WEBVTT - The Iran war revealed that China has a new oil weapon 0:00:02.720 --> 0:00:09.360 Bloomberg Audio Studios, Podcasts, radio News. America's war with Iran 0:00:09.560 --> 0:00:12.560 is now in its fifth month, with only a few 0:00:12.880 --> 0:00:16.799 brief weeks of peace in between. That means the largest 0:00:16.840 --> 0:00:20.360 oil and gas supply shock to the world continues to deepen. 0:00:21.400 --> 0:00:23.320 Early on in the war, as you heard on this 0:00:23.320 --> 0:00:27.240 podcast and so many other places, analysts were worried about 0:00:27.280 --> 0:00:30.880 the oil price shooting up to two hundred dollars a barrel, 0:00:31.560 --> 0:00:36.040 causing a global recession and stoking panic in the markets. 0:00:37.000 --> 0:00:41.519 That didn't happen. The oil price didn't even reach one 0:00:41.640 --> 0:00:46.160 hundred and thirty dollars a barrel. This is zero. I'm 0:00:46.159 --> 0:00:49.960 Akshadharati this week, Where did the panic go? And what 0:00:50.080 --> 0:00:55.440 happens next? Joining me to discuss the impacts of the 0:00:55.440 --> 0:00:58.640 Iran war on global energy markets is Javier Plus, a 0:00:58.680 --> 0:01:02.480 Bloomberg opinion columnist covering energy and commodities. He's also a 0:01:02.520 --> 0:01:05.279 co author of the book The World for Sale, Money, Power, 0:01:05.360 --> 0:01:09.039 and the Traders who barter the Earth's resources Have Welcome 0:01:09.040 --> 0:01:11.920 to Zero. Thank you for having me, So let's go 0:01:12.000 --> 0:01:15.040 back in time. On March fifth, barely a week into 0:01:15.080 --> 0:01:18.440 the war, you wrote a column title, this Isn't an 0:01:18.560 --> 0:01:22.319 energy crisis, at least not yet. Now, fine, mons On, 0:01:23.040 --> 0:01:26.919 you were right. We haven't quite seen an energy crisis 0:01:26.959 --> 0:01:29.920 of the scale in oil markets as we have seen 0:01:29.959 --> 0:01:33.880 in the past. But for the wrong reasons. 0:01:33.680 --> 0:01:36.800 Oh absolutely, for the wrong resource. I'm very happy to 0:01:36.840 --> 0:01:39.560 admit that I was right for the wrong resource, which 0:01:39.600 --> 0:01:44.120 effectively means I was wrong. So in some ways I 0:01:44.160 --> 0:01:47.280 got very lucky that these didn't turn out as a 0:01:47.319 --> 0:01:51.600 full energy crisis. There were some elements on that column 0:01:51.640 --> 0:01:53.640 that I think I was on the money at the world. 0:01:53.680 --> 0:01:56.320 All that elements I wasn't. I think that the biggest 0:01:56.360 --> 0:01:58.600 one that I miss is I thought that the White 0:01:58.600 --> 0:02:02.800 House was conscious that this needed to be a quick conflict, 0:02:02.840 --> 0:02:05.960 that they were going to go in and out rather quickly. 0:02:06.040 --> 0:02:09.560 That has proven completely a mistake. What I think I 0:02:09.639 --> 0:02:12.840 got more right was that this was a crisis, that 0:02:12.880 --> 0:02:17.799 there was a big deal for the oil market. There 0:02:17.880 --> 0:02:22.200 was a significant deal for the LNG market, but doesn't 0:02:22.240 --> 0:02:24.679 mean the gas market. The gas market is a much 0:02:24.800 --> 0:02:28.920 larger piece that the LNG market. And I said that 0:02:29.120 --> 0:02:32.639 there was a risk of analyzing the crisis of this 0:02:32.840 --> 0:02:36.480 shock if the global economy was still in nineteen seventy 0:02:36.480 --> 0:02:39.440 three seventy four when the first oil crisis hit. And 0:02:39.480 --> 0:02:41.919 I think that the global economy is very different for 0:02:42.200 --> 0:02:44.000 a number of reasons, and we can go into them. 0:02:44.800 --> 0:02:48.200 What surprised me, and I think that we had Bloomberg 0:02:48.200 --> 0:02:52.680 opinion work quite quickly to recognize of the importance of it, 0:02:52.760 --> 0:02:57.079 was the role of China in this crisis. China pre 0:02:57.200 --> 0:03:00.240 war on the sea worn market. This is the rue 0:03:00.240 --> 0:03:03.920 oil that this boat by Danker was buying anywhere from 0:03:04.320 --> 0:03:07.600 ten to twelve million barros a day depending on the month. 