When Geopolitics Disrupts Energy Systems

Geopolitical conflict has long shaped the evolution of global energy systems. Over the past 70 years, periods of relative stability in oil and gas markets have repeatedly given way to disruption, from the Suez Crisis to the oil shocks of the 1970s, and more recently to tensions in the Middle East. These episodes have often prompted governments and markets to rethink how energy is produced, sourced, and used, sometimes reducing vulnerability, and at other times creating new risks that only emerge over time.

But these disruptions have not all played out in the same way. Some have triggered significant shifts in how energy systems are organized, while others have had more limited and short-lived effects. In some cases, efforts to manage risk have led to lasting changes. In others, they have introduced new dependencies that only became visible later.

On the podcast, Helen Thompson, professor of political economy at the University of Cambridge, explores how major geopolitical disruptions have reshaped energy systems in the United States and globally, and the policy and market responses that have followed. She also examines the vulnerabilities and pressure points in today’s oil and gas markets, and what recent tensions in the Persian Gulf may reveal about the resilience of the current system.

Full Transcript

Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone.

Over the past 70 years, global markets for oil and gas have experienced periods of relative stability followed, it seems inevitably, by periods of disruption rooted in geopolitical conflict. Oil markets in particular have seen a number of major interruptions, from the Suez crisis of 1956, to the oil shocks of the 1960s and ‘70s, and a new round of conflict-driven disruptions this century leading up to the war with Iran. While the drivers of these conflicts have varied over time, their impact has often been to alter the trajectory of the global energy system as countries and markets have sought to reduce their exposure to the vagaries of that system or to particular parts of it. Some of these efforts have been successful. Many have created new vulnerabilities that only became apparent years later.

On today’s podcast, we’ll explore the history of major geopolitical conflicts, and how energy systems have been reshaped by them, with Helen Thompson, a political economist at the University of Cambridge. Helen’s work focuses on the intersection of energy, geopolitics, and economic change, and on the role of conflict in shaping energy systems. She’ll walk us through key turning points and the policy and market reorientations that followed in the United States and globally. She’ll also explore the vulnerabilities and pressure points in today’s oil and gas markets that recent tensions in the Persian Gulf have exposed and what they may imply going forward. Helen, welcome to the podcast.

Helen Thompson: Pleased to be with you, Andy.

Stone: So we’re going to be talking today about how energy systems have responded to major geopolitical shocks over time, and what those moments can tell us about where the system is under strain today. And I just want to promise you I’m not looking for predictions on where the war in Iran is heading, or what the impact will be on the energy system. But I’ll of course be asking for your thoughts on the vulnerabilities in the system that the war may be highlighting.

So to get a start, I want to note that you pointed out in an earlier conversation that the structure of the modern global oil market really began to take its current form when the Suez Canal was closed, I believe for the second time, in 1967. And there was also a brief oil embargo at that time. Before we get to that event, I’d like to ask you if you could start us out by describing the market prior to that 1967 disruption. How global was the oil market at that point? Who were the key players? And what was the balance of power, again, leading into the late ‘60s?

Thompson: This actually is a really interesting question, Andy, because in lots of ways, at that time, there wasn’t really a global oil market. At least not in the sense that we would now think about that today. And one of the reasons for that was that the United States was pretty much self-sufficient. Not entirely so. And that there was an effective ban on both the exporting of oil and the importing of oil.

So the United States system if you like, where oil was concerned, was quite closed. It was dominated by independent oil companies, particularly in Texas. Then there were the international oil companies, what was sometimes called the Seven Sisters. There were seven of them. Five of them were U.S. companies, and two of them— one was British Petroleum as it then was, and the other was Anglo-Dutch Shell. And they dominated production elsewhere in the world, minus the Soviet Union. And particularly, obviously so in the Middle East. And Middle Eastern oil was primarily going to Western Europe and to Japan. And then there was the Soviet bloc, which was in some ways self-contained, but was beginning to export oil at a reasonably significant volume to a number of West European countries.

And at the beginning of the decade, so the beginning of the 1960s, when Kennedy was in the White House, the United States had actually tried to restrict that trade by making it difficult for companies in West European countries to participate in the building of the pipeline, the Druzhba Pipeline. But by 1965, that effort had come to an end, and the Druzhba Pipeline was up and running.

