Greg Brew on Surging Energy and the 'Strategic Trap' of the War in Iran

Joe Weisenthal (0:02)

Bloomberg Audio Studios, podcasts, radio, news. Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:25)

Tracy, we're recording this the morning of March 19th, around 9 a.m. and-

Tracy Alloway (0:30)

That's how you know it's bad when you have to throw in the hour and the minutes.

Joe Weisenthal (0:33)

9:07 a.m. 9:07 a.m. And I think the story right now is just the degree to which people are realizing more and more energy infrastructure in the region. We're talking about the Iran War, of course. More and more energy infrastructure in the region. I mean, it's literally on fire.

Tracy Alloway (0:49)

Yeah. The thing that I've noticed, having recorded these sort of emergency podcasts over the past, I guess, two weeks now, is that we will talk about a hypothetical, like, oh, what happens if Iran strikes the port of Salalah in Oman? And then a couple of days later, it happens, which gives you an indication of how quickly things are progressing. And one thing that has happened in just the past day or so, since we recorded an episode with Bob Brackett on NatGas, is we had Israel bombing Iran's infrastructure in the South Pars gas field.

Joe Weisenthal (1:25)

Yes.

Tracy Alloway (1:25)

And that was kind of a hypothetical that we talked about with Bob, and it happened shortly after. And then after that, we also had Iran bombing Qatari energy assets in the South Pars. So it's just progressing very quickly.

Joe Weisenthal (1:44)

Our colleague, Dylan Griffiths, has put together a really excellent list. I mean, the thing was, so we did that episode sort of near the beginning, or I've lost track of the time, with Rory Johnston. And he said the closure of the Strait of Hormuz was itself the sort of hypothetical, but was so extreme that it was almost not worth contemplating. So I think your framing is really excellent. All of these things that are just sort of like, you think about them as very bad possibilities, and one by one, they become realities. Our colleague Dylan Griffiths has a really excellent just sort of list of energy infrastructure damaged in Iran war peace, and it just goes down through the list. One of the refineries in the world shut down as a precautionary measure. Ras Tanura, a refinery in Saudi Arabia, halted various pipelines, gas facilities, and so forth. There is just a lot that's damaged, which of course means that the Strait of Hormuz is only one aspect. Maybe it gets opened, but then there's of course the question of all the infrastructure that's been damaged and how long it takes to come back online at anything near full capacity.

Tracy Alloway (2:47)

Right, and this raises two interesting questions, I think. One is that it seems like the US and maybe Israel to some extent weren't expecting Iran to hit back against various energy infrastructure assets or even cities this hard, right? And I think Trump has said a couple of times that he didn't expect Iran to, for instance, like go after targets in the UAE and places like that. So questions over what's happening there, like why did that become a strategy? And then secondly, the thing I'm wondering is how much financial pressure does this actually put on Iran? Because at the moment, yes, some of its big gas producing things are getting hit and damaged, and it seems like that's going to cause some fallout. But on the other hand, if oil prices are spiking and if Iran can still get out some oil to a certain extent to places like China, is that actually a fiscal windfall for them? Like, can they withstand some of this chaos better than perhaps other places can?

Joe Weisenthal (3:49)

Right. And, you know, for the US, obviously a lot of this translates into higher prices at the pump. For some of the region engulfed countries, I mean, it's just, it's GDP catastrophe, right? And some of the estimates for what some of the countries are expected to see a reduction in GDP, I think I've seen numbers like 15%, et cetera. I mean, we're talking about, you know, this depression level declines and so forth. And so the degree to which this drives a serious wage between Gulf countries and the United States is, of course, obviously a big part of the story here. Anyway, and of course, that makes the logic of the strikes, right? I mean, that makes Iran's logic seem very clear, drive a wage between US and its friends in the region and so forth. And so anyway, we need to understand both better, just how serious this damage is, the long-term fallout, because this is very important from the economic story, and then the way to think about this damage in the context of war strategy itself and what constitutes success for Iran here as it tries to defend itself.