Latest / Merryn Talks Money / Cambridge Professor Helen Thompson on the Iran War, Energy Markets and Britain’s Risks

Transcript

Cambridge Professor Helen Thompson on the Iran War, Energy Markets and Britain’s Risks · Merryn Talks Money

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
• 0:17
  Speaker 2: Welcome to Meren Talk's Money, the podcast in which people
• 0:20
  Speaker 2: who know the markets explain the markets. I am Maren
• 0:22
  Speaker 2: Sumset Web and with me today I have Professor Helen Thompson.
• 0:26
  Speaker 2: She is a professor of political economy at the University
• 0:28
  Speaker 2: of Cambridge and she concentrates on the political economy of energy,
• 0:32
  Speaker 2: which is useful staff at the moment. She is also
• 0:34
  Speaker 2: the author of Disorder Hard Times in the twenty first Century,
• 0:37
  Speaker 2: which is an excellent book I strongly recommend to all
• 0:40
  Speaker 2: of you which will help us all get to grips
• 0:42
  Speaker 2: with the multi crisis of our age, published in twenty
• 0:46
  Speaker 2: twenty two and no shortage of crisis since then. Of course,
• 0:49
  Speaker 2: I'm hoping that what you'll get from this podcast is
• 0:51
  Speaker 2: a fuller understanding of exactly what is going on in
• 0:54
  Speaker 2: global energy markets and how it is going to affect you.
• 0:57
  Speaker 2: Basically perfect Easter weekend listening, Helen. Thank you for joining us.
• 1:02
  Speaker 3: Absolutely pleasure to be with you.
• 1:03
  Speaker 1: Meren.
• 1:04
  Speaker 2: Yeah, now we lost saw each other at the Weekend
• 1:06
  Speaker 2: of Mistakes in hay On Why a couple of weeks ago,
• 1:08
  Speaker 2: and I missed your session which was irritating for me.
• 1:11
  Speaker 2: So I've asked you on so that basically I can
• 1:14
  Speaker 2: have you all to myself for forty minutes, no no
• 1:16
  Speaker 2: one else here, and that our audience can understand some
• 1:19
  Speaker 2: of your amazing insights into what an earth is going on.
• 1:23
  Speaker 2: So I guess let's start with that. This war with Aram,
• 1:27
  Speaker 2: how do you see it, how is it going, how
• 1:29
  Speaker 2: might it end? And what will the long term consequences be?
• 1:32
  Speaker 2: That is a huge question, So take it from whatever
• 1:34
  Speaker 2: angle you.
• 1:34
  Speaker 3: Like, Okay. I think that in part the mostives of
• 1:38
  Speaker 3: the Trump administration are relatively straightforward, and they're supported by
• 1:44
  Speaker 3: as well, and that is they want very seriously to
• 1:48
  Speaker 3: deplete Iranian military power, and that goes beyond the nuclear
• 1:53
  Speaker 3: weapons issue. It goes to destroying or trying to destroy
• 1:59
  Speaker 3: Around's ability to do the kind of things that it's
• 2:01
  Speaker 3: done in the first part of this war, which is
• 2:04
  Speaker 3: inflict significant damage on its neighbors, from the Arab States
• 2:08
  Speaker 3: the gold for Arab States to Israel. The question of
• 2:12
  Speaker 3: whether the Americans had sustained and worked out ambition for
• 2:19
  Speaker 3: regime change, I think is a lot more like complicated question,
• 2:23
  Speaker 3: and it could well be that in some sense the
• 2:25
  Speaker 3: way that the Israelis assassinated the Uranian leadership, the Relian
• 2:30
  Speaker 3: leadership actually made that more difficult because they killed like
• 2:33
  Speaker 3: too far down, so to speak, and so it became
• 2:35
  Speaker 3: more difficult to find somebody to do a deal with.
• 2:40
  Speaker 3: I think they, regardless of the military ambition, regardless of
• 2:45
  Speaker 3: the regime change ambition, this is part of a bigger picture.
• 2:49
  Speaker 3: It's part of an attempt by the Trump administration, or
• 2:52
  Speaker 3: at least we should seriously consider at least the possibility
• 2:55
  Speaker 3: that it's part of an attempt by the Trump administration
• 2:58
  Speaker 3: to reset the energy part of the world geopolitically. And
• 3:04
  Speaker 3: I think that has been a thread through Trump too.
• 3:08
  Speaker 3: I think it's what makes sense of the intervention in Venezuela,
• 3:13
  Speaker 3: and it makes sense of the attempts to destabilize Greenland,
• 3:20
  Speaker 3: and that is that the Trump administration thinks through the
• 3:23
  Speaker 3: lens of resource competition. It thinks through the lens of
• 3:27
  Speaker 3: the vulnerabilities of itself and China to resource disruption. It
• 3:35
  Speaker 3: experienced for itself a pretty significant resource disruption last year
• 3:39
  Speaker 3: in the way that China handled the rare Earth's issue
• 3:42
  Speaker 3: after Trump turned to the trade war. Indeed, I would
• 3:45
  Speaker 3: say that actually they were taken aback by what happened there,
• 3:50
  Speaker 3: and that in part there is a sense, I think,
• 3:53
  Speaker 3: in which they have wanted retaliation for that of disrupting
• 3:57
  Speaker 3: China's energy security in the way in which their rarer
• 4:02
  Speaker 3: security was disrupted last year. And it's not a coincidence
• 4:06
  Speaker 3: in that respect then that the major moves have been
• 4:08
  Speaker 3: made this year, first against Venezuela and against Iran. And
• 4:12
  Speaker 3: these are states in which China's had long term energy
• 4:15
  Speaker 3: alliances and has some dependency, obviously more so in the
• 4:17
  Speaker 3: case of Iran than in the case of Venezuela.
