The mother of all disruptions. What the war with Iran means for energy.

This is the worst energy crisis the world has ever seen. It is worse than a 1973 boycott because that was just oil. We have not adjusted ourselves to this new world. And maybe that ends up being the big shift that this drives is away from fossil fuels altogether. Trump doesn't get to decide when this ends now. The Iranians do. And the world of February 27th no longer exists. And those are two things that I don't think the collective market psychology is taken in yet. You look at the amount of renewables that we have put into play, right? Installed capacity, it's massive. And yet 80% of energy in the United States was fossil fuel in 1980. And it's 80% in 2026. Hello and welcome to The Energy Gang, a discussion show from Wood McKenzie about the fast changing world of energy. I'm Ed Crux. And on this show we're going to be talking about the lasting impacts of the war with Iran. Is this going to turn out to be one of the defining events of our lifetimes? I certainly think it's possible that it could be. To discuss it, I'm joined by Amy Meyers-Jeffy. Amy is the director of the Energy, Climate Justice and Sustainability Lab at New York University. Hi Amy, how are you? I'm good. I'm glad to be here. Yeah, great to see you. It's also a pleasure to welcome back Samantha Gross. Samantha is the director of the Energy, Security and Climate Initiative at the Brookings Institution. Hello Samantha, how are you? I'm well thanks. Great to see you again. It's been a while, hasn't it? It's been too long. Yeah, it's been a minute. It's been on the podcast. It's nice to be back. Absolutely, very nice to have you. And it's also a pleasure to welcome for the first time, Armos Hoxstein. Armos is a managing partner at the holding company, TWG Global. And he's also a former senior advisor for Energy Security at the US State Department and to President Joe Biden. Hello Armos, welcome to the show. It's great to be here. I hope there's this my first of many. Absolutely, let's certainly hope so. Something we would like to do with new people on the show is get them to talk a little bit about their career paths. I know you've had a very eminent, wide-ranging career, both in government and in the private sector. Perhaps you could just give us a few highlights for a list of them. So they get a sense of where you're coming from? Sure. I started on Capitol Hill. I worked on the House Foreign Affairs Committee in the Senate. I focused mostly originally on Africa and then the Middle East and international trade. So more on the economic side of the regions. And then in 1998, I had a trip to Saudi Arabia that had a Ureka moment for me that energy is the most important thing in foreign policy that nobody's thinking about. And dedicated the rest of my life to energy and national security. I worked in the private sector with some energy companies, both on the renewable side as well as oil and gas, mostly on the natural gas side. I joined the Obama administration when Secretary Clinton and President Obama created the energy bureau. I came in as the deputy to help create it. And then took it over. It was the head of the bureau for the remainder of the next several years under the Obama administration. I worked for an LNG company afterwards. Remember, President Obama was really the one that unleashed the LNG industry, although don't tell some people about that today. And then joined President Biden asked me to join the administration. And I worked closely with him when he was vice president as well. And came in as his top energy adviser at the White House, but also did a lot of on the Middle East side and Middle East negotiations. So I've done the ceasefire negotiations with Israel and Khusbola. I worked on some energy transition issues and energy. And of course, the Russia Ukraine. The last time we had an energy crisis to manage gasoline prices and diesel prices and LNG prices and gas prices in Europe and so on. And today I'm with TWG Global investing really in looking to invest in the energy and power and tech. So how those from the well head to the data. And that's where it is. Fantastic. Yeah, well, with that background, it's really great to have you on to be discussing this crisis that we're going through at the moment. So as I said, I want to talk about the long term implications of the world around later on. But first of all, I think it's important just to kind of look at where we are right now. As we're speaking today, we're approaching the end of the fourth week of the war. The outlook is still highly uncertain. There have been reports circulating that the Trump administration wants the war to end soon. There are also reports that US ground troops may be about to land on the ground in Iran. So that obviously would be a very significant escalation. So still a tremendous amount of uncertainty. Very volatile situation. Things could change very quickly. But as of where we are right now, let's just have a look at that and kind of think about the situation as it exists today. I mean, almost maybe to start with you on that. How do you think the war is affecting energy as we're seeing at the end of this fourth week? Well, and I think that the war started with sort of a rolling sense of goals. It started with which fits into where we are today. It started out with the president said, "Help is on the way during the protest." So the war was really about the protest. But that had morphed into some days. It was about missiles, some days it was about real obliterating the obliterated nuclear sites. And then the Israelis had continuously injected the idea of regime change fairly directly. Although the president was very careful not to talk about regime change, except for sometimes he did talk about, "I want to choose the next Iatola," etc. So the reason I bring up sort of the lack of goals won very different from my experience in multiple administrations of working in conflict. It's very difficult to achieve victory in conflict when you don't know what the goal is or what it's defined. And hard to maintain public support when the public doesn't know what the goal is either. So they're willing to take it when it doesn't affect them. But if it affects them and they don't know what the goal is, then now I don't know why I'm paying more for a conflict that I'm not sure why I've regard it into. The reason I say this sort of the preamble is important is because it's a war that's operating on recency bias. Recency bias in the administration and recency bias in the markets. The administration came to this and said, "Venezuela, everybody in Washington said it was impossible to do and look I did it and to be fair, it went very well. It is a successful operation and a successful outcome without a doubt." The 12-day war in June, Iran did not retaliate. The proxies, meaning the Cisbola and Lebanon, the Shia militia groups in southern Iraq and the Houthis in Yemen took a knee. They decided to stay out of it. And so that was a recency bias so we can just do regime change. It'll be great. It's going to be fine. The markets also said, "Hey, we always thought that any war in the Middle East was a reason to price in a lot of risk." So they did. In January, when the protests were going on, we were at $60 a Brent. And by the time we started the war, we were already at 80. So actually priced in the risk of war before it ever started and then we ran it up to about 100. And so the recency bias was, "That's all we need to do." And so the market, the effect, is not understood yet. Well, not only that, it was a boycott and they were very arbitrary and applying it or not applying it. I mean, they even gave the US fuel for Vietnam more. So it was like, but when I like to make the point, almost because you're really bringing out, I think the most important element is the other thing about 73 was not actually the energy crisis part. It was the complete change to geopolitics writ large. The whole creation of the global south, what we now call the BRICS, wouldn't have been able to happen, but for OPEC and the embargo, empowering, second tier, economic powerhouses in the global south. It changed so many different things and then again, we'll get into it on