The Polycrisis
Tim Sahay and Kate Mackenzie on how geopolitics has been driving a quiet revolution in clean tech, and how the energy transition is in turn reshaping world power.
The Polycrisis
03 | Electric World Order | Demand destruction
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How is the Middle East war going to change the energy strategies of many countries?
Global powers have long relied upon the threat of cutting off fossil energy flows – or the revenues from selling them – to discipline and coerce other countries. The US has done this for decades with oil. Five of the seven countries attacked by the US under the second Trump administration are rich in oil. But the emergence of cheap clean energy tech and electrification complicates the picture. What can history tell us about the motivations of the US around geopolitical dominance and energy?
Even among the chaos of the current US administration, a desire to perpetuate a globally traded fossil fuel system persists. Oil-producing nations that depend on selling the stuff overseas face existential threats from the energy transition; but the US administration wants to keep oil use high so that it can exert global power.
Guests:
Helen Thompson - Professor of political economy, Cambridge University; former co-host of the London Review of Books’ “Talking Politics” podcast
Alex Turnbull - Managing director, Sagax Capital; energy researcher, commodities and energy trader
Hosted by energy and climate finance expert Kate MacKenzie, and Tim Sahay from the net zero industrial policy lab at Johns Hopkins University. They co-author The Polycrisis newsletter, which explores connections between energy, geopolitics, climate change, finance and industry.
- Produced by Sarah Allely
- Original music by Russell Stapleton
- Mixed by Bethany Stewart
Contact us at: polycrisispodcast@gmail.com
Welcome to the Polycrisis Podcast. This first season, Electric World Order, tells the story of the clash between new and old energy regimes.
SPEAKER_00There's a quiet revolution in energy, and we're exploring how this shift from the old fossil world to the new electric world order is unfolding. I'm Kate McKenzie, a Sydney-based energy and climate finance expert.
SPEAKER_02And I'm Tim Sahai. I'm at Johns Hopkins University in the US, where I co-direct the Net Zero Industrial Policy Lab.
SPEAKER_00This episode, Demand Destruction, we look at how the electrification shift away from oil and gas is connected to the decline of American global dominance.
SPEAKER_02We had planned this episode before the war. It was going to be about crude oil use plateauing since 2018 and going down, and what kinds of winners and losers that would produce in the world.
SPEAKER_00But what's happened now is there's this huge and sudden drop in the supply of crude oil and liquefied natural gas, or LNG. So lots of countries are now actually scrambling for oil and LNG and fertilizer.
SPEAKER_02We wrote in our essay on the war, Iran is the seventh country that the United States has attacked in the first 15 months of Trump's presidency. Five of those countries are rich in oil. Oil wars might make sense if American companies actually wanted to drill more. But they are hesitant to do so when oil is oversupplied and under-demanded.
SPEAKER_00Straight after the Venezuela intervention, when the US captured President Maduro, the big US oil companies like Exxon were very ambivalent about actually wanting to go back into Venezuela to try and start producing oil there. Which is kind of incredible when you think about it. So the question is, what could the Middle East war mean for this trend away from oil and towards electrification and clean energy? And what will it mean for LMG, which has been talked about for over a decade now with this amazing, flexible, global fuel?
SPEAKER_02Is it the erosion of sales of oil and gas that's undermining US hegemony? Or is it just the chaos of the Trump administration? So, Kate, you and I think that the war just demonstrates that there are three main pillars of US power in the world: money, military, and energy, right?
SPEAKER_00Yeah, we've written a lot in the past three years about the global dollar system, which is mostly headquartered in New York and London, and the fact that the dollar is how most people and most countries will make payments and store their savings. And there's legacy institutions like the IMF and the World Bank that govern that to a degree, but also things like the swaps deals that are offered by the US Federal Reserve to their counterparts in select countries. All of this means that US dollars remain the currency for most international financial activity in most of the world.
SPEAKER_02Yeah. So everyone knows about US military power and the US Navy maintaining freedom of navigation on the world's oceans. And since World War II, the US has maintained military bases in Europe and East Asia, and since 1979, military bases all around the oil-rich countries of the Persian Gulf. But Iran has shown how it can use new military tech and its naval chokehold in the Strait of Hormuz very effectively to exert pain on the US. And energy is a whole other thing.
