Why the Energy Crisis Isn’t Worse—Yet

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FP Live Introduction

0:30Hi, I'm Ravi Agrawal, Foreign Policy's Editor-in-Chief. This is FP Live.

0:40The ongoing war in Iran has been called the biggest energy crisis in history. With the Strait of Hormuz still essentially shut, a fifth of the world's oil and natural gas is stuck. How will countries and companies change their way of doing business, not just in the short term, but in the longer term? The energy guru Daniel Yergin joins me this week to share his insights. That is coming up, but first, my read on the latest in the Iran conflict.

Ravi's Read

1:11Back in June, when the United States and Iran signed a memorandum of understanding, I wagered that the deal would last, in large part because the two sides needed it to. My thinking was that neither side could continue to withstand a prolonged conflict. And I was wrong. Well, partly. The White House has indeed made clear it wants out. But I didn't fully account for just how much Tehran's new leadership has changed its calculations. As more details come to light, its strategy is becoming clearer.

1:45Iran sees its disruption of the Strait of Hormuz as a superpower. It doesn't want to give up that leverage without extracting real concessions from Washington. It also doesn't want to keep returning to war every few months. So it's holding out for a more durable solution and a commitment that the United States and Israel won't attack it again. The other change is that Iran seems very ready to strike first, as we've seen in the past week. My sense is that Tehran wants Washington to really see that it is willing to accept much more pain

2:19to get a better version of the old MOU. And this explains why we are where we are.

Escalating Conflict

2:26In the last few days, both sides have hit key targets hard, and the war has expanded to include Iraq, Jordan, and even Egypt. Saudi Arabia has become directly involved, jointly attacking Iranian assets in Iraq. We are locked in an escalatory spiral. All the more reason to urgently look for solutions. We've run two important essays recently, hunting for a way out. One is by Phil Gordon, a long-time Democratic policymaker who was most recently Vice President Kamala Harris's national security advisor.

3:01Phil makes the point that the White House needs to essentially pay Iran off, by way of reducing sanctions, to get to a new MOU. Two other scholars build on his point. Nate Swanson, who was on the show last week and served under both Trump and Biden as an Iran expert, teamed up with Alison Miner, another former Biden Middle East official, to make the point that both sides have to sell a victory at home to reach a deal. Once you start from that recognition, it becomes clear that the only way out is for Trump to take a two-pronged approach.

3:36In the short term, he needs to re-up the old MOU, but with much clearer language about opening up the strait. The way to get Iran to agree to that would be to clearly signal long-term reductions in sanctions and make a commitment to no further strikes. But in the longer term, and here's the other prong, the White House should help its Arab Gulf partners to build energy and security resilience, and then to form alliances with traditional U.S. partners to build safeguards against Iran.

4:10That would be the longer-term plan. We'll leave gift links to both essays in the show notes. The reality, as you'll see, is that neither plan is perfect. There are very clear flaws. For one, the nuclear file is not resolved. Giving this Iranian regime more access to money is painful. But the reality is we are in a real mess right now, and we need creative proposals and solutions. As one policymaker told me, we need to throw some spaghetti against the wall.

4:40Because if we don't, it is hard to see how we get out of this war. And the longer this goes on, the worse the global energy and commodities crisis gets. The main ray of light for me here is that no matter what option the White House goes for, it will spin the outcome as a win. Trump is very good at spinning a narrative. And he must know that most of Congress and the American people will just be relieved the war is over. So why not explore the solutions suggested by the experts,

5:13including at least one that he fired?

Daniel Yergin Interview

5:15We'll have to wait and see. Okay, time for this week's interview. Regular watchers will know we've been grappling with some big questions about energy recently. First of all, this is the biggest energy crisis in modern history. But second, it could have been so much worse. Why wasn't it? Well, the answer is partly that Saudi Arabia and the UAE used pipelines to bypass the Strait of Hormuz and get some of their oil on the market. But the big surprise is how China was able to lower demand internally

5:49and draw on its huge reserves of crude. The question now is how long that can continue. And regardless, what are the longer-term changes that countries and companies will make? I have the best possible guest this week. Daniel Juergen won the Pulitzer Prize in 1992 for his groundbreaking book, The Prize. He has since written many other books, such as The Quest and The New Map. Juergen is widely seen as the oracle of the energy industry.