the energy side. We used to use oil to make electricity in the United States. Now we don't. I mean, so many things happen. All the clean tech that we're going to talk about getting deployed. That was all R&D that happened during the 70s, right? So a lot of things changed, but not necessarily because there was an oil disruption because that disruption was actually minuscule compared to what we're going through now. And the tanker wars and other things, but I think it's important that most of the other crises we've had, Libya took up one and a half million barrels off the market and markets really reacted harshly on it. But this is an energy broad energy crisis because we've lost 16% 15, 16% of the energy crisis. You know, her mood is 15, 16 percent, but we've lost 12 million barrels, let's say, of production right now. We've lost 20 percent of LNG. We've lost 5 million barrels a day of jet fuel diesel gasoline. We've lost 30 percent or more of fertilizer, global fertilizer, and nitrogen. We've lost all other products that are not in those categories, but our byproducts like helium, like all the things that are separated out of Urea. I'll give you for listeners an example. If you want to make gloves for, you know, hospital gloves, the main ingredient is now off the market. And so the Malaysian manufacturers of those gloves have gone to zero. And the other, the second largest manufacturers, gone down by 80 percent. So I talked to a hospital system CEO, said he bought four months supply of gloves in a dissipation, but anybody who didn't do it can't get them anymore. So this is a broad crisis that nobody prepared for. Right. Okay. So what I wonder then, and some other be interested to get your view on this, is given then the scale of that shock that I was just talking about. And I think, you know, when you start talking about medical supplies, that makes me think about COVID and the disruption to supply chains we had then. And I think there's some quite interesting parallels between what happened in COVID and what's happening to us now. And maybe we're still in that position we were in in sort of February of 2020 when kind of the full implications of what was unfolding hadn't really hit us. But if you look at market prices in lots of ways, things don't look that bad. The last time I looked at oil, Brent Crude was priced at $108 a barrel, even just as recently as 2022 in the aftermath of Russia's invasion of Ukraine, it got to over $125 at one point. If you look at European gas prices, last time I looked at those, that was about the equivalent of let's say $20 per million British thermal units for gas. That in 2022, that price got up to about $100 per million British thermal units. So, you know, in a quite wide variety of measures, it doesn't seem so bad at the moment. So, why is that? Even Eurea. I mean, I happen to know it on a European number. Yeah, Eurea is at $660, which seems expensive. But in 2022, it was $910. Yeah. Right. So, how do you interpret that? Yeah, I mean, I think what's happening is markets just haven't caught up yet. I mean, this isn't just a big disruption. This is the mother of all disruptions. If you look at what happened in 73 and in 79, this is bigger than those two combined on the oil side. And then if you think about gas markets, we tend to think of the 2022 crisis as over. But if you think about Europe's gas situation, it's still 2022. That gas is shut in. It's not available to be used. And so, it's still 2022 to gas markets. And then we're taking a similar amount of natural gas out of world supply by cutting off Katari LNG. And I'm baffled that prices are as low as they are, to be honest. Tons of people have asked me this question. Friends and colleagues, media, the whole gamut. And I've answered a couple things, but none of them are particularly satisfying. One of the things that I've said is we're just not feeling the crunch of the full disruption yet. Starting to feel it in Asia. And you're starting to see things like, please work from home, please conserve. Those are really important things. And all the things that I'm as described in terms of manufacturing. But we're not feeling it certainly in Europe or the United States just yet. There's supplies on the water. There are stocks held for various fuels. And so we're not, it's like looming over us, but it hasn't quite landed on us yet. But still, usually your price risk is. And don't you think that's partly because we were in such a surplus situation. Yes. I was just going to say that. The action of 3.8 million barrels a day more crude than we needed. We were planning to have 15 B.C.M. of natural gas, LNG that we didn't need. And so traders were on sort of traders were in what we call in trading speak. They were in collars. So they were betting either in the options market, either the prices would fall dramatically. Because the war would be like two days. Or they were figuring, you know, there might be some upside. But I think they haven't adjusted yet to like, no, there we are. I think, I mean, you think of a well-supplied oil market. And I remember going to an LNG conference back in December. And they were talking about being concerned about the glut of LNG coming online and you know, trying to find optimism that all of it would find homes. And yeah, I mean, it's, it's just shocking what's going on. But the other thing that I think is happening in markets is they still have this idea that this might be a short war, although that I think is fading. But also, they think that the world of February 27 before this bombing started still exists. That that that Trump can end this and we can go back to that. And Trump doesn't get to decide to decide when this ends now. The Iranians do. So, almost what do you think about that? The world of February 27th, 2026 has gone forever. We'll never get back there again. So I want, Samantha makes a lot of good points. I agree with most. I don't agree with all of it. I think that the market is pricing in risk because that's what the market knows how to do. The problem is we're not in a risk pricing environment. We're in a disruption environment. In 2022, the market priced in a risk that we would lose three to five million barrels a day of production. And so the market ran it up from 107 to 122 for Brent. We never lost a barrel. Why if we didn't lose those barrels? Exactly. And I was calling every trader because I was suffering the consequence at the White House. You can imagine presidents when we are five dollars a gallon. And he says, but we were before at three. And how much oil have we lost? None. The physical market never moved. Gas we lost. But not as much that warranted the $50 an MBTO. So right now, there is nobody in the market who's lived through a disruption because it was, it's been decades since it happened. So I suspect, and I'm talking to some of the largest participants in the market, that the market is pricing risk because they don't know the difference. We are, we spent two weeks with $90 WTI West Texas intermediate pricing of the US price Brent, which we think of as a global price. It's not to European price and a hundred and thirty to a hundred and fifty dollar physical price to take a barrel to Asia. And so we're in this. The market is right now just in the wrong place. They're marketing the wrong thing. Then I want to say another thing I grew some matter. I think the market says Trump, the whole taco thing, right? Trump always stops before he said he will before he says he will, right? The liberation day. But liberation day is a very big scar in the market. A lot of people priced in those massive tariffs and they were short and they were, they paid a very difficult price for it. They lost a lot of money on those trades because when he, that's where taco came came from, right? That's where, and they lost a lot. So I think a lot of market participants are saying he's going to end this war. I'm going to get stuck in a short position. So I am, I'm flirting with this. I'm letting it go up a little bit but not too much. And that's, and that's where I think we are. So the market says I think he's going to end this early. Right? The president says I don't need to end it early because the market's not down. And the market's