0:03:07.639 --> 0:03:10.160 I would say on average eleven million barrows a day 0:03:11.120 --> 0:03:14.600 in June, China boat less than six million bars a 0:03:14.639 --> 0:03:17.239 days and more than a fifty percent reduction in total 0:03:17.320 --> 0:03:21.200 oil imports from kind of pre war levels or forty 0:03:21.320 --> 0:03:24.400 forty to fifty percent drop. And that really changed the 0:03:24.440 --> 0:03:30.840 market completely because China acted as a balancing mechanism. I 0:03:30.919 --> 0:03:34.280 call it the invisible hand of the oil market. It 0:03:34.400 --> 0:03:37.800 was very visible and very directed by Beijing. The price 0:03:37.920 --> 0:03:40.520 have gone uppen, and certainly it is a bit painful, 0:03:40.520 --> 0:03:43.160 but it has not been a complete flown, blown up 0:03:43.280 --> 0:03:46.240 crisis that people will complain and and looking at the 0:03:46.280 --> 0:03:51.200 global economy, nothing suggests we I mean inflation is contained, 0:03:51.280 --> 0:03:55.360 is under three percent. Interest rates have not really gone 0:03:55.440 --> 0:03:58.280 up meaningfully. Yes we are. We look at the bond 0:03:58.320 --> 0:04:00.920 market that you know, the highest number of yeares, but 0:04:00.960 --> 0:04:03.640 there are many other reasons for that. The stock market 0:04:03.720 --> 0:04:10.240 keeps going up, Unemployment remains low. Nothing really says crisis, 0:04:10.240 --> 0:04:14.360 and certainly nothing similar to the crisis of nineteen seventy three, 0:04:14.440 --> 0:04:16.599 seventy four or any other oil crisis that we have 0:04:16.680 --> 0:04:19.919 had seence. But yeah, I was right, but only for 0:04:20.000 --> 0:04:20.880 the worn reasons. 0:04:21.000 --> 0:04:23.320 Let's go through the numbers here, because you know, two 0:04:23.400 --> 0:04:26.720 hundred dollars a barrel was floated. Now we're recording this 0:04:26.839 --> 0:04:29.719 on August third, and the price of oil is below 0:04:29.760 --> 0:04:32.839 eighty five dollars a barrel, and you know, Iran and 0:04:32.920 --> 0:04:36.760 the US are apparently talking again. But it did not 0:04:36.880 --> 0:04:39.440 even go beyond one hundred and thirty dollars at its 0:04:39.680 --> 0:04:40.200 very peak. 0:04:40.240 --> 0:04:40.720 In the war. 0:04:41.520 --> 0:04:44.600 You talked about how China was about five million barrels 0:04:44.720 --> 0:04:49.279 a day of sort of buffer provided taking, essentially not 0:04:49.400 --> 0:04:51.640 taking that supply and allowing the rest of the world 0:04:51.640 --> 0:04:55.320 to not panic as much. Another five to seven million 0:04:55.320 --> 0:04:59.080 barrels a day came from oil rerouting that happened where 0:04:59.160 --> 0:05:02.440 Saudi's got about five million barrels a day going outside 0:05:02.560 --> 0:05:05.880 hormones into the Red Sea, and same thing the UA 0:05:05.920 --> 0:05:08.640 about two million barrels a day. That takes you about 0:05:08.640 --> 0:05:11.880 twelve million barrels a day. There was the release of 0:05:11.920 --> 0:05:14.839 the Strategic Petroleum Reserve, which goes between two and three 0:05:14.880 --> 0:05:18.039 million barrels a day. That still leaves two or three 0:05:18.240 --> 0:05:20.440 million barrels a day those. 0:05:20.320 --> 0:05:23.840 Comms commercial inventories. We have been draining commercial inventories the 0:05:23.960 --> 0:05:27.320 market also at the beginning of the war. Now clearly 0:05:27.440 --> 0:05:30.160 we know that it was over supply, so supply was 0:05:30.200 --> 0:05:32.719 running above demand and the rest of the world has 0:05:32.760 --> 0:05:36.400 not kept juice. A steady oil production in the Americas 0:05:36.560 --> 0:05:39.880 is booming the United States. When you count every barrel 0:05:39.920 --> 0:05:41.960 in the US, and I like to count not usee 0:05:42.000 --> 0:05:45.599 the crude, but also condensates and natural gas liquids because 0:05:45.600 --> 0:05:47.640 we count them from the demand side. When we talk 0:05:47.640 --> 0:05:49.880 about one hundred million bars a day of demand, we 0:05:50.000 --> 0:05:53.960 mean all total oil liquids. You count every barrel in 0:05:54.000 --> 0:05:56.360 the US. The US is producing a million barrels a 0:05:56.440 --> 0:05:58.799 day more than a year ago. You look at production 0:05:58.920 --> 0:06:02.320 of Brazil is app twenty percent year on year. Venezuela 0:06:02.400 --> 0:06:05.160 is doing more, Argentina is doing a bit more, Colombia 0:06:05.240 --> 0:06:07.440 is doing a bit more. And you know they are incremental. 