Latest / Energy Empire / Trump: The Accidental Clean Energy President

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Trump: The Accidental Clean Energy President · Energy Empire

0:00
I mean, just look at the results.
0:01
I mean, you know, I don't think Donald Trump, you know, has any
0:03
desire to to place himself in Camp Green.
0:06
But the outcome of his actions is everybody scrambling to say I
0:12
need more solar, I need more battery like.
0:14
And if it comes from China, hey, I'm OK with that.
0:22
James Gutman backed by popular demand.
0:25
I know it's like midnight where you are in in London, but
0:29
appreciate you jumping back on the podcast you were on on March
0:34
2nd. I think we're on like 17 days
0:39
into this conflict and inquiring minds want to know why you got
0:46
so much stuff wrong. No, I'm kidding.
0:49
But but you know, I, you know, I think that you gave our
0:52
listeners A framework for how like to really think about what
0:56
was happening and it really was under the new jewel order
1:00
framework that was applied in real time, right?
1:03
I think you've talked about the price spike.
1:06
You talked about all these other things like 2 weeks in, you know
1:10
what are you saying? Gosh.
1:13
Well, let's start with what I got wrong.
1:15
And I think the big one is I said we would measure this in
1:20
days, not weeks. And, and I wanna like, I wanna
1:24
go on that because clearly we're moving into weeks when the US
1:28
didn't win, whatever win means 'cause it's not really clear to
1:32
me what those objectives are. When the US wasn't, you know,
1:35
able to say we've satisfied our objectives in the first three
1:39
days. Then I think at that point the,
1:42
the optimal outcome was to declare victory and walk away
1:45
because where we are today was, was in many respects a
1:48
forecastable event. The Iranians, you know, with,
1:52
you know, decapitation strikes, putting them basically against
1:56
the wall. You know, they were going to
1:58
push the economic nuclear button and, you know, close the straits
2:03
when the US is in a position where that's the obvious next
2:06
step for the adversary. You, you walk away.
2:09
Like, why would you do it? For whatever reasons, we decided
2:14
to double and triple and, and quadruple down.
2:16
And so we're we're still here. The Iranians have pressed the
2:20
button. And so we're now in a situation
2:23
which I didn't expect to happen. I thought that the US would have
2:27
cut its losses by now and, you know, gone home.
2:30
We didn't pull off a Venezuela. So move on.
2:34
So we're now in a in a slightly different world than than the
2:39
one that I was that I was talking about before.
2:42
What hasn't happened is we haven't seen a sort of collapse
2:46
in consumer confidence. We haven't any more than I had
2:50
already been soft. We haven't seen a collapse in
2:53
the financial markets. You know, we haven't seen
2:56
everybody sort of, you know, in the US in particular sort of
3:00
panicking in the way that you might expect given the magnitude
3:03
of the, of, of the disruption. And I think there's, I think
3:07
there's sort of, you know, a couple different reasons for
3:10
that. One the the US is, as I said
3:14
before, it's, it's to a great extent insulated from from
3:19
these, from these events in the Straits of Hormuz because US
3:23
consumers are able to consume, consume natural gas, which is
3:29
domestically produced and has limited exit opportunities
3:33
because. I mean the price at the Henry
3:36
Hub has has been relatively unchanged.
3:39
I mean, certainly gasoline prices are up $0.60 a gallon.
3:42
Yeah, but is that really a lot? Well, I mean, politically it's a
3:46
lot. Once you hit $4.00 a gallon, you
3:48
know, folks start to lose elections.
3:50
But but I agree with you that, you know, the the percentage of
3:54
people's salaries that fossil fuels represents was at its peak
4:00
in 1973, was lower during the first Gulf War and is much lower
4:06
today, right? And so we're going to have some
4:09
inflation just because energy going up, you know, by this much
4:13
is going to flow through the fertilizer and all sorts of
4:15
other stuff. But but I agree with you,
4:18
natural gas prices remain low in the United States.
4:21
Yeah. I mean, I think, I think one of
4:23
the things we talked about before was that the implications
4:25
for the rest of the world, we're going to be extreme and dramatic
4:28
and the implications for the US consumer, at least in the
4:31
beginning, we're going to be a lot, a lot lower.
4:34
And I think that's one of the reasons why the US is doing
4:36
this, you know, because, you know, we, we kind of look at
4:41
this and we say, well, it's not that bad.
4:43
You know, you say $0.60. I mean, you know, $0.60 is not
4:47
is not the end of the world in the same.
4:49
Well, that's certainly Trump's point of view.
4:51
He thinks that everyone makes so much money that $0.60 a gallon
4:55
is immaterial to most family incomes.
4:57
Even though I think a lot of his MAGA voters probably.
5:01
Think might disagree. But but let's just go through
5:04
some of the other things you said, right?
5:05
So I think one of the things you said was that, you know, Iran
5:08
was going to let its friends, you know, send their oil through
5:12
the Strait, but not their enemies.
5:14
It does seem like that's happening.
5:16
Is that how you read it is A2 tier system?
5:18
Yeah. So it's more than seem it's
5:20
becoming pretty explicit now. So the the flow through the
5:24
straits never really went to zero.