The Johnson administration was accepting that there was going to be an oil and subsequently gas relationship between Western European countries and the Soviet Union. So on the Soviet side, you can already see the old order, if you like, cracking, in terms of the Soviets coming into the system for Western countries. But at the point of 1967, there was still quite a clear separation between where Western Europe was getting the rest of its oil from, the Middle East, and where the United States was getting its oil from, domestically.

Stone: So in 1967, during the Six Day War, the Suez Canal closes and it stays closed for eight years. What did that actually disrupt in terms of how oil moved around the world?

Thompson: This is a pretty significant blow for the Western European countries, because they had been used to oil that wasn’t coming through the pipelines out of the Middle East, which were— there were only principally two— coming out of the Persian Gulf, up the Red Sea, through the Suez Canal, and into the Mediterranean. And it was to keep the Suez Canal opened at Britain and France, with Israel had gone to war with Egypt in 1956 until Eisenhower brought that operation to an end by the amount of financial pressure that he put on Britain.

And that moment was something that was regarded by the Western European leaders as a turning point because it effectively had been the Americans saying that Western European powers couldn’t militarily take responsibility for their own energy security. So for the canal then to close for eight years, meaning that oil that was coming out of the Persian Gulf had to go around the African way, which was much further distance, more expensive, that was a pretty significant blow in itself.

And then it came, because it was part of the same set of developments in the Middle East that year, within the same months as Britain being effectively kicked out of the Middle East as the imperial power by Britain’s defeat in Aden. And it was in January 1968 that the then-Labor government announced that Britain would be withdrawing from east of Suez. And that meant that Britain acting as the naval power that would guarantee freedom of navigation through the Persian Gulf— so, by the end of the ‘70s the United States would assume— that came to an end. And in the implosion, if you like, of the position of the canal and the British position in the Middle East, we start to see really assertive Arab nationalism about control of oil production itself. So we see the first nationalization of the assets of the Seven Sister companies. That starts, really, in Libya. And then by the end of the 1970s, most of the oil reserves, if not all the oil reserves of any quantity in the Middle East are under state control.

Stone: So in 1967, when the Suez Canal is closed, that doesn’t actually disrupt the flow of oil. But it does mean it takes a lot longer for it to get to market. It’s more expensive to do so. And what exactly then causes, as well, the countries in the Middle East to start to nationalize? What’s the actual impetus for that?

Thompson: Well, I think there’s several different things that are going on here. One thing is earlier in the decade actually, which in a way leads the formation of OPEC in 1962 as an oil producer’s cartel, which includes Venezuela. And indeed, Venezuela takes a quite important part in initiating OPEC.

In a way, the driver there is actually the Soviet entry into the market. Because the response of the international oil companies to that is to lower prices to compete. And that doesn’t suit the oil-producing states themselves, the governments, because then they lose revenue. So you can see at that point that there’s a tension growing. I mean, it’s been there for other reasons, but a new tension, between the interests of the oil-producing states and the interest of the international oil companies.

And then, in a context in which British imperial power comes to an end in the Middle East, that is a really decisive moment in terms of the politics of oil in the region. Because the whole presence of the international oil companies, including the American international companies, is bound up with the way in which the British and the French originally acted as imperial powers there in the wake of— well, really, after the result of the first World War— and created the space for the international oil companies to operate. Offered protection for them in some sense.

So once you have the— if you like, the imperial unraveling, the unraveling of British imperial power— the corollary is more Arab nationalism. And it’s also Iranian nationalism in the end as well. But it starts with Arab nationalism. And then that manifests itself, or one of the ways in which it manifests itself is the seizure of assets.

Stone: So the countries have taken control of their own resources. And then in 1973, we have the first oil embargo. And the oil shocks of the ‘70s— that one in ’73, and the following one in 1979, were particularly disruptive for the United States. Why was that the case? And how did policymakers in the U.S. respond? If you could, give us a little bit of background as well to what happened in ’73.

Thompson: Yeah. I mean, one of the things that’s important to see here is that just as the British position was unraveling from 1967, that the American position is getting quite a lot more difficult. And that is because in 1970, then-U.S. domestic oil production, prior to what would happen with shale in the 2010s, peaked. And so the US, through the course of the 1970s, would be on a very rapid trajectory to becoming the world’s largest oil importer.

