War in Iran Is Already Reshaping East Asia's Energy Future

SPEAKER_2 (0:02)

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Joe Weisenthal (0:18)

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 (0:24)

Tracy, it's April 9th, 9:05 a.m. There's a ceasefire-ish. It's sort of, there's been something announced that's called a ceasefire.

There does not seem to actually have been much of a cessation of fire, per se. Maybe it's slowed down a little bit. Some of the headlines this morning are about Israel continuing to strike hard in Lebanon. Iran's saying that, well, if there's no ceasefire in Lebanon, there's no ceasefire at all.

But overall, at least as of right now, the market, et cetera, we saw that huge drop in oil Tuesday night. The market's still sort of buoyant, still sort of resilient.

Tracy Alloway (1:07)

Well, I think the important thing for the purposes of this particular discussion is if you take a look at what's going on in the Strait of Hormuz, it still seems to be shut more or less.

Shout out to the Bloomberg Function, ECAN, Hormuz Go. You can see the number of ships that are going through that particular choke point and I have two as of today, which is basically two today.

Joe Weisenthal (1:31)

There were some headlines about how maybe even in the good case, they would lead through 10 to 15, which is still sort of nothing compared to normal ship traffic. So nothing's back to normal.

Tracy Alloway (1:43)

I was gonna say to your point, I think the thing that's confusing everyone is we keep seeing these headlines about like a billion barrels lost of world supply or 20% of the world's oil supply now choked out because of the Hormuz situation. And yet, if you look at the oil price, you know, WTI, Brent, definitely up, but they're not up as much as you might think given the scale of disruption.

Joe Weisenthal (2:10)

I think many people feel intuitively the price should be higher. And then, of course, there's the whole refined products situation, which is more extreme. And a lot of the prices that feel really extreme in general have happened, or we see it in East Asia, whether it's like Singapore jet fuel, et cetera, or a lot of the headlines that you see about extreme rationing come from East Asia. I forget which country was. They were like, you know, they're doing that classic thing of only drive to work if your license plate ends in an odd number on this day. Whatever.

Tracy Alloway (2:43)

Very 1970s.

Joe Weisenthal (2:44)

Yeah, and we're seeing a lot of these types of headlines, some in Korea, some Thailand, et cetera. So it also then raises the question, you know, the Strait of Hormuz is closed, maybe it'll be open, but does this change future energy trajectory in some way? Does this mean there's going to be more comfort with coal mining over the long term? Does this mean that economies are going to try to accelerate decarbonization efforts more intensely? Could this be a huge boon for the American LNG industry, where we know we're building a lot of export terminals, et cetera, and if, you know, there's some sort of impairment to Qatari LNG, then, I don't know, huge questions about even just setting aside market pricing right this second or this week, the future of energy.

Tracy Alloway (3:30)

One thing about our current market moment is we are getting like a crash course in real time about the flow of energy throughout the world. And as we will see in this conversation, like, it is still very much geographically constrained East versus West. And so, as you say, the big question is whether or not the East kind of, I don't know, scrambles even harder to adapt to this.

Joe Weisenthal (3:52)

Well, I'm very excited to say we do, in fact, have the perfect guest, someone who knows about all this stuff, someone who's been on the podcast before, but we haven't talked to him in years, which is really sad because we really like the guy. And so very excited to welcome back onto the show Alex Turnbull. He's an investor based in Singapore, but he's also a researcher with the Australian National University, focused on energy security, really knows the energy scene, very well spends his time thinking about the present and future of energy. So Alex, thank you so much for coming back on Odd Lots.

Alex Turnbull (4:24)

Thank you very much. It's great to be back on.

Joe Weisenthal (4:27)

Yeah, really, really appreciate it. Talk about, like, right now, you know, this phenomena that we talk about where, yeah, prices are up, but, you know, by some measures, still within some sort of historical range, whereas the headlines that you see about rationing, et cetera, like, oh, this is extremely dire, et cetera. Give us your lay of the land from the Asian perspective, from the perspective of East Asian countries. Like, how dire are things just like right now without that flow?