I think that we embraced in a way much more than the Americans like did this

this notion that the markets were the solution to all energy questions.

I'm not saying that markets are the solution to some energy

questions, but the idea that the state can just be completely like largely

hands off and that doesn't have to deal with like geopolitical like risk and

supply chain like risk, I think that that's turned out to be an incredibly

dangerous illusion and naive as well.

Welcome to Marin Drugs, Money, the podcast in which people who know the

markets explain the markets. I am Merryn Somerset Webb and with me

today I have Professor Helen Thompson. She is a professor of political economy

at the University of Cambridge and she concentrates on the political economy of

energy, which is useful stuff at the moment.

She is also the author of Disorder Hard Times in the 21st Century, which is an

excellent book. I strongly recommend to all of you,

which will help us all get to grips with the multiple crises of our age,

published in 2022 and no shortage of crisis since then, of course.

So I'm hoping that what you'll get from this podcast is a fuller understanding

of exactly what is going on in global energy markets and how it is going to

affect you. Basically.

Perfect Easter weekend listening. Helen, thank you for joining us.

Absolutely. Pleasure to be with you.

Merryn. Yeah. Now we last saw each other at the

weekend of Mistakes in Hay on Wye a couple of weeks ago, and I missed your

session, which was irritating for me. So I've asked you on so that basically I

can have it all to myself for 40 minutes.

No, no one else here. And that our audience can understand

some of your amazing insights into what on earth is going on.

So I guess let's start with that. This war with Iran, how do you how do

you see it? How is it going?

How might it end? And what will the long term consequences

be? That is a huge question.

So take it from whatever angle you like. Okay.

Well, I think that in part the motives of the Trump administration are

relatively straightforward and they're supported by Israel, and that is they

want very seriously to deplete Iranian military power and that that goes beyond

the nuclear weapons issue. It goes to destroying or trying to

destroy Iran's ability to do the kind of things that it's done in the first part

of this war, which is inflicting significant damage on its neighbours

from the Arab states, the Gulf Arab states, to to Israel.

The question of like whether the the Americans had a, you know, sustained and

worked out ambition for regime change, I think is a lot more like complicated

question. I think, though, regardless of the

military ambition, regardless of the regime change ambition, this is part of

a bigger picture. It's part of an attempt by the Trump

administration, or at least we should seriously consider at least the

possibility that it's part of an attempt by the Trump administration to reset the

energy part of the world geopolitically. And I think that that is been a thread

through Trump, too. I think it's what makes sense of the

intervention in Venezuela, and it makes sense of the.

Two attempts to destabilise Greenland, and that is the that the Trump

administration thinks through the lens of resource competition.

He thinks through the lens of the vulnerabilities of itself and China to

resource disruption. It experience for itself pretty

significant resource disruption last year in the way that China handled the

rare earths issue of the Trump turn to the trade war.

Indeed, I would say that actually they would take they were taken aback by what

happened there and that in part there is a sense, I think, in which they have

wanted retaliation for that of disrupting China's energy security in

the way in which the various security was disrupted

last year. And it's not a coincidence in that

respect. Then the major moves have been made this

year, first against Venezuela and against Iran.

And these are states in which China has had long term energy alliances and has

some dependency, obviously more so in the case of Iran than in the case of

Venezuela. And how dependent is China on on Middle

Eastern oil and on Venezuelan oil? Well, it's a tiny amount now in

Venezuela or a relatively small amount on our on on on Venezuela.

But China is the biggest single importer now of hydrocarbons through the the the

Persian Gulf. Now, obviously, China's strategy and

that is what China is doing in the Western Hemisphere and it's in the

Middle East and it's got this energy trade with

with Russia has been to have diversity of energy supplies.

So actually to disrupt China's energy security from this, you know, mindset,

you have to do quite a bit of disrupting.

And in terms of electricity, China could always fall back on coal and

domestically mined coal. So this is quite a complicated, like

long term issue. I do think, though, we have if you put

these things together, you know, we can say that the situation in the Persian

Gulf has been unstable for some time. You know, there was a big crisis in

2019, September 2019, when the Iranians hit a major Saudi oil

facility. In the end, that's what led a few months

later to the Trump administration assassinating Soleimani.

