Latest / Energy Empire / Trump's Iran War: Hubris, Blowback, and Peak Oil

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Trump's Iran War: Hubris, Blowback, and Peak Oil · Energy Empire

0:00
I think peak oil trade is really clearly here now.
0:05
What follows is peak oil demand. So in a very weird kind of way,
0:10
I wonder if Donald Trump is the guy who brings us to peak oil
0:13
demand on an accelerated fashion.
0:22
Hello, my name is Jigger Shah and I'm a clean energy
0:25
entrepreneur. And I'm Jamie Nolan, a clean
0:28
energy communications consultant.
0:30
And this is Energy Empire. What's going on, Jigger?
0:34
I mean so much stuff happening right now.
0:38
It is nuts that we are already at Earth Day.
0:42
It's it's hard to keep up with actually.
0:44
I mean, given that the conflict in Iran come like are, is there
0:48
a blockade? Is the straight open?
0:49
Is it closed? Where are we?
0:51
What's happening? And so that's why we had to have
0:54
James back. Yeah, I mean, it's, but the
0:57
thing that's crazy to me is just how many people are paying for
1:02
AI services now and they have less clarity than they've ever
1:08
had in their entire life. Like, I feel like you have all
1:11
this information available to you and then you're just like,
1:14
wait, what? Like wait, who's up?
1:17
Who's down? Like, how did this happen?
1:19
And you know, like it's more confusing than ever, right?
1:22
I mean, gasoline prices are high, yet oil prices are at like
1:26
$90.00 a barrel. And you're just like, how does
1:29
all this tied together? Sure.
1:31
I mean, AI, certainly it's not producing independent thinking,
1:35
right? It's just finding patterns and
1:38
information that you feed to it. And that's what makes
1:41
independent original analysis more valuable than ever.
1:46
And I mean, definitely that's what James brings to the show
1:50
and why we keep having him back. I mean, I learned so much every
1:52
time we talk to him. So let's get into it.
1:55
Let's dive in with James and hear what he's got to say today.
2:03
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energy affordability. All right, so day 51 of the Iran
3:04
war. I think the ceasefire expires
3:07
April 21st. I thought the Strait of Hormuz
3:11
was open, but now it seems closed.
3:14
My understanding is that there's some gunboats firing on Indian
3:20
tankers who are supposed to be friends of Iran. the US is, I
3:23
think, still blockading Iranian ports.
3:26
We've got a trio of extraordinary individuals and JD
3:31
Vance and Steve Witkoff and Jared Kushner heading back to
3:36
Islamabad, and I think we're still threatening to bomb every
3:40
power plant and bridge in Iran. Tucker Carlson, really like, I
3:46
think weirdly, is like asking whether Trump is the Antichrist.
3:50
And I thought, who better to talk about all this stuff than
3:55
our good friend James Gutman? Welcome back to the pod.
3:59
You are our first four time guest.
4:02
We love having you on. We wish we had more fun stuff to
4:05
talk about though. It's great to be here, Jamie,
4:07
Thank you. And and I do appreciate being
4:09
called back. I just, I'm waiting for somebody
4:11
to call back, you know, to say, hey, we want to talk about all
4:13
the happy Slappy stuff. We'll just have to do one for
4:18
like shits and gigs after. Hopefully all this wraps up.
4:21
Any day now. Any day now.
4:23
So this episode we are dropping right around Earth Day.
4:26
So I have to ask, you've come on the show 3 times and argued that
4:31
Trump is the accidental clean energy president.
4:34
Since this war started, countries are installing solar
4:37
at record pace so they never get cut off again.
4:40
And the IEA says oil demand may have peaked not because of any
4:44
climate argument, but because of this war.
4:46
Two years ago, Jigger got the Earth Day awards.
4:49
So, James, is it Trump's turn this year?
4:53
I think Trump absolutely deserves the Earth Day award for
4:57
helping to revitalize the the push towards renewables.
5:00
And there may be a Peace Prize, you know, down the road as well,
5:04
when, when we finally resolve all of these conflicts.
5:08
My God, the the Peace Prize, Lord Almighty, so you James, on
5:15
day 51 have been consistently wrong about the fact that like
5:19
folks are actually trying to solve this conflict.
5:22
And so like, so now that we've got a blockade, like what is
5:26
your view of the end game since day 31?
5:30
Yeah, thank you for that, Jigger.
5:31
You know, keep you keeping me honest.
5:33
You keep me honest. Just just for anybody who, who
5:37
wasn't here the last time or the first time, Yeah.
5:41
This war should have sort of ended on day three when it was
5:45
pretty clear that the Iranians weren't going to just
5:47
immediately collapse or submit. At that point, the US should
5:51
have just declared victory and gone home, in my opinion.
5:54
And now we're at day 51. And boy, these two are like
5:59
really stuck into it. It's like, you know, they're
6:03
both kind of trapped. I, I think that both of them
6:05
really wanted out an exit. And the problem is that they're,
6:08
they're unable to define, you know, an acceptable exit for
6:15
their own internal constituencies as well as, you
6:19
know, the longer term strategic goals.
6:22
So I, I don't want to get into the position of saying like, you
6:25
know, it's done or it will be done.
6:27
I unfortunately announced to, you know, a group of people I'm,
6:31
I'm very close to, you know, a few days ago that, that, oh,
6:35
that's it. You know, Iran has said that the
6:37
streets are open and I think this time will stick.
6:40
And here we are, you know, two days later and they're still,
6:44
they're still blowing stuff up. I actually think that, you know,
6:48
to be quite honest, most of like that shock from the closure of
6:55
the straight, the initial shock has actually worked its way into
6:58
the market. So like at this point, we know
7:01
what we're dealing with. We're struggling to find barrels
7:04
or we've struggled to find barrels and we've reallocated
7:08
and we've rejected. And so now there's this sort of
7:11
much more predictable, still painted very painful and sort of
7:16
ominous kind of pig in a Python working its way through.
7:20
But we're no longer in that Oh my gosh, what's happening phase
7:24
now? It's like it's happening.
7:26
So it's, it's kind of less interesting in my, in my mind,
7:30
you know, to, to sort of stare at the tickers and, and say or,
7:34
or the screens and say, you know, is this the, the tweet
7:36
that makes the difference? And it's more interesting to
7:39
say, OK, this is already now a fact.
7:43
What does this mean going forward?
7:45
Well, your expertise has always been the long term, short term,
7:51
play by play, so I appreciate that.
7:53
I studiously avoid trying to make short term forecasts.
7:57
That being said, tomorrow Vance, Witkoff and Kushner headed back
8:02
to Islamabad. Iran says it won't show up while
8:05
the blockade continues. So what Do you have any any new
8:09
thoughts on what might happen tomorrow if there's no deal?
8:12
I just, I, I can't begin to like, we're in a zone of
8:17
irrational behavior here where they're both sort of stuck doing
8:21
things that they shouldn't have been stuck doing things.
8:25
I think both sides need to declare victory and walk away.
8:30
However they phrase it, however they do it.
8:32
Just just get there. If this next round of
8:36
conversations in Islamabad doesn't, you know, turn out
8:39
anything good, then it will be more punching and it'll be the
8:43
round after that. All right, let's just dig deep
8:45
then, James, like so the IEA said that dated Brent, which is
8:51
physical crude, hit about $150.00 a barrel.
8:53
The futures market, which is what everyone really watches, is
8:57
trading below that. Global oil supply dropped, you
9:00
know, roughly 10 million barrels a day in March, a little bit
9:03
more. The IE is calling this the
9:05
largest disruption in the history of the global oil
9:08
market, bigger than the 1970s oil crises combined.
9:11
But markets keep rallying every time someone says the word deal,
9:15
right? So last time you gave us 3
9:17
reasons for the disconnect. Buy the dip, right?
9:20
The Trump put and stockpile resilience, right?
9:24
So seven weeks later, most of that stockpile seems to have
9:28
worked its way through the system, right?
9:30
So, so I think part of what you're saying is that the
9:33
markets are fairly pricing what they're seeing, right?