5:27
They, they went down, you know, quite a lot, but you were still
5:30
getting something like a million barrels a day, you know, pushed
5:34
through and that was almost entirely Iranian flag to known
5:38
tankers. Now what you seem to be getting
5:41
is, is you're starting to get Chinese, Pakistani, Indian
5:48
tankers and cargo ships who are being, you know, granted safe
5:52
passage. And it seems that with the, the
5:55
the Iranians are trying to do is to funnel them through a, a
6:00
straight, which is very close to the Iranian coast as a way of
6:03
checking them. So this is just a report that
6:05
I've that I would that, that I've heard as a possible
6:10
indication that what they're implementing is, is sort of a
6:14
long term strategy to try and manage who gets to go through
6:19
and who doesn't. And you know, that's, that's
6:22
kind of what you'd expect them to do, right?
6:24
Oh, yeah, no, I mean, I, I, I mean, I totally get it.
6:27
I just wanted to give you credit for predicting it.
6:31
Right. All right.
6:32
The next one is you predicted that the 50 largest oil
6:36
importing countries would look at 2026 and say we need
6:39
alternatives. Earlier this week, NPR National
6:43
Public Radio ran a story about how the Pakistani solar boom is
6:46
helping them weather the crisis better than anyone expected.
6:50
Bloomberg is calling this the first oil crisis where clean
6:53
alternatives are fully priced competitive.
6:56
Is that acceleration real? Where do I begin?
7:00
So I think one of the things we talked about is behavior
7:03
changing. And I think it's it's obviously
7:07
only a couple weeks in. So it's, it's too, it's too soon
7:11
to see like these massive shifts, but I think you are
7:15
seeing sort of governments respond in the 1st order with
7:19
what you'd expect them to do. So you have the SPR releases.
7:23
That's, that's not really a surprise.
7:25
You also have people, you know, implementing export controls in,
7:30
in China, in Brazil. I wouldn't be surprised if at
7:34
some point, and I have no indication that this is being
7:38
discussed, but it wouldn't surprise me if at some point we
7:40
get export controls out of the US.
7:42
You. Know which would be bonkers, I
7:44
mean like us like not selling finished goods and diesel,
7:49
whatever. I mean as you know, our
7:51
refineries cannot use most of the oil that we produce, right.
7:55
I mean, we still import 6.6 million barrels a day into our
7:59
refineries. So there's and there's a trade
8:01
and, and a lot of, you know, a lot of that trade takes
8:04
advantage of the global network so that, you know, the Northeast
8:07
is sort of plugged into the, you know, Atlantic refinery system
8:11
and the Gulf Coast is plugged into a different refinery
8:13
trading trading system. So, you know, for the US to sort
8:16
of take advantage of this, you know, so so-called autarky, you
8:19
know, you have to restructure those those trade flows.
8:22
I think the thing that's concerning is that you're
8:23
starting to see a little bit of that happening around the world
8:26
where other people are saying, right, you know, my refined
8:28
products, you know, not, of course, which is sort of a, a
8:33
flashing, a flashing red light. I think something else though,
8:38
that that we've talked about is what the longer term
8:42
implications are for people's countries behavior.
8:45
And this is where I think it gets really, really important.
8:47
And you're starting to see movement at the sort of the,
8:51
the, the verbal level of the signaling level.
8:53
And I think this is going to follow through on the policy
8:56
level. You know, when, when, when Trump
9:01
first came out and said that he wanted, you know, other
9:05
countries to start escorting traffic through the straits, you
9:09
know, helping the US to solve this problem.
9:14
He listed, you know, what was it the UK, France, Korea, Japan and
9:18
China, right. So he is already created this
9:22
bucket of countries that have shared interests and are, are
9:26
sort of aligned in what they need to do.
9:28
He sort of pushed America's allies into a a relationship
9:33
with a country that, you know, in theory, they, they have this
9:37
sort of wouldn't say adversarial relationship, but you know, that
9:40
that are they're not aligned with.
9:42
And I think that is something that we need to look for over
9:45
the course of the coming months and years, which is European
9:48
countries, America's partners in Asia and throughout the world in
9:52
the Gulf as well. You know, saying China, we may
9:55
not like certain, you know, political values that you hold
9:59
or we may not like, you know, these aspects of your economic
10:02
policies, but we have more in common with you now and we're
10:05
willing to cooperate or negotiate or, you know.
10:08
Well, that was the crazy thing I saw was that, I mean, you're
10:11
using words like allies and partners as if Trump has treated
10:16
anyone like an ally or a partner over the last 12 months.
10:19
And now we're going to them hat in hand and saying it'd be so
10:23
great for you to help us, even though last time this was
10:26
attempted, 1/3 of all the ships were sunk, right?
10:30
But like, but this time around, don't worry, it'll be different.
10:33
We would love your help to, you know, to open up the Straits of
10:36
Hormuz. Like, I mean, you know, color me
10:39
skeptical. I don't see a lot of folks
10:41
taking them up on this. Well, I think the reaction from
10:44
Europe has been pretty clear. They've said no, Yeah.
10:47
And. I think China actually just
10:49
like, spit out their tea laughing.
10:52
Yeah, but but I think China doesn't have to.
10:53
I mean, I think something that, you know, we talked about before
10:56
is that, you know, Iran, like, I mean, Iran is OK, you know,
11:00
giving. China, yeah, China's already
11:01
getting their stuff out and, you know.
11:03
Their importance is going to in an increasing volume, yeah.
11:07
Yeah, and their imports are so small as a percentage of their
11:09
total energy use, They've got their overland natural gas route
11:12
from Russia. I mean, they they're in pretty
11:15
decent shape. They've been stockpiling oil the
11:17
last year. So they.
11:18
Haven't been stockpiling natural gas, so they don't have the
11:21
natural gas reserves that you would hope for.