6:20He runs CERA Week, the world's biggest energy conference, and he is vice chairman of S&P Global. Remember, you can watch all of these discussions live on our website. Also, we love feedback. Rate the show. If you like it, share it with a friend. And you can write us directly. Our email is live at foreignpolicy.com. Let's dive in.

Energy Crisis Impact

6:48Daniel, welcome to FP Live. Glad to be with you today. Good day to be talking. Indeed. So the expert community says that the Iran war is a seismic event for the energy markets. The head of the IEA says it's the biggest crisis ever. Let's just start there. Why is this such a big deal? Well, I think, first of all, it's the biggest crisis since the Second World War, which was actually also, among many other crises, an energy crisis, but certainly in modern times. And the reason is because the Middle East is so central, because 20% of world oil, 20% of LNG flowed through the Strait of Hormuz.

7:25And it turns out it's not just an energy crisis. It also involves helium. It involves fertilizer. The products that will not be made because of the crisis will hit agriculture. So this is a seismic event for not only world energy, but for the world economy. But I have to say, Dan, as we've been covering this story, it strikes me that things could have been much worse, right? So crude prices peaked around 120 a barrel. Even in the last week, they touched $100, but then they came down quickly.

7:59And these are not historic highs for the energy market. The sky hasn't fallen exactly. So at least in terms of crude prices, why has this crisis not been worse, or at least not as bad as many analysts were predicting a few months ago? Well, first of all, you're right. The oil hit $120 a barrel roughly in 2008. And if you adjust for inflation, that's a higher price. But that was not really based upon any disruption. Obviously, what you're looking at here is the number one maritime choke point in the world economy, which is the Strait of Hormuz.

8:35Why it's not been worse is because the disruption has not been quite on the scale that people thought it would be maybe a month or two ago when they were really talking about $150 or $200 a barrel as inventories got drained. It's because some supplies did get through. The Saudis had built a pipeline system in the 1980s in response to what was called the tanker wars at that time. So they could move about half their supplies out. The UAE, Abu Dhabi, has a pipeline.

9:06It can move half of its supplies out. There are strategic stocks, which mean government-controlled stocks. In the U.S., it's called the Strategic Petroleum Reserve. Some oil was released from there. And there are two other factors, though, Ravi, that really stand out. One is the change, the dramatic change in the position of the United States as an energy producer, and in particular, its ability to export not only oil, but oil products like jet fuel, like diesel, like gasoline. But I think the biggest surprise here is the response of China, which replaced the United States as the world's largest importer of oil.

9:42And they cut their imports almost in half. And I'd have to say no one could see that coming. Let's just dig into that a little bit more, because, I mean, China is so opaque in many ways. Just to talk about crude here, how much oil was China importing pre-war? And do you have a sense of, you know, what are the size of its strategic reserves or how it was able to replace those potential imports? Well, China's demand was around 16, 17 million barrels a day.

10:13It was importing around, maybe around 12 million barrels a day. It has built up, as it has with many other products as well, strategic stocks controlled by the government. And it's thought that China has one and a half to two billion barrels of oil, which is a huge number in its stocks. I just want to linger on that for one second. One and a half to two billion, that is more than a year's worth of energy supply. Yeah. And then on top of that, companies have their own inventories. So China basically cut its, you know, by maybe its imports by 5 million barrels a day.

10:47How did they do that? The Chinese do not like to buy oil when price is high. They like to fill inventories when prices are low. And so they really pay very close attention to the market. So they raised domestic prices, which affected demand. And demand went down a couple million barrels a day. Their refineries also export oil. They said no exports. And then they drew on their inventories. And so all of that was basically keeping the price from hitting that $150, $200 a barrel.

11:18And, you know, something the Chinese were also concerned about, it depends so much on its exports to the world economy. It didn't want to see a global downturn. And we're not party to that. We don't know. But that's been speculated. But certainly they were interested in protecting their economy. And they did that. And that taking 5 million barrels a day of imports out of the system relieved a lot of the pressure. And also, it's particularly significant because the Strait of Hormuz, in economic terms, flows east.