But the situation in which you have a nuclear, ambitious Iran plus the.

Preponderance of hydrocarbon exports from the Persian Gulf going to Asia and

particularly to China. Whilst the United States is the maritime

power in the Persian Gulf and has the majority of the bases in the military

bases in the Persian Gulf. I think that that was never going to be

a stable scenario and certainly not one when you also bring Israel's interests

into play and a situation in which Iran had taken a major strategic blow,

really. Certainly from 2024, from the Israeli

pager attack on Hezbollah. But one could argue really in a way,

from the moment of the Hamas attack on Israel in October of 2023, things have

been going wrong for Iran. I think it would have been quite

surprising in some ways, whoever was the president,

for there not to have been a US move to try to reconfigure.

The situation, the balance of power in the Persian Gulf.

Hmm. How do you think it ends?

I mean, for a for someone who is not expert in the Middle East, not expert in

warfare, not expert and any of those things, it's very hard to tell because

so much of the analysis of this war seems so political and so based on

opinion rather than actuality, it's very hard to see exactly how this is going

and how it might end. Well, I think there's another reason

that isn't really being commented upon as much as it should be, is there?

Why? It's hard to work out how and this is

what is it that the Iranian regime is now, you know, is their own Iranian

regime in a strong sense of the meaning of the word like regime, or are there

actually a lot of decentralized bits of power around the Iranian Revolutionary

Guard Corps? And if there isn't actually a meaningful

regime in Iran any longer, then reaching any kind of like settlement becomes

actually extraordinarily difficult and it becomes a situation in which you can

expect there to be chaos, I think for for for for some time to come.

So I think that if we think about it in those terms, then even the idea of the

war ending becomes quite difficult. It can be much reduced in terms of like

hostilities, but without a cohesive regime in Iran, then the idea of there

being peace, I think, and a settlement is quite hard to imagine.

Okay. So we should when we think about the

world and energy, we should think about this going on for a long time.

We should stop thinking that this is a six week business or an eight week

business, that these the supply crunch is long term.

Well, I think that there's various bits to this that go on in a way on the

energy side, regardless of. But even if you weren't sure what I've

just said about, you know, the what is the nature of the Iranian regime, and

that is the energy infrastructure that is being hit.

It's particularly, I think, significant for Qatar in terms of its liquefied

natural gas facilities. That's why it's declared, you know, that

force majeure on some of its contracts.

It's insignificant in terms of the facilities, the refining processing

facilities in in in the Gulf states, including the United Arab Emirates and

Kuwait. The Saudis have got thus far, you know,

in a way, the best way out in terms of their immediate, you know, interest,

because they do have a, you know, pipeline, you know, to the Red Sea,

albeit that it does not fully compensate for what they would export through the

Strait of Hormuz. But I think that they're not going to

get back to the idea that exporting through the Strait of Hormuz

is is something that they can take for granted.

In the same way, I think China is not going to go back to assuming that

importing through the Strait of Hormuz is something that they can take for

granted there. I think quite a strong incentive now

where gas is concerned to think again about doing the power of Siberia to

pipeline with the Russians. I think we have to understand is that

the shock in the Strait of Hormuz is not something that the world economy has

experienced like this before, and that affects the calculations of all the

players, exporters, the importers. And the possibility that it can happen

again is something that they will have to adjust to.

And that's before, As I say, we get on to the actual damage to the oil and gas

industry in quite a number of countries in the Gulf.

Yeah. So even if the whole thing by some kind

of miracle, everything stops tomorrow, There is no returning to normal from

here. I don't think there is.

I certainly not. I think in terms of the the geopolitical

assumptions around it and for Qatar, I think that the the from what we can tell

anyway, is that the damage looks quite considerable.

And I think for Qatar as well, I think, you know, we really should focus on the

Qatar because for them, you know, this is like a not just a material blow, but

it's a staggering, like existential psychological

blow. Qatar has been a nominal, at least, you

know, Iranian ally. And the Iranians hit, you know, major

targets, not like they did in the

the war back in June of 2025 when they hit a US air base in Qatar and they hit

the Qataris own gas facilities. And I think if you look at the ways in

which the Qatari government have talked about that in the days after that

attack, one of them said something like never in his wildest nightmares.

