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Let's shift our focus now to the war's impact on the global energy market. Oil and gas prices
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spiked today, as the regional conflict escalated, and shipping was disrupted in the
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state of Ormuz. About 20 percent of the world's oil and liquefied natural gas flows through
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the street every day, making it one of the most crucial oil supply routes on the planet.
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William Brangham joins us now with more.
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I'm not at least five tankers have been damaged in the vicinity of the street since Saturday
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and traffic slowed dramatically there over the weekend. Separately, Iranian drones continue to
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attack energy infrastructure in different Arab Gulf states. Today, those attacks damaged
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in oil refinery in Saudi Arabia and halted the production of liquid natural gas or LNG in
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Qatar. So to help us understand these impacts and implications, we are joined by Dan Pickering.
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He's the chief investment officer at Pickering Energy Partners, which is a financial services and
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advisory firm that is focused on the energy industry. Dan, thank you so much for being here.
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Let's pick apart some of these different impacts first on the markets. What happened with oil prices
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today? Yeah, William, we had a strong rally and it will price up 7 percent. WTI, the US
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benchmark was about $72 a barrel. It was actually up less than many people expected. So the markets
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did better. The broad stock markets did better and oil didn't rise quite as much as expected,
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but still up strongly. And we mentioned the importance of the
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state of our moves and the attacks and the trickiness of what's going on there right now.
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What do we know is the latest happening in the strait? Now, the latest is essentially
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tanker traffic has slowed to almost nothing. Some vessels, primarily Iranian vessels are continuing
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to move through the strait, but because it's dangerous, because there have been attacks,
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there's not a lot of oil moving through there. And as we know, it is a big choke point for global
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supply. 20 percent of global supply comes through the straits and it's essentially shut down
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right now. I mean, obviously, this is the main route. That's why everyone has been using it for
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so many years. Is there, or are there any alternate routes to get that oil to market?
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For oil, there are some other pipeline export routes, maybe five million barrels a day. So
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remember, 20 million through the straits, perhaps five million of it can get to market other ways.
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So 15 percent of supply is trapped behind the straits on the gas side of the equation.
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There really is no other output for guitars, liquefied natural gas. And so that is that is kind of
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100 percent blocked right now. Do you have a sense of what Iran could do to both increase the
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pressure on the limited traffic that's going through? And what might the Americans or allies do
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to alleviate that choke point? When we think about what could happen from here, if Iran wants to
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ratchet up the tensions, it probably wouldn't be in the straits of Hormuz where they've already had
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a big effect, slowing traffic. It would be lashing out at the energy infrastructure of the other
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Gulf states. So attacking Saudi Arabia's capabilities, attacking Kuwait, Oman, the United Arab
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Emirates. So I think that the actions that the U.S. and the allies would likely take will be to
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try and safeguard the straits, whether using it doing that militarily with escorts and or aerial
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support and potentially creating a financial backstop that would allow tanker traffic to move
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through without fear that the damage would be uninsured. Right. I mean, you mentioned some of these
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other potential attacks. We have seen some of those already. What does this say about the state
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of the conflict that Iran is is right now reaching out to trying to attack those other other states
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and other refineries? I think it says this is clearly different than what we saw in June.
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Obviously, a much bigger conflict in one in which Iran is prepared to fight back and fight back
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aggressively. I would say that the first 48, 72 hours are very important and no significant
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infrastructure damages happen across the Middle East. And so I think we have to feel good
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that that there hasn't been more damage or more impact. And my expectation is we'll probably fix
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the straight support moves within the next 10 days. And so this is absolutely a flash point in time
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but one that is probably going to ease in terms of risk as we move through the next week to two
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weeks. I want to ask you about this one. There was one attack on an LNG facility, a liquid natural
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gas facility in Qatar. And European gas prices surged quite dramatically after that.
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How significant is the loss of that one facility or an attack on that one facility?
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Yeah, Qatar. They're 20% of global LNG supply and it all flows through the straits. And so
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when you take 20% offline, which has happened now, not damage to the facility per se, but just
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forced to shut in because they can't export their gas. 20% is a big impact. So European prices
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escalated. A lot of that LNG goes to Asia. And so those shortage will be felt in the next
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call a month or so. But European prices react because the whole global market has now tightened
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not a lot of excess LNG capacity around the world to offset those shut-ins.
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I mean, I know we are in early days and all of these things are predictions at this point.
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Do you have any sense as to whether or not and when American consumers might feel the ripple
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effects of this conflict? Yeah, I think we're very lucky here in the United States from the
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perspective that because of the shale revolution, because of the fact that the US has become
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the world's largest oil producer at 14 million barrels a day in a very significant gas producer.
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We're pretty self-sufficient here. And so we should be relatively insulated from what's happening.
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Global prices will impact US prices, but oil in the 70s gasoline prices should stay relatively
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muted. So unless things escalate from here, we should see relatively little impact in the US,
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unless things escalate. All right, that is Dan Pickering of Pickering Energy Partners.
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Thank you so much for being here. Glad to be here.