The American epoch of oil is collapsing. What comes next could be ugly | Jonathan Watts

“Farewell,” the flag-waving Chinese children chanted to Donald Trump as he strolled along the red carpet back to Air Force One at the end of his summit with Xi Jinping in Beijing.

The US leader claimed he was leaving with a cluster of “fantastic” trade deals to sell US oil, jets and soya beans to China. That has not been confirmed by his smiling host, but one thing was crystal clear from the two days of meetings: the global balance of power is shifting, from the declining petrostate in the west to the rising electrostate in the east.

Trump flew home to chaos – war with Iran, surging gas prices, spectacular unpopularity, friction with former allies and a 20th-century policy of “energy dominance” that seeks to turn back the clock, use tariffs and military threats to open markets, and enrich his supporters in the fossil fuel industry. The long dominant superpower increasingly appears a malignant force as it pushes the world towards ever greater turbulence.

Xi, meanwhile, presides over a country that has invested more than any other in renewable energy, which has helped to buffer its economy from the gas price shocks caused by the conflict in the Middle East, while opening up huge new export markets for solar panels, wind turbines, smart grids and electric vehicles. While the Chinese president’s Communist party still faces criticism for its suppression of dissent, its soft power deficit no longer seems so great when its main global rival is killing protesters at home and bombing schoolchildren overseas.

Why is this happening now? Tempting as it is to blame these global shifts on a single malignant narcissist in the White House, a more useful – and maybe even hopeful – analysis needs to take into account the tectonic changes that are shaking not just the foundations of politics, but the very nature of human power, as the world shifts from molecules to electrons.

History has proven that when the dominant form of energy changes, there is often a shift in the global pecking order. We are now in the midst of one such transition as the epoch of petrol, predominantly produced in the United States, Russia and Gulf states, starts to give way to an era of renewables, overwhelmingly manufactured in China. But the outcome remains contested, and the process could be ugly. The new energy order is winning the economic and technological battle – wind turbines and solar panels were already producing record-cheap electricity even before the Iran war pushed up the costs of gas and oil-fired power plants. But the old petro-interests still have political, military and financial might on their side, and they are using that to try to turn back the energy clock.

As a result, democracies across the planet are now threatened by what might be called fossil fuel fascism – an extremist political movement that breaks laws, spreads lies and threatens violence in an increasingly desperate attempt to maintain markets for oil, gas and coal that would otherwise be replaced by cheaper renewables.

Of course, there are multiple other, overlapping reasons for the war against Iran: its nuclear program, Trump’s need for a distraction from the Epstein files, and his willingness to adopt positions favourable to Israel’s Benjamin Netanyahu, Russia’s Vladimir Putin and Saudi Arabia’s crown prince, Mohammed bin Salman, to name a few.

But the wider context is that the Earth is becoming a more hostile environment for humanity. This is driving up tensions, exposing economic limits that have been ignored for centuries and redefining geopolitical realities.

Who is actually winning? In the short term, the biggest windfall from the Iran conflict has gone to companies, executives and shareholders in the US petroleum industry – a major source of campaign funding for Trump – that was struggling with low prices and a production glut at the start of the year, but is now enjoying a spectacular revenue surge while rival suppliers in the Gulf are choked by threats in the strait of Hormuz. Along with Russian and Saudi Arabian petro-companies, US energy suppliers look set to cash in for months to come, even as consumers pay more at the pumps.

At the same time, the war is forcing countries across the world to explore ways to increase their energy independence. In the next few years, that will happen by increasing domestic production of oil, gas and coal. By one reckoning, this has increased the likely 2030 output of fossil fuels by a fifth – an alarming setback for global efforts to reduce greenhouse gas emissions, and a victory for the petroleum industry and the far-right political groups it funds.

But that will not be the final reckoning of this war, which has reinforced the argument for both renewable energy and a concurrent shift in geopolitical alignments. With major oil and gas producers now led by ever more erratic and menacing authoritarian leaders, other countries are looking for alternative ways to generate power. Electric cars, for example, have never been more in demand.