0:06:07.520 --> 0:06:08.680 I mean, so a lot of these countries are doing 0:06:08.720 --> 0:06:11.240 fifty thousand baros a day more, which is almost a 0:06:11.279 --> 0:06:14.880 statistical noise. But you put all of that statistical noise together. 0:06:15.440 --> 0:06:19.840 You know, the Americas from the north of Alaska all 0:06:19.839 --> 0:06:23.400 the way to Tierra del Fuego in Argentina probably is 0:06:23.440 --> 0:06:25.960 producing about two million bars a day more than a 0:06:26.040 --> 0:06:28.520 year ago. That's making a difference. I give you an 0:06:28.560 --> 0:06:31.400 example a country that has been suffering for a long 0:06:31.760 --> 0:06:37.040 civil war and a lot of unstability. Livia. Livia production 0:06:37.240 --> 0:06:40.320 last month. Probably the data is a bit fuzzy, but 0:06:41.400 --> 0:06:46.520 Livia most likely produced the most oil last month since 0:06:46.960 --> 0:06:50.000 the very early days of the revolution in twenty eleven 0:06:50.080 --> 0:06:52.880 twenty twelve. A lot of that has helped on the market. 0:06:52.880 --> 0:06:55.800 But the big story is the China story, is the 0:06:55.839 --> 0:06:59.000 five million barrels a day story. What do we know 0:06:59.360 --> 0:07:02.479 and what do we not know about how China pulled 0:07:02.520 --> 0:07:02.960 us off? 0:07:03.480 --> 0:07:06.280 I think that we know very little. So what we 0:07:06.440 --> 0:07:10.600 know is that China has reduced its purchases of seaborne 0:07:10.720 --> 0:07:14.680 crude significantly. That's what we know that China pre war 0:07:14.960 --> 0:07:17.960 was buying somewhere around eleven million dollars a day, and 0:07:18.040 --> 0:07:21.320 that in June it bote less than six. That has 0:07:21.360 --> 0:07:23.800 increased a bit to probably six and a half in July, 0:07:24.600 --> 0:07:27.160 but we are still massively down. This is the less 0:07:27.520 --> 0:07:32.280 purchases by China in at least ten years. How China 0:07:32.400 --> 0:07:37.360 has done it, that's when it became conjecture at best, 0:07:37.360 --> 0:07:39.960 and I'm not going to claim to know how China 0:07:40.000 --> 0:07:42.360 has done it. One of the problems is that China 0:07:42.440 --> 0:07:45.440 does not provide data on his inventories. It does not 0:07:45.520 --> 0:07:48.200 provide even an estimate of his demand for oil. Many 0:07:48.280 --> 0:07:52.800 other countries provide estimates every month in Europe, every week 0:07:52.880 --> 0:07:56.840 in the United States. China simply does not publish any information. 0:07:56.920 --> 0:08:00.440 So everyone is trying to guess what is happening, and 0:08:00.640 --> 0:08:04.560 we can see things. I mean, clearly, demand has come down. 0:08:05.160 --> 0:08:08.280 Clearly the Chinese economy is not enjoying the best of 0:08:08.320 --> 0:08:12.360 the days. But to justify a drop of forty percent 0:08:12.400 --> 0:08:16.720 inputs of oil, I don't think so. Probably China is 0:08:16.840 --> 0:08:21.640 releasing sant oil from strategic inventories or commercial inventories. It 0:08:21.640 --> 0:08:23.960 seems that son oil has been released, but not a 0:08:24.080 --> 0:08:27.720 significant lot. There are a number of elements. Probably China 0:08:27.760 --> 0:08:30.720 have a lot of stock piles of refined products and 0:08:30.720 --> 0:08:33.680 they've been running that down. They probably have a lot 0:08:33.720 --> 0:08:38.480 of stockpile on plastics or plastic commodities they may have 0:08:38.559 --> 0:08:41.680 been running down. China is unique in the rest of 0:08:41.679 --> 0:08:44.559 the world that has a big chemical industry that you 0:08:44.920 --> 0:08:48.520 coal rather an oil or gas as a fed stock. 