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

19:38Sri Lanka has gone to a four-day work week to conserve energy. There are Asian airports that are shutting down.

19:46Ed Crooks:Thailand went to remote work like it's COVID. They're shutting down airports because there's no jet fuel. That's not a risk that I won't have it or it's too expensive. It's that I literally have a shortage. I don't have it. And so what happens in that scenario is poor countries pay the price first because they get priced out first, Sri Lanka, Bangladesh, et cetera. Then the next level becomes as the disruption grows. And remember, it's not growing in a linear way. It's growing exponentially. Then middle-income countries. And I think that you all make a good point. Americans don't, the market's not feeling it physically.

20:26There needs to be that moment. People say, but there are no gas lines. Well, there are gas lines, just not in America.

20:33Ed Crooks:Well, we're not seeing them on TV, but I would make this additional point. For those people who are older and have been through an actual disruption, what they remember, because that's how it hit the industry, for example, was that a real disruption absolutely craters economic growth. It kills GDP. And that is an instantaneous way to end a supply deficit because demand is immediately killed because people just stop doing economic activity and then you don't need energy anymore. That's a COVID situation. Yeah, because the economy is so slow. And so it's hard to know, you know, where are we? Because there were little pockets that showed, you know, maybe not so much in the United States, but in other places, in Asia, for example, that economies were under pressure.

21:31Ed Crooks:And even Europe was, I think, under a little pressure. And so, you know, are we now just anticipating that this is going to be like past crises where we're going to have a recession? and so that's already unconsciously priced in or priced in in some way for the players that have been around a long time? Or is it that people just really don't get it because they think this is a, you know, like a three-day war and then we're going to be done?

22:00Amy Myers Jaffe:Yeah, and before you answer that, Ben, because this makes me think about the image of, you know, the Looney Tunes cartoon, the way you're kind of describing the market and the world economy now, it's kind of, you know, Wile E. Coyote has run off the edge of the cliff and there's nothing really holding him up, but he keeps going until he kind of realizes where he is and then plummets to earth. So that goes to your question about what happens next, right? So even the longer it goes, everybody wants to answer the question, how long before, when it's over, how fast do you get it back? And there are two parts to the answer to that question.

22:39One part is known and one part is unknown. The unknown is the duration of the current conflict. The longer it lasts, the longer it takes to bring it back because there is some oil on the market, on the water, sorry, the Russian unsanctioned and the Iranian unsanctioned. And so that will play itself out, right? So regardless of what you think, if it was a good idea or not, the Indians have taken 60 million barrels of Russian oil already. which means that we have about another week before we get towards the end of the fifth week, we'll be out of the Russian oil and probably gone through a lot of the Iranian oil.

23:26The storage tanks at airports of jet fuel will run low. The storage of all the other products, and that's why I keep saying it's not linear, because right now we have a disruption, but we also have some storage that we can run through. Once the storage is gone, then you're really just looking at the disruption is the net for the market. So the duration matters here for the question. The second part is no. The war ends on day X. The LNG facilities in Qatar will take roughly two months to come back online. I'm not talking the part that was damaged, the two trains that were damaged because they're gone.

24:09They're gone for three years. But the rest is gone to a cold shut-in. So now from cold to hot, you got to go. That'll take you eight weeks or so and maybe even a little bit longer. The second part is the Saudis, the Kuwaitis and so on have stored up all this oil. So what we're going to have is the oil that will have a flood into the market of like a wave of all the things that they feel. So when you have to shut in your production, the last thing you want to do is shut in, right? So what you do is you fill storage first, then you fill the tankers, and then you start cutting production. So there's a lot of Iraqi, Kuwaiti, Saudi, and Emirati oil that's sitting in storage and tankers.

24:53So as they bring up production again, that wave will come, but it'll be like you have this blip of a wave, and then you'll have a decline again. Because it will take a few weeks, not a couple of days it takes a day to shut it in it takes weeks to bring it back on not just sending the crews back out there but you got to actually open the valves you got and this is a sophisticated industry it's really really complex systems that all have to work and you can't rush them if you do you have outages and then you got to get all the empty tankers to sail to they're not sitting there at the hermuz opening waiting to go in you got to then ship them in and that takes a while then you got to fill them and then you got to come out so all of this will take a while to feed into the system and that's why i also think the curve right now the forward curve i didn't check in the last few days but the fourth quarter was like in the 70s it's probably going to go up from there but i want to say something amy talked about in samantha there's in previous crisis when you go too far up on these prices you actually then accelerate the crash because everybody who's outside of the region i mean you're turning the taps on you're trying to produce as much as you can at this price and so you're throwing every rig you got every work over you got you're deferring maintenance every solar panel you can put up

26:22Ed Crooks:everything every electric car you can put back then you have this wave that comes right the price starts to come down and then you start crashing and remember just a month ago we have diamondback saying they're not producing increasing production in the u.s because the president is trying to take

26:40Amy Myers Jaffe:us to 50 right that that diamondback for listeners who may not know them that's one of the big independent uh exploration and production companies in the u.s or big oil producer particularly in the permian basin in west texas can i add a point to this that i haven't heard

26:56Ed Crooks:yet almost. And that is, if the war goes on for longer, it's not just that it takes longer to start up. It's you have the potential for more damage to facilities, to all the Persian Gulf producers. And that is really scary. And we've already saw what happened to Qatar energy. And the thing is, they have interceptors. They're doing their best to defend these things, but they don't need 100 % to get through. Only a few can do a ton of damage. And it appears that Iran still has weapons and that they can get through. They only have to get lucky a couple times to do some serious damage to infrastructure that could take not weeks or months, but years to repair, like we saw at QE.