SPEAKER_00So in this episode, first we're going to look at that historical connection between energy, especially oil, and US global power. And then we'll explore how the Middle East war is exposing the geopolitical risk that's always been a lurking issue for the world's fossil fuel system. We're talking to Alex Turnbull about what that will mean for the energy system now.
SPEAKER_02First, though, here's our interview with Helen Thompson, a professor of political economy at Cambridge University and author of the book Disorder. You might have heard her on the London Review of Books Stocking Politics podcast.
SPEAKER_00We recorded this interview before the war, but Helen's insights into the role of energy in world politics are even more relevant now. Okay, hi Helen. Welcome to the Polycrisis Podcast.
SPEAKER_03Hi Kate, it's a pleasure to be here.
SPEAKER_00I know a lot of your work is looking at the sort of centrality of energy and particularly oil, fossil fuels in geopolitics, in in you know, recent history. The US is a petrostate in a sense, but it's not dependent on fossil fuel revenue, right? It's not that's not like a huge part of its um of its sort of economic profile the way it is for some other countries. And yet it seems to be really determined to maintain fossil fuel order in the rest of the world and at home, which is again a bit different to other petrostates like Saudi Arabia, for example, which are actually trying to electrify at home so and keep keep all their reserves for for their export income. I'm just curious what what you'd think about why the US is wanting to see continued fossil fuel in the rest of the world. What's in it for them and how important is that for the sort of the general approach, general attitude to the world?
SPEAKER_03Yeah, I think those things are pretty striking, Kate, about the United States energy profile. I think some of it's quite complicated to unpack because there's been some significant shift between the Biden administration and the Trump administration. You know, I'm not somebody who thinks that the Biden administration was perhaps as green as some people do, but nonetheless, the Trump administration has very explicitly repudiated an energy transition, at least one that involves more solar and wind, because it is, I think, quite clear it does want more nuclear power. We've got to kind of try to, you know, unpack what's the United States and some kind of longer strategic pattern and its relationship to energy, and what's the Trump administration. If we just stick with the first way of framing it from the moment, I think what is true is that whilst the United States has never been a state that has needed fossil fuel revenues in a fiscal sense, it has been a state for quite some time that has used fossil fuel, and I mean by that decades, fossil fuel energy as a means of geopolitical power. If we just even just take like the post-war period, so post-1945 period, and we run it through till sort of the middle of the 1960s to begin with, you can see there that the United States uses under all presidents uses energy to discipline its allies. Like it sets rules for uh who they can import from, essentially. So that is used against the West European states in relation to the Soviet Union. So the Kennedy administration tries very hard to break that when the Western European states are turning to Soviet imports in the in the 1950s, particularly he tries to stop the the Drosbert oil pipeline being um built. And he can't stop it, but he he perhaps slows it down, and he he certainly puts West Germany in an incredibly difficult position over that um uh issue. It's also the case that the those administrations in the United States uh wanted to um check the way that Britain exercised its essentially still imperial military power in the Middle East over energy. So the Suez crisis in 1956, when Eisenhower brings to an end Britain, France and Israel's war against Egypt simply by making it impossible for Britain to access emergency dollars to buy emergency oil. If you then I mean there's obviously long periods in between, but if we if we go to the 2010s like and the shale boom years, we can see, particularly actually this time with regard to gas, that uh particularly under the first Trump administration, but you can see it going a bit in that direction under Obama, is uh the American government wants to use uh US uh gas exports to break Russian dominance of the European gas markets and to bind the European states uh closer to um the United States. And obviously what's happened since 2022 has has brought that actually about. And it was also willing again to use extraterritorial sanctions uh uh over the Nord Stream, the second Nord Stream like pipeline. So if you look at it in these terms, it's not the only way of looking at it, but if you look at in these terms, you can say, well, for the United States to move away from fossil fuels and to encourage others to do that would be to lose a means by which it had exercised geopolitical power. And then you get to the China question, which obviously can't at all be left out of of this, and I think and I think you can see this in the Trump administration's thinking, is importing oil and gas is a major China Chinese strategic vulnerability. It's been identified as such by the Chinese since at least 2003. I would say earlier than that, is just when it becomes sort of articulated as the Malacca polit predicament. Um then China has wanted alternatives to needing to import oil through that body like of um water. And so in a world in which the United States is finding competition with China harder than it was a decade ago or even five years ago for that um matter, then being able to pressurise China about oil imports is an important geopolitical weapon that the United States still has left. And so I I think again you might say there's some reluctance to to change that. And if you think and this has been very schematic about it, but let's try it for a moment, if you think that actually thus far, the transitions in the dominant power geopolitically has had a energy counterpart to it. So Britain, coal, uh disadvantaged by oil, United States, oil, and with a secondary one being the Soviet Union, which was the major oil um producer. But if there is a transition going on, a serious transition going on, and the future is electricity as the dominant um energy source. I know it's not a primary energy source, but just let's stick it that level for a moment. And you were in the United States, you wouldn't want that energy transition to happen if you were thinking in these terms. Because you would say, well, why would we move from an energy world in which we're up top to one in which the advantages lie with China? And the electricity advantages I think do lie with China, at least in a number of respects. So I think that it's a quite deliberate turn under Trump anyway. Understanding the Biden administration is more complicated. It's quite deliberate turn under Trump to say actually the fossil fuel energy world suits us geopolitically, and it's a problem for China, and that means that the status quo is good for us.
