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
01 | Demand Destruction | US oil is not winning the Iran war
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In this first bonus episode, we discuss why the Middle East war is accelerating the destruction of demand for fossil fuels, and why the US won’t become the new provider of "geopolitically secure” oil and gas.
We also argue about whether the data is sufficient – *yet* – to prove our point that this is already happening.
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
Links:
America’s bid for energy supremacy is being forged in war - Big Financial Times story setting out the “US is geopolitically secure energy provider” argument. With excellent data viz.
Iran War Pushes Asia to Think Twice Before Doubling Down on LNG - Bloomberg
One of the most persuasive anecdotal demonstrations that assumptions about LNG demand now have to be completely revised. “Bloomberg News spoke to more than two dozen executives, traders and analysts across Asia, who painted a picture of a region that had been thought of as the future of LNG, but is now rapidly losing faith in the super-chilled fuel.”
US is making Europe pay dearly for its half-hearted electrification - Cornel Ban, Geoeconomic newsletter. Highlights how Europe’s slow energy transition has left it vulnerable to US energy predation. Echoes some of the arguments in the Permanent Suez report that Tim co-authored in early 2024.
US ambassador to Europe threatens to remove “privileged” access to LNG - FT, March 24, 2026
Welcome to the Poly Crisis, a podcast that looks at our interconnected crises where the whole is bigger than the sum of its parts. Soaring inequality, a resurgence of war on the world stage, the ecological crisis and what to do about it, the rise of Asia and the decline in Western power. All the episodes for our first season, Electric World Order, are available now and season two is in development. But in the meantime, we have a special bonus season, Demand Destruction. Iran's closure of the Strait of Hormuz has made this the biggest energy shock in our history, as declared by the International Energy Agency. So each episode in this season, we're going to discuss the implications and the geopolitics of the energy crisis that's arisen from this war. I'm Kate McKenzie, a Sydney-based energy and climate finance expert.
SPEAKER_00And I'm Tim Sahai. I'm with Johns Hopkins University in the US, where I co-direct the Net Zero Industrial Policy Lab. I'm speaking to you from my home in New York City.
SPEAKER_01So, Tim, this episode we're going to look at the question, US energy dominance or irrelevance?
SPEAKER_00Yeah, almost everything you hear in the news these days is one of these two stories. Is the US energy dominant and selling oil to everyone? Or are electrotechnology sales surging and destroying fossil fuel demand?
SPEAKER_01I mean, in the immediate short-term future, right? Like right now, both these things are kind of true. But the this this narrative contest is about which of these trends is going to prevail. And, you know, you and I are both pretty much of the view that it's the second one, right? It's declining relevance of the US as an energy superpower and, you know, and other kinds of superpowers too.
SPEAKER_00Yeah, but US energy dominance, you know, is a narrative, but that's based on some s hard material facts. You know, America's set a new oil production record this year. It's averaging 13.6 million barrels of production a day. And the US has produced more oil, you know, almost 50% more oil than Saudi Arabia, which is a fact that you and I know, but almost no one outside the energy world knows.
SPEAKER_01Yeah, I think this story of the US's, you know, resurgent massive oil producer, crude oil and refined product producer and exporter. I don't know. Like I think there's a bit of awareness of that. Um, what seems to be happening right now, though, is that there's this story of, you know, the US is wanting to project itself as a reliable producer, a reliable supplier of these hydrocarbons, right? Natural gas as LNG and crude oil, and also the you know, refined products again, like diesel and so forth. Um and that's a bit of a change. Like there's this, you know, it's this opportunistic narrative, I think, that the war has taken a bunch of um of these fossil fuels offline, off global markets, it's creating a lot of uncertainty. And so what the US administration and the US oil industry wants to do, or parts of the US oil industry anyway, want to do is is declare that um we are the safe alternative. And the two the two examples that I think of the that demonstrate this or that you know are used to demonstrate this. One is that um since Russia invaded Ukraine in 2022, the EU now imports a whole bunch more LNG from the US than it did previously. Um, and that has, as we've seen, sort of become weaponized really by the US um administration, which we'll get onto in a minute. And the other thing is that um, you know, there are all these empty um tankers going to the US to to load up on US crude and US refined crude oil products to then go take them to Europe and Asia and even you know and Australia where I am, for example. And that like th like those are things that really happened or and and are happening. But I don't think that they tell us about where we're going, you know, what's actually gonna come out of this situation at all. Because no one wants that dependence on the US, do they? Really?
SPEAKER_00Yeah, everybody seems to be rushing to reduce their dependence on the US, which has become, you know, an unreliable security partner, an unreliable economic partner with the tariff wars. And there's just like countless examples of of countries uh rapidly electrifying, you know, the French double their electrification budget and double their support for EV subsidies and heat pump subsidies. The Spanish are rushing ahead on renewables and electric cars, the Asians are buying like way more electric cars this year than they did last year. I think European sales of electric cars have doubled. And if that's going to be the case, then that's just less oil gonna be sold in the future, right?