0:08:48.720 --> 0:08:52.560 Probably they're running that harder. But is that much capacity 0:08:52.640 --> 0:08:56.120 to completely explain everything. I think they may explain a 0:08:56.160 --> 0:08:58.560 portion of it, but not the whole thing. So those 0:08:58.600 --> 0:09:01.600 are elements that may play role, but we don't really know. 0:09:02.240 --> 0:09:04.199 In one of your columns, you estimated back of the 0:09:04.320 --> 0:09:07.320 envelope that if China did drain some of its reserves, 0:09:07.360 --> 0:09:10.040 it's about one hundred million barrels, So you know, that's 0:09:10.160 --> 0:09:11.800 less than a million barrels a day in the last 0:09:11.800 --> 0:09:15.360 five months. Some analysts like Rory Johnston talks about four 0:09:15.440 --> 0:09:20.839 hundred million barrels that China may have contributed, including commercial inventories, and. 0:09:20.840 --> 0:09:23.520 I like the range is huge. The range is huge, 0:09:23.520 --> 0:09:26.240 and one of the problems is. I'm not going to dispute. 0:09:27.160 --> 0:09:29.719 I have told to Rory about that. You know, he 0:09:30.120 --> 0:09:33.280 probably is right. We simply don't know, and we are 0:09:33.320 --> 0:09:36.960 relying on on a lot of these estimates are based 0:09:37.000 --> 0:09:41.120 on satellite data that rely on or measuring the shadow 0:09:41.160 --> 0:09:44.160 of tanks, etcetera, etcetera. So you know, the margin of 0:09:44.280 --> 0:09:48.199 error is significant. It's also clear that the Chinese economy 0:09:48.240 --> 0:09:50.520 is very different than the Chinese economy of ten years ago. 0:09:50.720 --> 0:09:54.079 There are a significant number of evs and significant number 0:09:54.200 --> 0:09:57.440 of electric tracks, et cetera, et cetera, gas tracks, so 0:09:57.559 --> 0:09:59.760 all of that may have played a role. But the 0:10:00.160 --> 0:10:03.120 that the energy transition has helped China. But if China 0:10:03.240 --> 0:10:05.280 was able to reduce demands so much because they can't 0:10:05.320 --> 0:10:07.120 run on ebs, what it was not doing it in 0:10:07.200 --> 0:10:09.240 January rather than now. So I think that has also 0:10:09.240 --> 0:10:10.080 played a role. 0:10:10.160 --> 0:10:13.959 Staying with conjecture, why do you think China did it? 0:10:14.320 --> 0:10:16.880 I think that China has done it, first of all, 0:10:16.920 --> 0:10:20.240 because it has no interest whatsoever on very high prices. 0:10:20.280 --> 0:10:22.400 At the end of the day, China is the world's 0:10:22.480 --> 0:10:24.960 largest oil important so it's going to be affected. I 0:10:25.000 --> 0:10:28.520 don't think that China has an interest on an economic 0:10:28.559 --> 0:10:31.800 crisis in the Southeast Asia where it depends a lot 0:10:32.120 --> 0:10:35.200 on the well being of those countries for his own 0:10:35.240 --> 0:10:36.840 well being. I mean, I don't think that this is 0:10:36.960 --> 0:10:41.720 China being particularly generous, is helping others to help itself 0:10:42.120 --> 0:10:46.920 just generally. I think that China wants a healthy global economy. 0:10:47.360 --> 0:10:49.800 But then a lot of this happened at the same 0:10:49.880 --> 0:10:53.400 time that China and the United States were having a 0:10:53.440 --> 0:10:59.320 strategic dialogue. So is there anything under the table that 0:10:59.559 --> 0:11:03.120 the Why has said, you help me here, I will 0:11:03.120 --> 0:11:07.320 go easier on trade on Taiwan? We simply don't know. 0:11:07.440 --> 0:11:12.679 I mean, to pretend that the oil import level of 0:11:12.760 --> 0:11:17.000 China has not been part of the Washington Beijing conversation, 0:11:17.160 --> 0:11:20.640 I think it will be naive. But is that the key? 0:11:21.320 --> 0:11:22.240 Simply we don't know. 0:11:22.480 --> 0:11:24.640 