SPEAKER_00Where we've seen the role of of energy, you know, fossil fuels and and particularly oil, um, you know, throughout say the last almost century or so, like being being sort of so central in geopolitics, this has generally been against this con background of constant increasing demand for oil. But if we're now moving into a situation or or into a kind of a world where increasing demand is no longer guaranteed and and a decline in demand is certainly sort of feasible or plausible. I wonder if you've got any reflections or thoughts on how that might play out. Does oil become a different kind of bargaining chip then, I suppose, and does it have then different hold hold different risks and and power for countries that have it versus those that don't?
SPEAKER_03I think that what we have to see here is that it can be true that oil demand will never accelerate in the way in which it has in the past. It may even be true, I've got some scepticism about this, that oil demand will peak in the in the 2030s. But even if it does, the question is what does that mean? Is it going to sort of peak at some level, even if it's say peaking around the hundred, and then is it going to fall away radically, or is it going to stagnate? And and there's a big difference, I think, as to what the implications are as to whether we're imagining it peaks and then decelerates, so to speak, or whether it plateaus and quite like slowly like declines. Because if you look at the situation on the supply side, that what we've had is now like you know, the best part of certainly well, a decade and a half, let's say, in which almost all the growth, about 90% of the growth, has come from US shale, and the US shale oil boom is within peak or pretty close to peak. Is that going to like show a sharp fall or is it going to stagnate? Because again, the implications of each are like quite different. So then the question I think becomes well, what about this from China's like end? Because clearly China is trying to do something that is different. It is trying to reduce oil consumption because it is taking electrification very seriously. More seriously, I would say, than um not just than the United States is, but than the European states are. So one could argue about like what's happening with China in terms of the decarbonisation of electricity because of how much coal is still being burnt and how many new coal power stations that there are. So it kind of does coal and solar. But it's quite hard to argue about electrification in China. So maybe, you know, maybe getting on for a third of China's um energy overall energy consumption is electricity now. It's a good 10% higher than it would be in the United States. So a lot of this I think then turns on well, is that going to be something that China is accelerating on and that China is really going to make a big difference to like to the world's like oil um demand, or has China done the relatively easier part on that and now it's gonna and and and now it's gonna be harder? Now, I think a lot of the answers to all these different questions that I've just posed is actually nobody quite knows. And once that's the case, once you take into account just how much oil, if you like, has wired the geopolitical order for like a century and two decades now. You might even argue since the 1890s, not just since the 19th, um, the first decade of like the 20th century. I don't think anybody in power is going to give up on that.
SPEAKER_00Yeah, I'm kind of curious if you're seeing like a bit of a different approach or a bit of a different stance from the current US administration in terms of how it's using oil, oil and gas, um, being like very proactive in trying to impose its oil hegemony or its oil, you know, its role as a supplier of fuels. You mentioned some, you know, there's quite a few historic examples of of this, but these ones, you know, incorporating them into trade deals or deals such as they are, it it seems a bit different. Like there's a there's an effort there, there's a kind of a willingness to project that this is a system that's going to continue, right? There's that that that seems to be part of it. It's not so much just the substance of the fuels, volume of fuel or the you know, value of fuel that's being discussed. It's that sort of projection that this is going to be a fossil fuel world. American dominance is kind of tied to oil and gas um dominance. That's a sense that I have.
