How Bad Could the Iran Oil Crisis Get?

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“If you want to see just how bad this energy crisis can become, just read what President Trump and Iran are saying to each other.”

On Saturday night, Trump posted a missive to truth social. He wrote, "If Iran doesn't fully open without threat, the state of her moves within 48 hours from this exact point in time, the United States of America will hit and obliterate. They're various power plants, starting with the biggest one first." It's a brutal threat meant to make Iran back down.

It did the opposite. In response to the speaker of the Iranian parliament said immediately after the power plants and infrastructure in our country are targeted,

the critical infrastructure, the energy infrastructure and oil facilities through the region,

will be considered legitimate targets and will be destroyed in an irreversible matter and the price of oil will remain high for a long time. I'm recording this on the morning of Monday, March 23rd. As I woke up today, oil prices had fallen a bit because Trump had extended his 48 hour deadline by five days, citing positive talks with Iranians. Iran is denying any such talks have happened.

They say Trump is backing down out of fear. They have already hit energy infrastructure in the region, so their threat is credible. But I don't pretend to know the truth here. The news and the price of oil and gas are changing radically by the hour. But here's the key fact that has not changed yet. The state of her moves remains mostly closed.

If it stays closed and even more so of the war expands, if Iran destroys more energy infrastructure through the region, and the US and its will destroy it inside Iran, we are going to enter the kind of energy crisis we have not seen since the 70s, or maybe even something much, much worse.

Jason Bordoff is the founding director of the Center on Global Energy Policy at Columbia University and a co-founding dean of the Columbia Climate School. He served as a special assistant to President Obama and senior director for energy and climate change on the national security council. I also want to show the walk us through what all this might mean for Iran, for America, for global energy prices and security,

“and also, I think something not to lose sight of, for America's geopolitical competition with Russia and China.”

Both seem likely to come out a lot stronger from this.

As always, my email, as we'll find out at nytimes.com.

Jason Bordoff, welcome to the show. Thanks so much for having me. So, last week, you and Spencer Dale wrote, "The scale of the current shock is extraordinary. The supply outage is the largest ever-recorded,

far exceeding prior disruptions not only in absolute terms, but even as a share of global demand." Tell me about that. Yeah, the straight-of-horse moves about 20 million barrels of oil a day and 100 million barrel a day market, so about 20 percent, about 20 percent of the words "liquified natural gas supply" as well, and it's mostly closed.

It's the most critical global maritime choke point for the energy sector,

and for lots of other things too, we can come to petrochemicals and aluminum and fertilizer, which has implications on food production and food prices.

“But for oil and gas, it's the most important choke point,”

and the Gulf, we all know since the 1970s, the Middle East is a huge energy producer, Iraq, Saudi Arabia, the United Arab Emirates, Iran, of course, and all of that oil, most of it, flows by tanker through this very narrow straight that jets like a little triangle around a corner, and it's right where Iran is, so it doesn't take that much with some drones or explosives in a dinghy boat racing out to a tanker.

You have something like 100 a day moving through before this conflict.

and for ships to just say we're not going to take the risk. There are some workarounds, Saudi Arabia has been able to move some oil by pipeline around Iranian oil, ironically, is still flowing through. We've tapped strategic reserves, we've eased sanctions on Russian Iran, we can talk about whether that makes sense.

But you're talking about a disruption of about 10 million barrels of oil,

maybe a little bit more, so more than 10 percent of global supply, the Arab oil embargo in 1973 by contrast. You saw that six or seven percent of world supply disrupted. So this is by far the largest energy supply disruption we have ever seen. What is Iran actually done to close this straight?

I mean, the story of this conflict so far has been the tankers, mostly as a precaution, are just staying in place. We have seen facilities in the region shut down production as a precaution. We're still not yet at the point where most energy infrastructure in the region has been physically attacked or damaged.

We're starting to be at risk of seeing that. Israel attacked a natural gas field in Iran last week,

“Iran retaliated by hitting a very important energy installation in Qatar.”

And it was to send a signal, it's tit-for-tat escalation. This is mutually sure destruction. If you come after me, I can hit you hard and you'll hurt me, but I'll hurt you in the process. And so people have mostly been holding back from that.

And that's important because if this conflict somehow is resolved and comes to an end and the straight is reopened, it might take a few weeks, maybe even a month or two, for some of that to come back online and for the energy to start flowing again. But if we start to see those attacks where we really have physical damage,

the Qataris are saying already it'll take three to five years to repair the damage that was done to their facility last week. If you do that to many other facilities in the region, the consequences of this crisis are going to last much, much longer. I want to hold on that attack on the Qataris,

liquified natural gas plant.

“Because I think at the beginning of this fight,”

when people would think about Iran and Israel and the United States, they would think about Iran, maybe firing missiles at Israel. That would be how they would fight back. But they have turned this conflict very asymmetric, and they seem to understand the vulnerability of Israel,

and particularly the United States, as coming through the vulnerability of energy infrastructure and other kinds of infrastructure in other Gulf states. So what kinds of attacks have they been launching? And what is both the threat that has already now merged to energy supplies? But certainly the implied threat that could emerge to energy supplies.

The point about the asymmetric nature of this is really quite striking.

You have very powerful militaries like the United States and even Israel,

dropping enormous amounts of munitions on Iran, Iran has its own military, but it's a much weaker power. But again, it doesn't take that much to throw the entire global energy market into chaos. And that's what they're doing. So they're not just hitting neighbors, although the neighbors are being harmed,

a rock of some other countries. If you run out of places to store the daily production of oil that you have, and you can't get it into market and put it on a ship to sell it somewhere. You have to shut in production. You just have to stop producing.