11:5080% of the oil that went through the Strait of Hormuz goes to Asia. 90% of the LNG, liquefied natural gas, that goes through the Strait of Hormuz normally goes to Asia. So there was particular sensitivity in Asia to this disruption and the challenge in China, like Japan, which is the other country that's built up large reserves, has that cushion of supply. And I'm just following your lead here because, as you mentioned Asia, you know, I realized at the start we said that things weren't as bad as we thought they were going to do.

12:25But that said, Asian economies, South and Southeast Asia, mostly have really suffered from this crisis. There have been countries that have run out of cooking oil. You know, universities have been shut down. Governments have asked their workers to stay home for a day a week. And all of this, we don't have full data yet, but this is going to lead to an economic slowdown. Yeah, in Bangladesh, I think four out of the five government-owned fertilizer plants shut down because they couldn't get supplies.

12:56And India, which had come to depend very much on propane for cooking, and it was a huge program that went back. I remember I was in India 10 years ago when Prime Minister Modi launched this program to send propane so people would stop burning wood and waste for cooking. That was very dependent on the Gulf, and they ran short. And as you know, restaurants in India shut down. And so a lot of hardship there. Businesses failed, rationing of supplies, and it fell disproportionately on the poorer countries.

13:30So if this war ends tomorrow, magically there's some sort of a resolution, and we see no further conflict, and the Strait of Hormuz gradually gets back to normal. I'm not saying that'll happen, but let's just assume that's the case. What happens then to energy prices in the near term? It's already been signaled by whenever they think peace is at hand, and negotiations are going to begin.

14:01We saw crude oil, which had been about $100 a barrel or more, went down as low as into the low 70s. So that tells you prices will come down, the market will come down. It will take time to replenish, it will take time to get refineries operating again. But then you would have an adjustment. But, you know, this is so volatile, you know, you see the oil price bouncing around. And although people are not focusing on it, more severe is not the price of crude oil, but it's that price of diesel.

14:33It's the price of jet fuel and so forth. And what it means for farmers and fertilizer. So we will see continuing impacts on agriculture. Yesterday, I was in a discussion about Brazil. Brazil is being hit hard, its agriculture, because of its dependence on the Gulf for supplies. So, you know, when the crisis happened, if we'd been talking on February 27th, Ravi, and you'd said to me, Dan, there may be a war.

15:06What's the impact? You know, most people would have thought, OK, oil. Some would have thought LNG, natural gas. But who would have said fertilizer? Who would have said helium that you'd need for manufacturing semiconductors? Who would have thought aluminum? Who would have thought sulfur, which you need both for mineral mining and for making fertilizer? People didn't realize, I think, just how significant the Gulf region had become for the world economy. The change from where it was 20 or 30 years ago.

15:40And by the way, they have one other really big export, which has been very important, which is called money. Their sovereign wealth funds, multi-trillion dollars of sovereign wealth funds. Those are big sources of capital for the world economy. And many of the countries in the region are expecting downturns this year. I think Qatar, especially, is projecting a pretty severe contraction. So, yeah, can I just say, Qatar, I'm glad you pointed out, because we talked about Abu Dhabi and Saudi Arabia having alternatives. Kuwait is in a very difficult position because they don't.

16:13Qatar, exporting LNG, you can only do it by ship. The other country that's really been hit hard is Iraq. And we've seen this kind of remarkable announcement that, again, if you'd said it three or four years ago, people would not believe it. In order to secure Iraqi exports of oil, there's now serious discussion of building a pipeline across that very secure and stable country called Syria. You know, who would have thought? It's a brave new world. So, as we look at, you know, we've been discussing the last few months and where energy is right now.

Longer Term Changes

16:49I want to try and explore the longer term changes that will come about because of this conflict. So, the crisis has impacted energy exporters and importers in different ways. My sense is that many of them don't have the same trust in supply chains as they once did. No matter how this gets resolved, I think that they're going to be more skeptical about not only the Strait of Hormuz, but any kind of choke point dependency. What's your sense of how countries at this point are beginning to think about longer term adjustments they'll have to make?