9:36
And they're absorbing all of this.
9:38
So help us make sense as to why oil futures are at $100 a barrel
9:43
or below. Yeah.
9:45
So I think, I think what we need to do is we need to, you know,
9:48
sort of distinguish between the physical market and the paper
9:51
market. And this is where, like, you
9:54
know, most people start to yawn and walk away.
9:56
But just just bear with me because it's, I think it's
9:59
really, you know, kind of the crux of the whole thing.
10:03
I can't say this often enough. Equity and bond markets, they
10:07
price the future, but commodities price the past.
10:11
When I'm buying a stock or where when I'm buying a bond, I'm
10:16
getting, you know, a promise of future earnings, you know,
10:19
through, through dividends, a promise of future coupon and
10:23
repayment. But when I buy a commodity, I'm
10:26
buying something that is like already out of the ground or
10:30
something that is in the ground, but like there is a, a plan to
10:34
take it out of the ground. So it's something that's already
10:37
there. It's the past.
10:38
So that's you know, that's that's what the physical market
10:42
there is trading. So in the physical market there
10:45
are three prices. There's the price to pull it out
10:48
of ground, out of the ground and that's the long end of the
10:50
forward curve and that hasn't moved jigger like it is like
10:56
long dated Brent is flat as a pancake.
10:59
There's another price, which is a price to pull it out of
11:01
inventory. Now that's the backwardation to
11:04
spread between that front month contract and the long did
11:06
whoever you want to put the long did in in Brent, the front to
11:12
the 12th month M1 to M12 screamed to a 50% backwardation
11:18
which like annualized back like over that entire curve, which is
11:22
the steepest back we've ever seen in the history of Brent
11:26
crude oil trading. So that is a a paper market
11:29
right there which is screaming stress.
11:33
It is saying the price to pull inventory out right now has just
11:38
boom gone through the roof. O that is, that is like really
11:43
extreme. And then there's the third
11:45
price, which is, you know, what is the price to get people to
11:49
actually stop consuming? And that's where you get into
11:52
your physical markers. So you know, your, your dated
11:56
brand or you know, your physical barrels, you know, in the, in,
12:00
in East of Suez, or you know, your physical products, you
12:06
know, Singapore jet, which got as high as I think close to over
12:10
250, but close to 2 to 300 on a, on a, on an all, all in basis.
12:15
So those are the prices that you have to see to get a refinery to
12:19
say that's my willingness to pay.
12:23
I'm like, that's what I have to do to get those barrels to avoid
12:27
shutting down my refinery in a really painful and uneconomic
12:31
fashion, or what you have to do in order to get people to say,
12:35
you know what, I'm going to shut my pet Cam, you know, processing
12:39
facility and I'm just not going to produce the plastics or to
12:43
get somebody, you know, to say, I'm not going to use that that
12:48
LPG for my cooker and I'm just going to turn off the heat or
12:52
I'm just going to do without. So that's the demand rationing
12:55
piece. If you look at what the what the
12:58
paper market trades, which is what everybody sees on their
13:00
screen, you know, Brent roughly 95 bucks a barrel, which is
13:05
quite a price, right. So that's pricing inventory in
13:09
the Atlantic basin, OECD commercial inventories in the
13:12
Atlantic basin as a spread to that long dated price.
13:15
That hasn't changed. Well, right now OECD inventories
13:19
are they're fine. I mean, they're not like through
13:22
the roof, but we walked into this with inventories looking
13:26
decent. And so far, they haven't drawn.
13:30
So why should you see this, like ginormous backwardation in these
13:36
paper markets if you haven't seen the actual inventory come
13:40
out? Because ultimately, that's where
13:42
the price is going to converge. But at some point, like, those
13:48
barrels have to be replaced. Like they got to come from
13:51
someplace so that that fleet of tankers that Mister Trump likes
13:56
to point to that are heading towards the US Gulf Coast.
13:59
You know, assuming they can all load, that's going to
14:02
dramatically reduce the inventories a visible
14:05
commercial. But they're not filling up with
14:07
oil, right? They're filling up with finished
14:09
products. They're filling up with
14:11
gasoline, diesel and jet, right? There's only so much finished
14:15
product that units refineries can pump out.
14:17
Like it's at some point you're going to start taking these
14:21
crude oil inventories out of OECD commercial.
14:24
That's where you're going to start to see, I think the price
14:26
pressures feed through into the paper market in a very direct
14:28
way. You can't avoid this Jigger.
14:31
I mean, I said I don't like to forecast, but this is as close
14:34
as you're going to ever get me to making a forecast.
14:36
Like, like you can't avoid inventory.
14:39
Like there is no, I can't imagine a universe in which we
14:43
don't have dramatic inventory draws in OECD commercial.
14:46
It just doesn't. It has to happen.
14:49
So let's take this one step further from we were talking
14:53
about price disruption, supply disruption, but this rationing
14:57
is driving real deployment of demand destruction.
15:01
I know that that hasn't been a huge story in the US, but we're
15:05
starting to see, you know, the stories about Japan, the
15:08
Philippines. I just read that there might not
15:11
be enough jet fuel for the major European European airlines this
15:16
summer, which is absolutely wild.
15:18
And you can really see that that would start to spill over into
15:21
the lifestyles of Americans. So when does this actually
15:25
become the story, the demand destruction story?
15:28
Like particularly in the US where I do, I feel like beyond
15:32
rising gas prices, we have been largely isolated to date.
15:38
Yeah, I mean, I think, I think you want to be careful because
15:42
this this could have a real sharp sting in the tail for the
15:45
US You know, one of the reasons why we had this great big
15:49
beautiful energy market in the US is because we've got a market
15:53
and that means that you can price for things.
15:55
And if people will get a better price by filling up their tanker
15:59
in the US and shipping it overseas, then that's exactly
16:01
what they will do. So you know, there's this,
16:05
there's, there's, there's a greater price elasticity for the
16:09
consumer in the US because the market has fewer, fewer
16:12
restrictions. There's there's just more pass
16:14
through, you know, to the end user market.
16:17
So I think, you know, as you start to see that physical pull
16:22
coming through the pipeline, the one I was talking about before
16:25
where it's just sort of like inevitable that you're going to
16:28
get this massive draw out of Atlantic basin inventories and
16:33
commercial and commercial inventories.
16:35
You know, that gets fed very, very directly through to
16:38
American consumers and American consumers will start to see
16:42
meaningfully higher prices. You know, then we bought already
16:46
God and that will curtail consumption directly in the US.
16:52
So so that's where you're going to see some of that demand
16:55
destruction. I think it's important to bear
16:58
in mind that like take take for example, the IEA, you know,
17:03
Jigger, you mentioned before that the IEA, you know, has
17:06
recently revised its, its demand forecast as as one must when
17:10
something like this happened. And they've really they've,
17:12
they've completely eliminated their, their expectation for,
17:18
for global oil demand increase in 2026.
17:22
So they basically taken it to zero.
17:23
I mean, I think it's like 70,000 or whatever.
17:26
It doesn't really matter anymore.
17:29
But what they haven't done is they haven't like like at the
17:33
end of at the end of 2026, they have demand, global oil demand
17:38
recovering to 106 million barrels a day.
17:42
So they've got this like great big crater, which tells you that
17:46
that is, you know, demand rationing, but it's not
17:50
completely permanent demand destruction.
17:53
So I think that's kind of the next place, you know, that you
17:56
want to look after that wave of demand rationing, you know,
18:01
which is how people get through that temporary shortfall.
18:05
There's going to be that permanent demand destruction.
18:07
So where does that come from? That comes from permanently
18:09
higher prices and it comes from a permanent willingness or, or
18:14
reluctance to be dependent on something which is so intensely
18:19
volatile. And I think that's where you're
18:21
going to see and we're we're seeing it now actually.
18:24
I think, you know, that's already like very visible.
18:26
That's where you see sort of the permanent demand destruction.