And we've seen about seven, eight, nine million barrels a day of oil globally, just shut in where people say we're going to stop producing. So that hurts those countries. But we are in a global oil market. If there's a disruption halfway around the world,

you take one, two, ten million barrels off the global price of oil goes up.

And as we are seeing in the United States for everyone listening who goes to fill up at the pump, the price of the pump is set by the global price of oil. Even though the United States is now a huge net exporter and the largest producer in the world. So the pain around is inflicting is global in scope because they can affect the global energy market. And that's true for natural gas as well, which particularly hurts Europe and Asia,

because that's where those supplies go. So it is not a new question for the United States military to think about what would happen if we ended up in a war with Iran. And in every war gaming of that question, I am aware of. And there have been many more that I'm not aware of. The closing of the state of Hormuz is an immediate possibility.

We seem to have been caught flat-footed by it. Why? Well, I can't speak to what kind of planning went on. Obviously in the Trump administration before they started it, you do have a sense that they thought this would be over much more quickly.

Other recent conflicts have been we woke up on a Saturday morning and found that we removed the leader of Venezuela. And that seemed to be over a few days later. There was conflict in the Middle East last year, the 12 day war between Israel and Iran. And you know, it was only 12 days. So there may have been excessive optimism that things would change in Iran quite quickly.

Whatever the objective of this action is regime change or something else.

“And the other thing that I think you want to do in the situation like you're describing,”

because you're right, closing the state of Hormuz is the mother of all nightmare scenarios for global energy markets,

You want to pursue an effort that might result in that with allies and in cooperation with other countries.

And obviously other countries did not know this was coming to the extent where the President of the United States is now taking to social media to ask both adversaries and allies alike. Send your worships to the region and help reopen the straight because you need that oil just as much as we do. And most countries are saying no thanks. This is not our problem of our making.

“What makes it hard for the US to reopen the straight by itself?”

Well, again, those are probably questions for military experts even more. But like I said a moment ago, it doesn't take a lot to create a risk perception. You just have to hit one every couple of days or every week or two to create a fear about going through the straight. And there are so many tankers. And it's not that hard with drone technology with small little boats that can race out to a tanker.

You could probably protect a couple of warships or a couple of vessels that need to transit. But if you're talking about dozens or even a hundred or so tankers a day, it's just hard to protect all of them from any risk. And so insurance has been canceled for a lot of these tankers. So they're not going to go through almost there in short. And they're not willing to put these huge cargoes at risk.

Tell me about how the deprivation of this oil and natural gas compounds as it goes on. I mean, something I am seeing a lot of discussion of from energy analysts is like, if it's another week, oh, maybe that's higher prices, but not a huge deal. But there seems to be a sense that as it compounds that the effects on the global economy are non-linear, that the economy is sort of working through reserves that currently has,

but things can spiral into a very different kind of situation. You understand the way energy flows through the economy in a way I don't. So talk me through that compounding and how this might change, you know, if it goes on in other two weeks and other month, then other two months.

“Yeah, it's a good question because I think both the impact of higher prices on the economy are non-linear,”

but the impact of conflict and supply disruption on oil prices are non-linear. As I said a moment ago, this is the mother of all nightmare scenarios closing the straight.

If someone had said we're going to close a straight with 20 million barrels a day to most of its supply,

you'd be talking about $150, 200 dollars a barrel. It's striking that oil prices are just a bit over a hundred, which historically is not an excessively high price. It's high, but it's not crazy high. And so I think there are a couple of reasons for that.

One is a general market perception that this was going to result in Trump pulling back, declaring mission accomplished as we saw with Greenland or Liberation Day tariffs. We did not have the staying power, so we'd figure out how to get out of this pretty soon.

“I think if this goes on, we haven't seen anything yet in terms of how high energy prices are going to go.”

Right now, the price of oil that you're reading about in the newspaper is sort of one that's set by traders every day, based on market expectations at a certain point.

Physical reality has to catch up and prices need to rise high enough to destroy 10 million barrels a day of global demand.

We don't know exactly what that price is, but it's really high a lot higher than the prices today. And you're starting to see little signs of that where the price of jet fuel, the price of heating oil are much higher than would be suggested by, you know, a benchmark price of a hundred dollars a barrel. So people might have heard President Trump say the US is a winner when oil prices go higher because we're the world's biggest oil producer now. Is that true? Is this good for us?

It's true, and it's not. I mean, it is the case that the US is the largest oil producer in the world. And it is noticeable that when oil prices spike, Putin celebrates, but the United States does not. Even though we produce more oil than Russia does, and the reason of course is because we're a super large consumer as well. So I've often heard the Secretary of Energy say, "Hi, oil prices might be good for oil producers, but they're not good for consumers." And this administration cares about the 99% who consume oil and gas, not the 1% who produce it.

An oil price spike of this magnitude means a lot more money for producers, but, you know, consumers pay more at the pump. And what's different about the impact on the US today, is that an oil price shock is more of a distributional issue, meaning it's affecting people who consume. It probably has a smaller impact on the macro economy on GDP than it did before, because that increased consumer spending is flowing to domestic producers and their shareholders, and they're spending some of that money in our economy too.

It's not flowing overseas the way that it used to. Which means that the issue is that if you're working class in the US and you're filling up your car at the gas station, you're paying a lot of money, where is there people who either own or are invested in US energy companies who are making a lot of money? Well, US producers are making a lot of money, and we should remember some of those are global too, and they own assets. But yes, US companies, their shareholders, their workers, oil producing states, of course, they all benefit from high prices.