11:23
And I think you know on natural gas, you know this this is an
11:26
area where they could be a little bit more vulnerable, but
11:29
I don't think they're I think they're prepared for this
11:31
actually. So, so I think that's, I think
11:35
that's so we were talking, I just want to go back to where
11:37
the, the question started, like how is behavior changing?
11:39
So 1 is, I think we're reshaping the alliance.
11:42
We're sort of reshuffling the deck with, you know, like who's
11:45
in whose camp. And I don't, I don't think we're
11:47
like creating any like new long term, you know, I love you
11:50
forever brother kind of relationships.
11:53
I think it's very like in this particular context, I've got
11:57
more in common with you than I don't.
11:58
Let's work together. The other one that I think is
12:02
sort of very, very clear is that you have, you have got to stand
12:07
on the accelerator for your localized energy.
12:10
And I know this is something that, you know, we've talked
12:12
about many, many times. I, I, I think actually I think
12:17
you sent me the, the Telegraph article that was talking about
12:20
how the, the, the person is in charge of.
12:24
Renewables UK. Renewables UK The the the wind
12:28
advocacy in the UK is like, let let North Sea oil and gas be
12:33
developed like it's OK. So I don't mean to go on a big
12:38
tangent on this, but it's basically an ex Shell executive
12:43
slash worked at 10 Downing who is now the head of Renewables UK
12:49
and she wrote an op-ed. She wasn't misquoted in an
12:53
article. She wrote an op-ed in the
12:55
Telegraph saying we need to like, open up the North Sea to
12:59
oil and gas drilling, right, being the head of basically the
13:03
offshore wind trade association. And in the UK now at the same
13:08
time, Ed Miliband, right, who is a friend, like, is, you know,
13:13
like an environmentalist, like he doesn't want to open up the,
13:17
the, you know, the North Sea. And so, like, I hear you on the
13:22
localization side, but the UK has got some complicated
13:28
politics. And so for the head of
13:31
Renewables UK to be calling on Ed Miliband to open up the North
13:36
Sea to me is like bonkers. I don't know that it's bonkers.
13:42
I think it, I, I mean, I, I think it makes, I think it makes
13:45
a lot of sense. Wind, solar with battery,
13:48
nuclear, all of these, you know, SMRS, you know, they need to
13:52
compete with fossil fuels on their merits and they are
13:55
competitive on their merits. I mean, think about it like
13:58
this. What's the worst possible
14:00
outcome for for the renewables path, the renewables transition?
14:05
The worst possible outcome is blackouts.
14:08
As soon as we get to a point where we actually can't keep the
14:12
lights on, then the backlash becomes vicious and people do
14:17
what people do. They're like, give me power,
14:19
whatever it costs, wherever comes from, I want my lights
14:22
back on. You know, where did Germany go
14:25
when they had the power crisis? Because the natural gas from
14:29
from Russia, which was curtailed, they went to the, the
14:33
lignite coal, they just went down and dirty.
14:35
So get in front of that, like focus on building out your
14:40
renewable stack. Stand on the accelerator, you
14:44
know, get it there. But make sure that if you're
14:46
balancing the grid, you're balancing the grid with local
14:49
molecules and. Make sure if.
14:52
You're feeding, if you're feeding a pet chem industry,
14:55
which we can't do without the barrel at this point, do it with
15:00
your local barrels. And if you're flying jets, which
15:03
we can't do on batteries, we're not there yet, or hydrogen or
15:08
SAP, make sure it's local and throw money at solutions to, you
15:14
know, solve those problems which are solvable, But like, you
15:20
know, focus on keeping the system functional so that
15:23
everybody is like, yeah, OK, this whole transition thing is
15:27
working. I think that's what I would what
15:29
I would lean on here. OK, last setup question.
15:33
Who's up and who's down? Tankers are tanker companies are
15:37
up 60%. Airlines are getting crushed.
15:40
United Airlines dropped 33% in a single day.
15:44
The solar and clean energy index is way up.
15:48
You spend your days talking to investors and traders like what
15:51
is the money? Tell us about where the world
15:54
thinks this is going. So I think the world is
15:57
complacent, to be quite honest at the moment.
15:59
You know, the the trades you're talking about are the obvious
16:02
ones. I want to point out that Donald
16:05
Trump has been extremely good for the renewables space on a
16:09
financial returns basis. Oh, like, like in the first term
16:13
we were up like 200%. It was fantastic.
16:15
I know. Despite his best efforts, let's
16:18
say that. I mean, ironically or not, yeah,
16:21
he is in fact the environmental president, as much as I think
16:26
he'd hate to hear that better. I mean, I feel like what you
16:29
mean to say is he's the degrowth president like he's got like, I
16:34
mean Scott Besson on TV is like, I would like consumers to stop
16:38
consuming as much. We'd like to tariff the things
16:40
that they consume, but not like inputs into our oil and gas
16:44
industry or semiconductor industry, etcetera.
16:46
But look at what? But I mean, just look at the
16:48
results. I mean, you know, I don't think
16:49
Donald Trump, you know, has any desire to to place himself in
16:53
camp green. But the outcome of his actions
16:56
is everybody scrambling to say, I need more solar, I need more
17:00
battery like. And if it comes from China, hey,
17:02
I'm OK with that. So who's?
17:04
But we're doing that not because of him, but in spite of him.
17:07
To be fair, imagine what our growth would look like if he
17:10
weren't fighting us tooth and nail every step of the way.
17:13
Hey, I agree. I, I, I'm on your, I, I agree
17:16
with you. But the fact is, first there's
17:18
Donald, then there's Green. Hey, it's a, there's a causal
17:21
relationship here. He doesn't intend it, but he
17:23
gets there. All right, let's get into the
17:25
next the next conversation. So Jason Bordoff, who runs the
17:30
Columbia Center on Energy, basically has said that.
