ENERGY UNWRAPPED! — A 2026 MID-YEAR UPDATE
By: Chris Sladen, PhD, CBE
Date: 21 July 2026
My end-2025 summary for ANZMEX was entitled ‘A year of living dangerously‘. It could easily summarise the first 6 months of 2026 too. After only a few days of January, came the USA ‘intervention’ in Venezuela, quickly followed in February by an explosive conflict across the Middle East with global ramifications that has dominated news feeds ever since. Meanwhile, the Russia-Ukraine conflict grinds on.
The world has had to respond to steep rises in energy prices and a prolonged period of volatility. The closure of the Straits of Hormuz created genuine fears of supply shortages. Oil prices had begun the year around US$60 per barrel. Fortunately, global oil stocks and product inventories were high, and drawdown of strategic reserves eased many supply shocks. Wild swings in oil price between US$75 and 115 per barrel were often related to military activity or social media comments; these swings have created economic havoc and stoked inflation, but markets responded well to ensure physical supplies remained available. After an initial LNG price spike to US$20/MMBTU in January, on fears of closure of the Straits of Hormuz, spot LNG mostly traded at US$10-15/MMBTU as northern winter demand faded. Periods of very high refined product prices were short-lived, though some countries saw spikes to record levels.
Renewable power, electric vehicles, and heat pumps each received a big boost from the Middle East conflict as people sought alternatives to oil and gas. In April, for the first month ever, wind and solar generated more electricity globally than natural gas, though coal remained the largest source of power production. Many European and Asia Pacific countries switched back to coal with demand surging as LNG supply tightened. Solar was the standout performer for new power capacity, together with large battery storage systems (BESS), and the world became smarter at integrating these into electricity grids. Even so, power demand surged from AI/datacentres (large ones often need 100-500 MW), increasing EV use, and continued electrification of industry and domestic heating/cooling. Grid constraints are pushing consumers to more self-generation and hybrid solutions. Notably, small nuclear reactors and geothermal are now attracting significant investor attention.
The Middle East conflict has forced all governments to re-examine the true meaning of energy security and energy independence. (The Russia-Ukraine conflict had already sensitised many countries and consumers.) Some countries have quickly adjusted policies seeking to accelerate renewables and nuclear, whilst delaying hikes in fuel duties and increasing subsidies to producers and consumers. But the biggest challenges involve improving energy infrastructure and removing bottlenecks, reducing energy taxes, and speeding up slow approval and permitting processes, as well as easing the massive bureaucracy imposed on investors and companies. Collectively, these challenges prevent projects from quickly breaking ground and becoming commercially viable. For the time being, energy security and the energy transition remain caught up in muddled thinking, U-turns, policy flip-flops, and a lack of global consensus.
In Australia, vulnerability to oil and refined fuel imports coming through the Straits of Hormuz was immediately exposed. Fuel reserves dropped to below 30 days with many shipments cancelled. The consequences of closure of many Australian refineries over the last 20 years (going from eight to just two) were suddenly in the spotlight. Australia’s energy independence is compromised. Part of the response was to reduce fuel quality standards, and source oil and fuels from elsewhere, particularly the USA. In May, strikes by energy sector workers complicated the situation, threatening both east coast domestic gas supply and west coast LNG exports. Australia remains locked into fossil fuel dependence, fuel imports, low fuel stocks, and a slow pace of transport electrification. With the east coast facing a natural gas supply crunch, use of coal may be extended.