And so the United States now had an interest for itself in importing oil from the Middle East. And it had interest in finding ways to pay for that oil, particularly after the price of oil became more expensive. And that actually begins before the 1973 shock that comes from the Yom Kippur War. You can start to see increases in oil prices in the United States, at least by 1972. Indeed, there’s actually some shortages in 1972, and the prices rising quite significantly in the summer of 1973 as a result of meetings between OPEC and the oil companies. So the embargo and the increasing prices from the Yom Kippur War comes on top of what is already a structural upward pressure in oil.

Now, I think from the point of view of the US, with the first oil price shock, there’s actually a two-edged view to it or double-sided view to it. Because for consumers— and the Nixon administration is well aware of the problem for consumers— higher gasoline prices is a big problem. But at the same time, the big hope in terms of not becoming too dependent upon the Middle East in the medium term, is offshore oil production. And that includes Alaska and it includes the North Sea. Because at that point, offshore production there had been pretty much confined to the Gulf of Mexico.

There’s actually quite some hope at that point that there’s going to be offshore Chinese oil production as well, that the Americans are willing to back. Now, the thing about offshore production is it’s quite a lot more expensive than onshore production, and it needs high prices in order to make it commercially viable.

Stone: So, ‘73 creates that high price environment for that? Is that what happens?

Thompson: Exactly, yeah. So, there is an advantage, the first time around, to high prices. And you might say, I think, that the advantages are bigger than the disadvantages, from the United States, with the first oil price shock. I think the second oil price shock is different. It’s obviously that the high prices still help where offshore production is concerned. The inflationary impact the second time around hits really hard. And that’s the context, really, in which the “Volcker Shock”— so, the tightening of monetary policy when Paul Volcker arrives at the Federal Reserve at the end of the ‘70s happens.

Stone: So, we’re also seeing at this point a push for a more flexible and diverse energy system from the government in the United States. We see the Public Utility Regulatory Policy Act of 1978, or PERPA, which provides some incentives for wind and solar. We see the development of the Department of Energy. So, more oil and gas offshore production— oil production, I guess, primarily— as well as re-emphasis on coal power and looking at some new sources of energy, right? So, we’re seeing this new inflection point in the policy of the United States. It had been really overly dependent on oil.

Thompson: Yeah, and you can see it, actually, in terms of the push that the Carter administration makes in terms of solar power. You know, think of the solar panels on the White House. And this is replicated in Europe, in Western Europe. The first real push for wind comes in Denmark at the end of the 1970s, in the wake of the second oil price shock now. So, trying to diversify energy supplies— energy sources, actually, would be a better way of putting it— is definitely part of what happens in the 1970s.

I mean, probably the most significant example is actually— in terms of its long-term consequences, anyway— is the way that the French really accelerate their nuclear power program after 1973. I mean, it had started. It had been driven by the Suez Crisis in 1956, when the French were optimistic that, actually, nuclear power could directly replace oil consumption. Turned out to be a false hope. But the French pushed big again— as do the Germans initially, the West Germans, initially— on nuclear power after 1973, because dependence upon oil is seen as a risk that is too great for countries that don’t have it.

Stone: So, again, we’re seeing these at key inflections. Sixty-seven. Following that, we’ve got the nationalization of the oil reserves resources in the Middle East. That is obviously still the case today. Then we have these shifts following the oil shock of 1973 in particular. And then there are a number of additional conflicts involving Iraq. The first one, the Gulf War in 1990. And then in 2003, we have the U.S. invasion of Iraq. And you’ve pointed out that that 2003 invasion and conflict in Iraq really was the next important inflection point where conflict had an impact on policy, particularly here in the United States, but more importantly, on oil markets. What made that moment so important?

Thompson: I think the thing about the Iraq War is that it comes at a particular moment in time in which the relatively benign oil markets or situation in the oil markets that prevailed from about 1982 through to the early 2000s was coming to an end. If you look at that period, there are bits when oil prices— or times when oil prices are very low, like 1986. There’s a spike in 1990 with the first Gulf War. But generally, it’s a period that is crisis-free, where oil is concerned, from the point of view of western countries. Not true for developing countries.

What’s beginning to happen at the beginning of the 2000s is that people with some foresight can see that that that era is coming to an end. And it’s coming to an end for two reasons. First of all, that Asian oil consumption driven by China is accelerating. And China’s, emphatically so, after China joined the World Trade Organization. China enjoyed those years of spectacular economic growth. And because the world’s largest oil fields were aging. So I think by the beginning of the 2000s, 19 of the 20 largest oil fields in the world have been discovered before 1970.