17:22Certainly, choke points has now become part of the geopolitical vocabulary. Before, it was a very limited number of people who talked about choke points. I think I'm glad you used the word supply chains because it's really part of a larger phenomenon. This is writ large, but the kind of shifting view of supply chains that began about 2019, 2020 was accentuated by the COVID crisis and then by the rising tension between the U.S. and China, where supply chains used to just be about efficiency and you didn't think much about security.

17:57You didn't pay a security premium. You just want it the quickest, most efficient. Now, it's shifted to got to think about security, got to think about resilience, and that affects certainly the case here. I think the Gulf countries, for their sake, are going to seek to diversify basically from dependence upon the Gulf, and that does mean pipelines. Now, in the case of Saudi Arabia, it means pipelines going to the Red Sea, and you have there the issues of the healthies, but I think that's very much on the agenda.

18:32And in general, I think you'll see a movement to diversify sources. I think kind of a rebranding of renewables is going on right now from climate and emissions to resilience and energy security and independence. That's going on, and I think also it means other regions are going to get a big boost in terms of investment and attention. I have to ask, though, when you speak of resilience, doesn't that disproportionately sort of advantage bigger countries or richer countries and leaves a lot of other ones behind?

19:11Yeah, I do think that's the case, that if you're Japan, you can afford to have large strategic stocks. If you're a developing global South country, you don't have that same ability. But it also, you know, frankly, Europe forgot about energy security, and it's a rich reason, but they're going to have to do it too. And obviously, the U.S. is in a position that China wishes it was in.

19:42The U.S. went from being the world's largest importer to being the largest producer of oil, the largest exporter of natural gas. So you talked about the impacts on Asia, where, you know, really hit people's incomes and livelihoods and led to rationing and shortages. In the U.S., it's been mainly measured in terms of what happens at the gasoline pump. And prices, they're up by about a third since last year, right? Yeah, that's right. A dollar higher. They've gotten up to about a dollar 50. And as we know, there's no price in the United States that is more politically sensitive than gasoline prices.

20:19And lower income people who have to commute 40 miles a day to their job and have not been able to afford to buy an electric car or don't have charging, they're the ones who get really hurt by that. And then it is the pervasive impact on inflation. And even in the United States, because our team at S&P Global did a calculation once that about 70 percent of the food on your table is actually energy costs, from fertilizer to diesel for your tractor to transporting it from farm to destination processing and so forth.

20:53So those costs are going to work their way through the system over time. Fascinating. I want to linger just a moment on the United States. S&P Global also had some great research on how natural gas will become its second biggest net export in about five years. Because, you know, it's striking to me that as you were talking about the price of the pump, which is crude related, and that sort of tends to have a global price point that affects all countries relatively equally.

21:24But gas is just so different because the United States is able to sort of afford or sell gas at a far, far lower price point than, say, what Asian economies are able to access. And that, in a sense, has become one of the big changes between now and, say, a decade ago, right? Absolutely. I mean, just to put in context, second largest exporter, that means three times that of all the Hollywood and television programs. It means about three times corn, two and a half times, three times soybeans, and also 70 percent of the value currently of semiconductors.

22:05But it will go to that number two position. And what's happened is it's the shale revolution. I mean, the shale revolution saved Europe from Vladimir Putin because we wouldn't, you know, because of their ability to send LNG to them meant that Putin thought he could use the gas weapon and shatter the coalition supporting Ukraine. I mean, it failed at some cost, but because of U.S. LNG right at the forefront of it. At our CERW conference, which you mentioned, the German economy and energy minister in March said that the number one thing that really saved them was exports of LNG from the U.S., along with supplies from Norway and other countries and gutter at the time.

22:46But we basically have 40 years of known certified natural gas reserves. So that means that we can build up exports of LNG, but our volumes, we still have more gas, even though we're exporting LNG. And so that means natural gas prices in the United States, wholesale prices have actually gone down since this war started. And these low prices give the U.S. an economic advantage as a manufacturer over Europe and other parts of the world.

23:22Which has immense geopolitical ramifications. I mean, in as much as the price at the pump, which is crude, has some impact on the thinking of, you know, the White House on how long it can tolerate this war. The fact that natural gas prices are down is very telling because that has a range of impacts. I want to talk a little bit about the private sector, which you know very well. I mean, you get to speak to all these energy executives at CERA Week and elsewhere. What is your sense of how they are thinking about the post-Iran war landscape?