It is very interesting. I mean, this White House has 0:11:24.679 --> 0:11:26.959 not been as leaky as the first Trump White House, 0:11:27.480 --> 0:11:30.280 but we do get pretty good reporting coming out of 0:11:30.280 --> 0:11:31.960 the White House. So the fact that we've not heard 0:11:32.000 --> 0:11:35.280 anything on oil price conversations with China is interesting. But 0:11:35.480 --> 0:11:38.319 there is an aspect of this which to me is 0:11:38.480 --> 0:11:42.360 still confusing, which is that if we are running down 0:11:42.400 --> 0:11:46.640 reserves and in places like the US, for example, reserves 0:11:46.720 --> 0:11:50.600 are not their lowest level since the early eighties. Yes, 0:11:50.640 --> 0:11:53.800 the panic hasn't shown up yet, but how long do 0:11:53.920 --> 0:11:58.640 you think this war can continue before that panic does happen? 0:11:59.040 --> 0:12:02.000 Well, very much the and so for how long China 0:12:02.040 --> 0:12:05.840 can sustain this very low level of demand into the 0:12:05.920 --> 0:12:09.480 international market. It also very much depends of and that 0:12:09.679 --> 0:12:11.360 is also a big question of what we are not 0:12:11.440 --> 0:12:14.800 a two hundred and we are at below eighty five today, 0:12:15.480 --> 0:12:18.240 and it is that the straight of hormones is close, 0:12:18.840 --> 0:12:22.000 but an awful amount of oil is leaking every day 0:12:22.040 --> 0:12:25.479 through the Strada hormos what we call the dark shuttles. 0:12:25.760 --> 0:12:28.959 These are oil tankers that they go dark. By that 0:12:29.000 --> 0:12:32.600 we mean that they are not advertising where they are located. 0:12:32.800 --> 0:12:36.679 By international agreement, every big oil tanker has to have 0:12:36.840 --> 0:12:40.920 effectively a GPS broadcast into the wall. Here I am, 0:12:41.040 --> 0:12:43.800 and this is my position, this is my speed, and 0:12:43.880 --> 0:12:45.840 this is my draft and my name. 0:12:46.120 --> 0:12:47.280 Don't come and crash into me. 0:12:47.320 --> 0:12:50.199 Please don't crash with me. Please. I carry two million 0:12:50.240 --> 0:12:52.280 bowels of oil, So that would be a very bad idea. 0:12:53.400 --> 0:12:56.920 Those those transponders that they are called the I system 0:12:57.440 --> 0:13:01.720 can be disconnected and they have disconnected. So tankers go 0:13:01.960 --> 0:13:05.920 dark and they shuttle between the terminals inside the Persian 0:13:05.960 --> 0:13:08.439 Golf and the Gulf of Man where they run the 0:13:08.520 --> 0:13:11.640 boot with another oil tanker. They get alongside, and we 0:13:11.720 --> 0:13:14.280 call that a ship to ship transfer, and they move 0:13:14.320 --> 0:13:16.400 the oil from one to the other, and then one 0:13:16.440 --> 0:13:19.120 tanker goes back to the Persian Golf to pick up 0:13:19.120 --> 0:13:22.920 another cargo, very dangerous. Some sailors have died because of 0:13:23.080 --> 0:13:25.679 that attacks and the other tanker goes into the high 0:13:25.760 --> 0:13:30.920 seas to the destination we reckon that anywhere from three 0:13:30.960 --> 0:13:34.040 to five million barrows a day of crude keeps flowing 0:13:34.160 --> 0:13:37.520 on these dark transits, and that has been important. So 0:13:37.640 --> 0:13:41.440 if the dark transits continue, if China keeps a lead 0:13:41.520 --> 0:13:44.880 on his purchases, we can carry on for a while 0:13:45.000 --> 0:13:48.600 before we exhaust our researchs. And have a column recently 0:13:49.440 --> 0:13:52.680 mentioning that there is no doubt that the reserves are down, 0:13:53.080 --> 0:13:56.760 both strategic and commercial, but they are not completely out. 0:13:57.000 --> 0:14:00.320 Strategic reserves. China has at least a billion barrels. The 0:14:00.480 --> 0:14:05.959 International Energy Agency member countries have probably a billion barrels 0:14:06.080 --> 0:14:09.000 left on the reserve. Japan and South Korea are sitting 0:14:09.240 --> 0:14:12.520 on a significant amount of crude oil the US is low. 0:14:12.840 --> 