Grappling with the Iran war energy crisis

[0:00] Welcome to the Global News Podcast on YouTube. Hello, I'm Oliver Conway. And today we're joined [0:05] by the BBC's New York business correspondent, Michelle Flurry. Michelle, the US-Israeli war [0:12] with Iran continues to disrupt oil and gas markets. How bad is the energy shock for the global economy? [0:20] Look, I think there is growing concern that it's going to do lasting damage, but it's not sort of [0:26] in one immediate big shock. It's going to kind of ripple out over time. Obviously, [0:33] everyone is aware most immediately of kind of the prices that they've seen increasing at the [0:38] petrol pump. But, you know, then you get the secondary effects. So diesel is one of them. [0:43] It's crucial for shipping. That means that items will go up in price further down the road. We've [0:50] talked also about not just oil and gas, but also other commodities that are affected, [0:55] like fertilizer. So, again, as the prices of those rise because of shortages, [1:01] then that has a knock-on effect both on the volume of crops, but also on the prices of crops. [1:07] And that will feed through ultimately into kind of what people pay at the grocery store. [1:13] There are things like helium that could have a huge impact on another big story we've talked [1:17] about all year, which is AI and the growth in artificial intelligence. Helium is a gas that is [1:25] crucial. [1:25] The production of chips that are used in the development of AI. So, again, about 30 percent [1:31] of the world's supply is locked up in the Strait of Hormuz. That is also beginning to cause [1:36] challenges. And we haven't even touched on jet fuel. They're warning in Europe that they could [1:41] run into shortages by May. And that could have a huge impact on sort of airport hubs around the [1:48] world, major hubs. So that's also something to watch out for. I think it was the boss of [1:52] Ryanair, one of Europe's largest aircraft manufacturers, who said, you know, we're going to [1:55] have to deal with these failures who was warning that they might run out in May. So that's another [1:59] huge concern that sort of we're going to have to grapple with. [2:02] And on top of those immediate direct effects, are there wider, intangible elements to do with [2:10] confidence for perhaps people investing and things like that? [2:14] Markets have been focused more in some ways on words than on actual action right now. [2:20] What I mean by that is, if you look, whilst we're talking, the stock market here in America has, [2:26] opened higher and that's because traders are kind of counting that this will all be over soon, [2:32] in a couple of weeks maybe. If that optimism proves to be unfounded then you could see [2:38] traders reassess. So the messaging has played a key role in terms of how markets have reacted, [2:44] somewhat disconnected in some ways, to the actual economic impact. Now we're seeing high oil prices [2:51] but also fears of shortages and so governments are now taking action to try to limit use. Take [3:00] us through what we're seeing around the world and particularly in Asia which seems to be the [3:04] worst affected area. Yeah the thing to remember here right is that the Strait of Hormuz is this [3:10] critical sort of waterway through which oil and gas travels and where is most of that oil and gas [3:15] headed? Well it's headed to Asia. So it follows therefore that a lot of the impacts of this have [3:21] been caused by oil and gas. So it follows therefore that a lot of the impacts of this have been caused [3:21] by oil and gas. So it follows therefore that a lot of the impacts of this have been caused by oil and [3:21] gas. So it follows therefore that a lot of the impacts of this have been caused by oil and gas. So [3:21] it follows therefore that a lot of the impacts of this have been caused by oil and gas. So it's [3:21] been caused by oil and gas. So it's being felt and hardest in Asia. If you look just a couple of [3:24] days ago we had the Philippines, the government there, declaring a state of national emergency. [3:29] In other parts of the region, Pakistan and others, they're also struggling with shortages of oil and [3:36] gas and trying to figure out how to kind of change habits to reduce it. So typically when you have a [3:42] crisis the first instinct is, is there a workaround? Is there another way to get the oil or [3:47] the gas that we need? Then the second thing is you start [3:51] seeing, once that kind of process has been worked through, then you start to see people trying to [3:58] reduce demand. And I think that's what's happening right now. So there are talks about four-day work [4:03] weeks in some countries, because again, that will reduce the amount of oil and gas that's being [4:09] consumed. In Australia, I mean, it was stunning. You heard the Australian leader coming out, [4:14] addressing the public and suggesting, could they please not sort of get in their car and drive [4:19] anywhere if they don't have to? [4:21] So that they can conserve fuel for those who need it most for industry and business and farmers. And I [4:27] think the longer this goes on, people will be worried about, you know, are people trying to sort of [4:31] hoard as much as they can? But that is always a worry in these types of situations. You know, these [4:37] are sort of things that could have impacts long after this crisis is over. And it shows the way [4:45] what's happening is that the attempt to try and reduce demand to kind of address the fact that there [4:51] is a supply shortage. [4:53] You mentioned markets were going up at the moment on hopes that this would finish soon. If it was all over [5:00] today, how long would it take for things to get back to normal in the energy markets? [5:05] The answer is not quickly, not overnight. And the reason is that some of the damage has been done is much [5:11] worse than just reopening a shipping waterway. I mean, if you think back to Iran, part of the retaliation they [5:18] did was an attack on a gas pipeline. [5:21] And that's the only gas facility in Qatar. I mean, rebuilding that and repairing that infrastructure could take a [5:29] couple of years. So that is, you know, supply that is now offline for an extended period of time, or at least [5:35] reduced. That's why people are saying, look, the economic damage of this is going to far outlast the length of [5:43] this conflict. And potentially, obviously, the longer it goes on, that damage could get worse and worse. I mean, we [5:51] don't know yet, you know, what will happen. [5:51] Overnight, there was sort of damage to a steel plant in Iran. So again, these kind of longer lasting attacks on [5:59] infrastructure, those are things you don't bounce back from overnight. [6:03] What about longer term effects? Might this ultimately lead to changes in energy policy across the world? [6:12] There is obviously going to be a huge reassessment, people looking at supply chains wondering where are the vulnerabilities? [6:19] What can we do to change that? [6:22] And it's hard to kind of calculate what ultimately how things will shake out. But interestingly, also, what does this do [6:31] longer term for the Gulf countries? [6:34] You know, they have been such a centre of economic activity in the last few years. [6:40] Will that just bounce back as if nothing had ever happened? [6:43] Or is there now permanently some sort of dent in confidence when it comes to those economies? [6:49] The other thing also is, you know, we've seen huge tech investments. [6:51] In AI in Gulf countries, will that continue? [6:56] Will there be worries going forward? [6:59] I mean, there are still a lot of questions to be answered. [7:02] And what about a push for renewables so you don't have to worry about where you get your oil and gas? [7:08] You know, all of that is on the table. [7:10] I remember, you know, one of the first weeks of the conflict reading something about, you know, will this be good for renewable energy? [7:17] Because there is now a focus. [7:19] That being said, you know, I was reading. [7:21] Something about a plant in Michigan that had been set up to deal with electronic vehicles. [7:28] And, you know, America has turned away from electronic vehicles. [7:32] They don't think that oil at higher prices for a few months will do much to bring it back. [7:38] So, you know, in some parts of the world, there will be longer term conversations. [7:41] I could see in the UK there are conversations about what to do in the North Sea. [7:46] You know, potentially it has the opportunity to boost renewables. [7:51] But these are long term. [7:51] Long term investments, and that may require oil higher for longer. [7:57] Michelle, thank you very much. [7:58] Michelle Fleury, the BBC's New York Business Correspondent. [8:02] If you'd like to hear more from the Global News Podcast, click the link below. [8:06] Thanks for watching.