not down because they think he's going to end it early. In the meantime, we have what's a man that talked about Sri Lanka has gone to a four day work week to conserve energy. There are Asian airports that are shutting down. Thailand went to remote work like it's cold. Right. They're shutting down airports because there's no Jeff fuel. That's not a risk that I won't have it or it's too expensive. It's that I literally have a shortage. I don't have it. And so what happens in that scenario is poor countries pay the price first because they get priced out first Sri Lanka, Bangladesh, etc. Then the next level becomes as the disruption grows. And remember, it's not growing in a linear way. It's growing exponentially. Then middle income countries. And I think that you all make a good point. Americans don't, the markets are feeling it physically. There needs to be that moment. People say, but there are no gas lines. Well, there are gas lines, not just not in America. Well, we're not seeing them on TV, but I would make this additional point. point, for those people who are older and have been through an actual disruption, what they remember, because that's how it hit the industry, for example, was that a real disruption absolutely craters economic growth. It kills GDP. Oh, yeah. And that is an instantaneous way to end a supply deficit because demand is immediately killed because people just stop doing economic activity and then you don't need energy anymore because-- That's a COVID situation. Yeah, because the economy is so slow. And so it's hard to know, where are we? Because there were little pockets that showed, maybe not so much in the United States, but in other places. In Asia, for example, that economies were under pressure. And even Europe was, I think, under a little pressure. And so are we now just anticipating that this is going to be like past crises where we're going to have a recession? And so that's already unconsciously priced in or priced in in some way for the players that have been around a long time? Or is it that people just really don't get it because they think this is like a three day war and then we're going to be done? Yeah. So once it happened, because this makes me think about the image of the Loonitune's cartoon, the way you're describing the market and the world economy now, it's widely chaotic, run off the edge of the cliff, and there's nothing really holding him up. But he keeps going until he kind of realizes where he is and then plummet to earth. So that goes to your question about what happens next, right? So even the longer it goes, everybody wants to answer the question, how long before when it's over, how fast do you get it back? And it's, there are two parts to the answer that question. One part is known and one part is unknown. The unknown is, I don't, the duration of the current conflict. The longer it lasts, the longer it takes to bring it back because there is some oil on the market on the water, sorry, the Russian unsanction and the Iranian unsanctioned. And so that will play itself out, right? So regardless of what you think of as a good idea or not, the Indians have taken 60 million barrels of Russian oil already, which means that we have it about another week before, you know, we get towards the end of the fifth week, we'll be out of the Russian oil and probably gone through a lot of the Iranian oil. The storage tanks in airports of jet fuel will run low. The storage of all the other products. And that's why it keeps saying it's not linear because right now we have a disruption, but we also have some storage that we can run through. Because the storage is gone, then you're really just looking at the disruption is the net for the market. So the duration matters here for the question. The second part is known. The war ends on day X. The LNG facilities in Qatar will take roughly two months to come back online. I'm not talking at the part that was damaged, the two trains that were damaged because they were gone. They're gone for three years. But the rest is gone to a cold shut it. So now from cold to hot, you got to go, that'll take you eight weeks or so. And maybe even a little bit longer. The second part is the Saudis, the Kuwaitis and so on have stored up all this oil. So what we're going to have is the oil that will have a flood into the market of like a wave of all the things that they feel. So when you have to shut in your production, the last thing you want to do is shut it, right? You do is you fill storage first, then you fill the tankers and then you start cutting production. So there's a lot of Iraqi Kuwaiti, Saudi and Emirati oil that's sitting in storage and tankers. So as they bring up production again, that wave will come, but it'll be like you have this like blip of a wave and then you'll have it decline again because it will take a few weeks, not a couple of days. It takes a day to shut it in. It takes weeks to bring it back on. It's not just sending the crews back out there, but you got to actually open the valves. And this is a sophisticated industry. It's really, really complex systems that all have to work and you can't rush them. If you do, you have outages. And then you got to get all the empty tankers to sail to the, they're not sitting there at the Hermues opening, waiting to go in. You got to then ship them in and that takes a while then you got to fill them and then you got to come out. So all of this will take a while to feed into the system and that's why I also think the curve right now, the forward curve, I didn't check it the last few days, but the fourth quarter was like in the 70s. It's probably going to go up from there. But I want to see something that Amy talked about in Samantha. There's in previous crisis, when you go too far up on these prices, you actually then accelerate the crash because everybody who's outside of the region, I mean, you're turning the taps on, you're trying to produce as much as you can at this price. And so you're throwing every riggy got, every work over you got your deferring maintenance, every solar panel you can put up everything, every electric car you can put back on. Then you have this wave that comes, the price starts to come down and then you start crashing. Remember just a month ago, we have Diamondback saying they're not producing increasing production in the US because the president is trying to take us to $50. That Diamondback for listeners who may not know them, that's one of the big independent exploration and production companies in the US or big oil producer, particularly in the Permian Basin in West Texas. Can I add a point to this that I haven't heard yet almost? And that is, if the war goes on for longer, it's not just going to take longer to start up, it's, you have the potential for more damaged facilities to all the Persian Gulf producers. And that is really scary and we've already saw what happened in Qatar energy. And the thing is, they have interceptors, they're doing their best to defend these things, but you won't, they don't need 100% to get through. Only a few can do a ton of damage and it appears that Iran still has weapons and that they can get through. They only have to get lucky a couple times to do some serious damage to infrastructure that could take not weeks or months, but years to repair, like we saw at QE. And so the longer this goes on, the more likely that is to happen because if we keep getting Iran, Iran is going to keep using its weapons against us, which in this case are keeping this rate closed and hitting infrastructure and the other Gulf producers. Well, and then take it a step further. Let's say, best case scenario, there is some kind of negotiated solution, but that leaves Iran with some weaponry. Now you have this permanent risk that somehow this solution doesn't stick and you have this, you have this continuing risk against facilities. That's exactly what I mean when I say that we can't go back to February 27. The facts on the ground have changed and to me, one of a couple of important points, one of them is that Iran, you know, we knew Iran had one shoreline of this trade of hormonose. It's always been so. Energy security people have been modeling that disruption since the dawn of time, but it's never