18:31
You know, it's very maybe here's another one we can give to to
18:34
President Trump. You know, something that I wrote
18:37
about in the past was my with with my colleague Jeff, you
18:40
know, was that, you know, this, this idea about peak oil supply
18:43
was something that got people really sort of angsty, but never
18:46
really happened. We never hit peak oil supply And
18:49
then we spent a lot of time talking about peak oil demand.
18:53
But the truth is we didn't see peak oil demand.
18:56
Like demand kept rising. And even the IEA had to sort of
19:00
throw in the talent on that one. And what we argued was that what
19:04
we're seeing is peak oil trade. Well, I think peak oil trade is
19:07
really clearly here now. But if peak oil trade is here,
19:13
then I think what follows is peak oil demand very, like,
19:19
relatively rapidly. So in a very weird kind of way,
19:24
I wonder if Donald Trump is the guy who brings us to peak oil
19:28
demand on an accelerated fashion.
19:31
Well, I mean, it is a straight shot from peak oil demand to the
19:36
Nobel Peace Prize. So I just want to make sure
19:39
that, like, people realize like that it's just so much winning.
19:45
Oh, my God. All right, James, let's get back
19:48
into your area of expertise, which is that you've been
19:52
writing about this a lot around energy independence as hubris.
19:57
And we talked about, you know, the United States, right?
20:00
Basically not having to protect the Straits of Hormuz and all
20:03
the shipping lanes because we feel like we're energy
20:06
independent. Your working title here is like
20:08
hubris, blowback and energy independence.
20:11
Walk us through this thesis, particularly as it pertains to
20:15
Israel. Yeah.
20:17
So when the US, when the US crossed that sort of magical
20:22
line between net energy importer to net energy exporter, it
20:27
created this sort of perception of, you know, new possibilities.
20:32
And I think it's important First off, the caveat that by saying,
20:35
you know, perceived energy independent independence.
20:38
So like if I happen to be sending, you know, 100 million
20:43
barrels of crude oil products overseas, but I have no refining
20:48
capacity, so I import 50 million barrels of refined product,
20:52
which is what I consume. I am not energy independent.
20:56
I am on a total joules basis, but I actually have a lot of
21:01
energy dependence there. So first caveat here is that
21:05
when the US crossed over from energy importer to net exporter,
21:09
it didn't completely shake off its dependence on this global
21:13
trade flow because a lot of these refineries grow overseas.
21:16
And a lot of the crude oil that was importing to consume in the
21:19
US was, you know, coming from overseas.
21:23
So that's just sort of the the first cock hit.
21:26
But what happened with that relative shift is that it
21:28
created this, this kind of willingness to use coercive
21:32
force in a way that, that, that perhaps the US might not have
21:37
been willing to, to do in the past.
21:40
Now we can see the same kind of pattern if you, if you sort of
21:45
think about it with some other countries.
21:47
So let's take the example of Israel, because you mentioned
21:48
that one, it's kind of pretty topical.
21:50
So Israel's been in a state of war kind of nonstop since, you
21:53
know, the formation of the state.
21:56
So, so work is nothing new to Israel, but in 2014 with the
22:00
opening of the tomorrow natural gas field and and Leviathan, you
22:04
know, Israel saw this dramatic reversal in its energy
22:09
dependence. So they went from basically
22:11
having a near 100% dependence on imported energy supply to, you
22:17
know, whatever 20% ish. It's a big move.
22:21
Like they still need imported fossil fuels.
22:24
They've got, they don't have a domestic civilian nuclear energy
22:27
program. You know, renewables don't pick
22:30
up the slack. It's imported fossil fuels, but
22:34
with with that natural gas that gave them, you know, a lot more
22:39
scope to to maneuver. So if you look at about from the
22:43
perspective of of Jerusalem, they have fewer constraints.
22:47
You know, if they get aggressive, very aggressive with
22:51
Iran, right, wrong or indifferent, there's just one
22:55
fewer threats that they have to worry about because they don't
22:58
have to worry about being, you know, subjected to an oil
23:02
embargo or an energy embargo, doesn't matter anymore.
23:05
So it's that relative shift in perceived energy dependence or
23:10
independence that can make you act in a less constrained
23:14
fashion. And I want to keep extending
23:16
this now because, you know, let's look at Russia.
23:20
So Russia is and always has been like for as long as we've, you
23:24
know, the crude oil age, Russia's an energy exporter and
23:28
even in sort of, you know, the bottom of its energy production
23:33
story in the mid 1990s, it was, it was, it was still a net
23:37
energy exporter, net crude oil exporter.
23:40
But with the collapse of the Soviet empire, you know, they,
23:44
there was also this collapse in, in Soviet oil production,
23:48
Russian oil production that recovered in the latter part of
23:51
the 1990s. And so by the early 2000s, their
23:55
exports as a as relative to their consumption had actually
23:59
really recovered quite strongly. And so they were, they were back
24:03
in the game as an oil exporter for a lot of different reasons.
24:06
But what do they do with that? That early 2000s was also a
24:09
period when the Russians started to weaponize very explicitly
24:15
their their energy exports, oil and gas, primarily to the former
24:21
components of the Soviet empire. So the Russians would, you know,
24:27
put energy embargoes or, or or restrictions or cut off supply
24:33
to former Soviet states or to former client states from the
24:38
Warsaw Pact, you know, Czech Slovakia or or the Czech
24:42
Republic, you know, Slovakia as well.
24:45
And so by by having this sort of, you know, inflation in their
24:51
own sort of ability to wield this energy weapon, it gave them
24:55
more confidence in swinging with it.
24:58
So let's take it another step further.
25:01
You know, what's another country out there which has seen a sort
25:04
of a noticeable shift in its energy dependence independence
25:08
was China. So.
25:11
So China is a net energy importer.
25:14
And it probably always will be at some level.
25:16
It's just kind of the way geology works there.
25:19
You know, they are, you know, not as blessed with, you know,
25:23
oil and gas as some other countries.
25:26
So it is, but they have worked really, really aggressively to
25:31
to reduce their dependence on the energy that is feeding their
25:36
massive industrial powerhouse. So it's domestic coal.
25:40
It is nuclear, it is solar, it is the electrostate that
25:45
everybody likes to talk to. And it is a mountain like a like
25:50
a veritable mountain of strategic reserves for most of
25:54
these products, these imported energy products.
25:57
And where they can't, they diversify.
26:00
So they've made, they've sort of put themselves into, they've
26:04
taken a losing hand, an energy dependent hand, and they've
26:08
turned it to one that's actually pretty good.
26:10
What does that do for China? It makes them less constrained.
26:14
It means they don't have to lay a lay awake at night worrying
26:19
quite so much about energy that can be used as a weapon against
26:23
them. So it lets them do things with
26:26
their neighbors that maybe otherwise they wouldn't feel as
26:30
comfortable doing. So that's how like, you know,
26:33
this whole shifting in, you know, the, the energy dependence
26:38
and independence sort of scale kind of creates these
26:41
opportunities or unshackles these constraints on these very,
26:46
very various different players. And you can probably replicate
26:51
this with with other with other countries throughout the
26:53
throughout the world. So let's jump back over to
26:56
Europe. Europe did not want this war,
26:59
Storm Stormer said explicitly. This is not our war.
27:03
Now over 40 countries are meeting in Paris on Auk and
27:06
France LED mission to reopen the straight without the US at the
27:10
table. Europe is building a post war
27:13
security architecture for the most important waterway on earth
27:16
and the country that started the war is just not invited to that
27:20
conversation. So how big of a deal do you
27:23
think that is? Yeah, I think it's a really big
27:25
deal. And you know, a couple caveats.
27:28
I mean, to start with, you know, the Europeans have said that
27:31
they are not going to force a straight open and that they're
27:33
not going to get involved until the straight is open.
27:35
It's just going to be a keep it open kind of situation.
27:39
And, and I think that's fair. I also think promising to force
27:42
a straight open would be, you know, sort of beyond their
27:45
capacity. I think I think the fact that,
27:51
you know, they have explicitly done so, you know, as a as a
27:56
parallel track to what the United States is doing.