SPEAKER_03Yeah, I definitely think that that is like um part of it. And I say I think that goes back to it. The core strategic aspect of it, if you like, is that oil and gas imports are a Chinese strategic vulnerability. And US mineral metal dependence, obviously, including but not only like rare earths, is a US strategic like vulnerability that's played out quite badly, I would say, for the US since Trump began the trade war in April of last year. I I think that you can say that the Trump administration wants to assert its credentials and power in the area where it thinks the US has strength and it wants to ensure that China is weaker than it might otherwise be in the areas where the US has weakness. Now, whether those both of those things are doable is an is an is another matter, but I think you can see like some strategic like intent to it. I think the case of the the European states and LNG is interesting because this actually is not something that historically US administrations did in the same way. Indeed, if we go back to the period I was giving all my examples like from, um the US was not exporting very much oil at all. In fact, it was exporting oil really in an emergency, hence why it had the leverage that it did over Britain during the sewage crisis in in 1956. So this period in which the US has been an oil and gas exporter, and I think the gas exports are actually more important here than the oil ones, and has then tried to force European states into purchasing them that gas from like US like companies is actually a shale development. It's the last 10 years or so development. Um, it was done quite hawkishly by the first Trump administration, it's now being done hawkishly by the second. You can see it actually in relation to China as well, because that first trade deal, preliminary trade deal that China and US agreed in January 2020 before the pandemic really curtailed, like it involved China agreeing to buy quite significant volumes of LNG from the US. Now, there is a way of looking at this, it says it's not particularly strategic, it's that the Trump administration is quite well connected to the US shale companies and it's like commercially important or it's serving their commercial interests. But I think it can be both of those things. It it can be um you know this is to the good of these companies and their mind, um, and that it shows that the US can still use energy, fossil fuel energy, to exercise like power. And again, if you can do that and you would do it successfully, whether it's successful or not is another matter, you can see why they might think, well, um, we're not giving this up, that this is a an effective, uh potentially at least effective way of the US exercising its geopolitical power because it creates emergencies very suddenly, as the British found like in 1956. You can literally have to change your policy and stop a war overnight if you are on the end of this kind of action.
SPEAKER_00And this is still a big vulnerability for a lot of countries, isn't it? Like Europe, for example, has been dependent on oil and gas imports for the past hundred years or so.
SPEAKER_03I mean, that's why obviously plenty of people in Europe, quite rightly, want to get away from that dependency upon like fossil fuels, because this has been Europe's story for most of the time, since you know, I would say actually since the 1880s, 1890s, let alone the beginning of the like the the 20th century. I mean, I don't think it can be underestimated what a huge problem for Europe, including having some catastrophic consequences, not just for Europe, but for the whole world of Europe's problem. Um, then the need to import oil and then uh later gas has been for like European countries. And in a way, I think that it's also part of its difficulties with the energy transition, because I don't think it's a coincidence that some poorer countries find it rather easier to deal with the energy transition than European states do, because European what European states did was they did get into a hundred percent fossil fuel energy world, despite all the geopolitical problems that uh it brought for it, because they were particularly obviously Western Europe's state, Western European states, were sufficiently rich at the point in which oil became important.
SPEAKER_00Yeah, it'll be interesting to see. Thank you so much, Helen. That was really interesting, really good to talk to you.
SPEAKER_03That's pleasure, I really enjoyed that.
SPEAKER_00So, Tim, Helen points out that the US has this long history of using energy and especially oil to Discipline other countries and get what it wants. And the US has fairly recently been forcing countries to buy oil and also to buy its own LNG.
SPEAKER_02Yeah, so the Trump trade deal with Europe is an example of that, demanding that the Europeans buy hundreds of billions of dollars worth of US LNG if they don't want to get hit with exorbitant tariffs. But that was before the war. No one has to be forced to buy anything when 20% of the supply has dropped out. This is an absolutely huge amount of supply.
