Myelinated axons conduct action potentials, or spikes, in a saltatory manner. Inward current caused by a spike occurring at one node of Ranvier spreads axially to the next node, which regenerates the spike when depolarized enough for voltage-gated sodium channels to activate, and so on. The rate at which this process progresses dictates the velocity at which the spike is conducted and depends on several factors including axial resistivity and axon diameter that directly affect axial current. Here we show through computational simulations in modified double-cable axon models that conduction velocity also depends on extracellular factors whose effects can be explained by their indirect influence on axial current. Specifically, we show that a conventional double-cable model, with its outside layer connected to ground, transmits less axial current than a model whose outside layer is less absorptive. A more resistive barrier exists when an axon is packed tightly between other myelinated fibers, for example. We show that realistically resistive boundary conditions can significantly increase the velocity and energy efficiency of spike propagation, while also protecting against propagation failure. Certain factors like myelin thickness may be less important than typically thought if extracellular conditions are more resistive than normally considered. We also show how realistically resistive boundary conditions affect ephaptic interactions. Overall, these results highlight the unappreciated importance of extracellular conditions for axon function.