As you mentioned, the price of barrel oil, or at least in the measure we tend to use, is a bit of a hundred at the moment we're speaking, but if you just looked at the chart and you had no narrative, you would not predict the conversation we are currently having, which is once in a generation geopolitical crisis that has created the nightmare scenario for global energy supply,

which is the closing of the most important choke point for global energy supply of people like you, saying the scale of the current shock is extraordinary.

Something seems off here, either it seems the market is not correctly pricing in, the risk that is being described by plenty of people in the market. Listen to people who believe energy companies or traders in this area, their hair is on fire, but this looks not much worse than 2022 in the oil pricing.

“So is someone wrong? Am I misunderstanding what markets are supposed to do in terms of pricing and risk? How do you explain this?”

Well, they're the, you know, so-called physical markets and then paper markets, meaning like there's the price we see as a result of trading activity. That is based a lot on expectations, not just the physical reality at any given moment. And so the price you're seeing includes what's happening, but also expectations about what is going to happen.

And as I said a moment ago, if tomorrow declares mission accomplished, we've done what we need to do, it's time to pull back, reopen the straight.

It would take a couple of weeks, but eventually, you know, supplies come back reasonably quickly. And I went to bed, made a few notes last night for coming on your show about how high the oil price was, and woke up to find oil prices had fallen dramatically, because President Trump made some comments about how he had had very productive discussions with the Iranians and we were close to a resolution. The fundamental reality hasn't changed in the last 24 hour, but market prices fell enormously, because people had an expectation that things would come to an end reasonably quickly.

“So I think that helps to explain the disconnect. It also takes time for the physical disruption to show up in the market.”

You know, you load a tanker with a bunch of crude from Iraq or Saudi Arabia, and it can take two weeks to get to its destination. So we still have some cargos that were loaded before this all happened that haven't even reached their destination yet. You kind of work through some inventories, work through some oil that is in transit, and a couple of weeks into this crisis. Then you start to see the physical reality bite a lot harder. [Music]

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The measure a lot of people actually see in their daily lives is the numbers when they go to the gas station. But something I'm hearing a lot about from energy analysis, the middle distillate products, the sort of fuels and the intermediate products that go into other things. And there's actually seem to be going up and cost higher and faster than the price you pay at the pump.

“Can you talk me through both what those are and why that is?”

Yeah, when you refine a barrel of oil, you get a bunch of different products from it. Gessolene is the one most people think of, but there's diesel, which is sort of the more course. The lifeblood of the of the industrial economy, because everything would buy in the store gets there by truck and those all run on diesel. So you start to see it show up in prices elsewhere, heating oil, jet fuel, and lots of other kind of things use and asphalt and things that we don't think about normally.

And so the physical tightness in those markets starts to hit refiners much more quickly.

So people who need to buy those products from refiners, they're seeing people charge a lot more for it already. If this keeps going for two weeks, three weeks, four weeks, five weeks.

“What do you think happens to the to the US economy? What do you think happens to the global economy?”

What happens if this begins to cascade? I think we haven't seen anything yet in terms of where I expect oil prices would go if this goes on for weeks longer. Because as I said, you really do need prices eventually to the physical reality catches up. You need prices to rise high enough to actually destroy demand and that's hard to do. What does destroy demand mean?

It means everyone figures out how to do something other than by gasoline. So you're going to drive your car or less. We saw the CEO of United Airlines the other day say they were going to start to idle some of their flights. The flights that maybe get a little less revenue like Tuesday Wednesday Thursday rather than on the weekend. The flights that aren't as profitable, they're going to stop flying as many airplanes and some industrial factory is going to shut down.

We're already seeing countries that struggle to afford high prices in Southeast Asia, Thailand, Indonesia, Malaysia. Countries like that have announced work from home one day a week. They are having school closures, putting in place emergency measures to cut fuel.

“So the question is, how high a price do you need for the global economy to use something like 10 million barrels a day less of oil?”

And that's a pretty high price. And there's, you know, in the 1970s, there was a little actually lower hanging fruit. There were some opportunities to reduce oil use that were a bit easier. We've kind of gotten the low hanging fruit out of the system. And so today, you know, the things we use oil for, there's not a huge number of substitutes in the near term.

And the long term obviously combined electric car instead of an internal combustion engine, that sort of thing. But in the near term, there's not that much you can do except shut down economic activity. And maybe take the subway or bus instead of driving and, you know, in businesses will make different choices. The Economist James Hamilton famously documented that basically every major oil shock of the 20th century preceded a recession. Do you think that's likely to happen in this situation?

Well, it depends how high oil prices go of course. But if you're talking about the kind of levels that would be needed to make 10 million barrels a day of oil demand go down.

Then yeah, that is the sort of price level that could push the economy into recession.

“I think we think about this from the American perspective where it would cause economic hardship and pain.”

It is hard to pay more at the pump. It is hard to pay more for a flight. But what will happen very quickly is that rich countries will begin bidding for scarce energy supplies. And this applies what make it to poor countries who cannot pay the cost. So if this continues, I think there's been a lot of talk about say recessionary risk in America, but we and Israel started this war. But if it continues, what happens to people in Malaysia or people in Kenya?

What is the cost that we are risking imposing on the two billion poor people in the world who had no say in this? I mean, I think it has the potential to be really quite devastating. We saw that in the 2022 energy crisis, which was largely limited to natural gas. In fact, oil markets as much. So when Europe lost access to natural gas from Russia, what did Europe do? It went into the global market for liquified natural gas.

That's gas that can be traded more easily. And prices went through the roof and like markets are supposed to do, the market allocated the supply to the people who could pay for it. So those flows went to Europe and Europe paid a premium for it. And that meant that coal prices went up because coal was the substitute for the gas that would otherwise gone to Asia. And so a country like China used more coal instead, but if you were a lower in a middle income country like Pakistan, Bangladesh, you struggled to afford any energy at all.