It occurred to him that a fellow Muslim country in the month of Ramadan would do

that to Qatar. That was a major, major turning point, I

think, for the way in which Qatar can think about the geopolitics of the the

Middle East. It can't go back to assuming that

there's some normality to which it can return.

And again, as you said, it's very hard to imagine what the motives of the

Iranian regime is. Because we're not sure there is a

regime. Absolutely.

Yeah. Okay.

Let's talk about the the consequences that we can see now and we can really

see across Southeast Asia, fairly major fuel and energy rationing going on.

So we've we've seen that. And we can we can begin to feel that

wave heading towards Europe. Right.

And one of the things that we're already seeing that you can see people talking

about on social media, for example, is the very sharp rise in the price of

flights. So we know that there's a there's a

shortage of jet fuel coming and we're already in the UK beginning to see lines

at fuel stations as people can feel a little panic.

And then of course, we will bit by bit, we will see the rise in energy prices

feeding through into the price of absolutely everything because that's

just the way this works. How do you see this playing out?

Yeah, I mean, I think that we in Europe have been relatively protected so far,

both in terms of the the prices. I mean, if you look I mean, they've come

down now, the difference. But there was a very big difference

between the Indian Price index and the Brent price for oil until the last few

days. And in terms of when the last tankers

that left the Gulf before the war started due

to arrive, I think I think I saw from a tweet from Ed Conway this morning I was speaking on

Tuesday that the last tanker with air fuel.

Yes, I saw the aviation fuel is due on Thursday.

Yeah. Yeah.

And you know, Britain is particularly when actually all European countries,

almost all European countries are particularly dependent on aviation and

fuel coming out of the Gulf, much more so than they are on crude coming out of

the the Gulf. And I suspect that that's why we were

already seeing the, you know, the the impact on on actual home prices.

But it's not going to be that much longer after that.

I think without something changing very rapidly in which we're going to see the

impact on petrol and particularly on diesel prices.

So we'll see that. We'll feel that first.

But then of course, there's also the impact on fertilizers on that.

People talk a lot about helium and about the other things that we're used to just

getting through the Gulf. So we're now at the point where the idea

that there is a global market for any of these things or a global price, even for

any of these things, is is slightly discredited.

The whole conversation about, for example, the global price of gas, that

doesn't quite work anymore, does it? No, you can see it in oil really

clearly. And it was interesting because usually

the you know, there always are different differences between the prices that

prevail in Asia and Europe and the United States, but they're usually

within a sort of 0 range may be of each other.

And that, you know, like at one point last week, I think that there was about

a 60 even possibly $70 difference between the price for essentially the

Indians were paying and India was paying for oil.

And what the the the WTI, the effect of the US price like was that So, you know,

that's a major difference. I was pretty much twice what the price

was at the start of this for the US.

Mm hmm. Let's talk a bit about what all this

means for the UK. So we've, you know, we've been

attempting to head towards net zero. We've been very clear or our government

has been very clear, parts of our government have been very clear on what

they want from the energy transition. But now that this has happened, it seems

to be very clear that we've made ourselves remarkably vulnerable.

Yeah, I mean, I think that the that it's clear that

Britain has a pretty weak energy security strategy.

Indeed, one might argue whether there is any real energy security strategy in

relation to fossil fuels, you know, which remain, you know, the largest part

of our energy consumption is interesting.

I'll just interrupt you there. I did just look up before we started to

double check the percentage of our energy that is actually oil, not just

fossil fuels, but oil. And it's near 40%.

Yeah, it's still yeah. And it's still the largest single source

of of all of our energy consumption. And we're well over 70% fossil fuels in

general. And there is often when you listen to

people discuss energy, there's a tendency to confuse energy and

electricity. Right.

And will often be told that 60% of our energy or 40% of the 70% of our energy

on any particular day comes from renewables.