And what you can see is that by 2005, so two years after the war began, that oil production had indeed stagnated at a time when oil demand was accelerating. Because of China’s demand principally, but also, which is interesting, India’s. And that led to that big spike in prices, the largest one, in terms of how high they went, that there’s ever been, in first half of 2008.

So the thing, then, about the Iraq War was that Iraq, at the beginning of the century, was one of three oil exporting countries that had sanctions on it. Iran, Iraq, and Libya. If you look at the Cheney report— that was the report that Dick Cheney as Vice President oversaw in his first months in office for George Bush— you can see the argument is that this is unsustainable, having sanctions on three oil-producing regimes. At that time, the idea of regime change in confrontation with Iran seemed untenable. Iraq was another matter. Sanctions came off against Libya in a different way. But there was a clear oil logic, regardless of what one thinks about the morality of the war and the way that the war was then executed, which was that if Saddam Hussein was removed, a pro-western regime was in power in Baghdad. And if it were to open up Iraq’s oil fields to western oil companies, then Iraq could be turned into a major oil producer. Indeed, the first Iraqi government after the civil war effectively ended— so the one that first issued the licenses which brought private oil companies back into Iraq— had hopes that Iraq could be turned into a producer of 12 million barrels a day. That would make it comparable with Saudi Arabia. That’s not what happened.

But I think you can see that the hope that the western oil companies could be back in Iraq, that that might even be the beginning of something bigger in terms of challenging state control of oil reserves in the Middle East, and that Iraq could be producing much more oil than it was under the sanctioned regime and with the input of western technology. And that that would be something that was necessary in order for the world economy to accommodate China’s rise as an oil importer.

Now, as we know, things didn’t go to plan. But I think it makes sense to think that the subsequent U.S. shale boom was in many ways, in logic anyway, the replacement for the failure of the Iraq War to turn Iraq into the kind of oil producer that Dick Cheney had hoped that it could become.

Stone: So it sounds like you have kind of parallel responses here in the 1970s. You have high oil prices. That creates the environment in which offshore oil development off of the United States becomes economic and that moves forward. And then in the early 2000s, you have a similar situation where the war in Iraq and other issues create a high oil price environment, and that makes it economic to push forward with shale. And we have this whole revolution for oil and gas and a very significant increase in production of those resources in the United States.

And it’s interesting that in the early 2000s, the U.S. and Europe do respond very differently. Again, the U.S. turns inward toward more domestic fossil fuel production, while Europe looks outward, particularly to Russia, even as it begins investing in more clean energy. Why do these paths, at least in my understanding of them— why do they appear to diverge so sharply?

Thompson: No, they do diverge very sharply. You’re absolutely right there. In the simplest sense, the European countries did have very little prospect at all for shale oil. There were some prospects, at least some of them believed—it was pushed furthest in Poland— for shale gas. But the problem was— I mean, there were quite a number of companies, several companies, that spent a lot of money in Poland trying to do shale gas. But the rock did not fracture in the same way as it did in the U.S. formations. And there was a backlash in a number of European countries against the whole idea of fracking.

But I think, actually, the decisive explanation about why there hasn’t been a shale gas push in the European countries is ultimately more the geological one, is that the United States was geologically advantaged over the European countries. But also, that there was a much stronger political and corporate will to get on and try, in the U.S. The conjunction of the monetary environment and the technological capacity of many of the companies that were involved in the shale boom, which weren’t initially the big oil and gas companies, did something that was in its own terms astonishingly successful, and was really necessary for the world economy to move on from the oil crisis it experienced in 2007-2008.

Stone: And that was actually a market driven thing, right? That was not government policy behind that, very different from what happened in the ‘70s, at least in the United States.

Thompson: Yeah. Yeah. And as I say, it was driven really by, to begin with, a lot of small independent companies. It was kind of more comparable, in a way, to the way in which the Texas oil fields developed at the beginning of the 20th century. The absolutely big fields, which wasn’t driven by Standard Oil, but was driven by Texas wildcatters.

Stone: So, also over this time, starting in the early 2000s, the EU becomes much more dependent on Russian oil and gas.