27:37Ed Crooks:And so the longer this goes on, the more likely that is to happen, because if we can't pee out in Iran, Iran is going to keep using its weapons against us, which in this case are keeping the strait closed and hitting infrastructure and the other Gulf producers. Well, and then take it a step further. Let's say, best case scenario, there is some kind of negotiated solution, but that leaves Iran with some weaponry. Now you have this permanent risk that somehow this solution doesn't stick. And you have this continuing risk against facilities. That's exactly what I mean when I say that we can't go back to February 27.

28:25Ed Crooks:The facts on the ground have changed. And to me, a couple of important points. One of them is that Iran, you know, we knew Iran had one shoreline of the Strait of Hormon, as it's always been so. Energy security people have been modeling that disruption since the dawn of time. But it's never happened. Iran has now demonstrated that it can and will block the Strait of Hormuz if it is backed against the wall. That is a different situation than we had on February 27th. And that is a risk that now must be thought of from here going forward. But let me talk about that point, Samantha, because, look, I've had some conversations with the region over the last several days talking with some of the leaders in the region.

29:11And I think we have to start. I keep thinking to myself, if I was my old job, if I was sitting at the White House right now, I think about it as sort of how would I advise the president about ending this and how would I. And you can't say I wouldn't start it. You got to take it as today. Right. What would you do today? Right. Take it today. And I have my views on how they can end it in a better way. But the day forward, the leverage that was always there in theory on the Hormuz, which both Samantha, you just talked about and Amy, you did, is now no longer a theoretical and will have to be priced in.

29:45And it's not just priced in market-wise. From a geopolitical perspective in the region, if you're UAE or Saudi or Iraq or Kuwait, you cannot live with that. It's not doable. It's just not possible. This is the lifeblood of our economy and a capricious neighbor. Now, it could be even more than that because some Iranians are saying, wait a minute, Egypt charges for the Suez. Why can't I charge? I'm going to take ownership of this now. It's no longer a public use. It is now Iranian waters. It's in our territorial waters. By the way, they're not wrong about that. So I think what I keep thinking, I think what has to happen is as soon as the war is over no matter in what format it's over.

30:31It doesn't matter. I would be convening a global summit that says we have to build massive amounts of infrastructure that takes, let's say, 80 % of what the Hormuz is out of the Hormuz. Not that it will be used necessarily, but that it can be used to take the leverage away. These are non-economic projects, but can somebody imagine if Saddam did not build the East-West Highway that the Saudis then nationalized. If the Emiratis, when the Emir, I went to the christening of the pipeline to Fujairah, which is the UAE pipeline that bypasses the Straits. And everybody ridiculed that pipeline in the markets.

31:13This is arrogance. This is spending money, good money after bad, blah, blah, blah. Can you imagine if we didn't have those two pieces of infrastructure? But I think we're going to have to do, why should Saudi or UAE fit the bill? or Kuwait. It should be Japan, Korea, Australia, China, the United States. We should all be footing the bill for that. And I think there's ways to do it. We tried to build a pipeline from Iraq, southern Iraq, to international markets in Turkey. You can build a pipeline to the border of Turkey and Kurdistan, but the Turks refused to build the continuation of that. We can easily get a significant amount of Kuwaiti and Iraqi oil to international markets that way.

31:56Qatar can build an LNG terminal on the Red Sea and go through Saudi with a pipeline so you can liquefy it there. There are things that you can do. They just cost money. And by the way, it's not just for the same thing for diesel and all the other stuff, but it's also about water. If the Iranians hit the desal, desalinization plants in Saudi, you would have to evacuate whole cities in Saudi Arabia within dates. Interestingly, though, the Saudis, after the Iraq-Aran war,

32:30Ed Crooks:they did a lot of different things, one of which is they put in a stockpile for water, right? So we don't, you know, it's a national secret, so we don't know exactly how well prepared they are, but they are much better prepared than if that had not happened. Yeah, but Amy, they had 10 million people then. They have close to 30 million now. That's a big difference. And how much water can you store if someone is completely taken out the desal plant? That's not a quick thing to build either. It's about giving you days. Yeah.

33:00Amy Myers Jaffe:Let's say it gives you a couple of weeks.

33:01Ed Crooks:Months or.

33:03Amy Myers Jaffe:My mind is somewhat being blown here by this, but I can't see a reason why you're wrong. I apologize. No, no, it's good. I think it's really important to think about it this way, that essentially, so what you're saying is the Strait of Hormuz has been a vital asset to the world. The fact that it's been navigable, that it's been open, has been something that the whole world has benefited from massively for decades. To the extent that we get 20 % of our oil that way, 20 % of our LNG, 30 % of our helium, 35 % whatever it is of our urea, and so on. And so we have to treat it as a global asset. And think about it, as you say, that's something that China contributes to and Japan and the countries of Europe and the United States.