The prime beneficiary is China, which suddenly appears a relative oasis of pragmatic, internationally minded diplomacy and energy independence. Beijing’s bet on renewable power and EVs over the past two decades is paying enormous dividends. Not only has this made it less reliant on fuel imports, it now has a wind, solar and battery export industry that looks set to dominate global markets for many decades to come.

Future historians may well see the Iran war as the moment the US unwittingly ceded leadership to China. If so, it would not be the first time that a change in the world’s energy matrix led to a reordering of the political hierarchy of nations. When humankind taps new power supplies, new empires rise and old ones fall. Realignments tend to be violent.

How empires fall

One of the cornerstones of geostrategic thinking since the start of the Industrial Revolution, 250 years ago, is that the country that controls energy supply controls the world. For most of the past century, that has centered on oil.

“Oil has meant mastery through the years,” wrote Daniel Yergin in his Pulitzer prize-winning book about the decisive role of energy in world politics, The Prize: The Epic Quest for Oil, Money, and Power. Yergin argues oil was a primary reason why Germany invaded the Soviet Union during the second world war, and motivated Japan to attack the US at Pearl Harbor. It was why the US launched Desert Storm to thwart Iraqi’s seizure of Kuwait, which would have given Saddam Hussein control over the planet’s most abundant oil supplies. It explained former US president Barack Obama’s comment that energy was “priority number one” for his administration. Earlier this year, it was a primary justification by Trump and other US officials for invading Venezuela, which has the world’s biggest untapped reserves, and it is now a key factor in the war on Iran, which has the fourth highest supply.

Not for nothing has the old joke been revived that the “US is a very fortunate country because everywhere it goes to bring freedom it finds oil.”

But what is different today is the realisation that oil – once considered “black gold” – and other fossil fuels are now a toxic threat to the stability of the climate and the political world order. Now that cheaper, cleaner alternatives are available, the demand for these industrial fuels has to be artificially inflated, propped up by political lobbying, hefty subsidies, disinformation campaigns and military force.

The most spectacular example of an energy transition completely upturning the world order was in the mid-19th century, when the coal-powered gunships of the Royal Navy shredded the fragile coastal defences of southern China to impose a market for the British empire’s most lucrative and unethical commodity: opium. Up to that point, Beijing had been the capital of the world’s biggest economy for most of the previous 2,000 years but its historic advantage in manpower and culture was being lost to fossil-fuelled engines and the spirit-sapping drug trade. The Daoguang Emperor was so deeply in denial about the changes reshaping the world that his actions stirred rebellion among his own people. His forces were crushed by the superior firepower of an industrialised adversary, ushering in an era of western dominance that became known in China as the “century of humiliation”.

Britain’s empire also came to end – albeit it more limply – when its primary source of fuel – coal – was superseded by oil in the early-to-mid-20th century. Back then, the UK had no petroleum supplies of its own which meant it was at a disadvantage to the US. The power shift was confirmed in 1956 when Britain, France and Israel invaded Egypt to try to secure the Suez canal – a vital route for fossil fuels from the Middle East. The US refused to help this imperial adventure by the old world, thereby confirming Washington as the dominant superpower outside the Soviet bloc. Since then, it has steadily expanded its primacy in the age of oil.

That era – and that supremacy – are both now winding down, as the pendulum swings again, this time towards renewables and back to Asia. In the past decade, clean energy investment worldwide has risen tenfold to more than $2tn a year. Last year, it was more than double that of fossil fuels, and for the first time renewables overtook coal as the world’s top electricity source. “We have entered the age of clean energy,” the United Nations secretary-general, António Guterres, observed in February. “Those who lead this transition will lead the global economy of the future.”

There is only one contender for that title: China. It is impossible to understand what is happening in the US, Iran and Venezuela without looking there.