SPEAKER_00Yeah, and look, oil markets are what we call tight. That means it doesn't take very much change on either the supply side or the demand side to create a big problem. And it's really quite a big problem to suddenly lose a big chunk of supply the way that we've seen. We've really never seen any supply loss on this scale, and the world is really waking up to that.
SPEAKER_02Alex Sternbull has been closely watching oil, gas, coal, and clean energy for years. Before the Middle East War, he already thought that oil use was not going to grow anymore, and the war will make the shift to alternatives even more urgent. Alex runs a hedge fund in Singapore. He's traded in commodity markets, in traditional energy, oil and coal, and in the new energy sources as well. He researches energy systems modeling with the Australian National University and collaborates with the US think tank, Employee America, on critical minerals policy.
SPEAKER_00Right, hi Alex, welcome.
SPEAKER_01Thank you. Good to talk to you.
SPEAKER_00How would you have described the energy landscape leading up to this point, you know, preceding this 2026 Middle East war in terms of the energy landscape and energy transition?
SPEAKER_01I would say in general, energy markets have been well supplied and responded very quickly from the shock of 2022. The adjustment largely happened via a massive acceleration in renewables and EV uptake, which largely has had absorbed the shock of the uh Russia's invasion of Ukraine. On top of that, Russian barrels found their way to market in various ways and forms, primarily through China.
SPEAKER_00So we were already seeing a shift to more renewable energy in response to the 2022 shock, partly, would you say? And is it also partly just the availability of stuff to actually do that?
SPEAKER_01I I think it was firstly, it was already growing very well. The there was a massive acceleration, and China accelerated CapEx to rate that capacity, uh albeit too much. Now the solar sector is very oversupplied in China, and batteries are somewhat too. Uh so that was the primary primary way that the adjustment occurred, certainly in Europe and um certainly in parts of Africa, emerging world, and so forth.
SPEAKER_02So we we have this idea that the oil hegemony was sort of like weakening and eroding because of that uh sort of peak oil, that that's sort of clean technology shift that that that you've been sort of telling us about. So oil and gas was seen as stable for so long, but now it's sort of a source of instability. Um, you know, there's that there's that clean technology shift, then there were the wars of the last few years. So is oil ever going to go back to a world in which it's seen as stable again?
SPEAKER_01I I would say no. Um the part of the problem is that the energy transition, if you think about it in simple terms, about 30 million EV sales displaces about a million barrels of oil uh per day. That's that's the broad numbers. And so you have this gradual erosion of demand, but a shock in which the world loses 15 or 20 million barrels a day of capacity cannot be absorbed by renewables uh in a given year. And I think there is an interesting question as to whether petrostates see this erosion of their potency and are going through some sort of uh middle-aged eruption as a result of not being able to emotionally deal with that. And you are seeing these conflicts become more common, uh, this kind of irredentist nationalism, but maybe it comes from a sense of overall vulnerability uh over time.
SPEAKER_00How do you think the oil consumers of the world, um, which you know in includes the US itself, but you know, particularly the oil and gas importing countries, how do you think they've been anticipating the these risks that that have just begun to become like very manifest in in early 2026? Like the threat of the straight reform is being closed has always been something that gets bandied around. But um I never get the impression it's been modelled very rigorously, and um I I think not not for sort of quite some time when the you know military possibilities were a bit different. Do you think this is gonna really change how policy and investment decisions are made?
SPEAKER_01I would hope so. I think the rigorous network flow shock modeling of this stuff is incredibly niche. I do some of it. I've got one paper out and which was published in 23, another couple coming. There was some work done by Lincoln Pratson and Junikita Shepherd on the on the um blockage of the uh caused by the Houthis in the Red Sea. I I think people are very sloppy about this, frankly. I think governments are remiss. All this work is done within intelligence agencies where it isn't published and it's been done, but you don't know it exists. And certainly US strategy in this particular conflict would suggest that if that work has been done, no one's reading it. Uh, at least um the people who matter. Um, so I would hope that going forward people consider these shocks very seriously and consider their options in dealing with these shocks, uh, because they're very complicated. For example, um Australia is very dependent upon liquid fuels refined in Korea and Singapore, but those refineries in turn are supplied by the Middle East. So you have these one-step remove dependencies, which are a bit more work than a cursory spreadsheet analysis. And I don't get the impression that a lot of governments have gone much through past cursory spreadsheet work, except for Japan, who has a strategic reserve of oil and has always been very serious about this institutionally with institutions like Jogmac.