17:39
What really made the world use oil more efficiently was a 1973
17:45
oil embargo and all of the the 10 years after that, not the ten
17:49
years after the Paris Agreement. It does feel like we're back.
17:53
We're entering the 1973 oil embargo again now that the
17:57
Straits of Hormuz seem closed for the foreseeable future.
18:01
And I don't know, we might even need ground troops to be able to
18:05
open it back up, right? Which would be, you know, like
18:08
an unmitigated disaster, I'm sure.
18:11
And so, you know, like explain to me whether you think we're
18:15
back like this is 1973 level disruption.
18:21
So I think the outcomes are going to be very, very
18:24
reminiscent of 1973, but maybe not necessarily in the same way
18:27
for the United States. So in the in 1973, the oil was
18:32
disrupted. The US was the big, you know,
18:37
loser in that. And so there was sort of, you
18:40
know, 2 policies that came out of it.
18:41
The first one was, you know, Nixon, who is the environmental
18:45
president because he ended up pushing for Project Independence
18:49
and, you know, you know, pushed on nuclear and pushed on
18:53
renewables in order to reduce America's dependency.
18:57
The second big policy shift was was Carter, who was, you know,
19:03
the American sort of the, the multilateralist, the peace
19:07
lover. But the Carter Doctrine said
19:10
that we were going to protect the flow of oil from the Gulf
19:14
and to the rest of the world. And then it was a Reagan
19:17
corollary which said, and that extends to protecting Saudi
19:20
Arabia. So that was the sort of the,
19:22
the, the impact of this oil shock on U.S. policy.
19:27
Now look at the impact of the Hormuz shock on everybody else's
19:31
foreign policy, right. So in the case of of China, it
19:36
means that they are now more deeply involved in what's going
19:41
to go on with, you know, the Gulf States and with the flow of
19:44
crude oil. They're, they're more, they're
19:46
being pulled more into helping to manage the global, the global
19:51
trading system. So they're sort of stepping up
19:54
as I wouldn't say the next hegemon, but they're getting
19:57
close. The European countries are, you
20:01
know, finding themselves in this position where they have to
20:04
change their their economic policies dramatically.
20:08
In order to respond. So in the same way as as Nixon's
20:11
Project Independence was really motivated by this fear of an
20:15
that was generated by an oil shock.
20:16
I think the Europeans are feeling this oil shock.
20:19
And I say, my God, here we go again.
20:21
Like I need to have, you know, a change.
20:25
I think the, I think something we talked about before was that,
20:29
you know, there there's going to be a spike in prices.
20:32
When we were last speaking, oil had not yet spiked, but it then
20:36
subsequently went up and briefly touched 1:20.
20:41
But that the, the longer term implications are going to be the
20:44
things that people talked about 10 years later.
20:47
And I think the longer term implications here very, very
20:50
much like what we saw in the 1970s are a reshuffling of the
20:56
global alliances and that's happening like in real time at
20:59
speed, a real a real push for localization, diversification
21:06
and redundancy and structurally higher oil and gas prices,
21:11
energy prices. So, you know, we are going to
21:15
see for the foreseeable future higher insurance rates because
21:19
now we know the tankers are a fair game.
21:22
We are going to see, you know, more storage.
21:25
You know, people are going to put, you know, more refined
21:29
product into storage just in case instead of 10 days, it's
21:34
going to be 90 days. We're going to see longer supply
21:37
chains. We're going to see more oil on
21:39
the water, more gas on the water as people have to avoid these
21:42
places. And we're going to see
21:44
redundancy in capacity. So people are going to say kind
21:48
of like we were talking about before, Jamie, I want to I want
21:51
to be able to, you know, to pull this out of the ground in my own
21:53
in my own space. So this is going to mean a
21:56
structurally higher energy price certainly for oil and gas and
22:02
then that's going to have that knock on effect for renewables.
22:05
It's going to make renewables look better.
22:07
Well, the other thing that Michael Semblis said in the eye
22:10
of the market from JP Morgan was that the amount of trade finance
22:16
that China is providing the 50 emerging markets around the
22:19
world today in terms of solar, wind, battery storage, EVs is
22:25
larger than the US Marshall Plan.
22:28
As a percentage of. An absolute dollars, inflation
22:33
adjusted, it's like $250 billion or so of aid that they're
22:37
providing. Like, it's not aid in the sense
22:39
of grants. It's aid in the sense of like
22:42
loose credit for countries that probably couldn't get it.
22:45
But that's how Pakistan shifted 10% of its entire, you know,
22:49
grid in two years. Yeah, I mean, let's, I mean,
22:51
let's bear in mind that the Marshall Plan wasn't a gift.
22:54
It was. I will give you credit so you
22:55
can buy stuff from America. Sure.
22:58
And And they're doing the same thing, yeah.
23:00
Exactly. You can buy stuff from China.
23:02
Right, but but but go back to what we were saying about like,
23:05
you know, knitting together alliances.
23:07
I mean, I think, you know, China isn't like, you know, walking up
23:12
to everybody in the world and saying, hey, let's sign a
23:14
contract to be new best friends. China is saying, you know what,
23:18
like I got this thing, you need this thing, How about I help you
23:20
out and like, you know, we can hang out at the coffee shop and,
23:23
you know, chat more. And I think people are like,
23:25
yeah, OK, I'll chat with you more.