And they really did start to see significant economic impacts to shut down economic activity to not be able to get around. We're seeing in Pakistan now a huge cricket tournament and they're telling people to watch on television rather than go in person. India oil spending is about 3% of GDP, Thailand that's about 5% fossil fuels overall in Thailand or 7%. These are very large shares of the economy that are spent on fossil fuels and nearly all of which is imported. And these are countries that don't have the fiscal space to pay more.

And we have an again, even talked about the fact that the state of Formus is a critical choke point for fertilizer. And a fertilizer has trouble getting to the market. You're going to see potential impacts on food and food prices.

And that puts in enormous economic strain on countries that are already struggling to afford these essential products in the first place.

If the world began turning to other geopolitical actors for supply, who is a capacity to increase supply and in an in a situation where this war kept going. And there's much more pressure to adapt what might this adaptations look like. Well, if it take time, so you know, there's not many countries Saudi Arabia is really the only one, maybe a few others that hold so called spare capacity. They have invested and spent extra money so that in an emergency, they can quickly bring oil to the market that they otherwise could produce, but they hold it back in case the market needs it.

They consider themselves the sort of central bank or federal reserve of the global oil market. But by the way, that Saudi Arabia and spare capacity can only get to market if you can put it on a tanker and send it through the straight of our moves. So it's not so helpful right now. People who have the potential to increase production and the United States is one of those now with the shale revolution. Shale supply is able to be produced a bit more quickly than more conventional oil, but you're talking about six months, twelve months.

It's not something that happens in a crisis.

“You mentioned the the shell revolution a few times, which I think many people probably don't know what that is.”

And you just give me the brief overview of US energy production from 1990 to 2025. What happened and how different is our position now than it was then? We're still part of an interconnected market, so we still feel higher oil prices, but it is hard to overstate how dramatic the transformation in the US energy position has been.

In just the last 10 to 15 years, 20 years ago, the US was producing about five million barrels a day and importing 60% of its oil.

We'd been since the Arab oil embargo year after year, we had President George Bush in the state of the Union, Warren that America was addicted to oil. And high oil prices were bad for the United States, and we needed to get off of Middle Eastern oil. And within just a couple of years, oil producers figured out new technology. What's good to do is hydraulic fracturing. You could fracture rock and you could extract oil and gas from the geology in ways we didn't quite know was possible or economic before.

And it started with natural gas and then it extended to oil, and it just really has taken off this extraordinary increase in US production. But that's starting to Peter out now. The growth is not happening in the same way it used to. And so these big oil companies were already saying, "Where's the next increase in production going to come from?" It places like Iraq and Libya, and going back to some of these geopolitically risky places. And I suspect people might be rethinking a little bit of those plans now, or at least assigning a bigger kind of geopolitical risk premium to those investments.

What about Russia?

“One of the things you mentioned earlier on in this that I think will sound strange as a sentence.”

Is it one of the moves that Trump's decision has made is to decenction Russian and Iranian. Yes, oil and gas. Now, to the extent of anything about a current foreign policy. It's that we have been trying very hard to sanction Russian and Iranian energy exports. So what is going on there?

You know, I think we are showing in this conflict the limits of the willingness of the American people, the American government, to bear pain in energy markets, pain at the pump to pursue foreign policy objectives.

That has always been the case.

In 2022, after Russian-vaded Ukraine, we did not use every tool we had in our toolkit to put pressure on Putin. We had some efforts to deprive it of some oil revenue, but we did not impose full sanctions to try to prevent Russia from selling all of its oil to the global market. Because Russia just exports too much, and you would have sent oil prices through the roof for all of us if we tried to do that. We worked in the Obama White House when the original sanctions were put on Iran. And the big question was, how do you take Iran's oil off the market?

That was one and a half two million barrels a day, and not send oil prices skyrocketing in the process. How do you impose the pain on them, but not impose it on us?

And so we've always been reluctant, and Iran is realizing that now.

“They know that. That's why they're doing what they're doing in the straight-of-hormous.”

Because we're part of an interconnected global oil market, our options are limited to pursue foreign policy objectives, but big oil producing states. If the result of that is you send oil prices through the roof and impose pain on ourselves in the process. So, because oil prices are going up so much, the administration is looking to pull every lever it can to find some relief. And one of those sources of relief is Russia has produced a lot of oil that is sitting floating on the water, so to speak.

It's in tankers looking for a buyer. It was having to discount that oil a lot to find a buyer, because people don't necessarily want to touch sanctioned oil. So, that's the sort of shadow economy to do it.

Get them into the market to bring prices down.

And now they're done the same thing for at least the next 30 days for Iran, which is, as you said, a bit to be pursuing a military campaign against Iran. And one of the tools we have to take to deal with high oil prices is to let Iran sell more oil. Not just to sell more, but even more importantly, to get a better price for the oil that may have otherwise been sold. And that sort of shadow economy.

Okay, I'm sorry, but that's insane. Just as a, like a 30,000 foot that we are bombing the country into rubble that, as we speak right now,

threatening to destroy their power plants and desanctioning their oil.

Like it really shows something here was unplanned for or is off. And also that if we're out of place now where we are waving sanctions on Iranian oil for 30 days, so that they can put that oil in the market as fast as possible. It probably would have been sold eventually anyway, but let's do it faster. And again, they're going to get a better price for it.

We may be running out of good options. And we could talk about what some of the other options are to bring oil prices down.

“And I just think again, this is why oil has always been such a key geopolitical weapon and such a key geopolitical vulnerability.”