SPEAKER_02So we wanted to sort of ask you about gas. So gas was going to be the safe and stable and secure source of energy for everyone. And there was this huge liquid natural gas build out happening around the world. There was going to be it's going to be exported from America and the Gulf, and there were giant import terminals, hundreds of billions of dollars of worth of import terminals being built largely in Asia and Europe. And now, you know, we have this really clear link between the oil and gas fields are being bombed, Hamus is being choked. So, how's this really going to change the future of gas?
SPEAKER_01I think the future of gas should be ruined here for a number of reasons. Firstly, if 20-odd percent of supply comes through a geopolitically risky strait that is subject to blockage and for changes in military technology reasons, you know, drones, uh, you know, cheaper, more available ballistic missiles, guidance systems, all this sort of stuff. If if being able to protect these bodies of water and transit through these areas is just structurally harder now, then you have to risk weight those things up. Then, of course, you have Russia, where it's obviously been shown to be an unreliable and dangerous source of supply, certainly for Europe. Um, there's a further technical reason to be skeptical about gas. And that is that gas was sold for power grids because it can be ramped up and ramped down quickly. So it's complementary with renewables. What we are seeing now in China and Australia and also California is that if you have some other coal baseload and batteries, then you can have a lot of renewables very comfortably because the coal doesn't need to flex. The batteries do that for the grid. So the gas is a risky, unreliable solution to a problem for which there are better options now from the point of view of Asia, namely coal renewables and storage.
SPEAKER_00So that would put gas in a completely different light, wouldn't it? Because as Tim just said, you know, it's been portrayed, it's there's been this image of it becoming like increasingly global, increasingly accessible, um, and also, you know, really flexible and dynamic. It's it's going to become a really risky prospect, um and just not not at all the um the kind of reliable nimble backup.
SPEAKER_01Yeah, sure. Um, if you think about okay, renewables, of course, once you've installed them, they run. That's that same with batteries for gas. The largest producers include uh Russia, um, the Qatar in particular, but also the overall Gulf. And the US, which is now threatening Europe with its LNG supply because it wants various things in the trade agreement. This is not a market which you would expose yourself to any more than you would want to at this point in time.
SPEAKER_00How much do you see countries that are, you know, energy insecure, like fundamentally energy insecure? How much do you see them, though, rushing to kind of build out coal capacity versus renewable and storage capacity or other things like hydro, nuclear, whatever?
SPEAKER_01Well, that they've been caught between a rock and a hard place because they have been encouraged to roll out renewables, certainly under the previous US administration and by Europe and multilateral lending authorities and so forth. And they have largely been doing that, and I think that's good. Um, the problem for them is that they have also been encouraged to roll out gas by the current US administration and to a certain extent by other multilateral lending authorities, and strongly discouraged from pursuing coal. Um, but from their point of view, looking at what we are seeing today, the merits of gas are very few and far between. And they would be well advised to do quite a lot less of that at the uh going forward.
SPEAKER_02And then finally, what is gonna be the fact that you started out by telling us that um, you know, solar, wind, and batteries had been overbuilt in China? There was this kind of oversupply of production that had come online in the last five years, and it wasn't all being bought. So we were buying much less than we were capable of making. So, what does the future of demand look like for renewables in the face of a shock like this, which is massively unstable, suddenly expensive, disrupting everybody's lives?
SPEAKER_01I I think it should accelerate materially. I think there are places like Korea which could be doing vastly more. Uh, certainly on things like residential solar. I think there's been a uh there are a lot of areas where they could do vastly more. The challenge with solar in particular is that you need to have some storage to make it work. Otherwise, you just end up with power prices at negative prices for four or five hours a day in the middle of the day, and then you have no supply in the evening. So the to the extent that you can roll out the complementary storage will determine how quickly you can roll out the solar in particular. Because the great thing about solar is you can surge it, you can buy gigawatts of panels and put it on residential roofs very quickly. We've seen this happen in numerous places, Australia, Vietnam, and so forth. Um, but the the the storage piece is what really constrains you.