0:14:16.120 But in some ways there is a lot of emphasis 0:14:16.120 --> 0:14:18.880 on the fact that the Strategic Petroleum Reserve of the 0:14:18.960 --> 0:14:22.520 US is at his lowest since nineteen eighty three. But 0:14:22.640 --> 0:14:26.760 we knew this the day that the SPR release was announced, 0:14:26.920 --> 0:14:30.560 because we can do the match. We knew what starting 0:14:30.600 --> 0:14:33.720 point the reserve was, and the US promised to release 0:14:33.760 --> 0:14:36.520 one hundred and seventy two million barrels, so we knew 0:14:36.600 --> 0:14:38.280 that by the end of that period we were going 0:14:38.360 --> 0:14:41.320 to be this low. That's no commun as a surprise. 0:14:41.640 --> 0:14:45.040 A lot of people are making what I would call 0:14:45.160 --> 0:14:50.960 exaggerated claims about what comes next, But I also think 0:14:51.000 --> 0:14:55.920 that I would emphasize the SPR was designed to be 0:14:56.160 --> 0:14:57.359 used in a moment. 0:14:57.120 --> 0:14:59.200 Of crisis exactly, and it's been used, and. 0:14:59.160 --> 0:15:02.000 It's been used. We may have our own political views 0:15:02.000 --> 0:15:05.960 about whether these wars should have been started or not, 0:15:06.600 --> 0:15:08.880 but we are in the situation that we are, and 0:15:08.920 --> 0:15:11.360 the war is ongoing, and there is a supply shock, 0:15:11.680 --> 0:15:15.080 and the playbook to react to our supply shock is 0:15:15.120 --> 0:15:16.080 to use the SPR. 0:15:16.640 --> 0:15:19.520 You know, you talked about the fact that maybe Iran 0:15:19.640 --> 0:15:22.400 overplaced its hand by trying to keep the Street closed 0:15:22.400 --> 0:15:25.120 for a longer time. But if it does that, you 0:15:25.160 --> 0:15:27.680 know there are the reason which the oil can get out. 0:15:28.320 --> 0:15:31.800 More pipelines are already being announced. We did see though, 0:15:32.080 --> 0:15:34.880 after the twenty twenty two energy crisis, which you know 0:15:34.920 --> 0:15:37.760 in your own words was a full blown energy crisis 0:15:37.800 --> 0:15:40.840 because the price of oil, gas, coal and electricity all 0:15:40.880 --> 0:15:42.080 went up simultaneously. 0:15:42.080 --> 0:15:44.760 Sorry I'm interrupting that, but we in some ways we 0:15:44.800 --> 0:15:49.040 have forgotten how bad it was. I mean, around this 0:15:49.320 --> 0:15:53.200 time in twenty twenty two, the price of electricity on 0:15:53.240 --> 0:15:55.760 the spot market in Europe was close to one thousand 0:15:56.120 --> 0:16:00.840 euros per mecab at hours around one hundred today. Twenty 0:16:00.880 --> 0:16:04.520 twenty two, particularly on the electricity market, was so extreme, 0:16:05.120 --> 0:16:10.920 so painful, that only effectively European governments bailing out businesses 0:16:10.960 --> 0:16:14.120 and families. We went through it, and then I will 0:16:14.160 --> 0:16:17.840 say we got quite lucky. But yes, I agree with you. 0:16:17.880 --> 0:16:19.720 Twenty twenty two was very different. 0:16:19.560 --> 0:16:22.920 And we saw a reaction from importing nations. At the time, 0:16:22.960 --> 0:16:24.920 I mean, Europe was the worst it and so Europe's 0:16:24.960 --> 0:16:27.480 reaction mattered a lot. From twenty twenty two. It did 0:16:27.520 --> 0:16:30.320 all the things right, It doubled down on renewables. It 0:16:30.360 --> 0:16:32.960 tried to electrify as much as possible. It got energy 0:16:33.000 --> 0:16:35.480 from wherever it could get lerng, it tried to get 0:16:35.520 --> 0:16:37.880 its cold supply chain sorted out. It did lots and 0:16:37.920 --> 0:16:41.440 lots of things. But Europe has money and they could 0:16:41.520 --> 0:16:45.000 react in a way that allowed them to address these 0:16:45.400 --> 0:16:49.120 critical supply shocks this time around. A lot of developing 0:16:49.160 --> 0:16:52.720 countries have been hit by that supply shock. And what 0:16:52.760 --> 0:16:55.240 have we seen in the last five months. We've seen 0:16:55.560 --> 0:16:59.360 record in imports of solar panels