Energy in the 21st century: More electricity, less oil

The consequences of events in the Persian Gulf — described by the head of the International Energy Agency as the "greatest threat to energy security in human history" — illustrate the world's deep dependence on oil and gas. Together they account for nearly 60 percent of global primary energy, and in Germany even somewhat more. Any sudden restriction of supply therefore leads to price shocks and disruptions in the global economy.

The limits of oil production

From a resource perspective, oil and gas differ fundamentally. While gas is still available in large quantities and in many countries worldwide — including in the form of shale gas and gas hydrates — oil production is approaching the geological maximum.

For conventional crude oil, that maximum has effectively been reached since around 2005/2006. The fact that global oil supply was nonetheless able to continue growing since then was due primarily to the rapid expansion of unconventional production: shale oil, oil sands, liquid by-products of natural gas extraction, and condensates. Central to this was the shale oil boom in America: the United States is currently the world's largest oil producer and also a (slight) net exporter.

However, this dynamic could soon come to an end. Analyses by the U.S. Energy Information Administration (EIA) from 2025 already pointed to a plateauing of U.S. oil production in the current year, 2026. The recent increases in oil and gas prices could trigger a short-term acceleration in U.S. output — but a sustained continuation of the expansion seems unlikely. The reasons lie in the complex interplay between productivity gains, financing conditions, and the depletion of reserves.

Strategic implications

With the foreseeable end of the U.S. oil boom, attention is therefore increasingly turning to countries with remaining oil expansion potential — Venezuela, Iran, and Russia, for example. With access to capital, markets, and technology, oil production in these countries could theoretically be scaled up substantially.

But even in that scenario, the days of steadily growing supply of crude oil and oil-like products are likely numbered. According to experts, the contribution from new potential sources will probably no longer be sufficient — within the next decade, or at the latest the one after — to offset the decline in conventional oil production in terms of volume.

Regardless of any considerations around climate protection, the geostrategic conclusions are twofold: first, as long as the economy remains so dependent on oil, access to crude oil will become a (significantly) more important factor of power. And second, rapidly weaning the economy off oil is a priority — above all for countries without significant oil resources of their own.

Electricity as the key

To the already-existing reasons for the strategic relevance of affordable electricity generation — as the foundation of a strong industrial base, a prerequisite for comprehensive digitalization, and a lever for reducing greenhouse gas emissions — a further reason now joins: its contribution to a strategic departure from oil. In many applications, electricity is a viable alternative, with battery-electric vehicles and heat pumps serving as important lead technologies. Taken together, a capable electricity sector is thus increasingly becoming a strategic locational advantage in the global competition among nations: "Power is power."

China, endowed with only modest oil reserves, is putting this insight into practice consistently. Twenty years ago, China generated a similar amount of electricity as the EU. Today, however, China has quadrupled that figure — while in the EU, electricity generation has slightly declined over the same period. Since around 2011, China has overtaken the United States as the world's largest electricity producer, and has since surpassed it by a factor of more than two.

At the same time, electricity's share of final energy consumption in China has risen sharply to over 30 percent. The foundation of China's development has been the simultaneous expansion of wind, photovoltaics (PV), and conventional dispatchable capacity — above all coal, but also nuclear and large-scale hydropower. The country's electricity generation potential grew again substantially in the past year. China is thus rapidly evolving into what might be called an electro-state.

Ambition and reality in Germany

Germany, too, likes to imagine its energy transition as a transformation into an electro-state. In reality, however, electricity's share of final energy consumption has remained stable at only around 20 percent for decades, and both electricity generation and demand have trended downward rather than upward over the long term — not least because newly installed wind and PV capacity, along with all the additional storage and grid investments required, must first replace the retiring coal and nuclear capacity before any net growth can occur.

Strategically, China and Germany thus stand in stark contrast: Germany is pursuing an energy transition, China an energy expansion. The relative industrial strength of the Chinese economy is growing accordingly.

The need for a comprehensive strategy

Given the emerging limits of the global oil market and the dynamics of digitalization, one can reasonably expect that major powers will shift their final energy mix away from petroleum products and toward electricity — and the faster, the less oil they are able to produce themselves. Wind and solar power plants will likely capture growing shares of electricity generation everywhere; but given the simultaneous growth in electricity demand and the need for dispatchable capacity, this will in most cases happen not instead of, but in addition to conventional energy sources. 

Because of their dependence on weather, the following holds true: the higher the share of wind and solar in electricity generation, the more difficult their integration becomes. According to International Energy Agency figures, this share in Germany already stood at over 40 percent in 2024 — far above the global average of 13 percent, or the figures for China (15 percent) and the United States (16 percent).

Germany's electricity generation is therefore a central strategic area for action. Taking into account both geopolitical and ecological challenges, coherent answers are needed — for instance on the development of (dispatchable!) electricity supply, on the best possible uses for the scarce resource of (dispatchable) electricity, and on how to secure it in times of crisis. Answers are also needed on the interactions between the energy sector, economic structure, and Germany's geopolitical orientation.

Questions of this kind can only be answered within the framework of a comprehensive strategy that coherently integrates climate and energy policy with all the other policy areas it affects. 2026 would not be too soon for the federal government to write such a strategy for Germany.

This article is also published on FAZ, in German. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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