33:56Amy Myers Jaffe:It is something which is valuable to the world. And so if this is a bit of kind of global infrastructure that is broken, the world needs to pay for a replacement.

34:06Ed Crooks:This kind of reminds me of the response to the oil crises in the 1970s. We created the IEA. We had countries hold a certain amount of their stocks, it is somewhat similar to that. And I mean, this crisis is going to require a proportional response. I mean, the results of this are going to cost a fortune too. It used to be in security circles and almost, you know, you must have heard this a million times, all these different war college events I went to. And I actually did one of the original studies that was done on pipeline routes, the bypass, the Strait of Hormuz. So the point is, though, it was always considered, and people would talk about it as China free riding, as Japan free riding.

34:52Ed Crooks:It was always imagined that the U.S. military, in its role as the global navy, the global policeman of the free navigation of seas, you know, if you go back in history, you know, people don't, you know, people watch, you know, Disney movies and they think about pirates in a romantic way. But actually, the Barbary Coast was the place where pirates stopped the kind of traffic we're talking about now, you know, at the turn of the century. So the United States Navy, first the British Navy, and then after it, the United States Navy has always played this role. And what's changed, and I think it gets to the point we're all making about, you know, what does the day after look like?

35:33Ed Crooks:What's changed is if we were talking just about the Iranian Navy, the strait would be open. But we're talking about asymmetric warfare with drones and automated boats that are robot boats, and we're talking about other kind of robot stuff. And so we have not adjusted ourselves to this new world. And we could have because it wasn't clear what hit the Saudis in 2019. It was some combination of drones and other kinds of weapons. And so for the listeners that don't know, one of the main production areas of Saudi Arabia was bombed in 2019, and the Saudis did an amazing job making that not impactful in the oil market.

36:21Ed Crooks:So, you know, we're in this new world as well because warfare has completely changed. And what one human being can do or 10 people can do is really different today than what it used to take an army of a million men. So it's really changed everything. But Amy, to your point, that's why what's shocking to look, you know, I've been involved in exercises on war, war gaming and straight up her moves is always the thing that I, you know, that's my job. I was like, hey, they'll close the straits. And then what do you do about it? And so, one, I can sit here and tell you there's a whole memo I wrote a couple of times about what do you do before the war?

37:04Assuming that we're the initiator of the war, there are things you can do. Right. So we talked about it. Then there's things that you have to understand that in the 80s, the tanker wars, right? So Iran-Iraq war, we reflagged some ships as American and we escorted them. Why did that work and it doesn't work now? It's because to Amy's point, they mined it. And so we can have a minesweeper at the head of the Navy minesweeper, tankers behind it, and a couple of destroyers so that if the Navy would dare to come close to us. But the Iranians didn't see the United States as an enemy at the time. They saw the Iraqis as an enemy and they were pissed that we were supporting the Iraqis.

37:43That's a big difference between that and sort of guilty by association versus guilty. And so Amy is 100 % right. Now, the administration was so unprepared for this that they said on day one, it was like, we're going to do escorts. Remember when the Secretary of Energy said, we're going to do escorts. But the escorts don't work because then you're sitting ducks there of a couple of Navy ships with drones. It's not about the mines sweeping anymore. It's a drone that can fly undetected for 1 ,500 kilometers and hit the tank or hit the Navy. So that doesn't work. And then you have, okay, maybe it's insurance.

38:18Well, that was a silly operation. I don't know what they were talking about, the insurance thing. At the end of the day, we cannot open this strait with Navy force alone unless we captured Iran. Even the idea of troops on the ground to take over a couple of the islands or the shoreline. Yes, but these drones can fly 1 ,500 kilometers. And when you do take those areas, you're sitting ducks. They can hit you. We don't have missile defense there, right? So I think I come back to the point that the only way the straits really open is the war ends. And when the war ends, we cannot allow the Iranians to control this strait any further.

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40:02Ed Crooks:I really think the administration misjudged what happened in Iran in January with the protests. I really think in the United States, we viewed that as a weak moment for the Iranian regime, that the people were rising up against the regime and that this might be a moment when we could, you know, that we might have a people's movement in Iran that might take over. Whereas the way I think we misread that is what Iran did is demonstrated that it was willing to kill its own people at an industrial scale in order to keep the regime together. And so we think the regime is weakened because of what happened in January and the protests, whereas the regime is actually stronger because people are afraid to go out on the streets, take over and protest because they know from very recent experience that the regime is willing to kill them in large quantities.

40:54Ed Crooks:And that, I think, was just a fundamental misunderstanding of us, because we think we can change the Iranian regime or make something quite different on the ground, whereas actually it's stronger than it was, you know, at the beginning of the year. Right.

41:06Amy Myers Jaffe:So given that then, and given that real regime change seems unlikely for the foreseeable future, I can see that Amos's solution building all this new infrastructure makes a lot of sense. But my big question about that then is, how long does that take? That if you're going to build all these new plants, all these new pipelines, question, what do you do between now and then, right? that you're still in that position where, for a very significant period, you're dependent on at least having some kind of arrangement with the Iranian regime where you can get along to the extent that shipping can be allowed to continue to pass through the strain?

