Oil Analysts WARN Global Depression Incoming

Joining us now to talk about the rapidly escalating economic poly crisis We have sorab Amari who is the editor of unheard great to see you, sir. I'm good to see you man. Thank you Thanks for having me. Yeah, of course. So let's start with the picture with regards to oil, which is not looking great We can put c4 up on the screen here. So as of this morning Right now in the markets, I think WTI is at about $101 Brent is at about $101.

Brent is at what, Sagar, like 115, somewhere around there. But we have this Bloomberg analysis where a lot of analysts are saying, this is going to get a lot worse, that reality has not completely sunk in. So what they say is the biggest oil supply shock in history

has reached the one month mark, prices have surged, growth forecasts are being cut, worldwide shortages are emerging across Asia, Thailand to Pakistan, but the energy industry is warning the crisis is only beginning and they float the possibility of oil going to $200 a barrel. So, you know, are you in agreement with this analysis that we have not even grappled yet with the reality of how bad things are currently,

let alone how bad things are going to get.

Yeah, I tend to agree with the more gloomy analysts out there, the reason being that what's not taken into account is the difference between this crisis and the 1970s oil crisis that followed the Yom Kippur War. In that case, it was a matter of a political decision by the OPEC, the Arab OPEC members to shut off or turn on the tap, right? That's all that there was involved and once they

decided politically to turn the tap back on, oil flowed again. In this case, the reason why this could be much more severe than the 1970s polycrisis that are related to oil is the fact that even if the political decision were there, if the political will were there to turn the tap back on, there is damage to the entire ecosystem that

makes possible the flow of oil from the Persian Gulf through the Strait of Hormuz and into the global markets. You have severe damage to oil facilities in obviously the GCC states to varying degrees. Some Iranian strikes have hit those in response to, I should say, to Israeli attacks on Iranian oil infrastructure, you have shut in fields in Iraq, where, you know, a country that, in a given day, you have like 4.3 million barrels, is now

down to like 1.6 million barrels. And after a while, when you when fields are shut in for a long time, it takes a long time to turn them back on. So, again, even if Iran tomorrow were to capitulate, which doesn't look likely at all, and were to reopen the Straits of Hormuz, the fundamental structural problem, the damage, the fact that in many of these cases, for example,

and now this is not oil, this has to do with LNG, but the Qataris have called force majeure for three to five years. So that's all gonna take a long time to get back online. And during that time, you're going to see price spikes.

You're going to see, you know, right now, I just read today in The New York Times that, you know, two Australian states, two of their provinces have made public transit free in response.

You're going to see more and more of that. You're going to see more and more of that. You're going to see fertilizer plants that rely on petrochemical products go offline. That affects farming. I mean, the the ramifications are huge and legitimately like a Mad Max level terrifying. And the crazy thing is that it was all a choice. It was a war of choice.

It was Donald Trump and his coterie deciding to do this, not something that was imposed on the United States or the world the way like the pandemic was, where it was just this random freak event. And OK, whom can you blame? Here, there is blame.

It's like Bibi and Donald Trump.

Yeah.

It's so crazy, Saurabh. Let's put C2 up there on the screen, actually, to basically to underscore what you're saying. This is from the Atlantic, welcome to a multi-dimensional economic disaster. And what they specifically tie here is the AI boom to a lot of the cheap energy. And of course, the data center already build out

and drain that all of these AI data centers we're already having on our power grid. This does not at all reflect a situation where you're gonna have massive increases, not only in energy cross globally, but they also talk about how the Gulf Arab states

are basically the guarantors and investors of some $100 billion into these companies. These AI companies are basically the backbone of the US stock market. And Saurabh, you and I, you know, we've been deeply concerned about the US industrial base now

for quite some time. So we could have a financial crisis, an energy shock, and we're already going through, effectively, an industrialization, or a reverse industrialization as a result already of nearly the last year of policy. Like, what does that look like, not just for Trump's agenda, but for all of us,

as you're saying, in the health of our country? Yeah, so the one spot, as you said, at least on equities markets, was where all these AI companies and the whole AI revolution and the potential growth that it was driving, even as it also threatened joblessness,

I should say. But that was in two ways dependent on cheap energy. One was, of course, you mentioned that the data centers take enormous energy to run. OK, that's one. And second, it was also dependent on just oil flowings, and therefore these

Arab states having money that they can then invest in these projects, they're not going to invest if they're not making money. I mean, it's very, it's as simple as that. So that's like a double blow to the US economy. Like one of the few bright spots in the US in the US economy that otherwise was lagging in other ways that had been way too much focused on services and kind of low-level services and

high-level financial services and so on. Okay, but now we're at the cutting edge of the AI revolution, or we were until this war

was launched.