23:27
You know, you're not as maybe as scary as I used to think you
23:30
were. I think that's the outcome.
23:33
OK. I hear what you're saying.
23:34
James and Isaac Levi at the Center for Research on Energy
23:37
and Clean Air called this the first oil and gas crisis in
23:41
which clean alternatives are fully price competitive and said
23:44
that looking at the solar booms, we should expect this to boost
23:47
deployment in a major way and that that might be significant
23:51
and durable this time. So is that how you see it?
23:53
Or do you think analysts are kind of getting ahead of
23:55
themselves in this moment? I don't think they're getting
23:59
ahead of themselves. I think before we got, we got
24:04
you know in stuck into this this conflict in Iran, I think
24:08
renewables were looking cost competitive and attractive with
24:12
the right conditions, right. So like always have that caveat,
24:16
you know, you have to have the storage, you have to have the
24:18
grid, etcetera and so forth. But it starts to make a lot of
24:21
sense now. It makes more sense because oil
24:25
prices, higher, gas prices higher, wind and solar just look
24:29
that much better. I think the other thing that we
24:32
just kind of need to focus on is that we've renewables are very,
24:41
very good at replacing Joules on the grid, but that's as far as
24:46
they can go at this point. And on a Joules, on an energy
24:50
contained basis, they just look pretty good compared to or
24:55
increasingly get better compared to fossil fuels.
24:59
The harder parts are the ones that remained.
25:01
It's where you really need that the molecule, either because
25:06
it's a it's, it's stored energy that you can really move around
25:10
in a in, in store in a way that's that's very, very useful,
25:14
or it can become a speciality chemical or, or plastic that's
25:18
really, really useful. Those are going to take a lot
25:21
longer for us to kind of squeeze out of the system.
25:24
But right now, from a clean energy perspective, yeah, I
25:30
mean, this just makes renewables look better.
25:34
More cost. Effective.
25:35
More reliable. Like if you look at China, I
25:37
mean, China is about 10% of their economy more electrified
25:41
than the United States, right? So that opportunity exists,
25:45
right? Like, you know, they're about
25:47
35% of their total energy use is electric electricity. the United
25:52
States is like 25%, right? So it feels like the US could
25:55
get to 35%. All the other countries in the
25:57
world could do the same. But I'm curious, like you said,
26:00
that oil hit $120.00 a barrel or touched it, right?
26:03
It's sort of retrenched a little bit now.
26:06
What would you have to believe for oil to hit 200?
26:11
If this curtailment of flow goes on for very much longer, and in
26:17
A and and in a meaningful way, 200's going to look easy.
26:21
Meanings weeks or months. You are going to start
26:27
exhausting the the excess inventory.
26:31
The, the inventory above ground in strategic stocks and in
26:36
commercial stocks that is, is, is incremental to what you need
26:40
just to keep the basic system flowing.
26:42
If you're running at, you know, 10 million barrels a day lost
26:45
for, you know, 60 to, you know, the next, you know, 8 weeks or
26:49
so, you're going to start hitting tank bottoms.
26:52
And at that point you have to start destroying demand.
26:55
And destroying demand gets really, really ugly.
26:58
You have to take the price up so that somebody stops consuming
27:01
it. The people who will stop
27:02
consuming it are not going to be, you know, the Europeans or
27:06
the Americans or the Japanese and Koreans.
27:08
It's going to be people in Africa or Latin America or South
27:12
Asia where they, they simply don't have, you know, the, the
27:15
resources to pay for it. You know, the Europeans will bid
27:18
away LNG carriers and, and pick them up.
27:23
The, the other place where I think you know, you need to be
27:27
really, really careful is to bear in mind that you're, look
27:29
you're talking about Brent and Brent is, you know, right now
27:32
$100 commodity, but Dubai is, you know, a different grade and
27:38
it's $150.00 commodity. And what is that reflecting?
27:42
And part of that is reflecting just, you know, shut in and
27:45
trapped capacity for a particular speck.
27:49
Part of it is reflecting that that is a kind of a barrel which
27:53
is very keyed or which refineries in Asia which are
27:57
very key to take and which they need in order to produce the
28:01
downstream products and in order to produce, you know, the, you
28:05
know what we actually consume, nobody consumes the barrel.
28:07
So that's gotten bid, you know, very, very aggressively.
28:10
So you talk about $200, you're talking about Brent, you're
28:13
talking about WTI, you're talking about an Atlantic basin
28:15
barrel where you know, inventories are still relatively
28:18
robust where you know, you don't have that particular grade being
28:23
sort of curtailed. What the the Iranians are
28:27
holding up on is actually a Dubai barrel or an Oman barrel
28:32
that is not $100. It's already at 150.
28:35
Now, if that starts to ripple out through the rest of the
28:37
world, which is what globalized commodity markets do, they start
28:41
to spread in their price implications, then that can get
28:45
pretty, pretty ugly. And that's how you get to your
28:47
$200. We mentioned before.
28:50
You know, one of the things that I'd be careful of is, you know,
28:54
the possibility of export controls.
28:56
You know, there's this new kind of idea out there that, you
29:00
know, instead of having a global trading system where we look
29:02
for, you know, efficiencies from trading with our neighbors.
29:06
Now what we want to do is have, you know, localized production
29:09
and in the entire trains as the entire supply chain in order to
29:14
preserve our own, you know, economic independence, which by
29:17
the way, I'm, I'm advocating for because we live in a scary time
29:23
in a circumstance where you start to see these extreme
29:26
products, short shortages. You know, jet fuel in Singapore
29:29
went, you know, to 230 bucks. It's back down below 200.
