Abstract This study examines the Gulf Stream energy cycle, with emphasis on the submesoscale pathway relative to other energy sinks. Using a high‐resolution coupled air–sea simulation (CROCO–WRF), we construct a Lorenz diagram based on temporally and spatially separated submesoscale and background energy budgets. We find that submesoscale energy primarily originates from potential energy (PE) through eddy stirring and subsequent baroclinic conversion to kinetic energy (KE), which is largely dissipated by surface vertical mixing. A forward KE cascade occurs only within the unbalanced submesoscales (eddy scales <10 ${< } 10$ km and internal waves), whereas the balanced component behaves similarly to the mesoscale energy cycle. Overall, the interior route to dissipation—via a direct turbulent cascade—plays a major role in downscaling mesoscale PE, but it is less effective at removing mesoscale KE than surface or bottom friction. These results have implications for the parameterizations needed in intermediate‐resolution climate models.