23:56Well, I think it's still early. I think their first thing, of course, was the security of their people, the security of their systems and the partners that they work with in the region. And, you know, do you keep your people there or not? And I think it's varied from company to company, whether you withdrew some or not. But I think what it does is it means that they will look at other regions. They'll look at the Western Hemisphere.

24:22Even before the crisis, the Western Hemisphere is actually producing more oil than the Middle East, which, you know, was a surprise. I mean, Brazil produces four times as much oil as Venezuela right now. It's thought that Africa will be a beneficiary of investment. I see a step up of activity in the eastern Mediterranean as an alternative source of gas to Europe, which it already is. So I think there'll be, you know, diversify supply. It's still early because, remember, people have these capital budgets, investments that go out five or six years.

24:57But we were seeing this even before the crisis. You started to see people saying, well, at some point the U.S. is going to peak out. We have to go back and start exploring for oil more seriously than we did before because you didn't have to explore with shale. It was just a different business. And now I think exploration was back on the table and this is going to accelerate it. And it will really be up to governments how to be competitive to draw in the investment. But in this moment of immense geopolitical risk, conflict, I mean, do companies have any confidence to even think about, you know, pipeline investments or exploration?

25:39Yes, absolutely. I mean, the Iraqi Syria pipeline is in partnership with a U.S. company is actually championing it. Big U.S. investment firms have announced major investment in pipeline systems within Kuwait as Kuwait was, you know, opening up, you know, household name companies. So I think that it's there. I mean, I think we'll see, you know, the autumn will be a critical time because there's some very big conferences that are being held in the region at that point.

26:18And I think the region is going to go out of its way, those countries to, you know, restore confidence. So I think people do want to maintain their partnership, show their support for those countries as they're having facilities being attacked in ways that had never been expected. But also those countries themselves will be spending more money on defense and thinking about it in a way they hadn't in the past. But, you know, it's funny you'd say after six months, people would have remarkably changed their plans. It just doesn't happen that fast in the energy industry because you're talking about investments that take five or seven years.

26:54And we'll be back in a minute with more of Foreign Policy Live. Remember, you can catch these conversations live and on video on foreignpolicy.com. Subscribers get to send us questions in advance in addition to a range of other benefits, including our magazine. Sign up.

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29:19I have to ask because energy's had such a disproportionate impact on geopolitics and foreign policy over the last several decades now. What is your sense of where energy demand is headed? I mean, at what point does it peak? Given, you know, populations peaking at a certain point, you know, there's all this talk of declining fertility rates in places like India. And even Nigeria. And so many of our older growth projections are now off by a bit. Right.

29:49Yeah. I mean, that's very interesting because some of the projections about climate and things like that were dependent upon the notion of a 14 billion person world. And it sure doesn't look like we're going to be a 14 billion person world. And is it 9 or 10 billion people? I mean, what you say about fertility rates, I mean, that itself is such an incredibly important, fascinating question. I think that the arguments about energy demand are both analytical and theological, depending upon various points of view.

30:21What we've seen so far is that energy transition is not going the way people thought it would go. It's been slower. There are many challenges to it. And it's really been energy addition. Because if you look at the numbers, you see wind and solar since 2010 have been commercial, growing a lot. But conventional energy has been growing a lot, too. But I think, you know, open question, what will the impact of this crisis when it's over?

30:55How will that change the direction? I think for China, it accentuates their drive for electrification, particularly in vehicles. And I think, you know, at the first couple of months of this year, electric car sales in China were running about 36 percent. Now they're running at 60 percent. We've been pretty consistent, thinking that oil demand probably peaked somewhere in the early 2030s. But as one of my colleagues wrote, this is the first energy crisis of the EV era.

31:30I think that's something to watch, how that accelerates it. I think natural gas, is thought, will peak longer before it flattens out. But a lot of that does have to go back to the population numbers you're talking about. Which are anyone's guess, right? I mean, that's an important number. Yeah. And we're doing a study now called Pathways, trying to look at it from the Global South point of view of their energy demand, not through the window of the Global North.