29:33
But like that's extraordinary. When you see these extreme
29:36
product shortages, you will see countries start to put in export
29:41
controls. I wouldn't be surprised if there
29:44
was a circumstance where the US started controlling its export
29:48
flows in this world. I think, you know, one of the
29:52
things that I'm not seeing yet, or maybe I'm starting to see,
29:57
but I want to see more of, we have to recognize that, you
30:02
know, energy has been weaponized.
30:05
And you know, regardless of how you want to score the events,
30:11
the the flow of gas and oil through the Straits of Hormuz
30:16
have been used in the context of a war as a way to punish your
30:20
adversaries. And the people who are feeling
30:23
this pain are, are Europeans amongst others.
30:28
And what I need to see from the Europeans is a recognition that
30:31
we need to look at our energy infrastructure in the same way
30:35
we would any other vital national security
30:38
infrastructure. So when we think about defense,
30:43
you know, one would hope we don't skimp on the resources
30:46
that that we provide in order to maintain our security and
30:49
sovereignty. When we look at energy
30:50
infrastructure, we need to take that same attitude.
30:53
And I think, you know, policymakers in Brussels, heads
30:56
of state throughout the European Union, need to apply that same
30:59
focus and that same urgency to questions about aligning the
31:05
grid infrastructure or developing A coherent strategy
31:09
for rolling out localized energy, which is almost entirely
31:12
renewables, for restarting nuclear where you can do it.
31:16
But to do that with a sense of urgency, as if your sovereignty
31:20
depends on it, because I think the weaponization of energy is
31:24
telling you that your sovereignty depends on it.
31:27
The conversations at Sarah Wake are going to be fascinating.
31:31
Sugar, you said something on Open Circuit this week that
31:34
really seemed to get a lot of people's attention.
31:36
No surprise. You said you have no problem
31:39
with countries building more coal plants because they're
31:41
going to build them and not burn them.
31:44
Solar and storage are just cheaper.
31:47
India and China burned 3% less coal last year even after
31:51
building 60 gigawatts of new coal plants.
31:54
Your line was, why shouldn't we shouldn't be fearful of coal
31:58
plant construction. We should be fearful of coal
32:00
plant burning. James, what's your reaction to
32:03
that? Do you think the LNG step is
32:05
just getting skipped entirely? My reaction was I loved it when
32:11
I, when I heard it, I was listening to Jigger on the
32:13
podcast and I thought it was just brilliant.
32:16
And the thing that I really liked about it was that it was
32:20
really putting the focus on the utility that coal provides.
32:24
So the price per unit of energy. I mean, I like renewables,
32:30
except when I can't get it. That's when I really want the
32:34
coal at that moment, fine, no problem.
32:37
Turn it on. Like that's the price.
32:39
But when I don't need that because I've got a better
32:41
something out there, which is, you know, the wind blowing at
32:44
the sun shining and the grid working, then it just sits
32:47
there. And the beauty of coal is it
32:49
does just sit there. Before the whole event set of
32:52
events in the streets of Hormuz, I would have been sort of
32:56
arguing against Jigger on the coal side and on behalf of
33:00
natural gas because natural gas does other stuff.
33:03
And you know, you can kind of get to a sort of less
33:08
environmentally damaging place with with emissions from natural
33:13
gas. But I going back to the start of
33:17
the conversation, I didn't really think we were going to
33:21
push ourselves into a situation where somebody like actually
33:24
closes the straight, which is just unheard of, unthinking.
33:28
It's crazy town. It's what you get taught in like
33:32
basic, like national security one O 1.
33:35
There are no good options to reopening the Straits of Hormuz.
33:39
Do not take steps to close it. Right, exactly.
33:43
Like step away from the car, Sir.
33:45
Like there's nothing good about. This but I really think Trump
33:48
thinks that this is his legacy in some way, right?
33:51
Like, I mean, but this is this is the thing that's so crazy for
33:54
me is I feel like, I mean, Trump is the person who was like, I'm
33:59
going to cut your energy bills in half, right?
34:01
That I've like, you know, bullied the oil companies to
34:05
open up the spigot such that like oil prices are down and I'm
34:08
saving you a bunch of money on gasoline.
34:10
His legacy, right, which is what he's pursuing.
34:14
I think right now with all this foreign war stuff is now that
34:18
Americans are poorer, that Americans can't afford a plane
34:22
ticket because 1/3 of the cost of your airline ticket is jet
34:26
fuel, right? They can't afford to fill up
34:29
their gas in their car every week 'cause it's an extra 20
34:32
bucks now every single week, right?
34:35
Electricity costs are up 13% since he got into office.
34:39
Like I just feel like execution is not his strong suit.
34:45
Yeah, I mean, I, I just want to go back to the conversation that
34:47
we were having Jamie before. Like, you know, Trump
34:50
inadvertently has made himself into the guy who's going to, you
34:53
know, spread the environmental, you know, transition around the
34:56
world. But I don't think he intended
34:58
to. And he's clearly not in, you
35:00
know, his intent wasn't to make Americans, you know, net poorer.
35:04
But, you know, that may actually, you know, kind of be
35:06
what happens. I think one of the things I
35:08
struggle with here, Jigger, is like we're, we're sitting here
35:12
and we're trying to ascribe it to intent.
35:16
I didn't expect the Straits to be closed because the sort of
35:22
sequence of events was so obvious.
35:24
You keep. You thought people with half a
35:26
brain cell actually worked there and that they wouldn't have
35:30
like, intentionally like, launched this conflict without a
35:35
plan. And then you're like, wait,
35:37
what? There really wasn't a plan.