SPEAKER_02And are people just gonna be rushing out to get EVs?
SPEAKER_01They already are. I'm in Singapore. I mean, the BYD, I think the I I spoke to the BYD, um, one of the main dealers here. I think the cars will have gone from spending close to 20 days in the lot before being turned over and sold to under seven. I mean, they're probably just gonna have a stock out here. So you're hearing similar things everywhere else. So yes.
SPEAKER_00Would you be willing to kind of put a number on what you think this is gonna mean, this the Middle East war is gonna mean in terms of like changing the outlook, changing like the long-term outlook for oil and gas demand?
SPEAKER_01It's it's hard to say because the situation's so fluid. Um, but it's certainly leading to a new vertical pickup in adoption rates for EVs, certainly in Asia. Uh, and it's also leading to a very substantial pickup in Europe. The the real question to my mind is how many EVs can China actually produce this year? Because I'm quite certain for if they could produce 50 million of them, they could sell them all this year. But that's the real question is what is Chinese capacity in this space? And how is that capacity going to be constrained by, for example, uh shortages of input materials, you know, plastics for battery separators, these kinds of things.
SPEAKER_02So, Alex, how are people going to respond to these high fuel prices and shortages that's coming everyone's way?
SPEAKER_01I think people respond to prices. And there is a certain that there's there's research which shows that when gasoline prices go up, you get a bit of a bump in EV sales. But I think the experience of actual shortages, which we are now seeing in Vietnam, in Thailand, in the Philippines, people are never going to forget this. Just like people who have experienced famine have never forgotten what real hunger is. And I think this is going to be a step function and a permanent change in the ability to sell IC vehicles in Asia. And I think governments are also who have been asleep at this and not modeling this and not considering these things seriously, are also never going to forget this.
SPEAKER_02Yeah, so my mom went out to get an induction stove pretty much as soon as cooking gas went into shortage in India. And I just think a lot of people are going to do things like that. So I, you know, wanted to ask Alex, like what happens, what happens to the people who are going to be making all of these machines? Are they prepared to boost their production?
SPEAKER_01I I think so. Some of the Chinese appliance companies which produce the induction stoves, like your Medeas, Greece, these sorts of companies have the capacity to ramp up very quickly. And these are these are not big things. It's not a lot of copper, it's not a lot of material, really. Could you put 50 million of these or 100 million of these into India relatively quickly? Sure. And that'd be a permanent step change down in demand for LPG. And I think that's quite a desirable outcome at this time. Uh unfortunately, there's all these subsidies and other ways in which LPG locks itself into um India, but I think this might be something of a break point, uh, though you can reasonably assume large politically connected uh businesses with interest in oil refining and petroleum products will fight this tooth and nail. But I think it's going to happen if there's real shortages.
SPEAKER_02Yeah, yeah. And I think I think that's exactly right. Like the shortages just change people's minds. Um, and and we saw that with with the with the Pakistan story in our podcast, right? Like as soon as you get blackouts and load shedding, people just are said, you know, screw this, I want an alternative. And they ran out to get um solar panels and and and batteries very soon. So I think we should just be prepared for rapid step changes across the world.
SPEAKER_01I mean, if China can ramp capacity of solar in the orders of hundreds of gigawatts over the course of literally two years, then I think it is reasonably safe to assume that they can also ramp the supply of induction cookers. I just think in India specifically, there is a particular company which has an interest in the LPG market uh that will probably try to stymie this in one way or another. And they're certainly very adeptly uh securing a continual supply of LPG from Iran right now, but this might just be too big even for them.
SPEAKER_00So, Tim, there were so many interesting things there in what Alex said.
SPEAKER_02Yeah, the science of the war has created a big surge in demand for clean energy and electric gear, like EVs and induction stovetops, and stocks of Chinese green companies have soared.
SPEAKER_00You've been listening to the first season of the Polycrisis. I'm Kate McKenzie.
SPEAKER_02And I'm Tim Sahi. We publish a newsletter about the political economy of climate change, amongst other things. You can sign up for that and find out more about us at thepolycrisis.com or in our show notes.
SPEAKER_00Our producer is Sarah Allerly, Russell Stapleton composed our music, Bethany Stewart is our sound engineer, and Sarah Allerly is our executive producer.