happened. Notice now demonstrated that it can and will block the straight of hormonose if it is backed against the wall. That is a different situation than we had on February 27. That is a risk that now must be thought of from here going forward. But let me talk about that point Samantha, because look, I've had some conversations with the region over the last several days talking with some of the leaders in the region. I think we have to start. I keep thinking myself if I was my old job, if I was saying it at the right house right now, I think about it as sort of how would I advise the president about ending this and how would I, and you can't say I wouldn't start it. You gotta take it as today, right? What would you do today, right? Take it today. And I have my views on how they can end it in a better way. But the day forward, the leverage that was always there in theory on the hormonose, which both Samantha, you just talked about in Amy, you did, is now no longer a theoretical and will have to be priced in. And it's not just priced in market wise from a geopolitical perspective in the region. If you're UAE or Saudi or Iraq equate, you cannot live with that. It's not doable. It's just not possible. This is the lifeblood of our economy and at a capricious neighbor. Now it could be even more than that because some Iranians are saying, wait a minute, Egypt charges for the Suez. Why can't I charge? I'm going to take ownership of this now. It's no longer a public use. It is now Iranian waters. It's an territorial waters. By the way, they're not wrong about that. So I think what I keep thinking, I think what has to happen is as soon as the war is over and no matter in what format it's over, it doesn't matter. I would be convening a global summit. That says we have to build massive amounts of infrastructure that takes, let's say, 80% of what the Hormuz is out of the Hormuz, not that it will be used necessarily, but that it can be used to take the leverage away. These are non-economic projects, but can somebody imagine if Saddam did not build the East West highway that the Saudis are nationalized? If the Emirates, when the Emir, I went to the Christening of the Pipeline to Fugera, which is the UAE pipeline that bypasses the straits. And everybody ridiculed that pipeline in the markets. This is arrogance, this is spending money, good money after bad, blah, blah, blah. Can you imagine if we didn't have those two pieces of infrastructure? But I think we're going to have to do why should Saudi or UAE fit the bill or quate? It should be Japan, Korea, Australia, China, the United States. We should all be putting the bill for that. And I think there's ways to do it. We tried to build a pipeline from Iraq, southern Iraq, to international markets in Turkey. You can build a pipeline to the border of Turkey and Kurdistan, but it's a Turks refuse to build a continuation of that. We can easily get a significant amount of Kuwaiti and Iraqi oil to international markets that way. We could or can build an LNG terminal on the Red Sea and go through Saudi with a pipeline so you can liquefy it there. There are things that you can do. They just cost money. And by the way, it's not just for and the same thing for diesel and all the other stuff. But it's not, it's also about water. If you hit, if the Iranians hit the diesel, desalanzation plants in Saudi, you would have to evacuate whole cities in Saudi Arabia within dates. So interestingly though, the Saudis, after the Iraq Iran war, they did a lot of different things. But they put in a stockpile for water. So we don't, it's a national secret. So we don't know exactly how well prepared they are, but they are much better prepared than if that had not happened. Yeah, but Amy, they had 10 million people then. They have close to 30 million now. That's a big issue. Yeah, and how much water can you store if someone is completely taken out the desal plant? That's not a quick thing to build either. It's about giving you days. Yeah. Let's say it gives you a couple of weeks to then. Yeah. My mind is somewhat being blown here by this, but I can't see a reason why you're wrong. I lost, which is that. I apologize. No, no, it's a bit, it's good. I think it's really important to think about it this way, that essentially, so what you're saying is, the straight of her moves has been a vital asset to the world. The fact that it's been navigable, that it's been open, has been something that the whole world has benefited from massively for decades. To the extent that we get 20% of our oil that way, 20% of our LNG, 30% of our helium, 35% whatever it is of our urea, and so on. And so we have to treat it as a global asset and think about it as you say that something that China contributes to in Japan and the countries of Europe and the United States, it is something which is valuable to the world. And so if this is a bit of kind of global infrastructure that has broken, the world needs to pay for replacement. This kind of reminds me of the response to the oil crises in the 1970s. We created the IEA. We had countries hold certain amount of their stocks. It is somewhat similar to that. And I mean, this crisis is going to require a proportional response. I mean, the results of this are going to cost a fortune too. It used to be in security circles and almost, you must have heard this a million times, all these different war college events I went to and I actually did one of the original studies that was done on pipeline routes, the bypass, the straight of hormones. So the point is though, it was always considered and people would talk about it as China free writing, as Japan free writing. It was always imagined that the US military in its role as the global navy, the global policeman of the free navigation of seas. If you go back in history, people watch Disney movies and they think about pirates in a romantic way. But actually, the Bibery Coast was the place where pirates stopped the kind of traffic we're talking about now at the turn of the century. So the United States Navy, first the British Navy and then after it, the United States Navy has always played this role and what's changed and I think it gets to the point we're all making about, you know, what is the day after look like? What's changed is if we were talking just about the Iranian Navy, the straight would be open. Okay, but we're talking about asymmetric warfare with drones and automated boats that are robot boats and we're talking about other kind of robot stuff. And so we have not adjusted ourselves to this new world and we could have because I'm not, it wasn't clear what hit the Saudis in 2019. It was some combination of drones and other kinds of weapons. And so for the listeners that don't know, the one of the main production areas of Saudi Arabia was bombed in 2019 and the Saudis did an amazing job making that not impactful in the oil market. So, you know, we're in this new world as well because warfare has completely changed and what one human being can do or ten people can do is really different today than what it used to take an army of a million men. So it's really changed everything. And aiming to your point, that's why what's shocking to look, you know, I've been involved in exercises on war, war gaming and straight up for a movie is always the thing that I, you know, that's my job. I was like, hey, they'll close the straights. And then what do you do about it? And so one, I can sit here and tell you there's a whole memo I wrote a couple of times about what do you do before the war, assuming that we're the initiator of the war. There are things you can do, right? So we talked about. And there's things that you have to understand that in the 80s, the tanker wars, right? So Iran or Iraq war, we reflagged some ships as American, we escorted them. Why did that work and it doesn't work now is because to Amy's point, they mined it. And so we can have a minesweeper at the head of the Navy minesweeper, tankers behind it, and a couple of destroyers so that if the Navy would dare to come close to us. But the Iranians didn't see the United States as an enemy at the time. They saw the Iraqis and an enemy and they were pissed that we were supporting Iraqis. That's a big difference