35:40
Forgot. We don't forget that we don't
35:42
know what the goals are. My God.
35:44
Let's not, let's not put, let's not.
35:47
I think they took a gamble. They the gamble didn't pan out.
35:52
I don't know that I that I would have taken that gamble, but when
35:55
it didn't pan out, that was the time to cut the loss.
35:58
Right. Yeah, Their best chance to have
36:00
declared victory was before Hominy's son was was put in as
36:07
Supreme leader. And now, like, and now that
36:10
like, he's been put in and they, I guess narrowly missed killing
36:15
him the other day. Then like, you know, like Trump
36:19
can't declare victory and leave because if the Straits of Hormuz
36:23
are closed and he declares victory and leaves, then people
36:26
will be like, what the hell? Like, the Straits of Hormuz are
36:30
still closed. So the only way for him to
36:33
declare victory is if the straits are open.
36:35
And that is controlled by Iran, not by the United States of
36:38
America. So.
36:40
So the straits aren't fully closed.
36:43
It's not a binary on or. Off 1,000,000 barrels a day,
36:47
that's getting through. Yeah, I understand.
36:50
But it's 1,000,000 and it's probably going to increase.
36:52
It's just going to increase at Iran's discretion and so.
36:57
You're saying they're making a lot of friends?
37:00
I think they're they're, they're in a position of more power than
37:03
they were in before. Wow.
37:06
I mean. That's a hard take.
37:10
I'm just saying say. That so far, the US mission has
37:15
failed. All I'm saying is all I hear all
37:18
day is how much winning we have so much winning.
37:21
And you're basically saying that like Iran is making more friends
37:25
than Mark Zuckerberg ever could. So like you say friends, as if
37:33
people like you I have yet to find.
37:37
Convenience. I mean, it's sort of like you're
37:40
in Chinese example in a coffee shop.
37:44
Yeah, I have yet to find anybody who's who's who's like said, oh,
37:49
wow, I'm really bemoaning the Iranian regime itself.
37:53
I see a lot of people who are deeply, profoundly troubled for
37:56
what's happening to the Iranian people and for the consequences
37:59
of the choices that the Iranian regime is taking.
38:02
But nobody really, I, I don't know anybody who likes the
38:04
regime. So nobody's going to be their
38:06
friend, but they have the ability to do things now that
38:12
they didn't before. You know, they were always
38:16
holding back from, you know, blow, you know, the nuclear
38:21
option on the straits because they were afraid of getting
38:24
pummeled by the United States. Now they've been pummeled.
38:28
That's out like that's been done.
38:30
Like we've, we've blown a whole bunch of stuff up.
38:33
We've we've killed a lot of leaders and and their family
38:36
members. What left do they have to lose?
38:38
So they push the button, they close the straits, which by the
38:42
way, they haven't actually blown up a lot of ships.
38:44
They've just close the straits by threatening, blowing up a few
38:49
and threatening to blow up a lot of ships.
38:51
You know, something that's really important here is that
38:52
like, in sort of a brilliant way, they've used the Western
38:56
financial system against the West.
38:59
I tell you, hey, there's a pretty good chance that insured
39:02
vessel is not going to transit. And Lloyd says, you're right,
39:06
it's not going to transit. You know, the US offers, well,
39:10
maybe we'll write the check and we'll ensure that vessel.
39:13
And then somebody sits down and thinks, well, hold on, we've
39:16
just made it more attractive for the Iranians to then blow up
39:19
that vessel. Because then not only do they
39:22
curtail the flow, do they scare people off, but they make sure
39:25
that the US has to pay, it has to write a check to compensate.
39:28
So what they've done is they've, they've sort of weaponized our
39:31
own financial system, you know, against us in a, in a, in a, in
39:35
a pretty effective way. But the end result here is that
39:41
an Iran which is no longer afraid of being bombed is an
39:47
Iran which now has agency and capacity to do things which it
39:51
would have restrained itself from doing in the past.
39:54
If you want them to stop at this point, you can't say, or else
39:58
I'll bomb you, right? Well, you've already done it.
40:02
Look, the last time you came on the pod, James, you told us that
40:07
nobody calls you when they want to feel better about the future.
40:12
So. So I don't know what you're
40:15
going to say to this last question, but I'll ask it
40:18
anyway. Is there a reason for optimism?
40:22
Absolutely, Jigger, I am an optimist.
40:26
I I usually like like like like like further.
40:29
Let's let's clarify this. I, I go through every possible
40:34
permutation of the downside scenarios and like, you know,
40:38
ruminate them on them, you know to the point where I have no
40:41
friends left and then I go ahead and do it anyways.
40:44
So that like what is optimism, except for that?
40:48
I think that something that we've talked about over the
40:52
course of these papers that I've been working on with my with my
40:55
colleague Jeff Curry over the past two years is how, you know,
40:59
the the circumstances that create incentives for the United
41:02
States in particular have changed in some really, really
41:05
meaningful ways. And so we wrote the new jeweler
41:08
and we start with this one basic observation.
41:10
When the US is no longer energy depend and it's no longer an
41:15
energy importer, it's incentives with respect to the global
41:18
energy trade change with the new Marshall Plan.
41:21
We talked about the US being afraid of the Soviet Union,
41:25
Soviet Union collapses. We're not afraid of the Soviet
41:27
Union anymore. Our behavior with respect to
41:29
with respect to Europe changes. And so we've been living in sort
41:33
of this like, you know, you know, hallucinatory state for
41:38
the past, you know, 10 years or so.