Let's talk about energy as a weapon for a moment. You and Megan Assalivan published late last year in foreign affairs, a big piece called the return of the energy weapon. What's the energy weapon? Well, and there's nothing new about energy being used as a weapon. Lord Krizon in World War I famously said the Allies floated to victory upon a wave of oil.

And the ability to cut off the supply of oil for the military in World War I, World War II. These were key sources. I mean, one of the reasons Japan attack Pearl Harbor was it had lost access to oil supply before that. Didn't stall in attribute the victory in World War II to cutting out Hitler's access to sort of oil fields.

Yeah, so trying to go after energy supply has always been central to that.

It was why Winston Churchill famously moved the British Navy from coal to oil, which was a much more efficient fuel. But maybe could be faster and but it also exposed it to new vulnerability because you had a lot of coal in the UK up near Newcastle. But now you needed to depend on places like Persia for your oil. So geopolitics of energy became an issue that in a way it hadn't been before.

“We wrote that piece because I think that the idea of energy being weaponized, which of course was a national trauma in the 1970s.”

Particularly after the Arab oil embargo lines at the gas station really did have it a long lasting effect on energy policy in the United States. And the way we think about energy has been framed by that trauma that energy and particularly in the Middle East could be weaponized. But the world has changed a lot in the half century since then the United States is now the largest producer of oil in the world by far. And generally we've had this multi-decade period a relatively cooperative and copicetic geopolitics economic cooperation, globalization, bringing other countries into the fold through the world trade organization in another ways.

And so I think we generally became a bit complacent with risks to energy security viewed them as largely a thing of the past. We had this unprecedented increase in US supply that comforted markets a little bit and provided ample supply kept prices low. Power demand was flat in the United States and Europe for the last 20 years. Of course now it's surging again with data centers and other things. But the most significant shift is the global order we knew is seems to be collapsing beneath our feet.

And we're in a new world of conflict and competition and rivalry between great powers.

“And in a world that is in disorder like that, a world where there is increased risk of conflict and competition, there's no reason energy would not be a key weapon and a key source of vulnerability.”

And we're starting to see that play out, obviously what Russia did to cut off the gas supply to Europe after it invaded Ukraine. Or even a China last year restricted rare earth exports and that really shook up the foreign policy community in ways that sent shock waves through it. And a ways that made us back down quite quickly from exactly. The trade war that Donald Trump had begun with China. You used a lot of passive voice in that answer. You talked about risk tenor g security global risks tenor g security.

You talked about the collapsing of the global and international order. But we chose this right. This didn't happen to us out of nowhere. The global order isn't collapsing out of nowhere. We're not the only ones Russia certainly bears its share of responsibility China has had its violations, but Donald Trump has been lighting the global international order on fire, opposing and capturing presidents of other countries launched a war with Iran with no consultation function of anyone except maybe Israel.

But it reflects something I think which is sort of odd, which is when you think about the conversation that dominated this in the 2000s we needed to get to a point where America had energy security,

“where we couldn't be squeezed by opaque. And we actually did quite a lot in that direction and became a net energy exporter and had this amazing shell gas revolution and began to work on decarbonization.”

And then in just the past couple of years, I mean Trump has destroyed the solar wind subsidies is trying as best he can. It seems to me to set back our work on decarbonization and electrification.

And at the same time has executed a series of moves in foreign policy that have created a lot more instability in the global economic and political order.

It has been we have chosen volatility that we have not planned for. In a way that is very strange. Yeah, it's hard to disagree with what you just said, but as you said, it's been like coming for some time and there's a number of actors, you know, some of your listeners will recall this speech. Former National Security Advisor Jake Sullivan gave at Brookings where he tried to explain why this order was changing and part of it was China wasn't playing by the rules that a lot of people thought they might two or three decades ago. But clearly when you threatened trade wars against your allies threatened to take other pieces of territory by force like Greenland that really did dramatize Europeans also and lead to a level of concern about dependence on the United States.

After some of these big international meetings like the Munich Security Conference or Davos, one of the questions I was getting the most was.

Are we misguided being Europeans to swap dependence on Russian energy for American energy? Are you a reliable supplier or is that going to be weaponized against us in a coercive ways as leverage to get a concession for something else? What did you tell them?

“I think it's probably not the case, but I understand why they might be concerned about it. I mean, I think US energy exports are probably pretty reliable, but we are seeing an administration that is looking for.”

Looking for leverage, looking for ways that it can sometimes use coercive tools to extract concessions from others and it seems like that's part of what the strategy with the liberation date tariffs was. But I think what that tells us now is there's energy risk all around, right? If you go back five years ago and talk to people about the need to have an energy transition. They would have said, okay, that's that's good, but we don't want to be dependent on China. If you want solar panels and batteries and critical minerals and electric vehicles, now we depend on China for all of our supply chains.

And I think one consequence of this conflict and everything that came before it, the weaponization of energy, I mean, literally not just sanctions, but a physical military blockade to prevent Venezuela from selling its oil. And I think what we did out of what we did out of Maduro, Russia cutting off supply people, obviously, if you're in Europe, you're not looking at Russia the same way again as a reliable supplier. Now you might not be looking at the Gulf the same way. And maybe you have your concerns about the predictability of US energy policy with policy swings back and forth. By the way, it was, you know, the Biden administration that put restriction on new permits for export of natural gas. So there's been lots of signals that might make people a little bit concerned.

And you're saying there's energy risk all around what I want to do. I want to insulate myself, right? After the 1970s, one of the main things we did to increase energy security was actually more cooperation and more interconnectedness. We created the international energy agency for diplomacy. We had 30 or so countries that agreed to hold strategic stocks together in case there was an emergency and release them together. And we created this well-functioning market. We talked about before. So we were all interconnected. If there's a supply shock halfway around the world, market forces can reallocate supply.