27:58
So not trying to make this depend upon or reflect the
28:02
interests of directly the United States is is is really
28:06
important. And I think that's actually good
28:07
for the US if in the long in the long term.
28:11
But what it does suggest is that there's sort of A and ongoing
28:15
reshuffling here of these various global alliance
28:20
relationships, how, you know, who we think of as our friend
28:24
and, you know, sort of Carl Schmidt kind of way, you know,
28:27
how we project power and who we do it with and, you know, for
28:31
what purposes. So I think, you know, the
28:34
Europeans are trying to find a way to protect themselves at
28:38
home, which is I think the primary, the primary criteria,
28:43
the primary importance to protect their energy interests
28:47
at home and abroad, which is where I think this task force
28:50
comes in. But I think what they're also
28:52
doing is they're opening themselves up to playing a
28:55
different kind of role on the international stage.
28:58
So it's not European warships in a flotilla commanded by an
29:04
American. It's European warships in a
29:07
flotilla that perhaps might include Indian warships or
29:11
perhaps Chinese warships, I don't know.
29:13
I have no idea. But like that opens up new
29:16
possibilities. If it's a European led and a
29:19
European only kind of mission, I think you're going to see a lot
29:23
more of that. I think that's good for America.
29:27
Actually. It's really, really good for
29:29
America because I think this whole this whole like the
29:35
situation where America perceives itself, in fact is
29:38
sort of trying to be Everything Everywhere all at once, you
29:43
know, to make sure that the entire world is sort of playing
29:45
according to a rule book that the US mostly wrote in the US
29:49
mostly benefits from. But that gets really confusing
29:51
and hard to maintain. Like, I think it stretches
29:56
America and it also aggravates America and it makes Americans,
30:01
I think, you know, maybe lose the plot a little bit as to what
30:06
the bigger picture might be. And if the Europeans can step in
30:10
and could be like, actually go away.
30:12
You know, you're energy independent.
30:14
Remember, you don't care about this.
30:15
How about we take care of this and we'll work with our friends
30:17
in the Gulf and, you know, we'll, we'll find a solution
30:20
here that that makes sense, that gives the US maybe a little bit
30:24
more chance to breathe and to focus more on some of its own
30:27
domestic and external issues, you know, in a, in a more
30:31
settled fashion. I mean, there is a family in the
30:33
ointment there, right? Which is that the US just told
30:36
European allies that including countries in the Baltics, in
30:40
Scandinavia, the border, Russia, that weapons they've already
30:44
purchased and paid for under US contracts are going to be
30:47
delayed because of the Iran war, right?
30:50
Because we are burning through American stockpiles.
30:53
Over 1800 Patriot interceptors were used in the first 16 days
30:57
alone. Trump spent years pushing Europe
31:01
to buy American weapons and to really spend a lot more of its
31:06
GDP on defense, and now he can't deliver the weapons right?
31:10
So how does Europe respond to that?
31:13
So, so let's, let's just be be clear, like, you know, it wasn't
31:16
Trump who did all those things as every U.S.
31:18
President who's ever breathed has been pushing American
31:22
weapons onto the Europeans and has been telling the Europeans
31:25
to spend more money. I mean, Eisenhower at the dawn
31:28
of NATO complained that the Europeans weren't spending
31:31
enough money. Clinton complained and Obama did
31:34
it, you know, as loudly as possible.
31:37
Trump just does it in his own inimitable fashion.
31:41
The the problem with the the resupply of our of America's
31:46
NATO allies with patriots and with other munitions is it's
31:49
just a fact. Like we've burned through a lot
31:53
of resources here and we now have a strategic vulnerability
31:58
because of the music munitions that we have expended in the
32:01
course of this engagement with Iran.
32:06
So, you know, Trump can say it aggressively, He can say it
32:09
nicely. He can, you know, try and bully
32:11
the Europeans. He can.
32:13
It doesn't really matter because we're not going to have the
32:16
resources today to give them what they paid for.
32:20
Now, obviously there's a, there's a consequence for that
32:24
Jigger. You know, if, if, if I tell you
32:26
that I'm going to deliver your, you know, you know, 38 widgets
32:29
on, on a certain schedule. And then it's, you know, 13
32:32
widgets 2 years later. And then it's actually, well,
32:35
it's no widgets and it might not, you know, be ever.
32:38
You're not going to come back and do another deal with me on
32:40
that. So like that adds to that
32:43
insecurity and a lot of the posturing and the, the pushing,
32:47
you know, over things like Greenland or, you know, going
32:50
into Iran, but not having consultations with, you know,
32:54
the, the NATO, European NATO allies.
32:56
This just sort of adds to that, you know, feeling of not feeling
33:00
to this, you know, push to sort of to sort of distance yourself.
33:06
And I think that gets felt in in Japan and Korea as well and with
33:10
with other, you know, US allies sort of around the world.
33:14
So go back to what we were saying before about, you know,
33:17
the Europeans working with the resources that they have and
33:21
trying to organize a European LED task force to help maintain
33:26
an open Straits of Hormuz. That is a necessary response to
33:33
a world where the United States isn't protecting these
33:37
commitments that we had protected in the past and is a
33:41
necessary consequences of living in the world where we can't just
33:44
expect the US to deliver on promises, whether those promises
33:48
are Patriot missiles or, you know, to act in a certain way of
33:52
Article 5 is is triggered. Europe just needs to suck it up
33:59
and work with what it's got. Well, that brings that brings us
34:03
very perfectly in line with our next question.
34:05
I mentioned earlier that Europe has maybe six weeks of jet fuel
34:09
left. We're looking at count thousands
34:12
of cancelled flights, one major airline actually shut down an
34:16
entire subsidiary airline. Jet fuel prices have doubled.
34:20
40% of Europe's jet fuel imports come through.
34:24
The came through the straight, I guess in past tense at this
34:27
point, none since the war started.
34:29
And this is right before the summer travel season.
34:32
So if the straight doesn't reopen, what happens to European
34:36
aviation at this moment? I was at a birthday party,
34:39
James, yesterday, and that was the question that every single
34:44
parent asked me. They were like, should we buy
34:47
tickets? And I was like, no, you
34:49
shouldn't buy tickets. You should wait to see what's
34:52
going to happen because like, I don't know that you're going to
34:56
be able to go to Europe this summer.
34:58
Yeah, I'll tell you what happened as you remember our day
35:01
three conversation. So around day 5 is when I
35:05
actually bought my tickets for a little holiday that I'd planned.
35:09
Because once I knew that it wasn't over on day three, I was
35:12
like, holy, Toledo, I don't know where this is going to go.
35:15
I want to get this in, but I have cancelled all other all
35:18
other travel. And, you know, that's probably
35:22
indicative of the way I think most Europeans like at the
35:26
consumer level are, are kind of responding to this.
35:29
I mean, I think, you know, as I was reading an article and
35:33
they're just talking about how like staycations or, you know,
35:36
going bid in the UK people, you know, which is great.
35:39
There are plenty of lovely places to to visit this summer
35:42
if you live in the UK and want to stay in the UK.
35:45
I'd like to point out there are also trains that connect you to
35:47
Europe. But anyways, I think like a big
35:53
part of this problem here is not just about the availability of
35:57
the crude oil. It's about the availability of
35:59
the refined product. And a lot of those refineries,
36:02
you know, are trapped, you know, to the West of of the Strait,
36:06
you know, the, the Gulf, the Gulf states were, were super
36:10
smart. And what they did, you know,
36:11
they had this, this oil and this gas, but this oil primarily that
36:15
they wanted to, you know, sort of move downstream and take more
36:19
of, you know, the profit making opportunities.
36:21
That's why you have so much aluminum that comes out of, you
36:24
know, the, the Gulf because you have this, you know, sort of not
36:28
quite stranded, but really inexpensive energy that can be
36:31
turned into power, which can be turned into aluminum.