between that and sort of guilty by association versus guilty. And so Amy's 100% right. Now the administration was so unprepared for this that they said on day one, it was like, we're going to do escorts. Remember when the Secretary of Energy said, we're going to do escorts. But the escorts don't work because then you're sitting ducks there of a couple of Navy ships with drones. It's not about the minesweeper anymore. It's a drone that can fly undetected for 1500 kilometers and hit the tank or hit the Navy. So that doesn't work. And then you have, okay, maybe it's insurance. Well, that was a silly operation. I don't know what they were talking about, the insurance thing. At the end of the day, we cannot open this straight with Navy force alone unless we captured Iran. And the idea of troops on the ground to take over a couple of the islands of the shoreline. Yes, but these drones can fly 1500 kilometers. And when you do take those areas, you're sitting ducks. They can hit you. We don't have missile defense there, right? So I think I come back to the point that the only way the straits really open is the war threats. And with the war ends, we cannot allow the Iranians to control this straight any further. I really think the administration misjudged what happened in Iran in January with the protests. I really think in the United States, we viewed that as a weak moment for the Iranian regime, that the people were rising up against the regime and that this might be a moment when we could, you know, if that we might have a people's movement in Iran that might take over. Whereas the way I think we misread that is what Iran did is demonstrated that it was willing to kill its own people at an industrial scale in order to keep the regime together. And so we think the regime is weakened because of what happened in January in the protests. Whereas the regime is actually stronger because people are afraid to go out on the streets take over in protest because they know from very recent experience that the regime is willing to kill them in large quantities. And that I think was just a fundamental misunderstanding of us because we think we can change the Iranian regime or make something quite different on the ground, whereas actually it's stronger than it was, you know, at the beginning of the year. Right. So given that then, given that real regime change seabedness unlikely for the foreseeable future, I can see that Amos's solution building all this new infrastructure makes a lot of sense. But my big question about that then is how long does that take that if you're going to build all these new plants, all these new pipelines? Question what do you do between now and then, right? that you're still in that position where, for a very significant period, you're dependent on at least having some kind of arrangement with the Iranian regime, where you can get along to the extent that shipping can be allowed to continue to pass through the straight. - Yeah, well, the perfect does not the enemy of the good. You have to start because you could always make the argument, this is not a solution for right now and therefore I shouldn't do it. And we do that all the time in the United States at our own peril, right? We don't do long-term planning because we're not gonna see the benefits and we're gonna have to have interim solutions. Of course it's gonna take years, by the way, it's not gonna all happen at once either. It's gonna have to be peace after peace after peace. But it's a signal that you're sending to the Iranians, your leverage here, if you push it, we're just gonna build it faster and more. And so yes, you'll have to come to an accommodation. I truly believe the war will end at some point with a regime that is intact, emboldened, believing regardless of how it ends, they're gonna believe we won, they're gonna believe they won. And they will focus on how do we recover from it and reachief strength. But you can't also deny the fact that they have been, their economy is destroyed. The amounts of money they're gonna have to spend. They're not gonna have any cash to spend on his Bala or the Houthis, okay? There's nothing, what will cause people to rise up, a regime change to me can happen months after the war ends. When the economy is terrible, when their own people, even the people who supported them during this war say, there's no food, there's nothing left. And I think we have to end this war. And again, this may be controversial, but I don't believe we should do a deal with the Iranians. I think any deal means we lost. I think it should be a unilateral declaration of end of war by us in Israel, where we say you gotta open it, or we'll continue. The Iranians want this war to end too, because they're getting assassinated and all the other stuff. You open the straits, and I'm gonna keep a CSG, a carrier strike group. We already have things we didn't have for the last 50 years, total air superiority, total control of the waters, right? We know, and our intelligence is impeccable. We've proved it with how we've hunted down some of the leaders, right? Between Israel and the United States. So, and they're hated by the whole region right now. So, I think we should be ending this with the President of the United States as in four days, when I'm gonna wipe out everything I can and the economy there, and then I'm gonna declare the end of hostilities. They'll take it, because the Iranians always believe, live to fight another day, is right? They believe survival is victory. - Yeah, remember Saddam hit himself in a sewer pipe, so yeah. - Correct. 'Cause they're not suicidal at the end of the day, right? They actually aren't. They send other people to commit suicide. They don't. There are no Iranian suicide bombers, right? There are Arab suicide bombers that are financed by Iran, but no Iranian suicide bombers. So, I think that there's a, to add to your point, yeah, it'll take time. I'm gonna have to figure out what to do in the interim and we'll have to play with it. But I think it's incumbent upon us to learn the lesson, spend the money, and build out the infrastructure. And that's why I think we end this on our terms, not theirs. And then we just go full steam ahead. My fear is, the United States in general and this President in particular, plays an ADHD, right? So, when we finish it, it's gonna be like, like a month later, it's gonna be Iran who, and we're never gonna do the whole donor conference that I suggested and nothing will get built. And we're just gonna be talking about China or Venezuela or maybe we'll take Cuba at that point or Colombia, I don't know. So that's my fear. - I'm also the one thing that I would add to that is I think the only solution to fear of a regime that will kill people at the industrial scale is a population that has absolutely nothing to lose. And if Iran is left in shambles, you will have that population that has absolutely nothing to lose. And so, I think the only way you can get regime change in Iran is when the people don't have anything left, they're hungry, they're angry, and they don't care anymore. And so they head into the streets. And it's clear that January wasn't quite that. But what might come afterwards could be? - Yeah, could be. - I don't know, I mean, people lost a lot of people. The numbers that have come out publicly about there were piles of bodies in the streets in Tehran. - Piles, and that's why they're not coming out today. - People wouldn't even come out and get their loved ones corpses. Right? So, but what I would say, which is, I just an interesting sort of aside as like a person who believes that the human race is resilient, is that if I'm sitting in Thailand or Vietnam or Africa or pretty much anywhere except the United States where we don't seem to be at a mobilized policies, do I stay on oil? Do I bet my future on LNG? Do I only buy LNG from Australia? Like, you know, the market's not gonna sit and wait for the Gulf Arabs to build a bunch of infrastructure to make their products more secure. I mean, we have to do what we have to do now, higher insurance, you know, soldiers that are willing to take sit on tankers instead of workers or seafarers that might not be willing to do it. But in the end, bottom line, I think