• 4:22
  Speaker 2: How dependent is China on Middle Eastern oil and on
• 4:25
  Speaker 2: Venezuelan And oil is a.
• 4:27
  Speaker 3: Tiny amount now on Venezuela or a relatively small amount
• 4:30
  Speaker 3: on Venezuela, but China is the biggest, single important now
• 4:33
  Speaker 3: of hydrocarbons through the Persian Gulf. Now, obviously China's strategy
• 4:38
  Speaker 3: and that is what China's doing in the Western Hemisphere
• 4:42
  Speaker 3: and it's in the Middle East, and it's got this
• 4:43
  Speaker 3: energy trade with Russia has been to have diversity of
• 4:49
  Speaker 3: energy supply. So actually to disrupt China's energy security from
• 4:53
  Speaker 3: this mindset, you have to do quite a bit of disrupting,
• 4:56
  Speaker 3: and in terms of electricity, China can always fall back
• 4:59
  Speaker 3: on cold and domestically mined cold. So this is quite
• 5:04
  Speaker 3: a complicated long term issue. I do think that we
• 5:07
  Speaker 3: have if we put these things together, we can say
• 5:09
  Speaker 3: that the situation in the Persian Gulf has been unstable
• 5:14
  Speaker 3: for some time. There was a big crisis in twenty
• 5:17
  Speaker 3: nineteen September of twenty nineteen when the Iranians hit major
• 5:20
  Speaker 3: Saudi will facility. In the end, that's what led a
• 5:24
  Speaker 3: few months later to the Trump administration assassinating solomony. But
• 5:29
  Speaker 3: a situation in which you have a nuclear ambitious Iran,
• 5:35
  Speaker 3: plus the preponderance of hydrocarbon exports from the Persian Gulf
• 5:44
  Speaker 3: going to Asia and particularly to China, whilst the United
• 5:47
  Speaker 3: States is the maritime power in the Persian Gulf and
• 5:52
  Speaker 3: has the majority of the bases in the military bases
• 5:56
  Speaker 3: in the Persian Gulf, I think that was never going
• 5:59
  Speaker 3: to be a stable scenario, and certainly not one when
• 6:03
  Speaker 3: you also bring Israel's interests into play, and in the
• 6:06
  Speaker 3: situation in which Iran had taken a major strategic blow
• 6:10
  Speaker 3: really certainly from twenty twenty four from the Israeli paid
• 6:15
  Speaker 3: your attack on hes Bolla. But one could argue, really
• 6:18
  Speaker 3: in a way, from the moment of the Hamas attack
• 6:21
  Speaker 3: on Israeli in October of twenty twenty three, things have
• 6:23
  Speaker 3: been going wrong for Iran. I think it's been quite
• 6:27
  Speaker 3: surprising in some ways, whoever was the president for there
• 6:31
  Speaker 3: not to have been a US move to try to
• 6:34
  Speaker 3: reconfigure the situation the balance of power in the Persian Gulf.
• 6:39
  Speaker 2: How do you think it ends for someone who is
• 6:43
  Speaker 2: not expert in the Middle least, not expert in warfare,
• 6:46
  Speaker 2: not expert in any of those things. It's very hard
• 6:49
  Speaker 2: to tell. Because so much of the analysis of this
• 6:51
  Speaker 2: war seems so political and based on opinion rather than actuality.
• 6:54
  Speaker 2: It's very hard to see exactly how this is going
• 6:57
  Speaker 2: and how it might end well.
• 6:59
  Speaker 3: I think there's another reason that isn't really being commented
• 7:01
  Speaker 3: upon as much as it should be as why it's
• 7:03
  Speaker 3: hard to work out how it ends. Is what is
• 7:05
  Speaker 3: it that the Iranian regime is now? Is there an
• 7:08
  Speaker 3: Iranian regime in a strong sense of the meaning of
• 7:10
  Speaker 3: the word. Are there actually a lot of decentralized bits
• 7:15
  Speaker 3: of power around the Iranian Revolutionary God? And if there
• 7:18
  Speaker 3: isn't actually a meaningful regime in Iran. Any longer, then
• 7:22
  Speaker 3: reaching any kind of like settlement becomes actually extraordinarily difficult,
• 7:26
  Speaker 3: and it becomes a situation in which you can expect
• 7:30
  Speaker 3: there to be chaos, I think, for some time to come.
• 7:34
  Speaker 3: So I think that if we think about it in
• 7:37
  Speaker 3: those terms, then even the idea of the war ending
• 7:41
  Speaker 3: becomes quite difficult. It can be much reduced in terms
• 7:44
  Speaker 3: of hostilities. But without a cohesive regime in Iran, then
• 7:49
  Speaker 3: the idea of there being peace, I think in a
• 7:52
  Speaker 3: settlement is quite hard to imagine.
• 7:55
  Speaker 2: Okay, So we should when we think about the world
• 7:59
  Speaker 2: and energy, we should think about this going on for
• 8:01
  Speaker 2: a long time. We should stop thinking that this is
• 8:04
  Speaker 2: a six week business or an eight week business, that
• 8:06
  Speaker 2: this supply crunch is long term.