36:33
So that tightens up the aluminum market if you can't, if you
36:36
can't get it out. So I think, you know, for the
36:39
Europeans and, and not just for the Europeans, but like for
36:42
everybody who, you know, would like to fly in an airplane, you
36:46
know, there's just this massive, you know, game of, you know,
36:51
pass the potato. As we try to figure out like
36:54
what refineries are going to be able to get crude in order to
36:57
produce the middle distillates that get into, you know, the the
37:01
jet Caro that, you know, that that we all need to fly until
37:05
that gets resolved, you're going to see sporadic and, you know,
37:11
localized shortages and rationing.
37:14
And you know, yeah, it does mean that they're going to be
37:18
airports in Europe, which are probably going to say, Yep,
37:22
these flights just have to be cancelled for the next three
37:25
months. And that's just kind of the way
37:26
it is. We're going to prioritize.
37:27
You know, certain airlines are going to have to just
37:29
prioritize. I would say that ticket prices
37:32
probably don't look like they're going to go down until there's
37:36
some resolution. And that would be my guess.
37:39
But this is just a pathway to the kind of demand destruction,
37:43
sorry, demand rationing that we were talking about before.
37:47
Now the next question is really, you know, does it lead to demand
37:50
destruction? You know, that's sort of which
37:52
is sort of like permanent rationing in the case of the,
37:55
the, the in the air travel market, probably not.
38:01
I mean, maybe at the margin, but probably not.
38:04
It's really, you know, how this is going to affect consumer
38:07
behavior in Europe, you know, throughout and that's going to
38:11
be a lot more EV like a lot more E PS I think like that has just
38:21
it's been a it's been a phenomenal shift in it's like.
38:24
You get a BYD and you get a BYD and you get a BYD.
38:29
I saw EV sales were up 50% in March in Europe, which is just.
38:34
Wait list now it's like, it's really incredible.
38:36
Especially yeah, no, it's, it's, it's, it's, it's fantastic.
38:39
It's, it's absolutely fantastic. So that's like a that's demand
38:42
distraction. The overcapacity that Janet
38:45
Yellen used to call because China is now like the right
38:49
amount of capacity. I think they exported like 1.2
38:52
million EVs last year and I think they are probably, you
38:55
know, on track to exporting 5 million EVs over the next 12
38:58
months. It's just like, it's crazy, all
39:00
right, let's just move to the other winners and losers because
39:03
it feels like everyone's calling Russia a winner right now.
39:06
But I feel like given where the Europeans are going, where
39:12
China's going, it does seem like there's a reshuffling of the
39:15
global order and Russia might get the short straw.
39:23
So, you know, superficially, like when, when this whole thing
39:25
sort of first happened, I think it was, you know, people, people
39:30
like to point to Russia as sort of the obvious winner.
39:32
And in a lot of ways, Russia is a winner because, you know, that
39:37
means that a lot of the sanctioned barrels that were
39:39
floating now have been purchased and have a home.
39:43
But you know, Russia isn't hasn't won as much as people
39:46
might have been initially, initially anticipated.
39:48
Those floating sanctioned barrels that have been, you
39:51
know, onshored those Russian barrels, they were already
39:54
priced. So like congratulations, you
39:57
know, they've like the transactions gone through, but
40:00
you didn't get, you know, 105 or 110 or 115 a barrel.
40:04
You got, you know, whatever it is, you sold it at, you know,
40:07
maybe without a disc, without the the discount.
40:10
And secondly, the Ukrainians have.
40:13
You know, been sort of pretty aggressive and trying to
40:16
interdict Russia, Russian crude oil exports and also Russian
40:21
refinery operations so that the so that the Russians have
40:25
actually put on an export ban for refined product or for
40:30
gasoline rather. Let me rephrase that.
40:32
So I think, you know, Russia wins, but perhaps not as much on
40:39
the dollars and the barrels front as you might have thought.
40:41
I think where they where they win more clearly is in the sort
40:45
of fracturing, the further fracturing of these Western
40:47
alliances. Another sort of, you know,
40:53
winner, but only in the sense of like losing less, is the US.
40:58
You know, the simple fact of the matter is that the US does
41:01
produce more jewels than it consumes, even if it is
41:05
dependent on a global trade system.
41:08
So, you know, the US is losing less and if you're in a 0 sum
41:14
world, you know, that means, you know, winning.
41:17
I think like it's, it's really though, it's, it's important to
41:21
understand that like for the Americans, if the producer is
41:27
going to profit, then the consumer has to pay because that
41:31
means that the producers are able to export.
41:35
If the, the Trump administration decides that it doesn't want
41:38
consumers to pay, then that means they're going to have to
41:41
put export controls on US crude and products.
41:45
And that means that US exporters won't benefit.
41:48
So there's a mix to how the US sort of, you know, wins and that
41:53
sort of scenario. The other, the other guy to look
41:57
at as far as like, you know, are you a winner is China.
42:03
So like we said before, but China is a, is a, is an energy
42:08
importer that has played a bad hand very, very well and made
42:15
itself, you know, largely insulated from this current
42:19
disruption. I mean, for example, one of the
42:21
reasons why TTF natural gas prices for Europe haven't risen
42:26
more than they have is because the Chinese very swiftly
42:30
switched in it from their own gas to coal-fired power plants
42:34
for their electricity burn. And that lightened their call on
42:39
LNG traffic on LNG in in Asia, which freed up more carriers to
42:45
move to Europe. So they actually did your kind
42:47
of a favor by switching to coal and they can do this because
42:51
they have so much capacity. It does feel like LNG is likely
42:56
to. It's like, fooled me once, shame
42:59
on, like, shame on me. Like it fooled me twice.
43:03
Like, you know, shame on me. Like, it's just, you're in a
43:05
place where it feels like, you know, folks got screwed on LNG
43:10
with the Ukraine conflict in 2022.
43:13
Now they're getting screwed again in 2026.
43:15
I don't know that LNG is ever used again for the power sector.
43:19
It's only used for like the industrial and PAC chem sector
43:23
that where it's absolutely needed.
43:25
Everyone else is either going to coal, renewables, you know, like
43:29
nuclear. Yeah, maybe.
43:32
I mean, I think, I think, I think you need the molecules and
43:34
I think, I think, you know, natural gas serves a great
43:36
function as in that balancing term.
43:38
And I hear you on the coal. Not everybody really has the
43:40
coal, and there are other sort of things that happen with coal
43:44
also. You know, the US natural gas
43:46
price has not budged, but that's because US liquefaction capacity
43:51
has, you know, is maxed out and so well.
43:55
Wait till Golden Pass, you know. Wait till golden.
43:58
Yeah, absolutely. That's like one BCF, right?
44:02
I know so, so, so right now, you know, the US is sort of like the
44:06
US consumer of natural gas is sort of insulated, but that
44:10
liquefaction is coming to market.
44:12
So you will have, you know, you know, quite a bit of, of, of LNG
44:18
floating around in the Atlantic. So I don't think, I think it's
44:21
bit premature to say that, you know, people are going to turn
44:24
away from LNG, you know, writ large.
44:26
I do think that, you know, people are going to want to
44:28
diversify and I think relying upon LNG is probably not a great
44:33
strategy and 1 needs to be a part of your strategy.
44:37
I think another winner, you know, if we're going through the
44:39
list, and so I mentioned China as sort of a surprising winner.
44:43
Another winner is Iran. I mean, they've been pummeled,
44:47
absolutely devastated. The Iranian people have suffered
44:51
beyond belief. But from a strategic
44:54
perspective, you know, they, the regime is still there and the
45:01
regime has exercised its, you know, sort of it's it's biggest
45:06
card, its highest playing card, and it's mostly worked.
45:11
Another loser in this is that you might want to think about is
45:16
Israel. And the reason for that is I
45:20
think, you know, Israel has been extraordinarily effective on the
45:24
military front. But politically, this has turned
45:28
into a real problem in the US, You know, on the on the far
45:34
left, on the left of left of center, you don't have to be
45:36
that far. You know, Israel's war in Gaza
45:39
has really caused a lot of a lot of unhappiness.
45:43
And now on the right, there's a sense that Israel is sort of,
45:48
you know, led the US by the nose into Iran.