In New Zealand, a country heavily reliant on fuel imports, prices rose strongly in response to the Middle East supply shock. In particular, airlines are facing huge losses, and minimum fuel stockpile rules were introduced. New Zealand’s last oil refinery (Marsden Point) closed in 2022 and was converted to a fuel import terminal. Today, 100% of gasoline, diesel and jet fuel are imported, mostly from South Korea, Singapore and Japan. Ironically, small volumes of domestic oil production are exported, despite being high quality. With domestic natural gas production halving over the last decade, power production is fragile, and methanol and paper production have been halted. Hydro and geothermal are increasingly relied upon in today’s power generation mix. Rebuilding natural gas production and reserves remains challenging. To solve shortages, the first LNG import terminal is in an advanced stage of procurement, but is yet to reach FID. A ban on new oil and gas exploration introduced in 2018 caused investment and investor interest to quickly dwindle. The current government lifted that ban in 2025, and exploration bids are being received, but new permits are yet to be issued.
In Mexico, Pemex continued to put immense financial strain on government budgets. Higher oil prices might benefit Pemex exploration and production, but large price subsidies for gasoline and diesel, and residential price caps on LPG, remove any financial windfall. The stated focus on reclaiming energy sovereignty and increasing refining capacity diverted attention from operational issues — a massive oil spill in February from a ruptured pipeline in the Gulf of Mexico affecting 600km of coastline, a fire at the new Olmeca (Dos Bocas) refinery, fuel oil leaks and fire at the Salina Cruz refinery in June, and a continued fall in oil and gas production. Chronic under-investment is simply too large to reset in just a few years; it would need decades. A program of Pemex ‘mixed contracts’ designed to bring private investment to oil and gas fields received few bids, and large foreign oil companies stayed on the sidelines. Pemex oil production at around 1.5 million b/d is the lowest for over 45 years and is less than half the peak of 3.4 million b/d in December 2003. Pemex’s domestic gas production peaked during 2010-2015 around 5bcf/d and has now declined to around 3.5bcf/d, whilst gas flaring continues to edge upward, now nearly 1bcf/d. Natural gas consumption keeps growing, reaching over 9bcf/d. Since 2000, it has tripled from 3bcf/d using new pipeline links fed by the US shale gas boom. Natural gas pipeline imports are now around 70% of consumption (6.5-7.5bcf/d), raising major energy security and dependency issues. The ongoing USMCA review might add extra complexity if cross-border energy trade, plus Mexico favouring Pemex and CFE over private investment gets drawn into negotiations. In April, the government launched a scientific committee to review Mexico’s unconventional natural gas resources and extraction techniques. Mexican shale could reduce dependency on US gas. At the centre of this U-turn would be overturning a ban on fracking introduced by the previous government in 2018. Even so, it would take some years to deliver meaningful shale gas production. CFE reasserted its control over the electricity sector. New supply capacity is being boosted by an accelerated program of renewables ‘mixed investment’ contracts backed by PPAs from CFE. Notably, large scale solar projects (totalling over 7,000 MW) have proved popular with foreign investors.
ABOUT THE AUTHOR
Chris runs an award-winning advisory service, Reconnoitre Energies, offering insights to inform, shape decisions, policy and regulation, and guide the next steps for energy ventures, acquisitions and divestments, and energy transition and climate strategies. His work is underpinned by extensive knowledge of petroleum systems and where best to find oil and gas as well as experience developing midstream, downstream, and renewables investments across many emerging economies. Chris has extensive experience on the boards of companies, subsidiaries, and business chambers and organisations, and is also a non-resident fellow at the Institute of Americas.
Chris has a career of over 40 years in the energy sector, having worked in over 40 countries and lived in Mexico (2001–2018), Russia, Vietnam, Mongolia, China, and the UK. His contributions to the energy and education sectors have been recognised by the UK Government with both an MBE and CBE, and also the Aztec Eagle from the Mexican Government — the first foreigner in the energy sector to achieve this award. Chris has published extensively over five decades.
Chris writes an occasional series of topical articles on energy for ANZMEX, including his widely-read ‘Energy Matters©‘ op-ed column (2019–2024, 50 volumes) and its successor series, ‘Energy Unwrapped!’ His articles reflect his experience and enthusiasm and are not paid for in any way; they are often also later published to a global audience in the USA, UK, and Singapore.