41:45Yeah, well, the perfect is not the enemy of the good. You have to start because you can always make the argument, this is not a solution for right now, and therefore I shouldn't do it. And we do that all the time in the United States at our own peril, right? We don't do long-term planning because we're not going to see the benefits and we're going to have to have interim solutions. Of course, it's going to take years. By the way, it's not going to all happen at once either. It's going to have to be piece after piece after piece. But it's a signal that you're sending to the Iranians, your leverage here.

42:19If you push it, we're just going to build it faster and more. And so, yes, you'll have to come to an accommodation. I truly believe the war will end at some point with a regime that is intact, emboldened, believing regardless of how it ends, we're going to believe we won, they're going to believe they won. And they will focus on how do we recover from it and re-achieve strength. But you can't also deny the fact that their economy is destroyed, the amounts of money they're going to have to spend, they're not going to have any cash to spend on Hezbollah or the Houthis. There's nothing. What will cause people to rise up, a regime change to me can happen months after the war ends, when the economy is terrible, when their own people, even the people who supported them during this war, say there's no food.

43:16There's nothing left. And I think we have to end this war. And again, this may be controversial, but I don't believe we should do a deal with the Iranians. I think any deal means we lost. I think it should be a unilateral declaration of end of war by us and Israel, where we say, you got to open it or we'll continue. The Iranians want this war to end too, because they're getting assassinated and all the other stuff. You open the straits, and I'm going to keep a CSG, a carrier strike group, we already have things we didn't have for the last 50 years, total air superiority, total control of the waters, right?

43:55We know, and our intelligence is impeccable. We've proved it with how we've hunted down some of the leaders, right, between Israel and the United States. So, and they're hated by the whole, you know, region right now. So I think that we should be ending this where the president of the United States says in four days from now, I'm going to wipe out everything I can in the economy there, and then I'm going to declare the end of hostilities. They'll take it because the Iranians always believe live to fight another day is, right? They believe survival is victory. Yeah.

44:26Ed Crooks:Remember, Saddam hit himself in a sewer pipe. So, yeah. Correct. Because they're not suicidal at the end of the day, right? They actually aren't. They send other people to commit suicide. They don't. There are no Iranian suicide bombers, There are Arab suicide bombers that are financed by Iran, but no Iranian suicide bombers. So I think that there's a, to add to your point, yeah, it'll take time. And we're going to have to figure out what to do in the interim and we'll have to play with it. But I think it's incumbent upon us to learn the lesson, spend the money, and build out the infrastructure.

45:02And that's why I think we end this on our terms, not theirs. And then we just go full steam ahead. My fear is the United States in general and this president in particular plays in ADHD, right? So when we finish it, it's going to be like a month later, it's going to be Iran who? And we're never going to do the whole donor conference that I suggested and nothing will get built. And we're just going to be talking about China or Venezuela or maybe we'll take Cuba at that point or Colombia. I don't know. So that's my fear.

45:40Ed Crooks:I guess the one thing that I would add to that is I think the only solution to fear of a regime that will kill people at the industrial scale is a population that has absolutely nothing to lose. And if Iran is left in shambles, you will have that population that has absolutely nothing to lose. And so I think the only way you can get regime change in Iran is when the people don't have anything left. They're hungry, they're angry, and they don't care anymore. And so they head into the streets. And it's clear that January wasn't quite that. But what might come afterwards could be. Yeah, could be.

46:17Ed Crooks:I don't know. I mean, people lost a lot of people. The numbers that have come out publicly about, there were piles of bodies in the streets in Tehran. Piles of bodies. And that's why they're not coming out today. People couldn't even come out and get their loved ones' corpses. Right? But what I would say, which is just an interesting sort of aside as like a person who believes that the human race is resilient, is that if I'm sitting in Thailand or Vietnam or Africa or pretty much anywhere except the United States where we don't seem to be at a mobilized policies, do I stay on oil? do I bet my future on LNG?

47:04Ed Crooks:do I only buy LNG from Australia? like you know the market's not going to sit and wait for the Gulf Arabs to build a bunch of infrastructure to make their products more secure I mean we have to do what we have to do now hire insurance you know, soldiers that are willing to take sit on tankers instead of workers or seafarers that might not be willing to do it. But in the end, bottom line, I think a lot of economies. For this moment in time, are going to say, what can we do so we don't need this stuff? They are. But that ain't quick either. No, I don't know.

47:51Amy Myers Jaffe:I'm skeptic. You're sceptical?

47:54Ed Crooks:Okay.

47:54Amy Myers Jaffe:Okay, so I'm less sceptical. Amy, I think I'm on your side on this one, because it just seems to me like, as you say, if you believe this point about this critical piece of global energy infrastructure is permanently broken, or at least in a position where it cannot be relied on now in perpetuity, then you've got to think about all the possible alternatives. And as you say, new kinds of infrastructure to enable new routes for energy to flow out of the Gulf region. That's going to be an important part of it. The other things are going to be the two things that Amy talked about. So one is alternative suppliers of fossil fuels around the world.

