How the war in Iran is impacting global energy markets

Let's shift our focus now to the war's impact on the global energy market. Oil and gas prices

spiked today, as the regional conflict escalated, and shipping was disrupted in the

state of Ormuz. About 20 percent of the world's oil and liquefied natural gas flows through

the street every day, making it one of the most crucial oil supply routes on the planet.

William Brangham joins us now with more.

I'm not at least five tankers have been damaged in the vicinity of the street since Saturday

and traffic slowed dramatically there over the weekend. Separately, Iranian drones continue to

attack energy infrastructure in different Arab Gulf states. Today, those attacks damaged

in oil refinery in Saudi Arabia and halted the production of liquid natural gas or LNG in

Qatar. So to help us understand these impacts and implications, we are joined by Dan Pickering.

He's the chief investment officer at Pickering Energy Partners, which is a financial services and

advisory firm that is focused on the energy industry. Dan, thank you so much for being here.

Let's pick apart some of these different impacts first on the markets. What happened with oil prices

today? Yeah, William, we had a strong rally and it will price up 7 percent. WTI, the US

benchmark was about $72 a barrel. It was actually up less than many people expected. So the markets

did better. The broad stock markets did better and oil didn't rise quite as much as expected,

but still up strongly. And we mentioned the importance of the

state of our moves and the attacks and the trickiness of what's going on there right now.

What do we know is the latest happening in the strait? Now, the latest is essentially

tanker traffic has slowed to almost nothing. Some vessels, primarily Iranian vessels are continuing

to move through the strait, but because it's dangerous, because there have been attacks,

there's not a lot of oil moving through there. And as we know, it is a big choke point for global

supply. 20 percent of global supply comes through the straits and it's essentially shut down

right now. I mean, obviously, this is the main route. That's why everyone has been using it for

so many years. Is there, or are there any alternate routes to get that oil to market?

For oil, there are some other pipeline export routes, maybe five million barrels a day. So

remember, 20 million through the straits, perhaps five million of it can get to market other ways.

So 15 percent of supply is trapped behind the straits on the gas side of the equation.

There really is no other output for guitars, liquefied natural gas. And so that is that is kind of

100 percent blocked right now. Do you have a sense of what Iran could do to both increase the

pressure on the limited traffic that's going through? And what might the Americans or allies do

to alleviate that choke point? When we think about what could happen from here, if Iran wants to

ratchet up the tensions, it probably wouldn't be in the straits of Hormuz where they've already had

a big effect, slowing traffic. It would be lashing out at the energy infrastructure of the other

Gulf states. So attacking Saudi Arabia's capabilities, attacking Kuwait, Oman, the United Arab

Emirates. So I think that the actions that the U.S. and the allies would likely take will be to

try and safeguard the straits, whether using it doing that militarily with escorts and or aerial

support and potentially creating a financial backstop that would allow tanker traffic to move

through without fear that the damage would be uninsured. Right. I mean, you mentioned some of these

other potential attacks. We have seen some of those already. What does this say about the state

of the conflict that Iran is is right now reaching out to trying to attack those other other states

and other refineries? I think it says this is clearly different than what we saw in June.

Obviously, a much bigger conflict in one in which Iran is prepared to fight back and fight back

aggressively. I would say that the first 48, 72 hours are very important and no significant

infrastructure damages happen across the Middle East. And so I think we have to feel good

that that there hasn't been more damage or more impact. And my expectation is we'll probably fix

the straight support moves within the next 10 days. And so this is absolutely a flash point in time

but one that is probably going to ease in terms of risk as we move through the next week to two

weeks. I want to ask you about this one. There was one attack on an LNG facility, a liquid natural

gas facility in Qatar. And European gas prices surged quite dramatically after that.

How significant is the loss of that one facility or an attack on that one facility?

Yeah, Qatar. They're 20% of global LNG supply and it all flows through the straits. And so

when you take 20% offline, which has happened now, not damage to the facility per se, but just

forced to shut in because they can't export their gas. 20% is a big impact. So European prices

escalated. A lot of that LNG goes to Asia. And so those shortage will be felt in the next

call a month or so. But European prices react because the whole global market has now tightened

not a lot of excess LNG capacity around the world to offset those shut-ins.

I mean, I know we are in early days and all of these things are predictions at this point.

Do you have any sense as to whether or not and when American consumers might feel the ripple

effects of this conflict? Yeah, I think we're very lucky here in the United States from the

perspective that because of the shale revolution, because of the fact that the US has become

the world's largest oil producer at 14 million barrels a day in a very significant gas producer.

We're pretty self-sufficient here. And so we should be relatively insulated from what's happening.

Global prices will impact US prices, but oil in the 70s gasoline prices should stay relatively

muted. So unless things escalate from here, we should see relatively little impact in the US,

unless things escalate. All right, that is Dan Pickering of Pickering Energy Partners.

Thank you so much for being here. Glad to be here.