• 8:09
  Speaker 3: I think that there's various bits to this that go
• 8:11
  Speaker 3: on in a way on the energy side, regardless of
• 8:15
  Speaker 3: even if it weren't true what I've just said about
• 8:16
  Speaker 3: the what is the nature of the Iranian like regime,
• 8:19
  Speaker 3: and that is the energy infrastructure that it is been hit.
• 8:25
  Speaker 3: It's particularly I think significant for Qatar in terms of
• 8:28
  Speaker 3: its liquefied natural gas facilities. That's why it's declared and
• 8:31
  Speaker 3: not like Force Madure on some of its contracts. It's
• 8:35
  Speaker 3: significant in terms of the facilities there refining and processing
• 8:39
  Speaker 3: facilities in the Gulf Dates, including the United A Rememorates
• 8:43
  Speaker 3: and Qait. The Saudias have got thus far, in a
• 8:47
  Speaker 3: way the best way out in terms of their immediate interest,
• 8:50
  Speaker 3: because they do have a pipeline to the Red Sea,
• 8:53
  Speaker 3: orbeit that it does not it can't fully compensate for
• 8:55
  Speaker 3: what they would export through the Strait of Homers. But
• 8:59
  Speaker 3: I think that they're not going to go back to
• 9:01
  Speaker 3: the idea that exporting through the Straight of horor Moves
• 9:04
  Speaker 3: is something that they can take for granted. In the
• 9:06
  Speaker 3: same way I think China is not going to go
• 9:08
  Speaker 3: back to assuming that importing through the Straight of hor
• 9:11
  Speaker 3: Mews is something that they can take for granted. They
• 9:13
  Speaker 3: ever think quite a strong incentive now where gas is concerned,
• 9:17
  Speaker 3: to think again about doing the Power of Siberia too
• 9:20
  Speaker 3: pipeline with the Russians. I think we have to understand
• 9:23
  Speaker 3: is that a shock in the Straight of Hormers is
• 9:27
  Speaker 3: not something that the world economy has experienced like this before,
• 9:30
  Speaker 3: and that affects the calculations of all the players, the exporters,
• 9:35
  Speaker 3: the importers, and the possibility that it can happen again
• 9:38
  Speaker 3: is something that they will have to adjust to. And
• 9:41
  Speaker 3: that's before, as I say, we get onto the actual
• 9:43
  Speaker 3: damage to the oil and gas industry in quite a
• 9:46
  Speaker 3: number of countries in the Gulf.
• 9:47
  Speaker 2: Yeah. So even if the whole thing, by some kind
• 9:49
  Speaker 2: of miracle, everything stopped tomorrow, there is no returning to
• 9:53
  Speaker 2: normal from here.
• 9:54
  Speaker 3: I don't think there is. They certainly not, I think
• 9:56
  Speaker 3: in terms of the geopolitical assumptions around it. And for Qatar,
• 9:59
  Speaker 3: I think think that from what we can tell anyway,
• 10:02
  Speaker 3: is that the damage looks quite considerable. And I think
• 10:05
  Speaker 3: for Qatar as well, I think we really should focus
• 10:07
  Speaker 3: on guitar because for them this is like a not
• 10:11
  Speaker 3: just a material blow, but it's a staggering, like existential
• 10:14
  Speaker 3: psychological blow. Qatar has been a nominal at least Iranian ally,
• 10:19
  Speaker 3: and the Iranians hit major targets, not like they did
• 10:24
  Speaker 3: in the war back in June of twenty twenty five
• 10:26
  Speaker 3: when they hit a US air base in Qatar. I
• 10:29
  Speaker 3: know they hit the Qatar's own gas facilities, and I
• 10:33
  Speaker 3: think if you look up the ways in which the Katari.
• 10:36
  Speaker 3: The government have talked about that in the days after
• 10:39
  Speaker 3: that attack. One of them said something like, never in
• 10:42
  Speaker 3: his wildest nightmares has it occurred to him that a
• 10:45
  Speaker 3: fellow Muslim country in the month of Ramadan will do
• 10:47
  Speaker 3: that to Qatar. That was a major turning point I
• 10:51
  Speaker 3: think for the way in which guitar can think about
• 10:53
  Speaker 3: the geopolitics of the Middle East. It can't go back
• 10:57
  Speaker 3: to assuming that there's some normality to which it can return.
• 11:00
  Speaker 2: And again, as you said, it's very hard to imagine
• 11:02
  Speaker 2: what the motives of the Iranian regime is because we're
• 11:05
  Speaker 2: not sure there is a regime absolutely. Yeah, Okay, let's
• 11:09
  Speaker 2: talk about the consequences that we can see now. And
• 11:11
  Speaker 2: we can readly see across Southeast Asia fairly major fuel
• 11:15
  Speaker 2: and energy rationing going on. So we've seen that, and
• 11:18
  Speaker 2: we can begin to feel that wave heading towards Europe.
• 11:22
  Speaker 2: And one of the things that we're already seeing that
• 11:25
  Speaker 2: you can see people talking about on social media, for example,
• 11:27
  Speaker 2: is the very sharp rise in the price of flights,
• 11:30
  Speaker 2: So we know that there's a shortage of jet feel
• 11:32
  Speaker 2: coming and we're already in the UK beginning to see
• 11:35
  Speaker 2: lines at fuel stations as people begin feel a little panic,
• 11:38
  Speaker 2: and then of course we will, bit by bit we
• 11:40
  Speaker 2: will see the rise in energy prices feeding through into
• 11:42
  Speaker 2: the price of absolutely everything, because that's just the way
• 11:46
  Speaker 2: this works. How do you see this playing out?