45:50
Right, Wrong or indifferent. But what it means is that, you
45:53
know, Benjamin Netanyahu may have the singular prize for
45:58
having lost America for a generation for Israel.
46:04
And that is an incredibly important thing.
46:06
Like that is the third rail of Israeli politics.
46:09
Whatever you do, don't screw up the relationship with America.
46:13
Literally anything else you can get away with, but not that one.
46:17
So I think it puts Israel, if if you think about it in in a in a
46:22
challenging situation from from that perspective.
46:27
I I want to talk about like, you know, there there might be a
46:33
surprising winner here and that might be Europe.
46:38
Nobody likes to sort of self criticize and flagellate more
46:43
than, you know, people who live in Brussels.
46:47
And it's mostly deserved, if I'm honest.
46:51
But I think that, you know, this sequence of just extraordinary
46:56
shocks has pushed the Europeans to make choices and to start
47:05
agreeing to compromises, to horse trade and to start really
47:08
getting to the very necessary sacrifices and commitments that
47:13
they need to make in order to, you know, to achieve some degree
47:18
of stature in the world. And that extends to defense.
47:22
It extends to energy, You know, you're talking about a European
47:25
flotilla going like, that's extraordinary.
47:28
I feel like I. Feel like this is like the joke
47:31
where there's like a priest, you know, who is like very pious in
47:37
in the church and you know, is warned by somebody that a
47:42
natural disaster is coming. And he's like, don't worry, God
47:44
will protect me. And then the floods start coming
47:47
in, a boat comes by and he's like, come on in, I'm going to
47:51
save you, priest. And he's like, don't worry, God
47:53
will protect me. And then he gets on top of the
47:54
steeple. And then like, there's a
47:56
helicopter coming down saying, get in here.
47:59
Like, I'll protect you, right? I mean, I feel like people are
48:03
saying to Europe, this is the time to like, get all 27 member
48:09
states, like riled up, right? Like, like, let's get your grid
48:13
fixed. Let's do all this other stuff.
48:14
Let's actually unleash European innovation.
48:18
And they're like, like God will protect me, like, you know, like
48:23
something else will happen. Like, I mean, are they finally
48:26
getting the message that they have all this innovation and
48:29
expertise that's ready to be unleashed?
48:32
Well, when their flights get cancelled, that might be just
48:34
the ticket. Oh my God, yeah.
48:36
I mean, it's funny, so to speak. No pun intended.
48:41
Yeah, I I know the same joke, Jigger.
48:43
It's just always with a rabbi. So the short answer is, in my
48:49
opinion, yes. Yeah.
48:51
Like sometimes, Jamie, I think you need to have your vacation
48:54
cancelled and you need to have your prices go to the roof.
48:57
And you need to be bullied by the guy next door.
48:59
And you need to just be like scared or angry or frustrated
49:07
enough to like shake it off and to get get down to business.
49:13
And I actually think that there is a lot of consensus that's
49:17
formed. I think there's a lot of a lot
49:19
of detail that needs to work be worked through.
49:21
There's a lot of process that needs to be worked for.
49:23
I mean, we're talking about a group of countries who have to
49:28
negotiate and compromise and work out an agreement.
49:32
And that is like the goal. They are pluralist.
49:38
They abide by rule of law discourse.
49:41
You know, these are, you know, you know, countries which have
49:45
to negotiate in order to move forward.
49:47
They don't force people to do things.
49:50
And I think that there are some very positive signs here.
49:52
I mean, I don't want to get like into the weeds on the Hungarian
49:55
election. But like at the end of the day,
49:59
it was, amongst other things, a vote against the the guy who was
50:04
opposed to working with the European Union.
50:08
Well, and was passing state secrets to Putin on every single
50:13
draft that was coming through. I mean, like, like, good
50:17
riddance to Orban. All right?
50:19
We need to get into a lightning round now.
50:22
So you talked about on Day 31 that we were going to have a
50:27
fertilizer challenge. We are now in that place, right,
50:31
where the American Farm Bureau just serving 5700 farmers, 70%
50:36
of them said they can't afford the fertilizer they need this
50:39
season. Some of them have basically said
50:41
if I buy fertilizer at these prices, I will be guaranteed to
50:45
lose money, right? And so I think some folks are
50:49
actually projecting the 25% of global acreage is probably not
50:54
going to apply fertilizer this year during this growing season,
50:58
right. And so, so you know, how do we
51:02
think about the impact on fertilizers?
51:05
The IT will be worse in the summer and in the Southern
51:09
hemisphere planting season. So does that mean like it we
51:12
have food now, but that we'll have less food in nine months?
51:18
Or different foods, so you know, more beans, less wheat and corn,
51:23
for example, because it just, it's just a different.
51:26
The anti ethanol people will thank you.
51:30
It also means, you know, that, you know, biofuels will, will
51:34
probably, you know, to some degree be priced out.
51:37
But I think it's, it's really important to bear in mind that
51:40
like it's the Southern Hemisphere growing season,
51:42
planting season that's coming up where you're probably really
51:45
going to see this one. Because I know that, you know,
51:47
there are a lot of farmers who hadn't, you know, purchased
51:49
their fertilizer or their crop treatments, you know, in
51:52
advance. But you know, this thing is sort
51:54
of kicked off and, and a lot of it had been, you know, purchased
51:58
or procured. So the real, the real hit, I
52:01
think is, is actually to come. And it's going to be, it's going
52:03
to suck and it's going to be painful, so.
52:07
So that American Farm Bureau survey found that 78% of
52:11
American Southern farmers cannot afford the fertilizer that they
52:15
need this season. And of course, these people are
52:18
Trump voters. They've got governor's races
52:20
this year. At what point do you think that
52:23
particularly the Republican candidates in those states are
52:26
going to start distancing themselves from this war, if not
52:29
from the Trump administration at large?
52:32
Yeah, I mean, I, I'm not going to profess to be like a, you
52:36
know, the most savvy or, or knowledgeable about, you know,
52:39
US domestic politics of, you know, I'll just be, you know,
52:43
sort of upfront about that. But from where I said, it does
52:46
look like, like there's there's already sort of a clear and
52:49
significant fracturing in, you know, the political support that
52:53
that sort of that Trump has has relied upon.
52:56
I think, you know, as, as, as Jigger, you mentioned before, I
53:00
tend to take a longer view and I tend to like start at 30,000
53:04
feet and work my way down. And the same thing applies with,
53:07
you know, with domestic politics.
53:10
There are a lot of longer term forces that are being that are,
53:17
that are working their way through the American body
53:20
politic right now that go way beyond Donald Trump.
53:22
And we're still going to be dealing with them when Donald
53:25
Trump is not president. And they're represented by a lot
53:30
of different factions within MAGA and within the sort of the
53:34
the shell of the Republican Party.
53:36
And they're also represented in the Democrats.
53:38
And so as farmers wake up and say, you know what, I wanted to
53:45
buy this much crop pre treatment, but I can't and I
53:49
have to settle for less or I have to settle for different.
53:52
That adds to the frustration and the agitation that they feel and
53:57
they're going to put their political chips with somebody
54:01
else, but that's still going to be within this highly fractured
54:05
and polarized and and sort of challenged American political
54:09
system. So I think it bodes poorly for
54:13
for Trump, and I think it raises the possibility of even further
54:18
fracturing in American politics. And your European listeners
54:24
should look at that and say, whatever I thought about
54:28
maintaining my own strategic secure independence, Oregon, my
54:32
own energy independence, I should be massively increasing
54:36
my efforts in that respect. You know, you can say from
54:39
London or Paris or Berlin or Brussels, I love America, but
54:44
right now America has to deal with America.
54:48
And those American farmers are going to say we need to deal
54:52
with American farmers, not we need to worry about what's going
54:56
on in the rest of the world. So Europe has to hold America's
54:59
beer for a while. I think it's basically it.
55:03
That'll be the key take away from the episode.
55:05
Europe has to hold America's beer for a while.
55:08
I mean, I wish they would. Please.