a lot of economies for this moment in time are gonna say, what could we do so we don't need this stuff? They are, but that ain't quick either. No. I don't know. I'm skeptic. You're skeptical, okay. Okay, so I'm less skeptical. I mean, I think I'm on your side on this one because it just seems to me like, as you say, almost if you believe this point about this critical piece of global energy infrastructure is permanently broken or at least in a position where it cannot be relied on now in perpetuity, then you've got to think about all the possible alternatives. And as you say, new kinds of infrastructure to enable new routes for energy to flow out of the Gulf region, that's gonna be an important part of it. The other things are gonna be the two things that Amy talked about. So one is alternative supplies of fossil fuels around the world. So that's the United States. And question, does this mean the US becomes even more dominant in global markets as a supplier of oil and gas to the world? Is it about, as you say, Australia? Is it about countries in Africa becoming larger exporters? Is it about maybe Venezuela's industry kind of reviving and turning that country into a major exporter? I'm still a bit skeptical, but yeah, but anyway. So that's kind of one kind of real thing. - Alaska, maybe Alaska, fine. And Alaska, exactly. So there's all those kind of things. And then there is also the shift away from fossil fuels altogether. And then the question of essentially China and Chinese dominated value chains in renewable energy, wind and solar, in batteries, in EVs. All of those things becoming the alternatives that countries go to. And you can see, for instance, a lot of, if you look at what's been happening in Pakistan recently, that's a great example of a country that's working very hard to reduce its reliance on imported fossil fuels. Maybe that ends up being the big shift that this drives away from fossil fuels altogether. - As green hydrogen finally finds its time. - And maybe, exactly. If you can't get, there you, I guess. If you're for anyone who hasn't got the benefit of the video, almost is shaking his head better. But I feel like that's something actually I do believe in. If you need, you know, not green hydrogen for every purpose, but if you need to get fertilizer. - That's places like that, that's something. - Yeah, exactly. If conventional routes for your rear are blocked, you need another way to get your fertilizer turning green hydrogen into green ammonia. Actually, there are places where that can be done in quite a cost effective way, probably India is one of them, probably China is another. So I wouldn't rule that out. Anyway, but go on, you see, almost, you, what Samantha got, you say, but I'm gonna be, you've got some skepticism. - Yeah, you've got some. - So let's Samantha be a little bit more cheerful. - Well, actually, the thing that I'm gonna say is both aiming at Amos are describing things. The deal is a problem. You move away from fossil fuels or you build vast infrastructure in order to get fossil fuels to where they need to go. Neither one of these solutions is cheap. - So that's certainly true. - And so the question becomes, especially in a world where we've disrupted everything and we have not enough steel and we have not enough everything. - So the question becomes in my mind, so you need cooperation to get to Amos's solution because it's expensive enough that you need this agglomeration of, you need an IEA-like organization of people to get this stuff built. And so do you get that enough of that together to move towards Amos's solution? Whereas Amy's solution is a little more of an every man for himself solution. And I think they're both really difficult. It's really hard to move away from fossil fuels. I'm working on a book project about that very topic. The reason why I mean slightly Amy word is because Amy's solution doesn't need cooperation in the way that Amos does. the actual sort of tally. do you move away or do you build all this infrastructure? I can't calculate that in my head. But the level of cooperation I think is a really interesting point on all of us. I think, look, I'm a skeptic because I've lived through a number of waves, of cycles. And I'm always told, this is going to be the renewable moment. And the truth is that it was the renewable moment. If you look at the amount of renewables that we have put into play, installed capacity, it's massive. The projections from 2010 and 2015, we far exceeded them. In those years, we made projections about 2025. We far exceeded on a global level. And yet, 80% of energy in the United States was fossil fuel in 1980. And that's the reason because we are human race is growing. We are our energy dependency is growing, energy generic energy dependency. We're doing more, all our innovations are more and more energy dependent and require a lot of energy, a lot of it. Europe lost gas from Russia. And it actually did a lot of renewable replacement since 2022. But it's not enough. So here's where I break it down. I think I'm a, you know, I looked, I was in the Biden White House. I fully support the fact that we should incentivize people to build renewables and consume renewables that they should build EVs and they should, and they should purchase EVs. And we get a lot of misfiring in the community because instead of oil, we should have renewables. Well guys, as Amy said, we don't use electricity with oil and they completely do not, there's no point of compensation between the two. Natural gas competes with renewables, but even that it doesn't because we need all the electricity we can get. And we don't have enough of it. So if we build all the renewables. And you need natural gas for other things. Right. And then that's what I was going to get to. And people are learning that we've got off. You can build all the EVs you want. You're still going to need a lot of oil and demand all these projections. I think what hurt the renewable in EV industry was rosy scenarios of people operating based on feelings and emotions and hopeful and hopes and dreams and not based on realities. I was swimming upstream in the Biden administration all the time because I had my colleagues who said, keep it in the ground and don't do this. I was like, great, but demand is growing. Demand is growing. So let's add the EVs. And that's why I don't understand all of Trump because if you want to have a good economy and you want you couldn't say, I'm going to, I disagree with them, but you could say, I'm going to give all the benefits to oil and gas, but take away the wind. Why? Take away solar. Why? So yes, China is doing all this stuff on renewables and EVs. They're also the leader on growing the fastest growth in coal is also happening in China at the very same time. So I'm not, I don't think they compete at my solution of the pipeline because that's necessary until 2050 or 70, we are going to need the straightover moves. Last point that you made it, the idea that the United States or Venezuela or others, it's finite. Africa cannot grow production. They're all most of Africa is actually in decline side of their oil story, not in growth side. They're not stopping their own print. All the growth right now is going to come either Middle East or it's going to come in the Americas. Then as well as not going to grow anytime soon, but by 2030 to 35, they can, they can grow a million barrels. Guyana did the United States at the end of Biden, we grew to the largest at 13, 4 and now we're at 13, 8, but we're not going to go to 18. We're also going to suffer through some declines. So it's not like you can just play that magic of, oh, somebody will just supply it. I think the world is hungry for energy. It's hungry for cheap energy. Look how many times the Russians screwed Europe and they still went back to the trough when prices were low and the economy was bad, right? Germany case in point. So I think we're, by the way, I think we should talk Amy. I think nuclear is going to end up being a more exciting part, but later could be the moment for nuclear. But that's true. Let me just say, almost on your, you know, we've run out of oil thing because I've lived through run out of oil for many decades. And then something always miraculously happens. And now we can run geology through AI. I have computerized drilling. 