• 11:48
  Speaker 3: Yeah, I mean, I think that we in Europe have
• 11:50
  Speaker 3: been relatively protected so far, both in terms of the prices.
• 11:55
  Speaker 3: I mean, if you look, they've come down now the difference,
• 11:57
  Speaker 3: but there was a really big difference between the price
• 12:00
  Speaker 3: index and the Brent price for oil until the last
• 12:04
  Speaker 3: few days, and in terms of when they last tankers
• 12:08
  Speaker 3: that left the Gulf before the war started due to arrive.
• 12:13
  Speaker 3: I think I think I saw from ed Conway this
• 12:16
  Speaker 3: morning that we're speaking on Tuesday, that the last tanker
• 12:20
  Speaker 3: with air fuel aviation fuel is due on Thursday here
• 12:26
  Speaker 3: and Britain is particularly actually, all European countries, almost all
• 12:30
  Speaker 3: European countries are particularly dependent on aviation fuel coming out
• 12:34
  Speaker 3: of the Golf, much more so than they are on
• 12:36
  Speaker 3: crewde coming out of the Gulf. And I suspect that's
• 12:39
  Speaker 3: why we were already seeing the impact on air prices.
• 12:42
  Speaker 3: But it's not going to be that much longer after that,
• 12:45
  Speaker 3: I think, without something changing very rapidly, in which we're
• 12:49
  Speaker 3: going to see the impact on petrol and particularly on
• 12:52
  Speaker 3: diesel prices.
• 12:53
  Speaker 2: So we'll see that, we'll fill that first, But then
• 12:55
  Speaker 2: of course there's also the impact on fertilizers on people
• 13:00
  Speaker 2: talk a lot about helium and about the other things
• 13:01
  Speaker 2: that were used to just getting through the gulf. So
• 13:04
  Speaker 2: we're now at the point where the idea that there
• 13:06
  Speaker 2: is a global market for any of these things, or
• 13:08
  Speaker 2: a global price even for any of these things is
• 13:11
  Speaker 2: slightly discredited. The whole conversation about, for example, the global
• 13:13
  Speaker 2: price of gas, that doesn't quite work anymore, does it. No.
• 13:17
  Speaker 3: You can see it in oil really clearly. And it
• 13:18
  Speaker 3: always interesting because usually there always are a different differences
• 13:22
  Speaker 3: between the prices that prevail in Asia and Europe and
• 13:24
  Speaker 3: the United States, but they're usually within a sort of
• 13:27
  Speaker 3: ten dollar range, may be of each other. Like at
• 13:30
  Speaker 3: one point last week, I think that there was about
• 13:33
  Speaker 3: a sixty seventy dollar difference between the price for essentially
• 13:38
  Speaker 3: the Indians were paying India was paying for oil and
• 13:41
  Speaker 3: what the WTI the effective US price was. That's that's
• 13:45
  Speaker 3: a major difference. That's pretty much twice what the price
• 13:48
  Speaker 3: was at the start of this for the US.
• 13:51
  Speaker 2: Let's talk a bit about what all those means for
• 13:54
  Speaker 2: the UK. So, you know, we've been attempting to head
• 13:57
  Speaker 2: towards in at zero. We've been very clear, or our
• 13:59
  Speaker 2: government been very clear. Parts of our government have been
• 14:02
  Speaker 2: very clear on what they want from the energy transition.
• 14:05
  Speaker 2: But now that this has happened, it seems to be
• 14:08
  Speaker 2: very clear that we've made ourselves remarkably vulnerable.
• 14:12
  Speaker 3: I think that it's clear that Britain has a pretty
• 14:15
  Speaker 3: weak energy security strategy. Indeed, one might argue whether there
• 14:19
  Speaker 3: is any real energy security strategy in relation to fossil fuels,
• 14:24
  Speaker 3: which remain the largest part of our energy consumption.
• 14:28
  Speaker 2: Interesting, I'll just interrupt you that Xu. I did just
• 14:30
  Speaker 2: look up before we started to double check the percentage
• 14:33
  Speaker 2: of our energy that is actually oil, not just fossil fuels,
• 14:36
  Speaker 2: but oil, and it's near forty percent.
• 14:38
  Speaker 3: Yeah, it's still yeah, yeah. And you know, we're still
• 14:41
  Speaker 3: the largest single source of our energy consumption.
• 14:45
  Speaker 2: And we're well over seventy percent fossil fuels in general.
• 14:48
  Speaker 2: And there is often when you listen to people discuss energy,
• 14:52
  Speaker 2: there's a tendency to confuse energy and electricity, right, and
• 14:56
  Speaker 2: it will often be told that sixty percent of our
• 14:58
  Speaker 2: energy or forty percent of during seventy per cent of
• 15:00
  Speaker 2: our energy on it any particular day comes from renewables.
• 15:04
  Speaker 2: But what people actually mean when they say that is
• 15:05
  Speaker 2: not energy but electricity. As in a fact we remain
• 15:09
  Speaker 2: like all economy is fully based on fossil fuel use.