48:31Amy Myers Jaffe:So that's the United States. In question, does this mean the U.S. becomes even more dominant in global markets as a supplier of oil and gas to the world? Is it about, as you say, Australia? Is it about countries in Africa becoming larger exporters? Is it about maybe Venezuela's industry kind of reviving and turning that country into a major exporter? I'm still a bit skeptical, but yeah. But anyway, so that's kind of one category of things.

48:57Ed Crooks:Alaska, maybe Alaska finally sees its thing.

48:59Amy Myers Jaffe:Alaska, exactly. So there's all those kind of things. And then there is also the shift away from fossil fuels altogether. And then the question of essentially China and Chinese dominated value chains in renewable energy, wind and solar, in batteries, in EVs, all of those things becoming the alternatives that countries go to. And you can see, for instance, a lot of if you look at what's been happening in Pakistan recently, that's a great example of a country that's working very hard to reduce its reliance on imported fossil fuels. Maybe that ends up being the big shift that this drives is away from fossil fuels altogether.

49:40Ed Crooks:Does green hydrogen finally find its time now?

49:43Amy Myers Jaffe:And maybe, exactly, if you can't get... No. If you're, for anyone who hasn't got the benefit of the video, almost is shaking his head there. But I feel like that's something actually I do believe in. If you need, you know, not green hydrogen for every purpose, but if you need to get fertilizer...

50:00Ed Crooks:Maybe in places like that, that's what I'm thinking.

50:02Amy Myers Jaffe:Yeah, exactly. if conventional roots for urea are blocked, you need another way to get your fertilizer, turning green hydrogen into green ammonia. Actually, there are places where that can be done in quite a cost-effective way. Probably India is one of them, probably China is another. So I wouldn't rule that out. Anyway, but go on. You see, Amos, well, Samantha, go on. Let's see. Because I'm going to be the skeptic. You've got some skepticism. So let Samantha be a little bit more cheerleading.

50:26Ed Crooks:Well, actually, the thing that I'm going to say is both Amy and Amos are describing things that deal with the problem. when you move away from fossil fuels or you build vast infrastructure in order to get fossil fuels to where they need to go. Neither one of these solutions is cheap. Well, that's certainly true. And so the question becomes... Especially in a world where we've disrupted everything and we have not enough steel and we have not enough everything. So the question becomes in my mind, so you need cooperation to get to Amos's solution because it's expensive enough that you need this agglomeration of you need an IEA-like organization of people to get this stuff built.

51:06Ed Crooks:And so do you get that enough of that together to move towards Amos' solution? Whereas Amy's solution is a little more of an every man for himself solution. And I think they're both really difficult. It's really hard to move away from fossil fuels. I'm working on a book project about that very topic. The reason why I lean slightly Amy word is because Amy's solution doesn't need cooperation in the way that Amos' does. The actual sort of tally, do you move away or do you build all this infrastructure? I can't calculate that in my head. But the level of cooperation, I think, is a really interesting point on all of this.

51:43I think, look, I'm a skeptic because I've lived through a number of waves of cycles. And I'm always told, Amos, this is going to be the renewables moment.

51:57Ed Crooks:And the truth is that it was the renewables moment. OK, if you look at the amount of renewables that we have put into play, right, installed capacity, it's massive. The projections from 2010 and 2015, we far exceeded them. Right. In those years, we made projections about 2025. We far exceeded on a global level. And yet. Here we are. 80 % of energy in the United States was fossil fuel in 1980. It does. And it's 80 % in 2026. And that's the reason is because we are, human race is growing. We are, our energy dependency is growing, energy, generic energy dependency. We're doing more, all our innovations are more and more energy dependent and require a lot of energy, a lot of it.

52:51And Europe lost gas from Russia, and it actually did a lot of renewable replacement since 2022. But it's not enough. So here's where I break it down. I think, look, I was in the Biden White House. I fully support the fact that we should incentivize people to build renewables and consume renewables, that they should build EVs and they should purchase EVs. and we get a lot of misfiring in the community because instead of oil we should have renewables well guys as amy said we don't use electricity with oil and they completely do not there's no point of compensation between the two natural gas competes with renewables but even that it doesn't because we need all the electricity we can get and we don't have enough of it so if we build Because you need natural gas for other things.

53:45Right. And that's what I was going to get to. And people always forget. We've got to cut off. You can build all the EVs you want. You're still going to need a lot of oil and demand all these projections. I think what hurt the renewable and EV industry was rosy scenarios of people operating based on feelings and emotions and hopes and dreams and not based on realities. I was swimming upstream in the Biden administration all the time because I had my colleagues who said, keep it in the ground and don't do this. I was like, great, but demand is growing. Demand is growing. So let's add the EVs. And that's why I don't understand Donald Trump, because if you want to have a good economy and you can say, I disagree with him, but you can say, I'm going to give all the benefits to oil and gas, but take away the wind?