I think in this world of collapsing geopolitical order and competition and risk, countries will increasingly say, we need to take care of ourselves. We need to think a little more in an art-tarkic sense, focus much more on the domestic production of energy, reduce imports, and reduce interconnection to other parts of the world. And I think that has significant implications geopolitically and friendship prices. It is very expensive.

“If you want to make all your solar panels or do all your mining and we're finding a processing of critical minerals within your own country.”

[Music] Tell me about the role and positioning of China in this moment.

China gets about half of its oil through the straight-of-arms, about a third of its liquified natural gas, and they're paying more for it just like everyone else. I do think they're as well or better prepared than many to deal with that.

They've built up a huge strategic reserve of oil of about a billion and a half barrels.

While the United States has been selling ours off because of the misperception on both sides of the aisle, that the Shell Revolution makes us insulated from all of this stuff. And China for decades has been pursuing a strategy to electrify more of its economy.

“That's why half the car sold in China are electric, a much higher share of their overall economy is electrified than in most of the rest of the world.”

That's more about energy security than it is a clean energy transition or climate change. And then they want to produce that electricity from domestic sources for them. That's coal and renewables mostly, some nuclear. So I think in the long run, the question is whether other countries, say if your import depend in Europe, and you say, look, we can't go through this again. We went through it in 2022 with Russia.

Now we're facing an energy shock again. We really need to produce our energy at home and we need to electrify more.

What does that mean? Means you got to buy a lot of stuff from China, all of the batteries and electric vehicles and all of those critical minerals and solar panels.

“And I think that China and the long run could end up a bit of a winner here in the sense that they're the ones supplying all of that.”

I have but long been trying to position themselves as a reliable commercial partner while the United States is the source of geopolitical instability. And this conflict doesn't make it harder for them to make their case. I want to talk about the two countries' strategies here for a moment. If you had just been watching China in the US for about a couple of years and particularly since Trump came back in for a second term, I think what you'd see is the US seems to be making a bet on being something in between.

A Petro State and a Petro Empire. A Petro State in that Trump has been gutting the wind and solar subsidies and making permitting harder and as best I get all China retarded the clean energy transition, but going all out on fossil fuels. But in addition to that, he has been trying to expand US influence. And to some degree control over the fossil fuel reserves of other places.

So Venezuela is the most obvious example here where we eventually took over that country and government and said completely explicitly that we are taking over their oil.

“And I think Trump's view of how Iran was going to go was that either he was going to cut a deal with some deputy level in the regime.”

There would be friendlier to the US in order to not have their head be the next one on a pike or not have their home be the next one hit by a missile. Or there is going to be a bottom-up Iranian revolution and they'd be so grateful to him that the resulting regime would be friendlier to US interests and would sort of deal with us on better terms. And in either case, you now have America with its tremendous energy, exporting potential, Trump's incredibly close relationships with different Gulf state countries like Saudi Arabia.

And then you'd add in Venezuela and Iranian oil gas etc. And that would give us a lot of power. And China has been, as you say, electrifying at a really toward pace, but developing functionally dominance over the clean energy supply chain. It is very, very hard to beat what they can do on cost. The Biden situation put huge tariffs on Chinese electric vehicles and Chinese solar power components is on.

But practically as America becomes a less viable partner for many countries, it won't have a clean energy transition. I think they are rethinking and in some cases it actually changed course. And so China seems to be betting a lot on becoming the supplier of the global electric state.

So first I want to see how much in that rendering of the two major energy strategies you disagree with.

And second given you know, where does an energy expert the world looks to be going to you, how you would think about those two strategies. I think it's exactly right. And as I said, this conflict might give a boost to China in the sense that it was a big concern before for countries that we're thinking about moving much faster toward electrified economy toward clean energy. The constraint was, do I want to be heavily dependent on China? Looking for the last couple of years as problematic as I think it was to roll back significant parts of the inflation reduction act.

The biggest risk to a faster clean energy transition was how policy makers, particularly in the US and Europe, come to perceive the risk supply chain risk of dependence on China because it's different to buy a solar panel. We're not buying electricity from China, we're buying products and technologies that are necessary to do that like a battery or solar panel. And it's perceived as an unacceptable risk.

I think people are going to look potentially a bit differently at relative risk when you look around the world right now and you say, well, there's a concern about dependence on China's dominant position in some of these clean energy supply chains.

There is risk all around and the view of the United States, certainly at least the Trump administration, as you said, has been to double down on petrostate dominance.

If you're the largest oil and gas producer in the world, why are we buying all this clean energy from China? Energy security comes from being self-sufficient, producing more oil and gas than we need.

“And I think today's conflict is a reminder that in an interconnected global market, there's a limit to that.”

And who would you want to be right now? I think being a BYD dealer, the Chinese EV maker in Brazil is like a pretty good place to be because people are going to be a bit concerned about what might come and view oil security in a way we haven't seen before. That is, in fact, though, as I said before, the national trauma of the 1970s, where we've really moved as a policy issue to increase domestic production, but also find alternatives to oil and use less of it. We were getting 20% of our electricity from oil in the 1970s and within a small number of years, you know, we brought that close to zero.

For really opportunities to use less of that. And I think depending on how long this goes on and how large the economic shock is, as we talked about earlier, it has the potential to be something that causes that sort of long lasting effect. I'm interested in what you think that could mean for the long term. So you go back to the oil shock of the 1970s and you have a major effort to find efficiency because there's not a straightforward and viable alternative. For what energy you would use to run the global economy and so you have Jimmy Carter telling the country to turn down the thermostat and put on a sweater.