SPEAKER_01Yeah, but I mean, like to kind of like steel man the argument that we don't really agree with, none of that stuff happens quickly. And in in terms of like how that changes a country's um energy import needs, right? If you're if you're a country like most countries that don't produce um enough oil gas relative to what you consume, you're still gonna you still have to keep importing most of what you've already been importing for in in in the near term. Um so it's like this contest between two different time frames, in a sense, isn't it? It's like you know, like like you say, these countries you're using examples of, and there's like so many other examples as well. Um, you know, the LNG plant being cancelled in Vietnam and and and uh a renewable plant being um a renewable project being being decided on instead. Um all of this like all of this stuff doesn't happen instantly, does it? Like heat pumps, people in India running out to buy portable induction stovetops. It doesn't kind of instantly cut how many shipments you need next week or next month. So I think that's where the that's like where the disconnected.
SPEAKER_00Do you think like US producers are gonna start drilling more oil? I mean, I agree with you that like it's not gonna happen instantly, but then they kind of have to decide to produce more oil and sell it to the rest of the world. Are they doing that?
SPEAKER_01Yeah, and that's like one of our first kind of like points of evidence that this that that you know we're not in for this like US becoming an energy superpower, you know, a bigger energy superpower than before. Is it because the US oil industry doesn't isn't buying this? Um if we're losing um what the net loss say, just looking at oil, the net loss is what like eight, ten million barrels a day. Like it's not the complete, not the complete 20 million um when you allow for all the other sort of contingencies that are in place. But that's still like that's still a lot more oil than US drillers want to drill. Right. They they don't want to produce that much more, they hardly want to produce any more. And you you looked at some um the um the Dallas Fed survey responses about this, didn't you?
SPEAKER_00Yeah, I mean the Dallas Fed, you know, basically surveys a bunch of oil producers and asks them how much do you want to expand US oil production and respond to the Iran war in 2026? And then, you know, most of their respondents, half of their respondents said, yeah, we're gonna increase oil production a bit, but not more than 0.25 million barrels a day, right? So that's just like 2% extra production in 2026 than they did last year. So Kate, like why are US oil companies not interested in expanding production?
SPEAKER_01Yeah, so there seem to be two main reasons why the US oil industry don't want to drill more oil. Like they aren't responding to this big, you know, still pretty big increase in oil prices and this supposed increase in a kind of like a captive global market. They're not sort of celebrating going, yeah, we're gonna massively ramp up the amount of oil we're drilling, or perhaps even the amount of gas that's being produced. Um, one reason is that they just don't seem to have confidence that this situation is gonna last. Um and it's you know, I've I've seen the fact that Trump keeps saying that he wants oil to be around$60 a barrel, that that's been cited by uh by by you know actors in the US oil industry. It's like, well, they believe like, okay, that could if if if he wants to keep oil prices low, then we can't max out our drilling capacity because it's we can't count on it being like$100 plus dollars a barrel. Um like who knows why they think that why or how they think that the US administration can get prices back that low again, but but you know, that's enough to create uncertainty. Um a second kind of side reason to that, I guess, is just that whole policy uncertainty thing, right? Like we could have a different administration in the US in a couple of years and then whatever, it's a different it's a whole different ballgame again. Also seems that really like the underlying reason is the point that we've been making all along, really, which is that demand is being permanently destroyed, removed from the energy system right now. Um the the the US oil industry cannot be unaware of this fact. Um, you know, it's not things are not gonna continue. This trajectory that we've seen is not gonna, is not going to continue, right? Countries don't want to increase their oil dependence at all or their LNG dependence. Um it's been, you know, this Bloomberg story excited two dozen energy executives and and traders in the region saying, we just think yeah, LNG used to be the future for Asia and now it's not. Um and you know, similarly for oil, like who who wants to who wants to maintain their dependence on or improve or increase or maintain their dependence on imported oil now, you know, let alone from the US?
SPEAKER_00Yeah, yeah. And and and I and I guess the second reason is okay, so prices aren't gonna last. Uh, they are not confident about that, but they're also really not confident about future demand because of electrification, right? So this demand is being destroyed by electric technologies. You know, Alex Sternbull told us um um in the season that for every one million electric vehicles sold in the world, oil demand is reduced by 0.1 million barrels a day. Well, this year, 20 million EVs were sold, and that's just crushing oil demand by 2 million barrels a day. And last year, EV sales increased by 25%. And with this war, as we are seeing, EV sales are accelerating quickly, and you know, oil producers can do the maths. They are basically not expecting that much demand increase. In fact, they're starting to expect demand to keep going down.