54:33Why? Take away solar? Why? Yeah. So, yes, China is doing all this stuff on renewables and EVs. They're also the leader on growing the fastest growth in coal is also happening in China at the very same time. So I don't think they compete, Ed, my solution of the pipeline because that's necessary. Until 2050 or 70, we are going to need the straight-over-moose. Last point that you made it, the idea that the United States or Venezuela or others, it's finite. Africa cannot grow production. Most of Africa is actually in decline side of their oil story, not in growth side. They're not stopping their own production.

55:16All the growth right now is going to come either Middle East or it's going to come in the Americas. Venezuela is not going to grow anytime soon, but by 2030 to 35, they can grow a million barrels. Guyana did. The United States, at the end of Biden, we grew to the largest at 13.4. Now we're at 13.8, but we're not going to go to 18. We're also going to suffer through some declines. So it's not like you can just play that magic of, oh, somebody will just supply it. I think the world is hungry for energy. It's hungry for cheap energy. Look how many times the Russians screwed Europe and they still went back to the trough when prices were low and the economy was bad, right?

55:56Germany, case in point. So I think And by the way, I think we should talk, Amy. I think nuclear is going to end up being a more exciting part, but later.

56:06Ed Crooks:Could be the moment for nuclear. But let me just say, Amos, on your, you know, we've run out of oil thing, because I've lived through run out of oil for many decades. And then something always miraculously happens. And now we can run geology through AI. I have computerized drilling. 100%. I have optimization. We have not yet. I mean, if the scenario you're talking about were to actually happen, like let's say for some reason we can't actually, you were right and there's no more oil left to find. Where did I say that? I'm not saying there's no oil left. I'm just saying.

56:48Amy Myers Jaffe:Scope for growth is limited, right?

56:49Ed Crooks:Scope for growth is limited. I said it's not finite. I said it's not finite.

56:53Amy Myers Jaffe:That's a big difference.

56:55Ed Crooks:Okay, here's my point. But here's my point. I always say this to people. We can liquefy coal into oil, right? We can.

57:05Amy Myers Jaffe:It doesn't mean we should.

57:06Ed Crooks:No, not at all. I'm just saying that the price at which we can do that is much lower than the price we're talking about for air barrels once we're going to have to build all this new infrastructure. So my point to you is the world will come up with a way, and Amos, what you're talking about is that it's very hard to get away from, to quote Paula Gant from GTI, to get away from molecules, right, as opposed to electricity. Yep. But we have other ways of getting molecules, waste the energy, you know, but cold, cold the liquids. There's all kinds of stuff we could do. We don't do it because the oil is available.

57:48Correct.

57:49Ed Crooks:And then same thing. I have lived through so many different, like, oh, guess what? We got oil in Guyana and Suriname and all the countries around there. Oh, guess what? The North Sea is a big place with lots and lots of oil. Oh, guess what? Which is why we're not going to renewables. That's my point. I don't think renewables are replacing oil and gas. Yeah, we thought that we could squeeze oil out of the stone, right? I mean, there'll be something maybe, right? But, you know, the question is really in some places, right? I mean, India is the one that springs to mind now because they were already thinking about green hydrogen in a kind of thoughtful way.

58:36Ed Crooks:And, you know, if I could get cheap natural gas, why would I do that? But now I can't. So I do think there's places. I think that the solutions that countries come up with are kind of geographically determined. You know, one of the misnomers, which I know from having to do a bunch of studies on decarbonization in Africa and traveling around there and so forth, is that a lot of the way African countries got to achieve universal electricity was through hydro. Yeah, for sure. And this mythology that it was somehow natural gas is incorrect. Because in Nigeria, the place that has the most flaring on Earth, they have the least amount of electricity.

59:20Ed Crooks:I don't know. Amy, it was definitely not natural gas. It was definitely not natural gas. And Kenya was geothermal. Do you know what I mean? So I feel like I'm kind of an optimist, not in a short-term way because, you know, it's inelastic. In a short-term way, the way we solve a shortage is demand disappears because people who can't pay don't use it. and we come up with other ways to get around it, right? And now we have more things we can do. We've got e-commerce. We've got remote work. We've got, you know, Ubers electrifying. Like, we've got all kinds of things that we're going to be able to do, right?

59:58Ed Crooks:That'll help us in the short run. But in the end, longer term, we do have these things. It's not just geothermal I'm going to drill for geothermal. It's I'm going to build buildings different, So I'm using a geothermal system that taps the coldness and heat of the earth underneath the building. I mean, there's just so many things we could do if we needed, if we knew that we needed to, if we knew we had to, which we don't do because it seems expensive and complicated. But if oil and gas was expensive and complicated, guess what? We'd do it. The underlying question to all this is what is the new cost curve?

1:00:36Ed Crooks:I mean, it has been for a very long time that oil and gas out of the Gulf countries has been cheap. They have really low lifting costs and they're kind of at the bottom of the cost curve. But if we have to build a bunch of redundant infrastructure to ensure that we can get those, then suddenly the whole cost curve switches on oil and natural gas. And so the question is, do different regions come in the money? Do different technologies come in the money? because I think the ultimate thing that this crisis is going to do is absolutely scramble the cost curve. And so things that we like almost you're right.