Right now, you have been in this period where we've seen a tremendous transition to solar to wind to geothermal to batteries to other kinds of things. And, you know, it's 2026. In the last five years, you've seen two tremendous geopolitical shocks to global energy flows. So as somebody who studies clean energy transition, which mostly we've talked about in terms of climate change, do you think this is in the long run in an accelerant of global clean energy transition simply because it creates less dependencies on some of these traditional players or does it just create new dependencies like on China or on whomever you get your electricity piped in from such that that does not offer itself as an answer.

“I think again, and we don't know yet how long this kind of folks going to go on, how severe it will be.”

But as we were talking about earlier, the potential that we haven't seen anything yet with oil prices and if this goes on for a week's longer or if there's real damage that causes the infrastructure in the region to take years to repair. This has the potential to be a kind of shock more like we saw in the 1970s than anything I've seen in the 25 or so years that I've been working in energy policy geopolitics national security issues.

And I think that would be a significant accelerant. And frankly, a more powerful one. I mean, although I would like climate change to be even a stronger concern for policymakers than it is.

If something is a national security issue and it's top of the agenda in the situation room, it's going to move policy makers in a way that the urgency of climate just doesn't today. So you have the potential now for an even more powerful motivator to move toward electrified economy and you get a lot of that electricity from domestic sources for places like Europe that'll be renewables and nuclear in particular, which can move you in a lower carbon direction. We're complicated than that and I want to say cold for a lot of the world, a domestic source of pretty cheap reliable energy if you're going to try to say we want to be less dependent on imports can also be cold.

And if you're in Indonesia or parts of Southeast Asia or other places, you know, you're seeing a lot of that.

So it doesn't always cut, you know, necessarily in one direction and the impact here is not just we want less fossil fuels.

We're going to take a comment about coal. It's we want less interconnectedness. We don't want to be volatile exposed to these volatile global markets that are exposed to geopolitical risk. And we want to reduce imports.

“That I think is what the energy security conversation in much of the world will be coming out of this and the way you respond to that is going to look different in different places.”

A country like Europe, I do think it accelerates a move toward a clean energy and electrified economy. It might look different in other places. But Iran itself, right now, as we're speaking, it does not look likely to me that Trump and Netanyahu are going to succeed in their initial goal of regime change. And if you are the Iranian regime that survives this under whatever conditions that might be true, it's not going to be a disarmed regime.

If you're that Iranian regime, it seems to me what you have learned is that your best defense, aside from eventually getting a nuclear weapon,

is your ability to close down the straight-offormous, that you want to be putting a huge amount of your effort and national defense strategy in figuring out how to threaten the regional energy supply through, you know, the energy systems of other Gulf states and through closing down the straight. And so in sort of forcing Iran into this position, you might have really forced it into a position where it is going to figure out how to make sure they can wield the energy weapon even more effectively in the future.

Thus creating better deterrence against its enemies. I'm curious how you think about that from an energy weapon perspective.

“I think that's right. I think it's true for Iran, true for others as well. Iran has at least for a 30 day period. It's temporary.”

It's secured greater sanctions relief from the United States by cradaring the global oil market than it did through years of negotiation about how it might adjust its posture toward its nuclear program. And we've learned how asymmetric that weapon can be. It just doesn't take a lot to not even physically close it, but create the risk perception that you could close the straight-offormous. And so the thing about the energy weapon is it is quite asymmetric. You don't need a massive military and battleships do wield it. You can do it in a much more targeted lower cost way.

So that's is a lesson that Iran is learning from this and I fear other countries might learn as well. Are there lessons United States should be or is learning from this?

I think there are lessons we should be learning and the first is kind of the myth of energy independence.

There are no doubt economic and geopolitical benefits that have come from moving from importing 60% of our oil two decades ago to being the largest producer of oil in the world in a huge net exporter. But that doesn't mean we are independent. It doesn't mean we are isolated and insulated from what happens halfway around the world.

“And the best way to protect ourselves would be to use less oil in the first place. So we were less exposed to these geopolitical shocks not just to produce more of it.”

I should note it is different for natural gas. I mean the price of natural gas in Europe and in Asia is sorted to $15 or $20 per million BTU in the US. It's three. And so the price of natural gas here is disconnected. We do not have natural gas crisis right now in the same way that Asia and Europe do or did in 2022. That's going to make our allies quite thrilled with us. Well, they're turning to us for our energy. I mean that's what Europe did after 2022. They did more renewables. They did more efficiency.

But they moved incredibly quickly for all the difficulty building energy infrastructure and discussion of permitting reform that you've written about as eloquently as anyone. Somehow Germany was able and months to build for important terminals to get more natural gas from the United States because when you really have an energy security crisis policy makers jump through hoops to figure out how to do something about it. Building this policy choice. So it seems to me that there are now two pathways for Donald Trump in this war.

One is in the quite near term in the next days or week or two to simply say my goal here was to reduce much of the regime's offensive capability to rub all to destroy their navy. We've done it. We're done. But that will leave in place the Iranian regime. They will declare victory as well. They will build back up their military, their capabilities now having done so with the knowledge of what the vulnerabilities of America and its allies actually are.

“The sort of declaration of victory that I think markets would be very happy with and actually the American people would be relieved by would also be seen as a kind of failure.”

And remember we had a bombing campaign against them, not that on go said their nuclear capabilities were obliterated and then a year later started this campaign because now we say they were only weeks or days away from a nuclear weapon. So apparently our ability to bomb them into sustained powerlessness is not what one might have hoped.

And if that happens then we're going to have an extended crisis in energy supplies. If we end up in that world.

“What are Trump's options for trying to maintain some semblance of stability in American energy prices such that he and his party don't get annihilated in the midterms.”

What what by he try in a world where this war has a month, two months, three months, maybe even more than that left in it.

