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The war in the Middle East has spurred the largest oil disruption in history. The Strait of Hormuz, a choke point for much of the world’s oil and gas supply, is functionally closed. Oil prices are hovering around $100 a barrel.
Many Americans are seeing the fallout in the form of higher prices at the gas pump. But in Puerto Rico, a part of the U.S. especially dependent on oil power plants, the conflict also likely means higher electric bills — a painful outcome on an island already beset by an expensive and unreliable grid.
“In the continental U.S., no one’s burning a significant quantity of oil to generate electricity,” said Cathy Kunkel, an energy consultant at the Institute for Energy Economics and Financial Analysis. But that’s not the case in Puerto Rico, where oil-fired plants make up about 60% of generating capacity. The island “just has a lot of old oil-fired power plants that were constructed in the ’60s and ’70s, when oil was obviously a lot cheaper.”
Puerto Rico does not produce oil itself, and so it must ship in every last drop it burns. Given that the U.S. territory’s oil supply contracts are tied to global price benchmarks, Kunkel said that she “can’t imagine a scenario” in which power costs won’t rise in response to the historic oil shock.
“[Puerto Ricans] will see an increase in electricity bills,” said Rodrigo Rosas, a senior research analyst at Wood Mackenzie. The scale and duration of the increase, he said, depend on a “million-dollar question”: How long will the oil market disruption last?
The looming price hikes come amid heated conversation about the future of Puerto Rico’s energy system — and whether it should hitch itself further to imported fossil fuels or focus on transitioning to clean energy.
Puerto Rico relies on fossil fuels for more than 90% of its electricity, with liquefied natural gas as its next-biggest source after oil. For now, the territory is relatively protected from the considerable shocks that the war has sent rippling through the global LNG market, analysts told Canary Media.
That’s because it gets most of its LNG from Trinidad and Tobago and from a facility in Mexico that is fed by U.S. pipeline imports. Those sources both “operate in supply systems that are largely insulated from disruptions linked to the Middle East conflict,” Rosas said.
Puerto Ricans will soon have more specifics on what the war means for their bills in the near term. Every three months, the island’s electricity regulator adjusts prices for fuel costs, a process that is set to happen next at the end of March. That means higher rates would kick in starting in April.
Even a marginal rise in power bills could mean hardship in Puerto Rico, where the median household income is around $26,000 a year, less than one-third of the U.S. median. Already, the island faces some of the highest electricity prices in the U.S.
Faraway energy shocks have caused prices to climb in Puerto Rico before. After Russia’s 2022 invasion of Ukraine sent oil and gas markets reeling, the fuel-cost portion of Puerto Ricans’ electric rates jumped from 15 cents per kilowatt-hour at the beginning of that year to 22 cents per kilowatt-hour in the summer, according to Kunkel. That price jump, she noted, was driven by higher prices for both LNG and oil.
To some, the latest threat of price hikes underscores once again the need to embrace solar, wind, and batteries — all of which produce power unperturbed by global conflict.
Utility-scale renewables provide very little of Puerto Rico’s electricity today. But devastating hurricanes and frequent outages have motivated many Puerto Ricans to install rooftop solar and home batteries in recent years.
In 2023, the Biden administration launched a $1 billion program to boost the buildout of these distributed systems. The Trump administration, however, has clawed back or redirected much of that federal funding. Meanwhile, Jenniffer González-Colón, the Trump-allied governor of Puerto Rico elected in 2024, has supported plans to boost the island’s gas generation and weakened a 2019 law that commits it to ditching fossil fuels by 2050.
In late 2024, the Puerto Rican government approved the construction of a new gas plant on the island, and it’s currently looking to procure another 3 gigawatts of “firm” capacity, which likely means gas plants. Contracts for temporary generators run by LNG and diesel are also advancing, Kunkel said.
“I think the government’s making a huge mistake doubling down on natural gas as opposed to investing more in renewables,” said Sergio Marxuach, policy director at the Center for a New Economy, a Puerto Rican think tank.
In light of that, the island should work “as hard as possible” to insulate its economy from fossil fuels, said Tyson Slocum, director of the energy program at Public Citizen, a nonprofit consumer advocacy group.
“I don’t care what kind of supply agreement you negotiate. I don’t care if you’re getting your LNG from the United States,” Slocum said. “You are going to continue to be vulnerable to shortages and price shocks because of the inherent features of global fossil-fuel supply chains.”
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