Well, I have my issues with the AI revolution, but there's no doubt that if the bubble pops, it's going to be extremely painful. And let me just read because there's one other angle of the hit to AI here that was not immediately apparent to me that the Atlantic lays out in this piece. They say, one of the clearest examples of the problems are advanced memory and training chips, which are among the most important or by far the most expensive components of

training any AI model. Currently, most of these are produced by two companies in South Korea and one in Taiwan, and something all of us have focused a lot on. These countries, in turn, get a large majority of their crude oil and much of their LNG,

which help fuel semiconductor manufacturing from the Persian Gulf. The chip companies also require helium, sulfur, and bromine, three key inputs to silicon wafers, largely sourced also from the region.

In addition, Saudi Arabia, Qatar, the UAE, and other regional petro-states have become key investors in the American AI firms that purchase most of those chips. I think that's a really important example, but I also think, Sorab,

that it just underscores, you know, it's almost impossible to wrap your head around the disruptions here. I mean, the best analog we can look to is our recent past history with the combination of the Russia-Ukraine war and COVID, obviously, which just screwed up supply chains in a million ways, ways that even, you know, experts could not fully anticipate how it would create problems and backlogs that would then go on to fuel inflation and have all of these residual, both real economic

and political effects.

Yeah, and it's so infuriating, dismaying, scary, terrifying. I don't know which adjective to pick, but I read in the Times also today that President Trump had said at one point, well, I'm not worried about the oil because it's really the Asian countries that are most dependent on Persian Gulf oil. And while that may be true, it reveals such profound ignorance of what a fungible commodity like oil is like, right?

If you inch supply in one corner of the world, prices rise everywhere else. And just in general, that you gum up the whole economy when you do that. So unless you're willing to impose domestic, for the US, export controls, right? Where we keep our oil for ourselves,

and that could also cause all sorts of problems. Unless we're willing to do that, the fact that this very important choke point in the global economy is being squeezed is also bad for the United States. It was part of this broader mentality

where I think the American right and the Trumpians got too high on their own supply. Yes, the US is blessed in many, many ways. We became the world's largest energy exporter in the world. We have these two oceans protecting us from any kind of immediate enemy or anything like that.

So there's these natural advantages, this natural bounty that the United States has, and all Americans should be grateful for it. But there are limits, right? We might want to de-globalize, and I've never been a fan of the kind of globalization that revealed its limits during COVID, where it suddenly realized

that supply chains were way too far-flung, and at the imposition of the slightest stress, they would snap, and we couldn't produce our own masks or protective equipment and so on. That was a problem, and we should move toward maybe a less globalized world. I agree with that. But still, we are living in a globalized world to some extent. So that this attitude of, oh, well, beggar thy neighbor, it's just going to be China's

or India's problem if oil stops flowing out of the Persian Gulf is stupid. And it's arrogant. And I think we're all going to pay the consequences for it. And to that point, actually I think we have a good piece here. Let's put C6 up here on the screen. How the Iran war has already rippled across the world. Now as you said, look, it might be China or India's problem.

It might be South Korea's problem. South Korea by the way is, oh, I don't know, a top 10 trading partner. So is Japan. pointing out South Koreans are being told by their president to take shorter showers. In Thailand, another actually vital ally in the region, they're saying you need to make sure that you're wearing short sleeves to work

so that we can cap air conditioner use. I'm looking at news out of India where this is personally tragic for me and for all the white tourists in New Delhi, butter chicken has now disappeared from Indian menus because they don't have the cooking gas

to be able to make it. Dosa, apparently, there's a huge shortage. I talked to my family recently, they're rationing cooking gas and they're looking at it. Their Sri Lanka is taking shortages there, or shortages and they're actually encouraging

the work week to reduce. And C7, this is part of the point of what you're talking about, is that the Asian shortage has already hit because of the way that tankers move across the globe. But what this map shows is that actually we're about two weeks away from some of the major impacts and closures simply because of length of the tankers. Now, the big question, as you said earlier,

is about Donald Trump and his hubris by getting us into this situation. But solving a crisis like this from what we saw during COVID, not exactly his strong suit. So what do you think that the actual impact of this shortage will look like in terms of his administration, who are clearly scrambling?

Like realistically, what can they do to get us out of this?

I really don't know, because what it comes down to is is recognizing strategically speaking that Iran has this had always this potential to close the Straits of Hormuz that they were able to always do that and now they've exercised it and there's no return there's no easy return to the status quo ante. In other words the Iranians will want as part of any negotiated settlement, they will want some control over the state of Hormuz. And we should try to negotiate that. But the point is that that looks to the US like an enormous strategic blow, right?

We expended all this energy and at the end of the day, you have to grant the Iranians what they always possessed, but now have decided to exercise in response to this war. So that's a blow to U.S. strategic prestige, a really incalculable blow. We can't even begin to measure the scale of it. Otherwise, you're going to be facing, obviously, a bloodbath in November in the

elections. You're still going to face that. It's only a question of how bloody the blood bath will be. But if you think about it, there is a great tweet this morning. I saw someone said the objective of the war has become to restore the status quo ante before the war. Dumbest war ever.