Thompson: Absolutely. And the thing is, is that this story has been, in a way, building away. You know, in one sense, it’s been building away since the Suez crisis in 1956. But it really accelerated in the 1970s. And that was a decade in which West Germany really became the epicenter of the European, then Soviet, gas relationship. And a whole infrastructure for transporting gas through pipelines to Europe was built. Those pipelines were actually expanded in the 1990s, after the dissolution of the Soviet Union.

Now, what then becomes an issue, and really becomes a big deal by the end of the 2010s, is the fact that these pipelines which had been built to go through the Soviet Union from the 1990s, go through the independent former Soviet states, most consequentially, Ukraine. And what happens for the Germans is that the Germans not only doubled down on wanting more Russian gas— in part because they turn against nuclear, but other things going on too. But they also become fed up with the problems that are caused for them about those pipelines by the state of Russian-Ukraine relations.

So they want alternatives to transit through Ukraine. And that’s where this desire to build pipelines under the Baltic Sea, the Nord Stream pipelines, come from. And Germany agrees to build two. The first one opens in 2011. And the second one was due to open by the end of the decade, but effectively U.S. pressure, particularly once Trump became president the first time around, made that very difficult.

So what you have by the start of the decade that we’re now in is two things, is you have acute European dependency on gas, in particular through these pipelines, and the fiercely contested geopolitics about which pipelines are being used. And when it comes to the Russia’s invasion of Ukraine, even before Russia was actually invaded, then such pressure has been put on the German Chancellor— then, Schultz— that he effectively has to suspend the possibility of transit through—of opening the second Nord Stream pipeline. And that’s before it’s blown up in the autumn of 2022.

So Europe has a huge crisis that year. Because essentially, a dependency that was manifest in material infrastructure, is just, first of all, repudiated. And then the material infrastructure, or at least part of the infrastructure, was blown up during the war.

Stone: And at the same time, the EU shifts to the U.S. for more of its gas supply through LNG exports, again, from the United States.

Thompson: Yeah. I mean, this is the thing that’s really striking, is that the dependency of European countries on the United States for gas just deepens and deepens and deepens at this point. What you had in the 2010s was that a group of states, particularly Poland and the Baltic states, were very positive about U.S. liquefied natural gas imports, because they saw that as an alternative to Russia. I think it was the Polish Foreign Secretary who said, when the first LNG imports arrived in a Polish port, that Poland had got its sovereignty back again.

But the Germans took a very different view about that. They didn’t want U.S. gas imports. They wanted Russian gas imports. And they then very suddenly, after Putin had terminated the supply to Germany from the June of 2022, found themselves having to import U.S. gas. And even if you take a country like Britain— which had not been hostile to U.S. LNG imports in the 2020s but had already got quite a lot of contracts and was purchasing a lot from Qatar. In the last few years, you’ve seen a complete about turn there. So, Qatar used to be by far the biggest exporter of LNG to Britain. And now the United States is by far the biggest exporter of LNG to Britain.

So we have a situation at the moment where our Prime Minister, Keir Starmer, is wanting to be quite confrontational with Trump about the Iran War. But actually, even in the course of the war, since it began on the 28th of February, Britain’s energy dependence upon the United States has actually increased.

Stone: So, let’s talk more about this current moment that we’re in. And the war with Iran has led to what looks like a worst-case scenario involving the Strait of Hormuz and Iran’s ability to stop shipments of oil and gas through it. And Iran has also been able to damage energy production and export capacity in its Gulf neighbors. This seems like an obvious risk, but the global market really has allowed itself to be built in many ways around the Gulf, around the Strait of Hormuz.

And broadly speaking, what does the reality of this choke point mean for the market going forward? Do we hope for the best, that hostilities resolve and Iran does not exercise its power to block shipping, either as a result of some sort of peace agreement or through force? Or does the market now see a major need to somehow reorient away from the Gulf? I know we’ve been talking about the U.S. orientation of the EU for gas, but obviously, are there alternatives if the Gulf becomes somehow inviable?

Thompson: Well, I think there’s several things going on here. And I think that there’s no doubt that the Arab states are going to look for alternatives to transit. Not necessarily because they see transit through the Gulf and pipelines as mutually exclusive, but that they need alternatives in the emergency, so to speak. Like in Saudi Arabia, it has a pipeline that has been essentially its lifeline during this crisis, a pipeline that goes into the Red Sea.