SPEAKER_01Yeah, well, internal combustion engine car sales peaked years ago, right? I think it's like 2018 or 2019. Um, and that's that's responsible for a big chunk of demand. So even though, I mean, it's funny because we've seen, I feel like we've seen a lot of stories, a lot of reporting in the last six months, commentary saying, oh, you know, EVs aren't really taking off so much as everyone expected. Um, but I think that probably wasn't true before this war started. Um, and it, I mean, it's certainly not going to be the case now, is it? I mean, it there's certainly signs that it's, you know, we're it's gonna be a really, really, it really is getting to a tipping point now. Um the question is, you know, how long does how long do things like that take to show up in the data? Um it again, like it's not instant, right? Like whereas if you if you're missing shipments of oil or diesel or or LNG, like you feel uh as a country, as a society, you feel that pain instantly. But if you're swapping to things that don't require those fossil fuels anymore, that that's a bit like that takes a little bit longer to show up. Um and and you know, this is something I find really interesting. It's like the data isn't isn't necessarily that good, um, particularly in developing countries where some of these things are are changing, but it's kind of under the radar.
SPEAKER_00Yeah, I mean, I'm not sure it's all that much under the radar, right? Like you you you you we know the sales of EB cars, right? Car companies track their sales. And you know, I was in Brazil, sales were up 50% last year. In Mexico, sales have tripled, in Thailand, you know, EVs are now like a quarter of all the new cars sales. In Indonesia, it's nearly doubled. In India, it's increased by 75%. And so, I mean, I I just don't think there's that much uncertainty about this. They're just going up, and most countries in in the developing world are basically leapfrogging.
SPEAKER_01Yeah, but I mean, just again to like play devil's advocate against our argument. Um, we've just seen, I think the last few days, the last week, it's come out uh China's um cleantech export data, solar export data for uh March. Um that it was, you know, record, I can't remember the exact numbers, but you know, it was like never before uh seen volume and and and value of uh of solar PV sold by China last month. But that's been slightly complicated. Like the interpretation of that is a bit complicated because uh the VAT export um reduction or credit that China did have in place was ending at the end of March. So, you know, even you know, clean tech analysts are saying, oh, well, you know, some of that might, some of that surge could be attributed to the fact that there was a big rush to, you know, get things out the door on the ships before that um before that tax concession ended. Um but I did see, you know, but at the same time, like some of these numbers are huge. Like apparently, like Nigeria's imports of Chinese solar panels were in March this year, were like five times what they were in March last year. So I'm sort of hard to put that down to just like trying to get around to, you know, trying to make the most of a tax um credit, right? Or not tax credit, a tax discount. So then the question is like, again, like how do you how do you quantify that? How do you quantify things like that in terms of what they're going to mean for LNG exports um and for crude oil and product exports? Like what like how do you infer that? Because this is all this is all unprecedented. Like I think it is a bit harder, you know. I think definitely it's easy to see which way the wind's blowing, but like to actually quantify it um is you know not easy.
SPEAKER_00Uh yeah, I mean, I think I think, you know, these were the two big themes of our of our first season. The United States is a giant petrostate seeking to sell more and more oil and gas to the rest of the world, and the Chinese are the rise of this business electrostate, um, seeking to sell more and more electric technologies to the rest of the world. And so I guess the the the the question mark is what what does the war do to shift these two big powers? Which way does the world go?
SPEAKER_01Yeah, I think you know, clearly the US administration wants to project this sense of it being um, you know, the supplier of geopolitically secure oil and gas. But but I don't think I don't think anyone else in the rest of the world is gonna buy it. And yeah, like you say, it's just it's just gonna be a matter of time before we see the reality of it play out, which is that the world is moving away from dependence on fossil fuels, and most of the world is trying to move away from dependence on the US as well.
SPEAKER_00Yeah, and you know, I would very much want governments and investors and consumers to be choosing an option that is safer for them, cheaper for them, de-risk away from volatile and expensive and unreliable fossil fuels. But as we know, um um all of these all of these actors are under a lot of pressure to just stabilize their energy, and they are, you know, trying to trying to look for US oil and gas where they can get these molecules.
SPEAKER_01Yeah, well for now, exactly. But yeah. Alright, you've been listening to the first episode of a bonus season of the Polycrisis Podcast, Demand Destruction, we're calling this one. I'm Kate McKenzie.
SPEAKER_00And I'm Tim Sahi.
SPEAKER_01We published a newsletter about the political economy of climate change, um, energy, geopolitics, among other things. You can sign up for that and find out more about us at thepolycrisis.com or in our show notes. Our producer is Sarah Allerly, Russell Stapleton composed our fabulous music, Bethany Stewart is our sound engineer, and Sarah Allerly is also our executive producer.