• 15:12
  Speaker 3: Electricity is a little bit more than twenty percent of
• 15:16
  Speaker 3: the UK's overall energy consumption, and if you look at
• 15:21
  Speaker 3: like fossil fuel energy consumption, only thirteen percent of it
• 15:25
  Speaker 3: actually goes to electricity. So you can have a strategy
• 15:30
  Speaker 3: for electricity, you can have a strategy for electricity security,
• 15:34
  Speaker 3: but it can't be the same just as a matter
• 15:36
  Speaker 3: of logic as an energy security strategy. And if you say,
• 15:41
  Speaker 3: which is really I guess the Admiliban like position, which
• 15:45
  Speaker 3: is actually you can't have energy security for fossil fuel energy,
• 15:48
  Speaker 3: to which actually that argument in itself, I have some
• 15:51
  Speaker 3: like sympathy. There is something that actually is a roller
• 15:54
  Speaker 3: coaster and has long been a roller coaster about fossil
• 15:58
  Speaker 3: fuel energy consumption any once oil came into the picture.
• 16:03
  Speaker 3: But nonetheless is that if you are going to have
• 16:07
  Speaker 3: a strategy to change that, then it has to be
• 16:10
  Speaker 3: simultaneously a strategy for decarbonizing electricity and for electrification. It
• 16:16
  Speaker 3: involves the electrification of those things that were presently using
• 16:20
  Speaker 3: oil and gas for And if you look at the
• 16:23
  Speaker 3: present government in Britain's energy policies, almost all of it
• 16:28
  Speaker 3: is directed at electricity and very little of it is
• 16:31
  Speaker 3: directed at electrification. So even in its own terms, that
• 16:35
  Speaker 3: is a problem. And this phrase clean power is banded around.
• 16:39
  Speaker 3: I think the power is a I'm not saying a
• 16:42
  Speaker 3: deliberate obfiscation. I don't think that, but it confuses because
• 16:45
  Speaker 3: power in energy terms isn't a meaningful term. We should
• 16:48
  Speaker 3: be talking about energy, or we should be talking about electricity.
• 16:52
  Speaker 2: And the different things. Yeah, and the idea of electric
• 16:55
  Speaker 2: trying to electrify more than we have already would be
• 16:57
  Speaker 2: hugely expensive.
• 16:58
  Speaker 3: In principle, at least there are easy wins. We're not
• 17:01
  Speaker 3: even doing that. If you look at electric trains in
• 17:03
  Speaker 3: this country, the electrification of the rail network, I think
• 17:06
  Speaker 3: it's under fifty percent actually of our rail network is
• 17:08
  Speaker 3: actually electrified. This is something that's stored like for a
• 17:12
  Speaker 3: long time in this country because actually it's not difficult
• 17:16
  Speaker 3: to do. I mean by that technologically difficulty is an
• 17:19
  Speaker 3: absolutely known thing to do for obvious reasons. We've already
• 17:21
  Speaker 3: got electricified track, that's an obvious thing to do. But actually,
• 17:27
  Speaker 3: as far as I can see, the government doesn't actually
• 17:28
  Speaker 3: have a strategy for the complete electrification of the railways.
• 17:51
  Speaker 2: So I suppose what we in the UK have learned,
• 17:53
  Speaker 2: for those of us who didn't know it already, is
• 17:54
  Speaker 2: that well, their fossil fuels market is extraordinarily unstable and
• 17:57
  Speaker 2: will remain unstable and has always been unstable. You kind
• 18:00
  Speaker 2: of have to live with that because nonetheless, fossil fuels
• 18:03
  Speaker 2: create the foundation of our economy completely. So how do
• 18:06
  Speaker 2: we in the UK try and stabilize our own supply
• 18:11
  Speaker 2: of fossil fuels? And one of the things that this is,
• 18:13
  Speaker 2: this whole thing is brought up is this argument again
• 18:15
  Speaker 2: about the North Seat. So you have one side of
• 18:17
  Speaker 2: the political world thing. What this tells us is that
• 18:19
  Speaker 2: we must go further and faster with our attempticket to
• 18:23
  Speaker 2: use renewables and the other side of the argument and well, yeah,
• 18:26
  Speaker 2: let's do that. But at the same time, why don't
• 18:28
  Speaker 2: we encourage more explanation and exploration and production in the
• 18:31
  Speaker 2: North Sea and why don't we actually move ahead with
• 18:34
  Speaker 2: some fracking the ascent that is now possible. Let's bump
• 18:37
  Speaker 2: up our own production of fossil fuels because that will
• 18:40
  Speaker 2: make us more secure. Where do you come down on that.
• 18:43
  Speaker 3: I'm generally of the view that we need to be
• 18:47
  Speaker 3: very open minded about the North Sea and that we
• 18:50
  Speaker 3: really need to get out of this binary that we've
• 18:53
  Speaker 3: got into of. It's like fossil fuels versus renewables, and
• 18:57
  Speaker 3: kiss Darma was using that like the other day for
• 19:00
  Speaker 3: the reasons that we've just been talking about morting. It
• 19:01
  Speaker 3: doesn't even make sense, and it's like own terms because
• 19:04
  Speaker 3: right now is you can't substitute renewables for most of
• 19:07
  Speaker 3: the things that fossil fuels are doing for just because
• 19:10
  Speaker 3: of the way that we set things up. You can
• 19:12
  Speaker 3: only think of that mindset about electricity, and that only
• 19:16
  Speaker 3: applies to gas, given that we don't use oil for electricity.
• 19:20
  Speaker 3: I think that what we have to bear in mind, though,
• 19:23
  Speaker 3: is that the Norse Sea isn't going to be or more.