I think the crucial thing we have to understand, though, is that this is a historical watershed in the Persian Gulf. At no point in the decades in which there have been conflict in the Middle East since— let’s say, since 1967. Because there is one earlier instance, I think that does matter. Since 1967, has there been the absence of freedom of navigation through the Persian Gulf? That was something that could be taken for granted. It was something that Britain protected. There was an interlude in the ‘70s when it was really Saudi Arabia and Iran who were guaranteeing it. And then at the end of the ‘70s, then the United States stepped in. And that was the commitment, in some sense, that it made to the world.

But what we’re seeing now, I think, is not so much that Iran closed the Strait of Hormuz, but in the first instance, that the shipping insurance companies did, because they did not think that they could offer insurance at viable prices when there was a war going on across the Gulf. And that now, since Trump’s announced that the United States is blockading the Persian Gulf, that the United States has shot exit out of the Strait of Hormuz.

Stone: I just want to point out that we’re recording on April the 14th. So by the time this goes live next week, things may change. But just to make that point clear.

Thompson: At the moment, the U.S. Navy is deciding what tankers and LNG vessels can get out of the Persian Gulf. Now, that’s a big reversal. Because the United States’ commitment has been to uphold freedom of navigation. Now the United States is using its military power— at least for the time being, we don’t know at all whether it’s going to last or not— to police exit from the Gulf.

And I think in some respects, nothing can really be the same again. Because the knowledge that the United States was willing and able to do that is now part of the geopolitical calculation. And I think, in many ways, that this was something that the Chinese government had feared. I think it’s not a coincidence that the Chinese had been building up oil reserves since last summer in preparation, I suspect, for a crisis in the Strait of Hormuz. And one actually ultimately brought about by the United States, rather than brought about by Iran.

Now, I’m not saying that Iran hasn’t got some capacity to do damage here, because it certainly had the capacity to mine the Strait. But nobody, I think, knows at the moment, at least, whether Iran did, in fact, do that or not. But again, the possibility that Iran could do that in the future in a conflict with the United States and Israel and the Arab countries is part of the geopolitical calculus in a way in which I don’t think it was before.

Stone: Well, it seemed like it was always there, but this brings home the reality that this can be acted on.

Thompson: The assumption before was that Iran had got too much to lose by trying to control or mine the Strait. And Iran’s maybe now in a position where it’s already lost so much that the calculations about rationality go into another level of irrationality, if you see what I mean.

Stone: So that brings up the question, what latitude does the global market have to adjust? I mean, are we seeing adjustments on the part of buyers, either in a temporary or potentially permanent sense to orient, again, away from this dependency? Where is the system flexible?

Thompson: I think that the answer for that is different for different states. If you just take China, China in a way, or in principle, is the state that’s hurt the most. Because China imports more hydrocarbons from the Persian Gulf than any other state in the world. But at the same time, China stockpiled oil before the war began. And it already had considerable oil stored before it started this recent period of stockpiling.

And China, as a proportion of its total energy mix, does not use that much gas compared to Western countries. And if you just take a comparison between China, which has been importing quite a lot of energy from Qatar, and a European country like Italy, that was also a significant importer from Qatar, then China has the capacity where electricity is concerned to burn more coal. That is not something that Italy has. So China’s got more energy options, I think, than most states, even though in terms of volume it’s the biggest one that’s hit.

Now clearly, in more general terms, the desire will be to speed up the energy transition, to make an economy less dependent upon oil and gas. But we have to break that down into two different things. How quickly and systematically can any country decarbonize the generation of electricity? And how quickly can it electrify, to reduce the need for oil in transportation and gas in heating?

And I think that what we see in Europe is that these things are quite difficult. They’re difficult in terms of electric vehicles, because of the cost of them and the reluctance to allow for lots of imports of electric vehicles from China, which are the cheapest ones on offer. And they’re difficult, particularly for northern European countries, in terms of decarbonizing electricity. Because we don’t have grid-level storage for solar and wind. And European countries have found that building nuclear, unlike in China, takes a long time.

So however acute the desire to speed up, decarbonize electricity, the practice of it is very difficult. The Germans have been very seriously trying to do an energy transition in this respect for a quarter of a century now. And it’s not that they haven’t made progress, but it’s limited progress.

Stone: Going further on that point, in the EU, there has been pushback recently against the pace of the energy transition. Concerns have been raised that the energy transition is expensive in a time that is already inflationary. But given what’s happening in the Gulf, and I guess what I would imagine is an increased awareness and urgency around dependence on energy resources from abroad, could this create new momentum or new support for accelerated transition policies in the EU to counter this recent move away, or some of the political pressure away from an accelerated energy transition?