and electric cars and batteries, 0:16:59.400 --> 0:17:02.400 all coming from China. So maybe China didn't plan for this, 0:17:02.600 --> 0:17:07.439 but China is certainly benefiting from developing countries choosing to 0:17:07.480 --> 0:17:11.159 get more and more of these clean energy resources. Do 0:17:11.240 --> 0:17:16.920 you think countries become especially important countries become wary of 0:17:16.960 --> 0:17:19.399 this reliance that they have on fossil fuels as a 0:17:19.400 --> 0:17:22.480 result of these two crises that have happened in this decade, 0:17:22.800 --> 0:17:26.000 and try and find faster ways to transition. 0:17:26.240 --> 0:17:28.240 I think that what we are going to see is 0:17:28.280 --> 0:17:32.480 that countries are going to get wary of importing energy. Certainly, 0:17:32.600 --> 0:17:36.280 fossil fuel energy in many places is important, So I 0:17:36.280 --> 0:17:39.159 think that some fossil fuels are going to suffer. I 0:17:39.280 --> 0:17:44.439 really struggle to see a number of countries trust in 0:17:44.480 --> 0:17:47.920 the LERG market going forward, because they have been hit 0:17:48.119 --> 0:17:51.000 twice in four and a half years, and I think 0:17:51.040 --> 0:17:53.520 that they will say, well, that was more than enough. 0:17:53.960 --> 0:17:56.040 But just generally, I think that there's going to be 0:17:56.040 --> 0:17:59.919 a tendency to try to be as self reliant as 0:18:00.200 --> 0:18:05.000 possible on energy that could mean, and obviously that self 0:18:05.000 --> 0:18:08.439 reliance is very different on fossil fuels, which is a flow. 0:18:08.800 --> 0:18:11.880 You need to buy those molecules time after time after 0:18:11.960 --> 0:18:14.960 time that relying on say solar panels, which you may 0:18:15.000 --> 0:18:17.560 need to impose from China, but you buy them once 0:18:17.600 --> 0:18:19.399 and they run for the next twenty years or twenty 0:18:19.440 --> 0:18:22.920 five years. The same thing with probably batteries, wind power, 0:18:23.000 --> 0:18:27.200 et cetera, et cetera, so many countries. I'm not saying that, 0:18:27.359 --> 0:18:30.240 you know, perhaps relying only on a source of solar 0:18:30.280 --> 0:18:34.760 panels like China, that also brings some challenges. But green 0:18:34.880 --> 0:18:37.560 energy is very different to fossil fuels in the sense 0:18:37.600 --> 0:18:39.399 that one is a flow and the other one is 0:18:39.400 --> 0:18:42.120 a stock. So I think that's important. What I think 0:18:42.160 --> 0:18:44.520 we're going to see is trying to what I have 0:18:44.680 --> 0:18:47.000 called and other people have been calling the rise of 0:18:47.040 --> 0:18:51.840 domestic energy. So if a country has access to domestic energy, 0:18:51.840 --> 0:18:54.720 they're going to try to maximize that energy. That the 0:18:55.520 --> 0:18:58.080 solution is going to be different for different countries. So 0:18:58.119 --> 0:19:01.639 for some countries it's going to be they have solar, 0:19:01.880 --> 0:19:03.800 let's try to do as many solar panels. Yes, we 0:19:03.840 --> 0:19:05.679 need to import them from China, but then once we 0:19:05.760 --> 0:19:09.080 have imported, they produce electricity for twenty years, so that's good. 0:19:09.760 --> 0:19:13.560 It maybe call a maybe domestic oil and gas production. 0:19:13.640 --> 0:19:15.720 I mean has one other aspect that we have not 0:19:15.840 --> 0:19:19.200 mentioned on China. Chinese gas production is an all time 0:19:19.320 --> 0:19:23.760 high oil production that deep about ten years ago has 0:19:23.840 --> 0:19:28.720 returned and China is producing about five to six hundred 0:19:28.760 --> 0:19:30.840 thousand dollars a day more than it was used producing 0:19:30.840 --> 0:19:33.440 a number of years ago, and that about six years ago, 0:19:33.600 --> 0:19:36.080 so that's also important. So I do think that we 0:19:36.119 --> 0:19:40.679 are going to see a movement to support sources of 0:19:41.040 --> 0:19:44.960 energy that one can produce either at home or perhaps 0:19:45.080 --> 0:19:50.000 regionally in countries that you have close political and economic relationships. 