But what people actually mean when they say that is not energy, but electricity

is in fact we remain a like all economies, fully based on on fossil fuel

use. I mean,

electricity is a little bit more than 20% of the UK's overall energy

consumption, depending if you look at like fossil fuel energy consumption,

only 13% of it actually goes to electricity.

So you can have a strategy for electricity.

You can have a strategy for. Electricity security, but it can't be

the same. You know, just as a matter of logic as

an energy security strategy.

And if you say which is really, I guess the the Ed Miliband, you know, like

position, which is, well, actually, you can't have energy security from fossil

fuel energy.

To which actually that argument in itself I have some like sympathy for.

You know there is something that actually is is a rollercoaster that has

long been a roller coaster about fossil fuel energy consumption.

Certainly when oil came into the. A picture, but nonetheless is that if

you are going to have a strategy to change that, then it has to be

simultaneously a strategy for decarbonising electricity and for

electrification. It involves the electrification of those

things that we're presently using oil and gas for.

And if you look at the present government in Britain's energy policies,

almost all of it is directed at electricity and very little of it is

directed at electrification. So even in its own terms that, you know,

that is a problem and you know, this phrase, you know, clean power is, you

know, is like bandied around. I think the power is a you know, I'm not

saying a deliberate obfuscation. I don't think that.

But but but it confuses because power in energy terms isn't a meaningful term.

We should be talking about energy or we should be talking about electricity, the

different things. Yeah.

And the idea of electric trying to electrify more than we have already

would be hugely expensive. Well, I think different strategy,

actually, in terms of certain things is though, we you know, where we were, you

know, in some in principle at least, there are easy wins.

We're not even doing that. I mean, if you look at electric trains

in this country, you know, the electrification of the rail network, I

think is under 50% actually, of our rail network is actually like electrified.

This is something that's stalled, you know, like for a long time, you know, in

this in this country, because actually it's not difficult to do.

I mean, I mean, what that technologically, you know, difficult is

an absolutely known thing to do for obvious reasons.

We've already got electric to fight like track.

That's an obvious thing to do. But actually, as far as I can see, the

government doesn't actually have a strategy for the complete

electrification of the railways. So I suppose what we what we in the UK

have learnt for those of us who didn't know it already, is that while the

fossil fuels market is extraordinarily unstable and will remain unstable and

has always been unstable, you kind of have to live with that because

nonetheless fossil fuels create the foundation of our economy completely.

So how do we in the UK try and stabilize our own supply of fossil fuels?

And one of the things that this is this whole thing is brought up is this

argument again about the North Sea. So you have one side of the political

world saying, well, what this tells us is that we must go further and faster

with our attempt to use renewables. And the other side of the argument,

Well, well, yeah, let's do that. But at the same time, why don't we

encourage more exploration and exploration and production in the North

Sea? Why don't we actually move ahead with

some fracking? Isn't that not possible?

Let's bump up our own production of fossil fuels because that will make us

more secure. Where do you come down on that?

Well, I mean, I'm generally of of the view that we need to be very open minded

about the the the North Sea and that we really need to get out of

this binary that we've got into of it's, you know, like fossil fuels versus

renewables. And Keir Starmer was using like the

other day and for the reasons that we've just been talking about, it doesn't even

make sense in its own terms because right now is you can't substitute

renewables for most of the things that fossil fuels are doing for us just

because of the way that we set things up.

You can only think about mindset, about electricity, and that only applies to

gas, given that we don't use oil for electricity.

And I think that what we have to bear in mind, though, is that the North Sea

isn't going to be more doing more in the North Sea, which I'm in favour of, isn't

isn't going to be a panacea because to get some of the benefits of that, we've

got to revisit some of the the policies that we've put in place, you know, like

decades ago in the way in which we treat like the North Sea.

I mean, for one of the things that we do obviously is to export about 80% of oil

that we produce in the North Sea. And we do that because we don't have

refineries in this country that can actually deal with that.

Well, with the kind of oil that's now comes out, the kind of crude that now

comes out of the the the North Sea. And I think this whole issue about what

we do about refineries is actually a bigger picture than that, too.