China looks to the future …

The government in Beijing has turned the greatest crisis facing humanity – climate breakdown – into an opportunity to finally lay to rest the “humiliation” of the opium war. For most of the past 30 years, it has been catching up with the west by copying its dirty, coal-driven model of industrialisation, which notoriously made it the world’s biggest carbon emitter. Now, though, it is leapfrogging its rivals on clean energy with astonishing results. For the past two years, China’s carbon emissions have been flat or falling, raising hopes of a historical turning point in the curve of global emissions.

Last year, the amount of wind and solar it had under construction was double the rest of the world combined, helping China to reach an installed capacity of 1,200GW six years ahead of the government’s schedule. Trump absurdly claimed he had not been able to find any wind turbines in China, though in reality the country now has more than the next 18 countries combined.

But the biggest success story is solar, which is now so cheap, abundant and efficient that its generation capacity in China has just overtaken coal for the first time. Meanwhile, petrol and diesel use is also falling because EVs account for more than half of car sales in China.

The country is also utterly dominant in supplying overseas markets with renewable technology. The top four wind turbine makers in the world are all Chinese. It is a similar story of majority market share for the manufacture and export of photovoltaic cells and EVs. China also controls supply of critical minerals, essential for batteries, AI datacentres and hi-tech military equipment.

Last year, more than 90% of the investment growth in China came in the renewables sector. Thanks to these trends, cleantech from China is affordable in many global south nations. The same is happening with battery technologies, which are spreading the market for electric cars to countries in Africa and South America.

China’s clean energy sector is now worth 15.4tn yuan ($2.2tn/£1.6tn), bigger than all but seven of the world’s economies. With every year that passes, this business becomes more important to the state, accounting for 11.4% of China’s gross domestic product last year, up from 7.3% in 2022.

To be sure China is simultaneously the world’s biggest investor in coal and far from a democracy in its domestic politics, but the scale of its renewable industry means Beijing has a growing stake in the success of global climate negotiations. Not just because it is good for the planet, but because it makes solid business sense.

The turbulence caused by the US-Israeli assault on Iran only strengthens its sales pitch.

… while the US goes backwards

While the rest of the world looks for an exit ramp off the exhaust-fumed highway on to a cleaner, electrified, 21st-century freeway, Trump has pulled a U-turn and is accelerating back towards 20th-century smoke stacks without so much as a glance in the rearview mirror.

On the same day he was sworn in for his second term in the White House, Trump signed an executive order withdrawing the US from the 2015 Paris Agreement, as he did in his first term.

But this time he has also announced that he will quit the entire UN Framework Convention on Climate Change, the Cop process that was put in place at the 1992 Earth Summit. In February his administration repealed the 2009 “endangerment finding”, the core US government determination that greenhouse gases threaten public health that has been the legal basis for almost all federal climate regulation over the past 17 years. Without it, power plants, factories and carmakers will have a freer pass to pollute the air and heat the atmosphere.

Trump has filled the Department of Energy and the Environmental Protection Agency with dozens of former oil industry employees. He has declared a “national energy emergency”, which was a cue for businesses to mine, drill and frack like never before. He has signed at least 20 more executive orders meant to incentivize fossil fuel extraction. And he has granted $18bn in new and expanded tax incentives for fracking, drilling and pumping.

His administration halted the closure of 17GW worth of power plants that use coal, the dirtiest and most polluting fuel, and ordered the US defense department to procure billions of dollars of coal power. Industry executives have shown gratitude with donations and a trophy for the “undisputed champion of beautiful clean coal” given to Trump by the CEO of the largest coal company in the US.

He also used the military – and the federal budget – to assist the petroleum industry by seizing control of Venezuela. (It is not a coincidence that Venezuela and Iran are both key partners to China.) Domination of this country will give the US more influence in setting global oil prices. But for whose benefit? Donald Trump said US companies would tap these fossil fuels and “start making money for the country”. In fact, most of the first billion dollars in revenue was initially stashed offshore in a bank account in Qatar.

After Trump ordered the bombing of Iran, he initially celebrated the spike in crude values: “When oil prices go up, we make a