Thompson: I don’t think there’s any doubt that the will will intensify. Because, why would you want to keep this level of risk in your energy consumption? Particularly when none of the European powers are in any kind of position to exercise any real influence about what happens in the Middle East. Certainly not to influence the Trump administration’s decision making.

I think the question, though, is which European countries are in a position where they could realistically accelerate the energy transition? Where there are things that are easy pickings that they could do that would make a difference. And I suspect the answer is that it’s actually not that many of them.

I mean, if you take Britain as an example, there’s no doubt, at least thus far, that the energy secretary here, Ed Miliband, and to some extent, the Prime Minister, Keir Starmer, have taken the view that what is required is doubling down, to use their language, on the energy transition. But at the same time, there were people in this country, including within the Labour cabinet, who are saying that actually, the lesson of the crisis is that it was a mistake for Britain to turn its back on new offshore drilling in the North Sea. And that, actually, new fields should be licensed, both for oil and gas. And that what is required is for short-term energy security in oil and gas to be improved.

Now, that isn’t because they, at least most of them, argue that we should forget about the energy transition. They argue— and this is an argument that I make myself, too— that you need a strategy that takes the energy transition seriously, and you need a strategy that takes the immediate fossil fuel energy security situation seriously. So, I think that the political arguments, if you like, in terms of the energy transition, cut both ways in Europe. They certainly do in Britain, as a result of what’s going on.

Stone: Well, let’s look at that same scenario here in the United States. So, energy prices are up here in the US, but there are not shortages. And at least to my eyes, it doesn’t appear to be an immediate existential threat to the energy system here. Yet, high prices do matter politically, as you’ve mentioned earlier. And I wonder if this is a reality that somehow puts pressure on the fossil fuel focus of the Trump administration. What are your thoughts on that?

Thompson: I think it’s pretty clear that the Trump administration has emphatically repudiated the energy transition. I mean, I don’t think that that means that the energy transition is stopping the United States, because the states obviously matter a great deal here. And you can see that Texas, for instance, is simultaneously an oil state, and it’s a renewables state as well. It’s not the binary there.

But I think if you look at the way in which the Trump administration has both spoken about energy, set out its concerns about energy, or its ambitions about energy in the national security doctrine, and the way in which it’s acted, from Venezuela to Iran, then I think it’s clear that for this administration, these are people in it that, they see the United States’ possession of what they think of as abundant fossil fuels is one of the United States’ big advantages in the geopolitical and economic world. And they’re not going to give it up. Indeed, they regard the dependence of other states, particularly on U.S. gas, as an instrument of their foreign policy. Something to be encouraged.

I think that they are committed to a big expansion of nuclear power. I think that should be seen in the context, really, of AI, as much as anything else. But I think that the idea for them that solar and wind are going to fuel the United States’ electricity is not something that they’re going to turn back to.

Stone: And it sounds like you’re saying that it actually reinforces their view.

Thompson: Yeah, because I think that they can see that, actually, if you just look at it in terms of comparative pain through this crisis, then the United States is really at the bottom of the league of suffering as a result of what’s happened in the Persian Gulf. And to the extent, then, that others have to absorb economic problems that come from U.S. action, then I think this administration thinks that that’s all well and good for the United States.

Stone: To finish up here, we’ve covered a lot of ground. Is there anything that you would like to mention that I have not thought to ask you in the questions here, in particular regarding any current pressure points that may be revealed, in addition to what we’ve spoken about by the current crisis?

Thompson: Now, the only thing I would say, I guess, is that I think that these questions sort of play out or are going to play out, increasingly, around metals as well. I think it’s interesting that one of the other serious moves that the Trump administration has made this time around is the Greenland issue. And Greenland has rare earths. Now, whether those wearers can be mined or not, I think, is a whole other matter.

But I think that the Trump administration has made clear that it does not want foreign companies— and by which it usually means Chinese companies, in this respect— being a resource presence in the Western hemisphere. And that’s as true about Greenland as it is about Latin America. So I think increasingly, these security concerns about energy are going to play out as the geopolitics of metals as well as energy.

Stone: Helen, thank you very much for talking.

Thompson: It’s been an absolute pleasure, Andy.