100% have optimization. We have not yet. I mean, if the scenario you're talking about, we're to actually happen. Like, let's say, for some reason, we can't actually, you were right. And there's no more oil left to find. When did I say that? I'm not saying there's no oil left. I'm just saying. No, no, I don't think we just like scope for growth is limited, right? It's not, I said, it's not finite. I said, it's not finite. That's a big difference. Here's, here's my point. But here's my point. Now we say this to people. We can liquefied call into oil. Right? I mean, we can't. Doesn't mean we should. No, not at all. I'm just saying that the price at which we can do that is much lower than the price we're talking about for error barrels once we're going to have to build all this new infrastructure. So my point to you is the world will come up with a way. And the people, what, what, I'm is what you're talking about is that it's very hard to get away from the, to quote, Paul again, from GTI to get away from molecules. Right? As opposed to electricity. But we have other ways of getting molecules. Waste the energy, you know, but cold, cold, the liquids. There's all kinds of stuff we could do. We don't do it because the oil is available. Correct. And then same thing. I have lived through so many different like, Oh, guess what? We got oil and Guiana and Surname and all the countries around there. Oh, guess what? The North Sea is a big place with lots and lots of oil. Oh, guess what? Which is why we're not going to renewables. That's my point. I don't think renewables are replacing oil and gas. Yeah, we're not that we can squeeze oil out of the stone. Right? I mean, there, there'll be something maybe, right? But, you know, the question is really in some places. Right? I mean, Indy is the one that springs the mind now. And because they were already thinking about green hydrogen in a kind of, you know, thoughtful way. And, you know, if I could get cheap natural gas, why would I do that? But now I can't. So I do think there's places. I think that the solutions that countries come up with are kind of geographically determined. You know, one of the misnomer's, which I know from having to do a bunch of studies on decarbonization in Africa and traveling around there and so forth, is that a lot of the way African countries got to achieve universal electricity was through hydro. Right? Yeah, for sure. This mythology that it was somehow natural gas is incorrect. Because in Nigeria, the place that has the most flaring on earth, they have the least the monobaly. I don't know, it was definitely, it was definitely not natural gas. It was definitely natural gas. And Kenya was geothermal, do you know what I mean? So I feel like I'm kind of an optimist, not in a short term way, because you know, it's in elastic. In a short term way, the way we solve a shortage is demand disappears because people who can't pay don't use it and we come up with other ways to get around it. Right? And now we have more things we can do. We've got e-commerce, we've got remote work, we've got, we've got, you know, Uber's electrifying, like we get all kinds of things that we're going to be able to do. Right? That'll help us in the short run. But in the end, longer term, we do have these things. It's not just geothermal. I'm going to drill for geothermal. It's, I'm going to build buildings different. So I'm using a geothermal system that taps the coldness and heat of the earth underneath the building. I mean, there's just so many things we could do if we needed, if we knew that we needed to, if we knew we had to, which we don't do because it seems expensive and complicated. But if oil and gas was expensive and complicated, guess what? We do it. The underlying question to all this is what is the new cost curve? Yeah, I mean, it has been for a very long time that oil and gas out of the Gulf countries has been cheap. They've really low lifting costs and they're kind of at the bottom of the cost curve. But if we have to be able to bunch of redundant infrastructure to ensure that we can get those, then suddenly the whole cost curve switches on oil and natural gas. And so the question is, do different regions come in the money? Do different technologies come in the money? But I think the ultimate thing that this crisis is going to do is absolutely scramble the cost curve. And so things that we, like almost you're right, we're going to continue to need oil and gas fossil fuels for a very long time. If nothing else has raw materials, but certainly as fuels too. But the question is, what's the cost curve look like? And then what do various technologies do to change that cost curve over time? Because the forces that are affecting that cost curve, at least on the oil and gas side have changed fundamentally. I'm not trying to agree with you, Samantha, on scrambling the cost curve. I hear you, and I know, and I think it's a fair point. You know, I just, I think that as time goes by, the cost of production, right, what are we talking about? The cost of production is not going to go up, right? It's the cost of two things. One is the redundancy that you have to build into infrastructure. That's a cost. And the second is a pricing in a risk of dependency on a region that may have a disruption. And so, one is elastic, which is the pricing in risk because in the early stage, it could be a little bit higher after a period of time if there's no signs of something happening that you let it go, and you sort of let it relax a bit. And that could play out through insurance prices, shipping prices, all kinds of things, right? The second, the first one, which is the redundancy in the pipelines, yes, building infrastructure that is not necessary, quote unquote, as redundancy isn't, is expensive. But look, the Emirates built 1.8 million barrel pipeline. It didn't affect the cost, and they built it in, and just not that long ago, it only opened 10 years ago. Well, and also they've, in recent years, they've really built up all their storage and hub in Fuzhira massively. Right. And now, will they build other storages in other locations in the world? Of course they are. They're not going to charge you for it because they make a lot of money as it is, right? For them, it's the security of their ability to supply. Right. So, if UAE had a massive 50 million barrel storage in China or in Singapore or in Japan, and that would have cushioned. Now if you thought that each of them had a storage facility in Latin America, Africa, and Asia, we could have gone three weeks without noticing this whole thing, right? On the oil side, not the products. I mean, that is a super good point. Right. It is, but what if this ends up being a four or five month problem? Guys, it doesn't cost that much money because it's financeable, because we're talking about very rich countries that have an underlying product that can sort of backstop it. And then I'm talking about coming in, building a facility at the World Bank that reduces the cost of the money, right? It's a suddenly financing it, instead of 10%, 12%, it's like 3%, 4%. And now you can actually do over a period of time. I don't, when I'm suggesting sounds more expensive than it is. It's labor intensive. Let's remember this is not a region where labor costs that much money, right? We may not like for the reasons that we don't like, but it is what it is, okay? So I think there are ways to think between global storages. I have advocated for 10 years since the Obama administration that the United States have product SPRs, right? Kerosene in the Midwest. I said that for California. They didn't listen to me. 100% well, California is ready for it. I wrote a report on GAO and then Mid-Auts on that. You've all been saying this about early-round. We are. Yeah. Yeah. That's what if you were an expert, that's what you would say. Right. Again, sometimes a crisis like this comes. And the worst thing to me would be if we didn't take advantage of this crisis to actually do some of the stuff that experts have been suggesting for so long, but in America, it's too expensive to do. I actually trust the Emirates, the