Its a bit of both.
My understanding:
All fuels have a limit to the amount of energy they can deliver ie they can not deliver more energy than their chemical composition contains.
With the exception of atomic systems (which I don't have a good handle on) all of our other systems involve the interaction (burn) of the fuel with oxygen, which liberates heat and causes the gas to expand (rise in pressure) which can be harnessed to deliver rotational energy or thrust. .
The amount of O2 delivered, in the form of air, to the burn, will strongly influence the amount of energy released, for a given amount of fuel - thats why we improve air flow and or density (pressure) and use axillary air pumps (turbos & superchargers) often combined with heat exchangers (intercoolers) as cold air is denser (more 02) than hot.
The burn may also be enhanced by increasing exposure/surface area to the O2 eg atomisation.
Then there is the ability/efficiency of the system (internal combustion, jet, ?) to turn the energy liberated, into meaningful power, usually expressed as "work".
The above has been improved with better materials, lubricants, engine design and cooling systems.
"Modern" engines reflect our improved ability, to combine the above factors, so that we can harvest more of the fuel energy AND use it more effectively, to deliver more power, which can then be used to reduce fuel consumed for a given output OR more work (however we want to express this).
I believe there is a limit to this improvement, that we are possibly close to acheiving.😈