32:02I have to say, when you just said the energy transition hasn't worked out as we thought it would, why is that? Because, I mean, on the one hand, you know, solar and wind is cheaper, more affordable than it's ever been. China has, you know, been able to produce so much of it and expand capacity to such a degree. You know, is it just that countries haven't been willing to take on China's supply? No, I don't think that's it.

32:32I think there are a whole host of reasons. I think that the concept of energy transition really needs a big rethink, because it was very ambitious. It was divorced from any previous experience of energy transitions. You know, I think the scale, you know, changing $120 trillion world economy overnight, pretty ambitious. The costs have been underestimated. The needs of the South, the Global South, in terms of development and rising incomes were underestimated.

33:04Energy security was forgotten about until it came back and hit people in the face. The issue of energy transition is mineral intensive. Electric car uses three times as much copper as a conventional car. How long does it take to bring a new copper mine on? 17 years. And that gets you into China. Then data centers, suddenly this new focus on electricity. And then, you know, for Europe, it was very interesting having the German economic minister at Syrewick. She talked about that this single focus on renewables had really undermined the competitiveness of the European economy.

33:42She said leading to deindustrialization, obviously having a big impact in terms of parties on the far right and far left. Costs much higher than they should have been that, yes, you can build renewables, but you have to build a second system, as she put it, a second pillar to deal with the volatility. So I think all those factors were kind of, kind of, people just didn't know that you needed to look at those things, too. But you couldn't just look at energy transition and forget about competitiveness, forget about geopolitical tensions, forget about economic growth.

34:21And I think there was lack of integrated thinking about energy transition.

34:27I mean, it's hard to dispute any of the facts of what you're saying there. But on the other hand, you have wildfires right now across France and Spain, and there are people there who are thinking that, quite rightly, that climate change is having dramatic effects on their lives. And at some point, policy needs to catch up. But what is your sense of how everything we've been discussing and the addition of fossil fuels, the way we've seen them being added on in the last few years, what does all of this mean for the clean energy movement?

35:02Well, I think it's what I've suggested. I mean, you're quite right, the impact of, in Europe this summer, the rediscovering of the virtues of air conditioning, rather than regarding it as immoral, but actually something that improves productivity. I remember Lee Kuan Yew, the founder of modern Singapore, saying the greatest invention of the 20th century was air conditioning because it made the tropics productive. Yeah, I couldn't agree more. Yeah, yes, exactly. I mean, you, you know, from your own experience, but, you know, these are, these are tough questions.

35:40But if you look at the far right parties in Europe, obviously, immigration is their number one issue, but very much also about high energy costs. So they're not easy tradeoffs here that you can just say you do one thing or the other. And by the way, you know, England's emissions, like, are 3% of China's. So what they do in England, you know, looks good for England. Not going to move the needle. Yeah. I mean, they say they want to set an example, but it doesn't move the needle.

36:12What matters is what happens in the big countries in the global south and in how they develop and how they find the balance. I go back to, we do an Energy Asia conference, and we had the prime minister of Malaysia saying, you know, he said, we're concerned about climate, but we're not going to be dictated to by Berlin, Brussels, and other countries and other cities in Northwest Europe, you know, or North America. Because we have to worry about economic growth, we have to worry about health, we have to worry about poverty.

36:45So, you know, that's why I say you need to rethink an integrated approach to it, because, you know, you've got to address those issues around climate and weather and, you know, these unprecedented forest fires. But you also have to keep people employed. Right. Yeah. And what you described from the Malaysian ministers, a common refrain I hear from leaders across the global south. I mean, they have populations that are, you know, growing in economic might, and they want to purchase more, they want to grow more, they want to put more food on the table.

37:22They are increasingly becoming meat eaters. You know, that has a carbon footprint. I mean, everything costs more. So, you know, the growth imperative is quite real, and there are politics behind this in that, you know, they need to stay in power as well to push through a lot of this growth. So I think really, Ravi, you've just set out the problem. Yeah, yeah. No, indeed. And the solution might just be the integrated thinking that you're describing, because it's, you know, it's clear we need an energy transition.