55:10
It all sorts of a flotilla. A Peroni or a Heineken?
55:14
Or a glass of wine. But it all it all, it all starts
55:19
with a fluto. And you know, it, maybe it
55:20
includes the, the Canadians, the Japanese, the Koreans, I don't
55:25
know if you saw, but like, you know, the Canadians have signed
55:27
up to, to observer status on, on the, the, the, the fighter
55:33
project that the, the British, the Italians and the Japanese
55:36
are developing. You know, it's another one of
55:38
those examples of how America's friends, and they're still
55:43
friends, by the way, America's friends are saying, like, we
55:46
need to be able to look out for each other so that America can
55:49
start working through its domestic issues.
55:53
I think the challenge I see with all of this, though, James, is
55:56
that, and you've got a lot of right wingers obviously that
55:58
have called, you know, Trump the Antichrist or whatever it is.
56:02
But the thing that I worry about so much is, you know, is Putin
56:07
actually testing NATO and, you know, like bombing somebody or,
56:14
or doing something that would, you know, test America's
56:18
resolve. And then the question is, is
56:20
Canada really up to the task, right?
56:23
Like when Carney gave that big speech at the left that everyone
56:26
cheered about, like, are they really ready to have each
56:31
other's back or Because I'm, I'm very worried that Putin's going
56:35
to test NATO's resolve this year.
56:38
So I think it, I think it's highly likely.
56:41
So I'm more worried than you. And, you know, The thing is, you
56:46
know, NATO article. So NATO as a mutual defense
56:50
pact, in my opinion, is probably dead.
56:55
It's very, very hard to maintain that, you know, that that
57:00
fiction of we will come, all of us will come to each other's
57:03
defensive aid if if any one of us is attacked.
57:07
And that is something that is, you know, you hope never to have
57:12
tested. So the next move, I think that
57:15
would sort of make sense for for Putin and and, you know, I, I'm
57:19
not asking for it, that's for sure, would be to look for the
57:22
weakest link in European NATO and to punch and to see if they
57:27
can punch back. And if the rest of the NATO
57:29
countries punch back. And, you know, quite frankly,
57:32
the weakest leak is probably the UK.
57:35
The reason why you would want to hit the UK is because it does
57:38
have a sizable military and it is relatively powerful compared
57:42
to its allies in Europe. However, it hasn't really
57:49
maintained its capacity. It doesn't have adequate missile
57:53
reserves. It doesn't have adequate
57:54
platforms. So a couple punches, you know,
57:58
and you could see just missile strikes and you could see the
58:02
UK, you know, sort of questioning whether or not they
58:04
have the ability to stay kinetic.
58:07
And, you know, that that next step up to nuclear would be, you
58:11
know, sort of catastrophic for the UK.
58:13
So you could find yourself in this place where if you can
58:16
force the UK to accept some sort of made-up, you know, submission
58:23
to some, you know, farcical, you know, Russian complaint by, you
58:31
know, a few days of missile strikes and the rest of European
58:35
NATO doesn't step up in order to help out the UK or to stand with
58:39
the UK, then I think you've ended NATO permanently or
58:45
something else happens, which is the rest of European NATO,
58:50
Forget about the US for a second.
58:52
Punches back as well. And if you did see some sort of
58:56
a concerted response to that kind of Russian aggression, I
59:01
think the Russians would back down pretty quickly, you know,
59:03
the Ukraine. Trade Putin.
59:08
I'm worried that he wants to test it.
59:09
All right so then the last thing is that for me is that China is
59:14
really telegraphed now that they're going to do a managed
59:17
reunification with Taiwan. It doesn't feel like there's an
59:20
uproar around the world around it.
59:22
You have said that when that happens, that's the sort of last
59:27
thing that that's remaining a friction between Europe and
59:32
being best friends with China, right?
59:35
I like, I wonder, you know how you think about that.
59:39
Yeah. So I just don't want to say best
59:41
friends, just, you know, friends.
59:45
So, yeah, I think you're exactly right.
59:47
So China has made it very clear that they, you know, will, will
59:51
take Taiwan, that they will have the military capacity to do so
59:56
around about 2027, which would be right in between US midterms
1:00:00
and U.S. presidential. So the US is distracted.
1:00:03
You know, this is also a moment when the US has rundown its
1:00:06
inventories, has, you know, found itself, you know, kind of
1:00:11
kind of stretched. A worst case scenario for the US
1:00:14
right now would be 1, where it is fully engaged with Iran.
1:00:19
Russia decides to test in Europe exactly as we were discussing
1:00:24
before to see the resolve, and the Chinese decide to say now's
1:00:29
the moment where we want to really assert ourselves with
1:00:32
respect to Taiwan. I think the, the outcome there
1:00:36
is the US just backs away from probably all three.
1:00:39
Now, if you're Taiwan, if you're the Taiwanese, especially for
1:00:43
the Guomondong who very clearly signalled what they want to do,
1:00:47
you're probably looking at a way to kind of manage that kind of
1:00:51
scenario. And you know, you want to
1:00:53
negotiate some sort of a, some sort of a deal that allows you
1:00:57
to maintain whatever degree of, you know, the sovereignty that
1:01:00
or dependence that that you want.
1:01:02
However that gets resolved, However this managed
1:01:05
reabsorption of Taiwan resolves. If it does, once it resolves or
1:01:10
once it's very clearly resolving, then the view from
1:01:13
Beijing shifts. Your natural adversary for 400
1:01:17
years has been Russia, not Europe.
1:01:21
The the Chinese have a very justifiable and long list of
1:01:25
grievances with respect to the European powers, but there's no
1:01:29
shared border, there's no contested resource.
1:01:32
They're not fighting over the South China Sea with a European
1:01:36
country. They're not worried about, you
1:01:38
know, the border in with Siberia, with a European
1:01:42
country, unless you think Russia's a European country.
1:01:44
So once Taiwan is no longer an issue, it becomes Russia where I
1:01:51
think Chinese anxieties become more directed.
1:01:55
And at that point, Europe is more, more interesting as a
1:01:59
counterbalance, as a, as a counterweight to Russia.
1:02:03
I think there's, there's sort of a logical progression here.
1:02:06
And I wouldn't be surprised that the Russians, you know, have
1:02:08
sort of thought this through. They Russia is at the moment a
1:02:13
de facto client state of China in the sense that they're
1:02:17
they're they're almost entirely dependent on energy exports for
1:02:20
their foreign revenues. And those energy exports go
1:02:23
almost entirely to China and India.
1:02:26
Russia is finding itself in an increasingly energy insecure or
1:02:29
an increasingly strategically insecure place.
1:02:32
You think about choke points, you know, if you look to the
1:02:35
East, Russia's naval access has a choke point in the east.
1:02:40
If you look at the West, there's a Russian naval traffic is
1:02:44
constrained by the gap Greenland, Iceland, UK.
1:02:49
If you look to the north, Russia has, you know, six 7000
1:02:53
kilometers of, you know, increasingly accessible shore
1:02:58
seacoast which the Chinese are developing nuclear, nuclear Ice
1:03:02
Breakers in order to travel along as they trade with Europe.
1:03:05
So Russia feels very insecure. What does Russia do in order to
1:03:09
manage that insecurity? They dominate Western Europe.
1:03:13
How do they accomplish that? Maybe they throw a punch at the
1:03:16
UK. The UK fails to respond.
1:03:19
NATO falls apart. The rest of the European NATO
1:03:22
countries say, OK, we'll cut a deal with Russia.
1:03:24
We'll follow orders. We'll, you know, give you some
1:03:26
preferential trade agreements, blah, blah, blah.
1:03:28
If you're in Beijing, that looks really bad, is now the guy who's
1:03:33
been scary for 400 years, has his own strategic independence
1:03:37
and you don't like that. So if you're Beijing, once
1:03:40
Taiwan is resolved, you want Europe to be able to kind of
1:03:44
stand apart from the US but also stand up to Russia.
1:03:49
It makes sense for you. So I think this is kind of a
1:03:52
roundabout way of getting to what I think it's a really
1:03:55
important question is like, what does the future hold?