1:01:11Ed Crooks:We're going to continue to need oil and gas, fossil fuels for a very long time, if nothing else as raw materials, but certainly as fuels, too. But the question is, what's the cost curve look like? And then what do various technologies do to change that cost curve over time? Because the forces that are affecting that cost curve, at least on the oil and gas side, have changed fundamentally. I'm not sure I agree with you, Samantha, on scrambling the cost curve. I hear you. And I think it's a fair point. I think that as time goes by, the cost of production, right? What are we talking about? The cost of production is not going to go up, right?

1:01:50It's the cost of two things. One is the redundancy that you have to build into infrastructure. That's a cost. And the second is a pricing in of risk of dependency on a region that may have a disruption. And so one is elastic, which is the pricing in risk, because in the early stage, it could be a little bit higher after a period of time. If there's no signs of something happening, then you let it go and you sort of let it relax a bit. And that could play out through insurance prices, shipping prices, all kinds of things, right? The second, the first one, which is the redundancy in the pipelines.

1:02:27Yes, building infrastructure that is not necessary, quote unquote, as redundancy isn't, is expensive. But look, the Emiratis built 1.8 million barrel pipeline. It didn't affect the cost and they built it and just not that long ago. It only opened 10 years ago.

1:02:46Ed Crooks:Well, and also in recent years, they've really built up all their storage and hub in Fujairah massively. Right. And now, will they build other storages in other locations in the world? Of course they are. They're not going to charge you for it because they make a lot of money as it is, right? For them, it's the security of their ability to supply, right? So if UAE had a massive 50 million barrel storage in China or in Singapore or in Japan, then that would have cushioned. Now, if you thought if each of them had a storage facility in Latin America, Africa, and Asia, we could have gone three weeks without noticing this whole thing, right?

1:03:34On the oil side, not the product side.

1:03:36Ed Crooks:I mean, that is a super good point. Right? It is. But what if this ends up being a four or five month problem? Guys, it doesn't cost that much money because it's financeable, because we're talking about very rich countries that have an underlying product that can sort of backstop it. And then I'm talking about coming in, building a facility at the World Bank that reduces the cost of the money, right? So suddenly financing it, instead of 10%, 12%, it's like 3%, 4%. And now you can actually do over a period of time. What I'm suggesting sounds more expensive than it is. It's labor intensive. Let's remember, this is not a region where labor costs that much money, right?

1:04:17We may not like for the reasons that we don't like, but it is what it is, okay? So I think there are ways to think between global storages. I have advocated for 10 years since the Obama administration that the United States have product SPRs, right? Kerosene in the Midwest.

1:04:37Ed Crooks:I said that for California. They didn't listen to me. 100 % what California doesn't do anything right on energy. I wrote a report for GAO in the mid-aughts on that one.

1:04:44Amy Myers Jaffe:You've all been saying this apparently, right?

1:04:46Ed Crooks:We all have. Yeah. Because if you're an expert, that's what you would say. Right. Yeah. Yeah. Again, sometimes a crisis like this comes. And the worst thing to me would be if we didn't take advantage of this crisis to actually do some of the stuff that experts have been suggesting for so long. But in America, it's too expensive to do. I actually trust the Emiratis, the Saudis, Kuwaitis, et cetera, to do this kind of thinking more than I trust us. They don't have a Congress that is looking to get elected in six months. They don't have a president who's going to have to be switched out in three to four years.

1:05:20And for them, it's the lifeblood of their existence. They have to do this.

1:05:28Ed Crooks:Well, and also, in fairness, Adnock was already moving in this direction. They just picked Fujairah. Now they need to go beyond that. And in fairness to Qatar, they have the deal with Exxon in Golden Pass. And now that they have Golden Pass, they probably should be thinking about are they going to have all their investments in LNG upstream in Qatar or somewhere else, right? Or does Golden Bass go to seven trains? Yeah, right. Exactly. Okay. And then the flip side is the minister in Saudi Arabia and the hierarchy there, I mean, again, they used to keep massive stocks in end-use markets. Still have some, right?

1:06:10Ed Crooks:But that's an easy thing because they have experience. It's coming back. It's coming. I can tell you they already know. I've talked to them. It's coming back. It's coming back. They will not let their storages go down ever again. Yeah, right. Exactly. Those are all good things, but all of that infrastructure in the Gulf is much – it was always vulnerable, but now we know exactly how vulnerable it is. And that scares me. And how we get around that is something that's going to be weighing on me for a long time. Right.

1:06:42Amy Myers Jaffe:I think that's exactly right. And that was really what I wanted to ask. Maybe it's a final thought just to kind of generalize that point. Going back almost to what you were saying about the scale of this crisis and how it is the biggest shock to the global energy system ever. You think back about previous crises. You think back to the 1970s in particular, the two oil shocks of the 1970s. that changed so much. Amy, as you were saying earlier, changed so much in the world of energy in terms of, for instance, getting away from oil for power generation in terms of all the investment into new types of energy, waves of investment into nuclear and so on.

1:07:22Amy Myers Jaffe:And so when I think about the parallels to that, and I was saying earlier, this could be the defining event of our professional lifetimes in terms of changing the world of energy, certainly one of the defining events. How do you think ultimately it's going to leave us differently placed? I'll be very brief. One, infrastructure in the Gulf. Two, storage in end use markets. Three, a total change of alliances. The Gulf is going to look, They got attacked by Iran in a vicious way without different attacks that did not differentiate civilian from military. They didn't attack American bases. They attacked Fujairah port.