I mean, it's one of the reasons why we're in this position, like of

importing as much aviation fuel as we do, like from the from the Persian Gulf,

because our refineries we've only got four oil refineries left.

You know, they're not set up to do that. We have to do more given the way we

produce oil. You know, I think I'm right to say is is

that we haven't opened a new refinery since 1969, I want to say,

and that we closed another one.

We've been they've been closing down, you know, like for several decades now.

The grangemouth in Scotland, like closed like that.

Which did. Which did.

It's one of those didn't it. Yeah.

Yeah. One of those oddities of like when we

had the boom of North Sea. So the North Sea.

The major North Sea oil discovery was 1970 year after we last opened a

refinery. That didn't go hand-in-hand with saying

that we need a strong refining and domestic refining

operation. The North Sea was from the start, quite

orientated to production for world markets.

And then on the gas side is we've set up a way of like pricing.

That effectively means that the gas that we do consume from the North Sea, we end

up paying pretty much the same as if we were consuming it, you know, from

liquefied natural gas purchases like in the in the global market.

So again, if we want to get the benefit of the macroeconomic benefit, the

economic benefit from more domestic gas production, which is a good would be

like a good thing. We've also got to look at the way in

which that we we we deal with gas in relation to the electricity at least at

least in relation to like electricity. So there's a lot of things that are

coming in terms of the decisions that were made in British energy policy for

decades, not just like the last decade and a half or so.

They're really coming home to roost is a complacency I think, that we had through

the North Sea years, through the boom, North Sea years, I mean, by that, which

was that markets would and global markets would be the, you know, the

solution to energy security.

And it's just not the case that they are.

But all these things, these are policy choices.

Right? So, well, it may take time.

Pretty much all these things can be reversed.

It would be possible for the UK to reintroduce a fairly hefty element of

energy security over, say, a five year period.

Yeah, I mean, I think that what we need is a like a rethink of a whole set of

things that we do in energy policy. You know, the I think it starts to make

sense if you think in the nineties that the UK across parties it wasn't

dependent on which political party was you know like in office made a bet

essentially that there wasn't really serious geopolitical risk attached to

energy. And then that's why the markets plus

some regulation could do the work and of the state

stayed out of it. Um essentially even to the point where

you know we got rid of having an energy secretary in the 1990s.

We only got one back in, I think it was 2008.

You know, energy was just consumed on the, the Department of Trade and

Industry. I think that we embraced in a way much

more than the Americans like did this this notion that the markets were the

solution to all energy questions. I'm not saying that markets are the

solution to some energy questions, but the idea that the state

can just be completely like largely like hands off and that doesn't have to deal

with like geopolitical like risk and supply chain like risk.

I think that that's turned out to be an incredibly dangerous illusion and naive

as well. So if you could start tomorrow, let's

say that you had Ed Miliband's job. We all quite like that.

Well, what would you do immediately? I mean, I think you've to review

everything and then say, I'm not saying that because I think that you actually

have to throw everything out. I mean, I think that in this respect, Ed

Miliband not like is why is right. The energy transition is necessary to

improve long term energy security as well as the climate change like issue.

But you have to be able to think about the short term and the medium term as

well as the the long term. And I think that's where we are like in

some sense imprisoned. And this is where I think that the net

zero question does come into play because what net zero did not just from

the 2019 legislation but from the climate change out back in like 2008 is

is create a pretty strict legal framework in which energy questions

really have to be thought about legally through emissions, the carbon emissions.

And then that makes it actually quite difficult to adjust

to actually review everything because we've got a whole set of priors that are

legally, legally built into the way in which energy policy must be and must be

considered. I mean, I think that there are, you

know, the the easy win, if you like, would be to, you know,

make a decision on Rosebank and Jackdaw, you know, the fields in the the North

Sea where the government or the energy secretary has been sitting on for quite

some time now without making a decision, make a quick decision about that, to

allow them to to to go ahead. That would be a start.

They've been a lot of losers and not so many winners from this war so far, but.

One of the big winners here seems to be Cole.

Certainly in Asia. I mean, I think this is what's actually

quite revealing about Europe's weakness. And it isn't just about Britain, though.