• 19:26
  Speaker 3: Doing more in the Norse Sea, which I'm in favor of,
• 19:28
  Speaker 3: isn't going to be a panacea because to get some
• 19:31
  Speaker 3: of the benefits of that we've got to revisit some
• 19:33
  Speaker 3: of the policies that we've put in place like decades
• 19:37
  Speaker 3: ago in the way in which we treat like the
• 19:39
  Speaker 3: Norse Sa. I mean, for one of the things that
• 19:41
  Speaker 3: we do obviously is to explore about eighty percent of
• 19:45
  Speaker 3: oil that we produce in the North Sea. And we
• 19:47
  Speaker 3: do that because we don't have refineries in this country
• 19:50
  Speaker 3: that can actually deal that well with the kind of
• 19:53
  Speaker 3: oil that now comes out the kind of crew that
• 19:56
  Speaker 3: now comes out of the Norse Sea. And I think
• 19:58
  Speaker 3: this whole issue about what we do about with fineries
• 20:00
  Speaker 3: is actually a bigger picture than that too. It's one
• 20:02
  Speaker 3: of the reasons why we're in this position of importing
• 20:05
  Speaker 3: as much aviation fuel as we do, like from the
• 20:08
  Speaker 3: Persian Gulf, because our refineries we've only got four refineries left.
• 20:12
  Speaker 3: They're not set up to do that, they're not set
• 20:14
  Speaker 3: up to deal.
• 20:14
  Speaker 2: And why don't we have refineries anymore?
• 20:16
  Speaker 3: I think I'm saying is is that we haven't opened
• 20:19
  Speaker 3: a new refinery since nineteen sixty nine, I want to say,
• 20:23
  Speaker 3: and that we closed another one. They've been closing down
• 20:26
  Speaker 3: like for several decades, and NOWS at Grangemouth in Scotland
• 20:30
  Speaker 3: like closed like last.
• 20:31
  Speaker 2: Year, which did produce aviation fuel, didn't it.
• 20:34
  Speaker 3: Yeah, one of those oddities of like when we had
• 20:38
  Speaker 3: the boon of north Sea. So the North Sea, the
• 20:41
  Speaker 3: major north Sea oil discovery was nineteen like seventy, the
• 20:46
  Speaker 3: year after the last open refinery. That didn't go hand
• 20:50
  Speaker 3: in hand. We're saying that we need a strong refining
• 20:54
  Speaker 3: domestic refining like operation. The North Sea was from the
• 20:57
  Speaker 3: start quite orientated to production for world like and then
• 21:02
  Speaker 3: on the gas side is we've set up a way
• 21:03
  Speaker 3: of pricing that effectively means that the gas that we
• 21:07
  Speaker 3: do consume from the North Sea we end up paying
• 21:09
  Speaker 3: pretty much the same as well as if we were
• 21:11
  Speaker 3: consuming it from liquefied natural gas purchases like in the
• 21:15
  Speaker 3: global market. So again, if we want to get some
• 21:19
  Speaker 3: of the benefit, the macroeconomic benefit or the economic benefit
• 21:22
  Speaker 3: from more domestic gas production, which is a good would
• 21:26
  Speaker 3: be like a good thing. We've also got a look
• 21:29
  Speaker 3: at the way in which we deal with gas, at
• 21:31
  Speaker 3: least in relation to electricity, so that there's a lot
• 21:33
  Speaker 3: of things that are coming in terms of the decisions
• 21:36
  Speaker 3: that were made in British energy policy for decades, not
• 21:38
  Speaker 3: just like the last decade and a half or so
• 21:41
  Speaker 3: that really coming home to us as a complacency. I
• 21:44
  Speaker 3: think that we had through the Norse Sea years, through
• 21:47
  Speaker 3: the Boom Norsea years, I mean by that, which was
• 21:50
  Speaker 3: that markets would and global markets would be the solution
• 21:56
  Speaker 3: to energy security, and it's just not the case that
• 21:58
  Speaker 3: they are.
• 22:00
  Speaker 2: All these things these are policy choices, right. So while
• 22:02
  Speaker 2: it may take time, pretty much all these things can
• 22:05
  Speaker 2: be reversed. It would be possible for the UK to
• 22:08
  Speaker 2: re and produce a fairly hefty element of energy security
• 22:11
  Speaker 2: over say a five year period.
• 22:13
  Speaker 3: I think that what we need is a rethink of
• 22:16
  Speaker 3: a whole set of things that we do in energy policy.
• 22:19
  Speaker 3: That I think it starts to make sense if you
• 22:22
  Speaker 3: think in the nineties that the UK, across parties it
• 22:27
  Speaker 3: wasn't depending on which political party was in office, made
• 22:31
  Speaker 3: a bet essentially that there wasn't really serious geopolitical risk
• 22:36
  Speaker 3: attached to energy and then that's why the markets plus
• 22:39
  Speaker 3: some regulation could do the work and that the state
• 22:43
  Speaker 3: stayed out of it. Essentially even to the point where
• 22:46
  Speaker 3: we got rid of having an energy secretary in the
• 22:48
  Speaker 3: nineteen nineties, we only got one back in I think
• 22:50
  Speaker 3: it was two thousand and eight, energy was just consumed
• 22:53
  Speaker 3: under the Department of Trade and Industry. I think that
• 22:57
  Speaker 3: we embraced in a way much more than the Americans
• 22:59
  Speaker 3: did this notion that markets with a solution to all
• 23:03
  Speaker 3: energy questions. And I'm not saying that markets aren't a
• 23:05
  Speaker 3: solution to some energy questions, but the idea that the
• 23:08
  Speaker 3: state can just be completely, like largely like hands off
• 23:11
  Speaker 3: and that doesn't have to deal with geopolitical risk and
• 23:15
  Speaker 3: supply chain risk, I think that's turned out to be
• 23:17
  Speaker 3: an incredibly dangerous solution and naive as well.