0:19:50.359 --> 0:19:54.240 But generally I think that the one that loses power 0:19:54.359 --> 0:19:59.240 here it's going to be oil and internationally trade gas 0:19:59.280 --> 0:20:08.840 by dunker After. 0:20:04.520 --> 0:20:07.280 The break, how will the strait of horror moves closure 0:20:07.320 --> 0:20:11.080 affect global food prices. If you're enjoying this episode of Zero, 0:20:11.160 --> 0:20:13.000 please take a moment to rate and review the show 0:20:13.080 --> 0:20:17.480 on whichever platform you're listening on. Recently, listener MPL twelve 0:20:17.720 --> 0:20:21.000 nine wrote the interview with Gerald Butts of Eurasia Group 0:20:21.280 --> 0:20:24.800 was a cracking episode of a consistently excellent show. Thanks 0:20:24.960 --> 0:20:39.879 MPL twelve nine. You have seen many energy crises in 0:20:39.920 --> 0:20:43.360 your time covering energy energy crises. Some of them can 0:20:43.520 --> 0:20:47.680 have many long term impacts, but one other aspect of 0:20:47.720 --> 0:20:50.639 the energy markets is the forecasting, and the forecasting can 0:20:50.680 --> 0:20:53.800 be fun but also can come to bite you. So 0:20:54.040 --> 0:20:57.080 I was writing a story about the fact that this 0:20:57.200 --> 0:21:00.919 year will reach three terror Warts of Soul, and no 0:21:00.920 --> 0:21:04.320 one really noticed because you know, it's another terror award. 0:21:04.359 --> 0:21:06.879 We just had another Terrra award two years ago, so okay. 0:21:07.600 --> 0:21:11.000 But when the first Terrawart was installed in twenty twenty two, 0:21:11.720 --> 0:21:14.520 we had a BLOUE mcginney I put out in an analysis 0:21:14.520 --> 0:21:18.160 and at that time they were expecting solar to reach 0:21:18.560 --> 0:21:23.960 nine terror awarts after twenty fifty. Today they're expecting that 0:21:24.040 --> 0:21:27.399 to reach in twenty thirty six. So clearly solar has 0:21:27.440 --> 0:21:30.000 been like a very surprise story, even for the most 0:21:30.040 --> 0:21:34.520 bullish people. But from your perspective, beyond solar, what has 0:21:34.600 --> 0:21:36.880 surprised you about the energy transition? 0:21:37.359 --> 0:21:39.040 I mean, the one that you know that I have 0:21:39.119 --> 0:21:42.680 been writing in Qualott is the resilience of coal. Call 0:21:42.920 --> 0:21:46.080 is the source of energy that refuses to go away. 0:21:46.520 --> 0:21:49.359 The fact that probably in twenty twenty six we are 0:21:49.359 --> 0:21:52.359 going to see record the amount for call. Yes, for sure, 0:21:52.800 --> 0:21:55.840 as a share of global energy that shared is going down. 0:21:55.880 --> 0:21:58.240 But what we care for the planet is the amount 0:21:58.240 --> 0:22:01.920 of tones that we are consuming and therefore burning, and 0:22:02.160 --> 0:22:05.120 the amount of CO two that we are releasing. That 0:22:05.400 --> 0:22:08.480 keeps surprising me because for the last ten years we 0:22:08.560 --> 0:22:11.800 have been talking about when coal is gonna pick, and 0:22:11.840 --> 0:22:14.359 every year keeps going up. And I was just looking 0:22:14.880 --> 0:22:16.680 and you know, this is a snapshot, and I think 0:22:16.680 --> 0:22:19.520 that you know, I'm very happy to raise my hand 0:22:19.920 --> 0:22:21.880 and say that I have been the first one who 0:22:21.920 --> 0:22:25.720 has underestimated solar. I mean, solar has been and it 0:22:25.760 --> 0:22:31.560 is the fastest growing source of electricity worldwide and is 0:22:31.680 --> 0:22:36.360 doing rather well. But if you look for example, as 0:22:36.359 --> 0:22:39.320 at of the analysis of the International Agency did on 0:22:39.400 --> 0:22:43.119 electricity markets two years ago, and it was just looking 0:22:43.200 --> 0:22:45.840 at what at the end of twenty twenty four, what 0:22:45.920 --> 0:22:50.400 the world looks like in twenty twenty six. They underestimated 0:22:50.440 --> 0:22:54.640