41:40
We're like, we sort of imagined that, like, everything was going
41:42
to continue the way it always had and that, you know, the US
41:46
was going to continue providing all of these, you know,
41:48
wonderful services, like as a benign global hegemon.
41:51
And that needed to stop. Like, we needed to wake up and
41:56
like, not rely upon the US to do these things.
42:00
And that's what we're doing. So you want to know, like, what
42:03
good comes out of this? The good that comes out of this
42:06
is that, you know, all of these countries which allowed
42:10
themselves to be dependent and in some ways submissive to the
42:14
US are not going to let themselves be dependent.
42:17
We will invest in a localized energy system with, you know,
42:21
renewables and nuclear at the core because that keeps us, you
42:25
know, safe, that provides us with cheap, abundant power.
42:30
And, you know, we can do it on our own.
42:34
We will talk to other countries around the world as if they are
42:37
our, as if they were deserve respect and we'll treat them as
42:42
equals. We will negotiate, we will give,
42:44
we will take and we will, we will work it out.
42:46
And we won't look for the US to sort of underpin and guarantee
42:51
and, you know, chastise or punish and reward people who
42:55
play, you know, according to the rules or who don't.
42:57
We're going to start, you know, exercising a little bit of
43:00
independent action and, and sort of grow up a little bit.
43:06
So you're saying that Iran is going to be the thing that that
43:10
solidifies Trump as the wind and solar president?
43:14
You really love that one, don't you?
43:18
Well, there is certainly a lot of hot air there.
43:22
I think one of the things that has to happen is we have got to
43:27
accelerate on renewables. I just don't see how you can
43:32
avoid it in Europe. And everybody I talked to is
43:34
just like, yeah, you're, you're, you're, you're right.
43:36
I do also think that, you know, we, we want to be careful in
43:40
giving him credit as opposed to acknowledging his role as the
43:46
midwife. Well, and I think the thing that
43:49
we didn't talk about, but I do think is even more important to
43:53
get accelerated is going to be electric vehicles.
43:55
I mean, I think that you're just going to see such a huge
43:58
acceleration of the deployment of electric vehicles into these
44:02
50, you know, oil importing nations because like, why would
44:08
you keep yourself dependent upon importing gasoline and diesel?
44:12
So the so the beauty of electric vehicles, it's like, you know,
44:15
gasoline does something really super useful.
44:18
It is portable stored energy. It's just like, it's great now
44:25
if I have an EV and I have a grid that can support it, then I
44:29
can start to take away the utility of of that gasoline.
44:34
And I want to do that if I feel like that gasoline can be
44:37
curtailed like war after war after war is is started and
44:41
fought over resources. So, you know, when I think about
44:46
what's going on in the Straits of Hormuz and I ask myself, am I
44:49
comfortable having that dependency?
44:51
No. Where's my oil consumption,
44:53
largest transportation fuels? How do I get that out of the
44:57
system on a like high volume basis?
45:00
I electrify my, my park, my vehicle park.
45:03
I expand my infrastructure of chart my, my, my charging
45:07
network infrastructure. I, you know, increase, you know,
45:11
the, the, the, the, the, the support for EVs on the road.
45:15
And that reduces my dependence. And the beauty of it here is
45:20
that you can reach this sort of tipping point where like you no
45:24
longer actually have to do that much in order to just let nature
45:29
take its course and people naturally move to an EV charging
45:32
network. So, so think about it like this,
45:35
you know, we talk about range anxiety with electric vehicles
45:38
and, and you know that sure, like you can solve range anxiety
45:42
with batteries, you know, with a charging network, you know, all
45:44
these wonderful things, But it's not like we don't have range
45:46
anxiety with ICE vehicles. Like I still, if I'm
45:50
particularly if I live in Texas or, you know, Wyoming, like I
45:53
need to know that there's a gas station where I can, I can
45:56
refuel my vehicle. As EVs start to extend, you
46:02
know, throughout the system, there are fewer vehicles that
46:05
are that are going on to the petrol station, 4 quarts.
46:08
There are fewer people paying for, you know, the soda pop and
46:12
the candy bars and filling up their tanks.
46:15
So the economics behind the gasoline recharging
46:21
infrastructure start to deteriorate and those are
46:23
expensive. Like it's messy having, you
46:27
know, a petrol station and paying to make sure that you're
46:30
not leaking into the housing estate next door and all that
46:34
kind of stuff. So once you get to this certain
46:36
level of EV penetration, you kind of just, you don't really
46:40
need to do anything anymore because the the utility of
46:44
having a nice vehicle starts to go down.
46:46
I start wondering how can I get to Scotland, You know, without
46:51
having to hunt around for a place to refill my my ice engine
46:55
kind of stuff. Well, always a pleasure, James.
47:00
I hope this is the last time we'll have you on, but I'm, I'm
47:03
unfortunately don't think that's going to be the case.
47:06
I feel like like your expertise is going to become more and more
47:09
important in the coming months. So.
47:12
Well, Jigger and Jamie, I always have great pleasure in talking
47:15
to you, so I hope I do have another chance to come on.
47:17
I just need to find, you know, really cheerful things to say.
47:26
I want to thank James Gutman for coming on with I think 24 hours
47:30
notice. He is a rock star and I always
47:34
learned so much from him. So thank you James for coming on
47:37
board. Thank you Simon for getting all
47:40
of the notes and everything else together in such record time.
47:44
And thanks everyone for listening.
47:46
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48:05
So kidding. But anyway, thank you so much
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