• 23:21
  Speaker 2: So if you could start tomorrow, let's say that you
• 23:24
  Speaker 2: had ed Milivan's job, we'd all quite like that. What
• 23:28
  Speaker 2: would you do?
• 23:29
  Speaker 3: I mean, I think you have to review everything. And
• 23:31
  Speaker 3: I'm not saying that because I think that you actually
• 23:34
  Speaker 3: have to throw everything out. I think that in this respect,
• 23:36
  Speaker 3: the energy transition is necessary to improve long term energy
• 23:42
  Speaker 3: security as well as the climate change issue. But you
• 23:46
  Speaker 3: have to be able to think about the short term
• 23:48
  Speaker 3: and the medium term as well as the long term.
• 23:50
  Speaker 3: And I think that's where we are like, in some
• 23:52
  Speaker 3: sense imprisoned. And this is where I think that the
• 23:55
  Speaker 3: net zero question does come into play because what net
• 23:59
  Speaker 3: zero did not just from the twenty nineteen legislation but
• 24:02
  Speaker 3: from the Climate change out back in two thousand and
• 24:04
  Speaker 3: eight is is great a pretty strict legal framework in
• 24:08
  Speaker 3: which energy questions really have to be thought about legally
• 24:12
  Speaker 3: through emissions, through carbon admissions. And then that makes it
• 24:17
  Speaker 3: actually quite difficult to adjust to actually review everything, because
• 24:23
  Speaker 3: we've got a whole set of priors that are legally
• 24:25
  Speaker 3: built into the way in which energy policy must be
• 24:28
  Speaker 3: must be considered. I mean, I think that the easy win,
• 24:31
  Speaker 3: if you like, would be to make a decision on
• 24:35
  Speaker 3: Rosebank and jack daw in the fields and the north
• 24:38
  Speaker 3: see where the government or the Energy secretary has been
• 24:41
  Speaker 3: sitting on for quite some time now without making a decision,
• 24:44
  Speaker 3: make a quick decision about that to allow them to
• 24:47
  Speaker 3: go ahead. That would be a start.
• 24:49
  Speaker 2: There've been a lot of losers, are not so many
• 24:51
  Speaker 2: winners from this war so far, but one of the
• 24:53
  Speaker 2: big winners here seems to be.
• 24:54
  Speaker 3: Cool certainly in Asia. I think that this is what's
• 24:58
  Speaker 3: actually quite revealing about U Rope's weakness, and it isn't
• 25:01
  Speaker 3: just about the Britain though Britain actually I think is
• 25:03
  Speaker 3: probably exhibit a where coal is concerned, because we know
• 25:06
  Speaker 3: we don't have any coal power reactors left. We close
• 25:10
  Speaker 3: the last one down at Raklafon saw a few years ago.
• 25:14
  Speaker 3: What happens in Asia, in certainly in China and in
• 25:18
  Speaker 3: India and Japan for that and South Korea actually quite
• 25:21
  Speaker 3: all the larger economies is when they're price of liquifined
• 25:24
  Speaker 3: natural gases like too much, they switch from electristic purposes
• 25:29
  Speaker 3: two more coal. And that is not an option for
• 25:33
  Speaker 3: like European count certainly not an option like for ours.
• 25:37
  Speaker 3: And again I think it goes back to Britain's structural
• 25:41
  Speaker 3: like weakness is there are things you can fall back
• 25:43
  Speaker 3: on in the emergency that are reliable. Coal is one,
• 25:48
  Speaker 3: nuclear is another, and hydropower is it is another, and
• 25:53
  Speaker 3: Britain has relatively little of those three things. As we know,
• 25:57
  Speaker 3: we haven't finished building a nuclear and like reactor since
• 26:00
  Speaker 3: the middle of the nineteen nineties when size well be open.
• 26:03
  Speaker 3: At the moment Hinckley point c looks maybe like two
• 26:05
  Speaker 3: thousand and thirty. We don't have a coal power station
• 26:08
  Speaker 3: and we don't have a country that's well suited at
• 26:11
  Speaker 3: all to like hydro power. So that makes us like
• 26:14
  Speaker 3: structurally vulnerable, and we simply do not have the options
• 26:18
  Speaker 3: of in the emergency burned coal that Asian countries and
• 26:21
  Speaker 3: some European countries still have.
• 26:24
  Speaker 2: Yes, we've just removed all the policy reasons, removed the
• 26:26
  Speaker 2: optionality from our system.
• 26:29
  Speaker 3: We're very locked in from a set of accumulated set
• 26:32
  Speaker 3: of decisions that I'd say have been made in a
• 26:35
  Speaker 3: way going back to the seventies, even certainly since the nineties.
• 26:40
  Speaker 2: Well, this is depressing, is really depressing. What about fracking?
• 26:46
  Speaker 2: That conversation has come up again in the UK, and
• 26:49
  Speaker 2: we've sawt phenomenal success it's been in the US, which
• 26:52
  Speaker 2: of course is fairly insulated from their own war because
• 26:55
  Speaker 2: they have this phenomenal energy security in the US which
• 26:57
  Speaker 2: we obviously don't have. Would it makes sense for us
• 26:59
  Speaker 2: to pick up that conversation, Seriously, I.