1:03:58
And the future holds more conflict, more unsettling
1:04:03
reshuffling of these of these alliances.
1:04:07
I also want to say that I think the huge future might hold a
1:04:11
revitalization of the center. You know, as we were saying
1:04:14
before, populist extremists and middling powers, you know, they
1:04:19
can get away with a lot when the rules are being enforced by the
1:04:24
European Union as a supranational authority.
1:04:27
But like, when push comes to shove and people are no longer
1:04:31
able to get away with these things because the situation has
1:04:34
got an extreme, or people are no longer able to get away with
1:04:37
things because the US isn't backstopping the global order,
1:04:40
then there's this perhaps convergence to the center.
1:04:44
So that might be the other thing that happens, more conflict, but
1:04:48
also a revitalization of the pluralist centre politically,
1:04:54
both internationally and, you know, within countries.
1:04:57
James, you've been on the show 4 Times Now.
1:05:00
Each time I feel like it's getting darker, but you know, so
1:05:04
I can always count on you to like bring me down after a
1:05:06
fantastic weekend. But no.
1:05:08
But your insights are just very clarifying.
1:05:11
And I think in this moment where everyone has access to ChatGPT
1:05:16
and Claude and all sorts of powerful tools, we have less and
1:05:20
less clarity. And so thanks for being clarity
1:05:24
for us and our listeners. Thank you very much, Jamie.
1:05:26
Thank you very much, Sugar. Ow I mean my head still
1:05:35
spinning. I feel like up is down and down
1:05:39
is up. Like, you know, we spent a lot
1:05:40
of time talking about Europe and Russia and China and Israel.
1:05:45
Like I am not used to having a Council on Foreign Relations
1:05:49
episode, but but I did learn a lot.
1:05:52
I'm curious, Jamie, though we didn't really get into the
1:05:55
politics of the moment. It does feel like whether it's,
1:06:00
you know, MTG or Tucker Carlson or Alex Jones or Megyn Kelly, it
1:06:08
just feels like even Joe Rogan is turning on the president.
1:06:13
I think a lot of these folks thought he was going to be anti
1:06:16
war. Now he's gone like full on Iran
1:06:20
conflict. Everything in the world is
1:06:22
upside down. And I feel like there hasn't
1:06:26
really been a clear understanding of what this is
1:06:28
going to do to the politics of the country.
1:06:31
Absolutely. I mean, you can really see the
1:06:35
public, the public faces of the MAGA movement like questioning
1:06:40
at least this policy decision of the administration, like I'll
1:06:43
take it this certainly this. You know, Trump and Vance were
1:06:47
very outspoken. Stephen Miller was very
1:06:49
outspoken that they would not be embroiling America in another,
1:06:54
you know, sustained conflict in the Middle East.
1:06:57
And here we are. And they haven't been able to
1:06:59
crystallize for the American public what the goals of this
1:07:02
war are or what the timeline is. And clearly they don't know how
1:07:07
to get out of it. So I don't really understand
1:07:10
what the end game is here for the administration, and I'm just
1:07:15
as bewildered as everyone else. It certainly doesn't bode well
1:07:18
for the midterms. Well, that and I feel like, you
1:07:23
know, Robert Bryce has never really been a huge fan of solar
1:07:28
and wind and is Casley talking about how much he loves coal and
1:07:31
natural gas. But like recently he's been like
1:07:34
the the big champion for killing data centers in communities.
1:07:39
And so, like, if the Trump administration isn't fighting a
1:07:42
front on this side around the Iran war, it's also losing the
1:07:47
battle around the American public support for winning the
1:07:50
AI data center race. I mean, you saw Maine just
1:07:54
banned data Centers for the next 18 months, right?
1:07:56
And so like, I just feel like there's so much stuff happening
1:07:59
on the home front that's not getting focused on.
1:08:02
Absolutely. I mean, data centers largely
1:08:06
disliked by folks on the right and the left facing so much
1:08:11
pushback. I mean, we know that energy is
1:08:13
an important trigger on that topic or like a lever that can
1:08:19
be pulled where, I mean, the data shows that the data centers
1:08:23
that are powered by clean energy are more supported by local
1:08:27
communities than those powered by.
1:08:29
I mean, who wants a diesel generator in your backyard?
1:08:32
It's loud, it's noisy, it's dirty.
1:08:35
I don't know if you saw this, but there's this new acronym
1:08:39
that folks are using. Bring your own new clean energy
1:08:43
for new. Beyoncé.
1:08:45
Beyoncé, Oh my God, so brilliant.
1:08:48
As a calm person, I was like so delighted when I saw that.
1:08:51
Bring your own new clean energy. That is definitely a key to
1:08:56
getting support for these projects.
1:09:00
And so it it is frustrating though, seeing the
1:09:03
administration so focus on these international issues when there
1:09:06
are all of these very important domestic issues that are falling
1:09:10
by the wayside, certainly rising energy prices.
1:09:14
And you know, who knows, next year it could be blackouts.
1:09:18
Like, we really, really need to see a sustained focus by the
1:09:23
administration, particularly the Department of Energy, on these
1:09:26
issues. Well, the last thing was I saw
1:09:29
there was a call that Chris Wright and Doug Burgum ran with
1:09:33
200 of the top oil and gas executives begging them to drill
1:09:38
for more oil. And all of them basically said
1:09:41
you guys should # sand. We do not believe that, you
1:09:46
know, these high oil prices are going to stay forever and this
1:09:49
is not a great investment for us.
1:09:50
And we are just going to, like, sit in our hands.
1:09:53
And you saw a lot of oil executives have been selling
1:09:57
their stock as their stock prices have gone up.
1:10:01
And so we're in this weird upside down world where, you
1:10:04
know, America is, you know, full of oil and gas.
1:10:08
And we have a lot of executives saying, I don't think this is a
1:10:11
good time to drill more. You know what it is a good time
1:10:14
for? It is a good time for the clean
1:10:17
energy industry to double down on the communication of the
1:10:22
benefits of our technologies. Like I want to see increased
1:10:27
spending on marketing and communications and political
1:10:31
advertising and spending and and pack spending across the board
1:10:35
from clean energy companies because this is the moment for
1:10:39
you to communicate what you can do for America and for the world
1:10:43
more broadly. Step into to fray.
1:10:46
Be bold. Well, I'm excited for that
1:10:50
message and I'm also excited because you know, Fuervo is
1:10:53
going to be in the news. Their stock is pricing gear
1:10:55
pretty soon. And so like, so I think you're
1:10:58
going to see this moment where clean energy is going to be
1:11:00
discussed in a really big way on CNBC, in the Wall Street
1:11:04
Journal, all these places over the next six weeks.
1:11:07
And so I'm excited to see how many people take you up on your
1:11:11
Clarion call and and rise to the occasion.
1:11:15
I can't wait. I love to see, I love to see the
1:11:18
winning. I love to see the winning by our
1:11:20
the companies and our sectors and, and yeah, I mean, I hope
1:11:25
that there's just more of this to come.
1:11:26
I mean, I hope that this is the silver lining from this
1:11:30
absolutely terrible war. War is never a good thing.
1:11:33
But when we see we're seeing like a renewed interest in EVs,
1:11:37
in solar, in batteries, in, you know, geothermal via IPO is like
1:11:42
like the forthcoming IPO from Furvo, I think I think it is a
1:11:46
good thing. It's a good long term thing for
1:11:48
all of us. And so I just, I want to see
1:11:51
people really embracing this moment.
1:11:55
Well, I think we'll leave it there, Jamie, So good to see you
1:11:58
and thank you everybody for listening.
1:12:01
As you know, you can hear us on Apple podcast, Spotify.
1:12:06
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1:12:09
YouTube. I still don't understand how you
1:12:11
like watch on YouTube and do other things, but I think it's
1:12:15
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1:12:21
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1:12:25
friends out there who keep recommending us keep doing it.
1:12:28
It really is making a difference.
1:12:30
Thanks everybody.