It really is like what is the point of this operation now is to open the Strait of Hormuz, which was open before we went in. None of the other the regime hasn't collapsed. Its will has hardened. You know, it can still fire ballistic missiles as a front story in The New York Times today, basically saying the U.S. keeps saying, you know, 500 percent of Iran's capacity has been destroyed. And that very evening, you know, an Iranian missile will fall on some U.S. facility in Saudi Arabia and destroy

a very kind of expensive command and control aircraft. So what's the point anymore? And again, I think the end point will be some capitulation, some recognition of Iran's ability to control the Strait of Hormuz. And that's like a Vietnam level debacle in terms of a blow to US prestige, which hurts me as an American to think that we'd have to do that.

I wanted to get your reaction to Trump's truth this morning, which obviously directly relates to the war. It also relates to the economic outlook. It appears to be yet another Trumpian blatant attempt at market manipulation here. He watches the Treasury bond yields very closely. He watches obviously the oil market, the stock market very closely.

And so this morning, he tweeted out, or truthed out, the United States of America is in serious discussions with a new and more reasonable regime to end our military operations in Iran. Great progress has been made. But if for any reason a deal is not shortly reached, which it probably will be, and if the Hormuz Strait is not immediately open for business, we will conclude our lovely stay in Iran

by blowing up and completely obliterating all of their electric generating plants, oil wells, and Karg Island, and possibly all desalinization plants, which we have purposely not yet touched. This is him pre-announcing war crimes, by the way. This will be in retribution for our many soldiers

and others that Iran has butchered and killed over the old regime's 47-year reign of terror. Thank you for your attention to this matter. I think people probably know you're not a fan of the Iranian regime. You are quite a vociferous critic

of the current government in Iran. But what do you make of what Trump is claiming here about how there's a new more moderate regime in place that he's totally working out a deal

with?

Look, I don't know where to begin. That's such a kind of barrage of stupidities, pile of the top stupidities. I don't know where to start. So first of all, I watch Iranian state TV 24-7 just to read the mood. There is no, the regime is there. It's called the Islamic Republic of Iran. It's become more militarized.

What's happened is all the, the, the restraining forces, which believe it or not, as much as a fan of, I was not by him. He defined my life. The course of my life would have been completely different if he weren't around. But Ayatollah Khamenei was a restraining force relative to the kind of younger commanders that are in the Islamic Revolutionary Guard Corps. These are the people who are in charge now. There is no indication. Yes, they're taking heavy, heavy blows, but they think that they have,

I'm going to use a polite word for it instead of what comes to mind. They think that they have the United States in an economic and energy vice grip and they're going to squeeze and squeeze until there is a kind of humiliating cry to uncle. And again, yes, they're going to take enormous hits. But this is a huge, huge country of 90 million people, four times the size of Iraq. It's going to take a long time for it to wear down long before that Trump, the economic pain will be sort of too much for Trump. So that's the first thing, his assertion that Iran has, the regime has changed. There's no sign of that.

Second, the hitting of the desalination plants. Actually Iran relies very little on these kinds of plants. It's America's Gulf allies and Israel that are much more dependent on these sorts of facilities and as Iran has proved, it can hit those and create calamitous effects for lots and lots of people who live in those countries.

And again, same thing with the electricity infrastructure, the power plants. They can do that just as quickly, except Iran's electricity system and the grid is far less centralized, so that if you hit a single plant, it won't have the kind of effect that it would have, for example, if you did an analogous thing, if they did the analogous thing to a country like Israel, whose power system is much more

centralized. You hit one node and boom, Israel goes into darkness. So, I mean, these threats aren't, everyone, this is not some secret intelligence. It's all, this is all in the public record. So it just, this stuff that he says,

like it was funny when it was about Rosie O'Donnell a decade ago, this kind of bluster. It's really, really depressing and scary when it's, you know, a world on the precipice of geopolitical and geoeconomic calamity.

And you don't detect, as you're watching Iranian state TV, you don't detect any of their attempts to sort of like soften the line and create an opening to sell to the public some sort of deal.

You don't see any of that. Not at all. Every night it's about revenge, The the daughters of Minab, the school that got hit early in the operation, you know, and this is a culture that

thrives on martyrdom, Shiite Islam. So every time you kill a commander, it it creates like a mini that only like the closest equivalent is a Catholic cult of the saints. Like it becomes some new

basis or it'll be, you know, they killed some, they hit a police station, the Israelis did, and they hit a street sweeper, just a guy like a random guy. So of course, he becomes like this, you know, his coffin is laid out and people line up in huge numbers to touch the coffin and then rub it on their faces to get like a blessing from his act of martyrdom. That's the kind of people you're talking about. And again, so much of the perception about what

Iran is or the kind of people is driven by this. You know, I'm part of it, this Iranian diaspora, very secular, very embittered. I understand the embitteredness about the regime, but they let us, I think they let US policymakers for years to believe that that's how all Iranians are and forget that, no, it's a Shiite Muslim country. Lots and lots of people are not cynical about their religion.

When you hear, when they talk about, you know, Imam Hussein and martyrdom and Karbala and all this sort of iconography of bloodied saints who give their lives for a greater cause, they like really mean it.

They mean it.

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