Saudis, Kuwaitis, et cetera, to do this kind of thinking more than I trust us. They don't have a Congress that is going to get elected in six months. They don't have a president who's going to have to be switched out in three to four years. So, and for them, it's the lifeblood of their existence. They have to do this. Well, and also in fairness, AdNoc was already moving in this direction. They just picked Fujira. Now they need to go beyond that. And in fairness to Qatar, they have the deal with Exxon in Golden Pass. And now that they have Golden Pass, they probably should be thinking about it. They're going to have all their investments in LNG upstream in Qatar or somewhere else. Right? So. Or does Golden Pass go to seven trains? Yeah, right. Exactly. Okay. So, and then the flip side is the minister in Saudi Arabia and the hierarchy there. I mean, again, they used to keep massive stocks in end use markets. Still have some, right? But that's an easy thing because they have experience coming back. It's coming. I can tell you they already know. I've talked to them. It's coming back. It's coming back. They let their storages go down ever again. Yeah, right. Those are all good things, but all of that infrastructure in the Gulf is much. It was always vulnerable, but now we know exactly how vulnerable it is. And that. That scares me. And how we get around that is something that's going to be weighing on me for a long time. Right. I think that's exactly right. And that was really what I wanted to ask. Maybe it's a final thought just to kind of generalize that point. Going back, almost to what you were saying about the scale of this crisis and how it is the biggest shock to the global energy system ever. You think back about previous crises. You think back to the 1970s in particular, the two oil shocks of the 1970s, that changed so much. Amy, as you were saying earlier, changed so much in the world of energy in terms of. For instance, getting away from oil for power generation in terms of all the investment and the types of energy, waves of investment and nuclear and so on. And so when I think about the parallels to that, and I was saying earlier, this could be the defining event of all professional lifetimes in terms of changing the world of energy. Certainly one of the defining events. How do you think ultimately it's going to leave us differently placed? I'll be very brief. One infrastructure in the Gulf, two storage in end use markets. Three, a total change of alliances. The Gulf is going to look. They got attacked by Iran in a vicious way without. In a tax that did not differentiate civilian from military. They didn't attack American bases. They attacked Fujera port. They attacked hotels. They went after civilians in Oman in Qatar that was not even seen as close to them. The Kuwaitis are like, "Hey, where our flag says, leave me out of it." That's literally what the entire ethos of the country is, right? And you hit us. And so alliances now, they're not. This is the Middle East. They will not forgive the Iranians for generation. For a hundred years this will live on. And it'll also mean, you know who else didn't come to their support? These countries told the United States, "Successive Presidents. I'm with you, more with you, but I can't. I have a good relationship with China. I got a working relationship with Russia. I'm friends with everybody." The Russians were sharing it are not where. Are sharing intelligence with the Iranians. They're supplying them with weapons. They're telling them what to hit in the Gulf. Yes, they're giving them the intel. You don't trust me. This is changing forever. The idea in the Gulf and they will come out of this with we have two friends that we can trust. And that's the United States and it's Israel. I worry about our relationships with the Sunni producers in the Gulf because, yeah, we've been on their side as this has been going on, but on the other hand, we are the ones who kicked the Hornets' masks. And Hornets came out and stung all of them. They didn't ask for this war. There's no love loss between them in Iran. They're not sad that the itola is gone. Some of them did ask for this. Okay, maybe. But I mean, we started a war that has been incredibly damaging to them. And there's no love loss there before, but there's also the issue that part of the reason why they may be in the line of fire is they all host American bases. And we haven't been, you know, they're still getting hotels and infrastructure and everything else. Despite our presence. So we're not providing everything that perhaps they might have wanted in the protection department. I worry about that. Yeah. No, that is a good point. So what's your answer then, Samantha Ron? What do you think will be permanently changed? Yeah. I mean, I think I agree with almost that I think alliances are going to change. I think that the Gulf countries are in a really rough spot because you see what some of that some of their moderate friends have done in China and Russia. Amos is right. But I also think there may be some animosity toward us and dragging them into a battle that was totally not maybe not. They don't mind us sitting around, but the idea that they suddenly ended up being an important front in the war. Nobody asked for that. And so I worry about their relationships everywhere. I feel like they're in a road kickoff. Amy, final thought. I'm going to go off the geopolitics because I think that almost and Samantha raised some really like food for thought, like how will this change relationships? I will mention that when I watch the press of what Europeans are saying, they're like, how did you take the eye off of the ball of Ukraine? And so and then we that would be a whole other show to talk about. It wasn't related, wasn't related, where we worried about. out the Russian Iranian alliance blah, blah, blah, but for another show, there are two big takeaways that I have that are outside the area of geopolitics that I want to put a pin down in, 'cause Ed and I have this thing. 'Cause in past I put a pin down on AVs, and Ed was like, eh, you know, but, and we're there. I think that the big dollars that are gonna go into fusion now, we already saw the billionaires locking down on fusion. You know, the Germans are interested in fusion, the Japanese are interested in fusion, the billionaires and tech are interested in fusion. I think the push now for fusion is gonna accelerate even more. So that's prediction number one. And then the second thing I think that has happened now is if someone didn't understand that before. If people were thinking big ships, whether that's China was thinking big ships in their region or we were thinking big ships globally, right? Warfare has changed forever now, and adjustments have to be made to how we think of our own defenses of country, how we think about projecting power. All of that has to be re-evaluated now. This is like a post-Vietnam moment for asymmetric warfare. Amen. Yeah. Palantir for the masses. Right, now there's a whole other show, but not I think one on the energy gag that we're gonna need to get to. We're gonna have to leave it there anyway, but it's been fantastic talking to you all clearly. This is a situation that's gonna continue to evolve the ramifications of this are gonna continue for months and years to come. So it'd be great to talk to you all again in the future to kind of discuss this as it plays out, because as I say, one thing is very clear is that this is going to change the world of energy very profoundly. As I say, for now we are gonna have to leave it, but thanks very much indeed. Almost great talking to you. Thank you very much. Thanks lots of my friends, great to see you again. Always a pleasure. Thank you, Amy. Sure we'll be talking again very soon. Yes, and so great to share the mic here with Amos and Samantha. Yeah, now it has been fantastic talking to you all. Thank you very much indeed. Thanks to our producers, Molly Mowin, Toby Biggins, Gilchrist and Dan Kotrol, and above all, as ever, many thanks to all of you for listening. We really value your feedback. Please do keep that coming, and we will be back very soon with all the latest news and views on the future of energy. Until then, goodbye. [BLANK_AUDIO]