyed the luxury of treating energy primarily as an economic or environmental issue. Hormuz has provided an expensive reminder that energy remains something much more fundamental: power.

A war concentrated around a narrow strip of water between Iran and Oman has helped push Brent above USD 100, sent diesel prices through the roof and revived inflationary pressures thousands of miles from the battlefield. With Bab el-Mandeb also under pressure, the global economy is rediscovering how much of its prosperity still depends on hydrocarbons passing safely through vulnerable maritime chokepoints.

The United States, however, has an advantage few great powers have ever possessed: an entire hemisphere overflowing with energy. American shale, Canadian oil, Guyana’s extraordinary boom, Brazil’s offshore production, Argentina’s Vaca Muerta and Venezuela’s enormous reserves could make the Americas an even more formidable energy bloc. This also helps explain Washington’s uncomfortable rapprochement with Caracas. Nobody should pretend Delcy Rodríguez suddenly became Thomas Jefferson because she discovered the virtues of American investment. Yet Maduro is gone, Venezuela is showing genuine signs of improvement, and bringing its oil industry back into the Western economic system makes strategic sense.

The danger comes if energy security becomes an excuse for political blindness. Billions in American investment will eventually create an interest in preserving Venezuelan stability, and “stability” cannot become shorthand for keeping whoever controls the wells in power. Hormuz should remind Washington of the enormous strategic value sitting in its own backyard. Artificial intelligence, semiconductors and drones may define this century, but they have not repealed geography.

Oil is power again. In truth, it never stopped being so.

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The world has lived through oil shocks before. This one is different.

In perspective. Brent crude has climbed back above USD 100 a barrel as renewed fighting between the United States and Iran disrupts the Persian Gulf. Diesel has reached record prices in the United States, tankers face increasingly dangerous routes, and the inflation that policymakers spent years trying to contain is returning. None of those developments, individually, is unprecedented. Together, however, they form what the International Energy Agency now calls the largest supply disruption in the history of the global oil market. The question is now is what happens if the crisis cannot be resolved soon.

How it works. The world initially adapted remarkably well, mainly because there were alternative suppliers. Refineries adjusted and some tankers made discreet crossings through Hormuz. Strategic reserves, also, were released on an unprecedented scale. By June, however, cumulative Middle Eastern supply losses had already exceeded 1.3 billion barrels. The problem is that the crisis did not end.

No Plan B. Saudi Arabia had one enormous geographical advantage during the crisis: its East-West pipeline could move crude across the kingdom toward the Red Sea, bypassing Hormuz altogether. Then the Houthis attacked it and everything changed. The resulting disruption at the Yanbu export hub threatened a route capable of carrying the equivalent of roughly 4% of global oil supply. At the same time, Houthi advances and attacks have made shipping around Bab el-Mandeb increasingly dangerous. The alternative is to sail around Africa, adding time, fuel consumption, insurance costs and pressure to an already constrained tanker market.

Why it matters. The consequences are already visible in an extraordinary distortion of the market. Iraqi crude trapped by Gulf logistics has traded at enormous discounts, while supplies capable of reaching buyers without passing through vulnerable chokepoints command substantial premiums. In other words, the problem is increasingly not whether oil exists, but where it exists and whether it can physically reach the market. But Governments have prevented something considerably worse by consuming the reserves designed for precisely this scenario.

Between the lines. The Gulf historically supplied around 900,000 barrels of diesel per day, roughly 10% of global supply. Meanwhile, Ukrainian attacks on Russian refineries have placed additional pressure on another major source of refined fuels. U.S. diesel, consequently, reached a record USD 5.82 per gallon this month, 55% higher than when the Iran war began. Diesel is where an oil crisis stops being something discussed by commodity traders and enters everyday life. It moves trucks, tractors, construction equipment and freight. Jet fuel moves people and cargo. Petroleum products enter plastics and manufacturing, while Gulf energy exports are intertwined with fertilizer production.

What will happen. The Trump administration has so far failed to produce a settlement capable of restoring normal passage through Hormuz. That does not make Washington solely responsible for a crisis involving Iran, Houthi attacks and a regional battlefield stretching across several countries. But the longer the conflict remains unresolved, the greater the economic cost becomes—for the United States and everyone else. And that may be the most dangerous feature of this crisis.

Something strange is happening on the walls of Caracas, as the revolution fades to give space to promises of change.

In perspective. For years, Hugo Chávez was almost impossible to escape while in Caracas. His eyes stared from government buildings, his face covered apartment blocks, and his signature became part of Venezuela’s visual landscape. Chavismo understood that political power was also cultural power, and it covered the country with reminders of who had supposedly remade it. Now some of those reminders are disappearing as images of Chávez and Nicolás Maduro have been painted over or removed. At Caracas’ Palace of Justice, the enormous portraits of Chávez and Simón Bolívar that once dominated the façade have given way to blue banners announcing a new government slogan: “Venezuela Renace”—Venezuela Reborn.

How it works. Delcy Rodríguez was one of the most powerful figures in Maduro's government, and a prominent representative of Chavismo abroad. Yet nine months after Maduro’s removal, Rodríguez is becoming something remarkably different in Washington. President Donald Trump has praised her performance as “fantastic.” His administration removed Venezuela from the list of countries deemed to be failing their counternarcotics obligations.

Winds of change. Since Delcy, hundreds of political detainees have been released. Rodríguez backed an amnesty law, although human-rights groups argue it remains incomplete. El Helicoide, perhaps the most infamous symbol of political repression in Venezuela, has been closed. Political detentions have declined, and Caracas has opened channels with sectors of the opposition. There is a rational argument behind Washington’s gamble. Removing Maduro was one thing; dismantling a state his movement had controlled for a quarter-century was another.

Yes, but. The analogy is intentionally uncomfortable because the bargain itself is uncomfortable. Rodríguez’s past cannot simply be erased because she has become useful. But foreign policy sometimes requires working with people a country would never choose as partners under ordinary circumstances. If that arrangement eventually produces a free Venezuela, the strategic logic will be difficult to dismiss. The results deserve recognition, but so does the danger.

Why it matters. A political prisoner can be released today and arrested next year. That does not prevent the machinery underneath from returning. And time increasingly favors whoever controls that machinery. Every month Rodríguez remains in Miraflores allows her government to become less transitional and more normal. As oil investment returns and diplomatic ties deepen, American companies and foreign governments will acquire an increasingly large stake in Venezuela’s political stability.

Between the lines. Trump has said Venezuela is not yet ready for elections, even while praising its progress. That may be a reasonable assessment of a country emerging from authoritarian rule and institutional devastation. But “not yet” needs eventually to become a date, mainly because Donald Trump will not be president forever. Imagine Rodríguez reaching 2028 with higher oil production, billions in American investment, functioning relations with Washington, a partially liberalized political system and the coercive institutions of the old regime still fundamentally under government control. The next U.S. president would inherit a very different calculation.

In conclusion. Perhaps she can earn a different legacy by helping destroy that system. History contains stranger transformations. But rehabilitation should follow irreversible change, not substitute for it. What would truly demonstrate that Venezuela has changed is not the disappearance of Chávez murals but the construction of institutions capable of surviving whoever occupies Miraflores. Ultimately, the clearest evidence of a democratic transition would come when Rodríguez is willing to surrender power if Venezuelans choose someone else.