37:56But if it didn't work, then we need to ask why it didn't and what we can do differently. And if you bring to power governments who want to dismantle the whole thing, which is a real risk in Europe now, that's a cost too. Indeed. Let's talk about a few industries and how they might change post-Iran war.

Post-Iran War Landscape

38:19Let me bring in a subscriber question. This one's from Dario Polsky, who asks what impact you might see on the development of nuclear energy after this war. Well, I think nuclear has already had, really, for about the last three or four years, a new energy to it, that it's really been embraced, you know, small modular reactors, you know, nuclear power plants that were shut down in the United States are going to be brought back to life and so forth.

38:52I think it was a lot of that, I mean, actually, again, going back to the German minister, she said, we shut down our nuclear in Germany, we shut down our largest carbon-free electricity. So it has that advantage. I think hyperscalers are very interested, the big tech companies in it for that reason, because they need electricity. So I think there's been a big, you know, a new boost to it anyway. What is it, seven or eight billion dollars of venture capital money in fusion? That would have been unheard of 10 years ago.

39:23And I think in that question, this gets a new push to nuclear as another form of diversification. What about geothermal? Geothermal, you know, has been around for a long time. Why don't you quickly just describe what it is, I think, for our viewers? Yeah, geothermal is basically you drill down into the earth and you have heat and you use that heat to heat water, create steam, drive a turbine up above. So it's a form of renewable energy.

39:54And it's been around, but it's been very kind of pretty fringes. But now what has happened, entrepreneurs, partly with the support of hyperscalers, are adapting the techniques of shale gas and shale oil to call it shale geothermal, drilling down and then having horizontal drilling. And then much more contact with heat, much greater efficiency.

40:26So there's some big projects going on right now in Utah and other places. And so I'd say geothermal, which, you know, again, was one of those things not on the agenda four years ago in any serious way, is now something that's getting a lot of attention. Hmm. Let's talk about winners and losers for a minute. I think it's clear that this war has produced many, many different types of losers in different buckets, whether it's countries, companies, specific groups of people, even industries.

41:00Are there any geopolitical winners in your mind? I would say Latin America, I would say, I would say Canada, which is going through a sea change in policy under Prime Minister Carney. And I think certainly because of its relative position, the United States.

41:27But, you know, but this is ultimately this is bad for everybody because it's bad for the world economy. Just explain your thinking on Latin America there. What did you have in mind? Well, Latin America, if you have political stability, you look at Argentina now, which there's now a shale revolution going on there and production going up significantly and investment going in there. I think, as I said, Brazil is much bigger than people recognize. Canada is bigger.

41:57But obviously, the country to watch is Venezuela, which is and I think there's probably more interest now in Venezuela than there was on February 27th.

42:10What is your sense of the prospects there? Because, I mean, from everything I've read, the system there has just been so ruined. The corporate structures, the brain drain, you know, all the best talent in the world lost over the last five decades. Can any of that come back online? Well, yeah, you're right. You go to Calgary or you go to Stavanger in Norway or even go in the Middle East and you find among the leading people in those industries are Venezuelans who are part of that diaspora.

42:41You know, I think there's a mixed message that there's some short term gains to be had. Significant investment will require political stability, contractual stability, things like arbitration, respect for contracts and all that. Well, I think it will have to be demonstrated before people spend big money. But there are opportunities there now, for instance, offshore natural gas of Venezuela that's adjacent to Trinidad can be developed.

43:14And I think smaller companies will go in and, you know, see opportunities. And those who have had positions there, some of them are going to step up their investment and restore. But as you say, the industry has been ruined, both in terms of human capital and in terms of physical capital. This has been a masterclass. Dan, we'll have to leave it there. Good. Pleasure talking with you. Thanks. Thank you so much. And that was the energy expert Daniel Juergen, vice chairman of S&P Global and author of, most recently, The New Map.

43:54Lots more coming up on FP Live next week, how the global economy has been weaponized. Eddie Fishman, author of Choke Points on the New Tools of Economic Warfare. You can register for it and catch it live on foreignpolicy.com slash live. This show wouldn't be possible without a great team. Donna Schoen is our executive producer. Justin Craig is our technical director. Dan Efron runs our podcast division. And I'm Ravi Agrawal. I'll see you next time.

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