Britain actually, I think, is probably Exhibit A WACOAL is concerned because,

you know, we don't have any coal powered reactors left.

We closed the last one down at Ratcliffe.

And so a few years ago, what happens in Asia and certainly in China and in India

and Japan and South Korea, actually all the major economies is when the price of

liquefied natural gas is like too much. They switch from electricity purposes to

to more coal. And that is not an option for like

European countries, certainly not an option like for us.

And again, I think it goes back to like Britain's like structural like weakness

is there are things you can fall back on in the emergency

that are reliable. Coal is one, nuclear is another, and

hydropower is a it is another. And Britain has relatively little of

those three things. As we know, we haven't finished building

a nuclear reactor since the middle of the 1990s, when sizewell be

open. At the moment, Hinkley Point C looks

maybe like 2030. We don't have a coal power.

Station and we don't have a country that's well suited at all to like hydro

power. So that makes us like structurally

vulnerable and we simply do not have the options of in the emergency burn coal

that Asian countries and some European countries still have.

Yes, we just removed all the for policy reasons, remove the optionality from our

system. Yeah.

And we're very we're very locked in from a sort of accumulated set of decisions

that I'd say have been made in a way going back to the seventies even.

Well, this is during the nineties. It's just really depressing.

What about fracking? I mean, that conversation has come up

again in the UK and we saw phenomenal success as being in the U.S., which of

course is fairly insulated from their own war because they have this is

fundamental energy security in the U.S., which we obviously don't have.

Would it make sense for us to pick up that conversation seriously again?

I think the thing that's difficult about like fracking in Europe is, is like if

you look in the early part of the 20 tens and there was a lot of hype placed,

particularly actually in Poland to some extent in Ukraine, and it's actually an

interesting part of the whole Russia Ukraine story about fracking.

And you see the US companies like involved in that.

You actually see, I think that the Obama administration was pretty keen on

pushing like fracking like in in in Europe, Poland, not the most propitious

but actually quite a lot of money was like spent there.

And quite simply the rocks don't fracture in the same way we have we have

different kinds of rocks. Yeah.

The geological prospects of fracking in Europe are just not the same as they are

in the United States. Now, that isn't necessarily to say the

whole thing is just a write off and not not to be like pursued or thought about.

But I don't think we should be under any illusions.

Here is, as I say, if you if you look in the Polish case, there was a lot

invested in the end. No, no reward.

So just because there are shale deposits, it does not mean that fracking

in a European country is a commercially viable proposition.

Helen, is there any chance that we can end our conversation on a note of

optimism? Where would you like to go, Merryn?

I like to be anywhere. Anywhere at this point,

Is there anything that we can say that is hopeful for the UK when it comes to

energy security? One thing I do think is it.

Yeah, one thing I do think is that, you know, the level of understanding about

energy questions

in politics I think is rising like really

considerably. Well, thank goodness.

And I've been talking about like energy, you know, on podcasts and in one way or

another since about 2016, like 17 when I was doing talking politics.

And to be honest, when I used to mention it like that, I always thought, like,

people would just say, What is she going on about?

And then there was a big change for obvious reasons, like in in 2022, like

with Russia's, like, you know, invasion of Ukraine.

And then I think it like faded away again.

But now we've had, you know, in some ways in supply terms, the biggest energy

like shock of peacetime that there has been.

And I don't think it will fade away quite so much like this time.

I think that we're actually reached a point in some sense like of no return

where the reckoning, if you like, is concerned.

And that I think for the UK is it is a good thing because we've got to like

undo like a mindset that essentially, um, left us with an eye out, an energy

strategy without an energy strategy in the world as it was while then the world

as policymakers wanted it to be. And now the world citizen.

We have to be serious. And I think that's a good thing.

I think you can see movement on, on the nuclear issue in terms of willing to

face what it actually would mean to get more nuclear reactors built.

I think there has been movement from the start, the government on that

issue. So I think that those are good things.

Okay. So the conversation has become serious

that we can follow this on that better late than never.

Yeah. Thank you very much for joining us

today. It's been it's been absolute pleasure.