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When Iran forced closure of the Strait of Hormuz last March, the world held its breath. When the waterway reopens today — assuming the US-Iran deal holds — many will exhale and celebrate the crisis’ end.
Nobuo Tanaka thinks that would be a mistake.
“This is the third oil shock,” the former executive director of the International Energy Agency told Semafor earlier this week. “Just as the first and second oil shocks made a huge impact on the global economy, the third shock is a transformational moment.”
Tanaka speaks with authority. He joined Japan’s powerful trade ministry in 1973, landing in its petroleum office just as the Arab oil embargo hit, and was on the ministry’s front lines again after the 1979 Iranian Revolution triggered the second oil shock — no small skirmish for a country that imports 97% of its oil. Tanaka rose through the ranks over three decades and was appointed to the top job at IEA, which he led from 2007 to 2011. Few officials have studied more carefully how the global energy system bends and buckles under pressure.
He’s cautious in assessing the timeline for a return to “normal.” Mines must be swept from the strait. Shuttered wells must be brought back online. Damaged refineries must be rebuilt. And the confidence of shippers, insurers, and cargo owners, shattered by four months of war risk, must be restored. All of that, Tanaka warns, will take time. Even with the deal signed, he says, full supply recovery could be two years away.
But what really troubles him is something larger. The crisis, in his view, has cracked open a fault line that was already forming in the global energy order — between what he and a growing number of energy analysts call “petrostates” and “electrostates.” He warns that the consequences for every major economy, and every major company, will be profound.
In Tanaka’s view, the immediate pain of an oil shock is not the point. The main thing is the responses it triggers, from governments, industries, and companies, and how it reshapes the global economic order in the aftermath of the crisis. History, he argues, is unambiguous on this: Countries that read that signal fastest and bet on the right technology don’t just survive shocks, they profit from them.
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The 1973 oil shock forced Japan, then almost entirely dependent on cheap Middle Eastern oil, to reinvent its industrial model, Tanaka argues. Japanese automakers responded by building the most fuel-efficient cars in the world and exporting them globally, triggering a trade conflict with the US but ultimately powering Japan’s rise as an economic superpower. The 1979 shock deepened that transformation.
This time, he argues, China is the economy finding opportunity in crisis.
The idea of a clash between petrostates and electrostates is straightforward. The former derive their wealth and strategic leverage from fossil fuel production and export. The latter have bet their future on electrification — renewables, nuclear, EVs, batteries, AI-driven grids. The two models have been in quiet competition for years. The Hormuz crisis, Tanaka argues, has suddenly made that competition “urgent and vivid.”
“Consumer countries have now learned the lesson,” he says — meaning the energy importers, the nations that depend on others to keep their lights on and factories running. “We never thought the Strait of Hormuz could be blocked. Now we know it can be. And we will have to start moving, quickly, toward electrification.”
The fissure was visible before the war. China, Tanaka notes, has almost certainly already hit peak oil demand. More than half of new car sales there are now electric, and the transportation sector’s appetite for crude is in structural decline. Europe leads on decarbonization. Japan, despite a relatively high electrification rate, runs much of its grid on imported LNG — precisely the vulnerability this crisis has exposed.
Meanwhile, the United States, heeding Trump’s call to “drill, baby, drill,” is moving in the wrong direction. It has become, as Tanaka puts it, “an isolated carbon island.”
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Tanaka sees the UAE’s April decision to exit OPEC after 59 years — driven partly by fury at being attacked by Iran, a fellow member, but also by a bet that peak oil demand is arriving faster than other producers acknowledge — as prescient. “They are trying to use their current oil revenues to build a future electrostate,” he says. “That is a very good strategy. But the crisis has put that strategy under enormous stress.”
He warns that Asian economies that had been counting on cheap Gulf LNG to bridge their energy transition must now recognize their vulnerability. Qatar’s damaged LNG infrastructure has set back the anticipated global LNG supply wave by at least two years. That gap has to be filled by something — and Tanaka’s answer, particularly for Japan, is nuclear.
In Tanaka’s account, Japan is a paradox. Before the Fukushima nuclear disaster of 2011, Japan had 54 reactors providing 30% of its electricity. It now has 15 back online, including — in a milestone freighted with symbolism — the first reactor at Kashiwazaki-Kariwa in Niigata, the world’s largest nuclear plant, which entered full commercial operation in April under TEPCO, the same company that ran the stricken Fukushima plant. Public support for nuclear has climbed back to majority levels for the first time since 2011, driven by rising energy costs.
And yet only 2.5% of new car sales in Japan are electric — roughly half the US’ rate, even though the US is considered an EV laggard. Toyota, the world’s largest automaker and the most powerful corporate opponent of the EV transition among major carmakers, has lobbied hard to keep hybrids at the center of Japan’s auto strategy. The Japanese government has obliged.
Meanwhile, TEPCO exemplifies a broader pattern of Japanese utilities clinging to the old model of large centralized power plants — and resisting the shift to distributed renewable energy that would erode their grip on the market.
The Takaichi government, Tanaka argues, has taken the path of least resistance, committing $19 billion to subsidize gasoline prices and keeping pump prices capped at around 170 yen per liter. “Ridiculous,” Tanaka declares. Japan risks becoming, in his phrase, “suicidal” — sleepwalking into the same carbon island trap as the United States, and squandering the instinct for industrial transformation that made it a world leader after the first two shocks.
Tanaka’s advice to CEOs: Don’t confuse the reopening of the strait with a return to normal. The short-term supply picture will stabilize. Prices will ease. The temptation to declare the crisis over and return to business as usual will be powerful — and dangerous.
“CEOs should watch the long-term geopolitics of energy,” he says. “The petrostates versus electrostates battle will impact every business, every supply chain. The companies that understand this transformation now are the ones that will be competitive later. … Japan understood the lesson of the first two oil shocks and became a global leader. Who will understand the lesson this time?”