There is not a policy tool in the policy tool kit large enough to deal with the loss of something like 10 to 15 million barrels a day of global oil supply.

But there is no way to prevent oil prices from going through the roof if the straight affordable remains closed. We've already seen policy makers pull some of the strongest levers they have. The largest ever release of strategic stockpiles through the international energy agency 400 million barrels. And the day that was announced oil prices went up not down because it was perceived as there wasn't a lot of detail around it, but it's just not enough. This is not the total number, but matters is in a 10 to 15 million barrel a day per day disruption. How much you can get into the market every day and that's maybe two or three.

And then you're going to see some other ideas thrown around like waving this law that makes it hard to move fuel between two US ports, waving some environmental standards that all of these are a few cents at the pump at most. Is really not much that can be done. So I think you're going to have a real energy crisis and we're going to have to I think that's going to be a major constraint on the administration that might cause people to need to pull back.

“Much more quickly that's what the market's betting on that's where we started in the beginning and why oil prices are not much higher than they are today.”

And we should remember that most of the energy infrastructure in the region has not yet been damaged. So it can start operating again relatively soon. If you're really start to see tit-for-tat escalation where you go after a run and they've signal they can come right back at us and other Gulf states. Then you're talking about months or years, not weeks to months to try to get things back to normal. I don't know if I want to say the nightmare scenario, but one of the more concerning scenarios. So let's imagine a situation where Trump does a decide to attack Iranian power plants say.

And the regime responds by unleashing drones and missiles on regional energy infrastructure. I mean, you've mentioned with the straight that what's going on with the straight is that you've closed a waterway.

We open it. Thanks and you're just moving through it again. But if you damage a bunch of multi-billion dollar energy installations, you can't rebuild those in a morning and in a week.

So what does that create as a possible long tail? I think people in their heads have the idea that the energy price disruption ends, the moment roughly the war ends. What would a war look like where that would not be true? I think the main thing would be either that the risk perception is still there, which makes it harder for people to move through the US tomorrow could say we've done what we need to do and we're leaving now. Thank you very much. You're not going to see tanker traffic restart unless Iran says Iran and Israel have a vote in this also, not just the United States.

“We're not done yet or Iran says we don't feel the same way, then you're not going to see tanker traffic go through. So you need to get to a place where people have confidence that it is safe to move through the straight.”

And then you have major pieces. President Trump a few days ago threatened to attack car island, which is this major piece of energy infrastructure that is responsible for most of Iran's oil exports. If that were attacked, we know what Iran would do in response. They would attack an important piece of energy infrastructure somewhere else. In 2019, the Houthis attacked Abkhac, this critical oil installation in Saudi Arabia. And it was remarkable how quickly the Saudis could get that back up and running, but the damage could have been much worse.

And so if you do something like that, you could see millions of barrels a day of disruption that we haven't seen yet.

Saudi was exporting about seven million barrels a day before this. And now they're getting to four or five through a pipeline to bypass the straightive for moves and send it to the Red Sea.

There's a port called Yanbu in the Red Sea. That's vulnerable. And we saw what the Houthis could do to tankers in the Red Sea not too long ago. We haven't seen attacks there yet. So that sort of energy infrastructure is damaged. Again, coming back to the attack on Qatar a week ago, the Qataris have said for the roughly 20% of their project that was damaged. It's going to take three to five years to repair. Maybe they can do it in two to three, but that's not weeks or a month.

So given how much this conversation has been about the physical constraints and choke points like the straight of our moves.

I would recommend that people read next on book called Ed Conway's Material World, which is a really great reminder of how important things we never think about like copper and sand are to the global economy.

“We don't think about it until something breaks. And with that book makes clear, and what this moment is illustrating, I think in real time, is just how dependent we are on all of those materials that we take for granted.”

I'd put that alongside a book called "More More and More" by Jean Baptiste François. I think I'm saying his last name correctly, a French academic and scholar, which explains why it is so hard to have an energy transition.

If you go back over time, we have added clean energy at an unprecedented rate, and it's met most of the growth in global energy demand.

But while use gas use coal use, they are all still going up as well. And he nicely walks through history and shows things like we have this narrative we think that the industrial revolution meant coal replace the use of wood.

“Because we stopped using wood as a fuel, but then we needed all the wood to reinforce and build the coal mines.”

And we needed the wood for a little ties that go on the railways, because the rails were what moved the coal. So wood demand went up because we ended up using it for other things. And it's really a reminder of why it is really hard to find ways to make things like oil demand go down. And then I'm going to end on something that has nothing to do with energy. But given how bleak this outlook about energy and Iran has been, I think it's worth making space for a little bit of joy in our world.

And anyone who reads my weekly emails knows that I always find a way to work our reference to Bruce Springstein into them.

“Because if you like joy, you should go see Bruce Springstein live, which you can do again starting next week when he kicks off his new tour.”

So I would read deliver me from nowhere as good as the movie was. The book was even better going much deeper into sort of the tension between who we want to be and what society expects us to be. Jason Bordoff, thank you very much. Thank you, thank you for having me. This episode of The Usuklanches Produced by Annie Galvin and Jack McCordick. Fact checking by Michelle Harris, with Kate Sinclair and Mary Marge Locker,

our senior audio engineers Jeff Gald, with additional mixing by Almond Sota and Isaac Jones. Our executive producer is Claire Gordon. The show's production team also includes Marie Cassione, Roland Ho, Marina King, Kristen Lynn, Emma Kelbeck and Yon Kobel. Original music by Dan Powell and Pat McCusker, audience strategy by Christina Simulusky and Shannon Busta. The director of New York Times opinion audio is Annie Rose Strasser.

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