• 27:01
  Speaker 3: Think the thing that's difficult about cracking in Europe is
• 27:03
  Speaker 3: if you look in the earlier part of the twenty tens,
• 27:07
  Speaker 3: and there was a lot of hope placed, particularly actually
• 27:09
  Speaker 3: in Poland and to some extent in Ukraine. And it's
• 27:12
  Speaker 3: actually an interesting part of the whole Russia Ukraine story
• 27:16
  Speaker 3: about cracking, and you see the US companies like involved
• 27:20
  Speaker 3: in that you actually see. I think that the Abarma
• 27:22
  Speaker 3: administration was pretty keen on pushing like cracking in in Europe.
• 27:27
  Speaker 3: Poland looked the most propitious, but actually quite a lot
• 27:29
  Speaker 3: of money was like spent there and quite simply that
• 27:32
  Speaker 3: the rocks don't fracture in the same way. The geological prospects.
• 27:36
  Speaker 2: We have different, We have different kinds of.
• 27:37
  Speaker 3: Geological prospects of cracking in Europe are just not the
• 27:40
  Speaker 3: same as that they are in the United States. Now
• 27:42
  Speaker 3: that isn't necessarily to say which the whole thing is
• 27:45
  Speaker 3: just to write off and not to be pursued or
• 27:47
  Speaker 3: thought about. But I don't think we should be under
• 27:49
  Speaker 3: any illusions here is as I say, if you look
• 27:52
  Speaker 3: in the Polish case, there was a lot invested for
• 27:54
  Speaker 3: in the end no rewards. So just because that there
• 27:58
  Speaker 3: are like shale, it does not mean that fracking in
• 28:02
  Speaker 3: a European country is a commercially viable proposition.
• 28:06
  Speaker 2: Helen, is there any chance that we can end our
• 28:08
  Speaker 2: conversation on a note of optimists?
• 28:09
  Speaker 3: Where would you like to go? Merrin?
• 28:13
  Speaker 2: Literally anywhere? At this point? Is there anything that we
• 28:16
  Speaker 2: can say that is hopeful for the UK? When it
• 28:19
  Speaker 2: comes to energy security or for our future. Yeah.
• 28:22
  Speaker 3: One thing I do think is that the level of
• 28:24
  Speaker 3: understanding about energy questions in our politics, I think is rising,
• 28:30
  Speaker 3: like really considerably. And I've been talking about like energy
• 28:35
  Speaker 3: on podcasts in one way or another since about twenty sixteen,
• 28:38
  Speaker 3: like seventeen, when I was doing talking politics, and to
• 28:42
  Speaker 3: be honest, when I used to mention it like then,
• 28:45
  Speaker 3: I always thought, like people just think what knows is
• 28:47
  Speaker 3: going on about And then there was a big change
• 28:50
  Speaker 3: for obvious reasons, like in twenty twenty two, like with
• 28:54
  Speaker 3: Russia's invasion of Ukraine, and then I think it like
• 28:57
  Speaker 3: faded away again. But now we've had in some ways
• 29:01
  Speaker 3: in supply terms, the biggest energy like shock of peace
• 29:06
  Speaker 3: time that there has been, and I don't think it
• 29:09
  Speaker 3: will fade away quite so much this time. I think
• 29:12
  Speaker 3: they were actually reached a point in some sense of
• 29:15
  Speaker 3: no return where the reckoning, if you like, is concerned,
• 29:18
  Speaker 3: and that I think for the UK is a good thing,
• 29:21
  Speaker 3: because we've got to undo like a mindset that essentially
• 29:27
  Speaker 3: left us without an energy strategy or without energy strategy
• 29:31
  Speaker 3: in the world as it was, rather than the world
• 29:33
  Speaker 3: as policymakers wanted it to be, and now the world's
• 29:37
  Speaker 3: hitters and we have to be serious. And I think
• 29:39
  Speaker 3: that's a good thing. I think you can see movement
• 29:41
  Speaker 3: on the nuclear issue in terms of willing to face
• 29:46
  Speaker 3: what it actually would mean to get more nuclear reactors
• 29:48
  Speaker 3: like built. I think there has been movement from the
• 29:50
  Speaker 3: Starman government on that issue. So I think that those
• 29:53
  Speaker 3: are good things.
• 29:54
  Speaker 2: Okay, so the conversation has become serious that we can
• 29:57
  Speaker 2: fail this onder better late than never.
• 29:58
  Speaker 3: Yeah, thank you.
• 30:00
  Speaker 2: Very much for joining us today.
• 30:02
  Speaker 3: It's been an absolute pleasure.
• 30:04
  Speaker 2: Yeah. I hope we haven't ruined everybody's Easter weekend. Thanks
• 30:09
  Speaker 2: for listening to this week's Marin Talks Money. If you
• 30:11
  Speaker 2: like us, show, rate, review, and subscribe wherever you listen
• 30:13
  Speaker 2: to podcasts. Also keep sending your questions and your comments
• 30:16
  Speaker 2: to Merinmney at Bloomberg dot net. You can also follow
• 30:20
  Speaker 2: me and John on Twitter or ex Helen. You're on Twitter,
• 30:22
  Speaker 2: aren't you? What's your handle?
• 30:24
  Speaker 3: Helen h g T twenty.
• 30:26
  Speaker 2: Brilliant Follow Helen any energy insight you want or need
• 30:30
  Speaker 2: you or find there. I'm at Marins w by the way,
• 30:32
  Speaker 2: and John is John Underscore Stepic. This episode was hosted
• 30:35
  Speaker 2: by me maresumset Web was produced by Someersadi Moses and
• 30:38
  Speaker 2: sound designed by Blake Maples and Aaron Casper.