1:08:10They attacked hotels. They went after civilians in Saudi Arabia, in Oman, in Qatar. That is not even was seen as close to them. The Kuwaitis are like, hey, we're our flag says, leave me out of it. That's literally what the entire ethos of the country is, right? And you hit us. And so alliances now, this is the Middle East. They will not forgive the Iranians for generation, for 100 years. This will live on. And it will also mean, you know who else didn't come to their support? These countries told the United States successive presidents, I'm with you, more with you, but I have a good relationship with China.

1:08:58I got a working relationship with Russia. I'm friends with everybody. The Russians are sharing intelligence with the Iranians. They're supplying them with weapons.

1:09:09Ed Crooks:They're telling them what to hit in the Gulf. Yes, they're giving them the intel. You don't trust me. This is changing forever. forever the idea in the Gulf. And they will come out of this with, we have two friends that we can trust, and that's the United States and it's Israel. I worry about our relationships with the Sunni producers in the Gulf because, yeah, we've been on their side as this has been going on. But on the other hand, we're the ones who kicked the hornets' nest. And the hornets came mountain stung all of them. They didn't ask for this war. There's no love lost between them and Iran.

1:09:50Ed Crooks:They're not sad that the Aitola's gone. Some of them did ask for this. Okay, maybe. But I mean, we started a war that has then been incredibly damaging to them. And there's no love lost there before, but there's also the issue that part of the reason why they may be in the line of fire is they all host American bases. And we haven't been, you know, they're still getting hotels and infrastructure and everything else, despite our presence. So we're not providing everything that perhaps they might have wanted in the protection department. I worry about that.

1:10:24Amy Myers Jaffe:Yeah, no, that is a good point. So what's your answer then, Samantha, on what you think will be permanently changed?

1:10:29Ed Crooks:Yeah, I mean, I think I agree with Amos that I think alliances are going to change. I think that the Gulf countries are in a really rough spot, because you see what some of their moderate friends have done in China and Russia. Amos is right. But I also think there may be synonymous of a detour toward us and dragging them into a battle that was totally not, maybe not, they don't mind us hitting Iran, but the idea that they suddenly ended up being an important front in the war, nobody asked for that. And so I worry about their relationships everywhere. I feel like they're in a real pickle.

1:11:04Amy Myers Jaffe:Amy, final thought.

1:11:05Ed Crooks:I'm going to go off the geopolitics because I think that Amos and Samantha to raise some really like food for thought, like how will this change relationships? I will mention that when I watch the press of what Europeans are saying, they're like, how did you take the eye off of the ball of Ukraine? And so and then we that would be a whole other show to talk about. Was it related? Wasn't it related? Were we worried about the Russian Iranian alliance, blah, blah, blah. But for another show, there are two big takeaways. that I have that are outside the area of geopolitics that I want to put a pin down in, because Ed and I have this thing.

1:11:48Ed Crooks:Because in the past, I put a pin down on AVs, and Ed was like, you know, and we're there. I think that the big dollars that are going to go into fusion now, we already saw the billionaires locking down on fusion. You know, the Germans are interested in fusion. The Japanese are interested in fusion. The billionaires in tech are interested in fusion. I think the push now for fusion is going to accelerate even more. So that's prediction number one. And then the second thing I think that has happened now is if someone didn't understand that before, if people were thinking big ships, whether that's China was thinking big ships in their region or we were thinking big ships globally, right, warfare has changed forever now and adjustments have to be made to how we think of our own defense as a country how we think about projecting power all of that has to be re-evaluated now this is like a post-vietnam moment for asymmetric warfare amen yeah palantir for the masses

1:13:05Amy Myers Jaffe:right now there's a whole other show but uh not i think one on the energy gang that we're going to need to uh get to um we are going to have to leave it there anyway but it's been fantastic talking to you all clearly this is a situation that's going to continue to evolve the ramifications of this are going to continue for months and years to come so it'd be great to talk to you all again in the future to kind of discuss this as it plays out. Because as I say, you know, one thing is very clear is that this is going to change the world of energy very profoundly. As I say, though, for now, we are going to have to leave it.

1:13:43Amy Myers Jaffe:But thanks very much indeed, Amos. Great talking to you. Thank you very much. Thanks a lot, Samantha. Great to see you again.

1:13:49Ed Crooks:Always a pleasure.

1:13:50Amy Myers Jaffe:Thank you, Amy. Sure, we'll be talking again very soon.

1:13:54Ed Crooks:Yes, it's so great to share the mic here with Amos and Samantha.

1:14:00Amy Myers Jaffe:Yeah, no, it has been fantastic talking to you all. Thank you very much indeed. Thanks to our producers, Molly Mowen, Toby Biggins-Gilchrist and Dan Cottrell. And above all, as ever, many thanks to all of you for listening. We really value your feedback. Please do keep that coming. And we will be back very soon with all the latest news and views on the future of energy. Until then, goodbye.

1:14:27Thank you.