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The West Asia conflict is triggering a global energy shock with Americans paying over $4 per gallon for gas, the highest since 2022, and oil prices hovering above $100 per barrel.
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00:01Hello everyone, you're watching NewsTrack with me, Maria Shaquille.
00:04The conflict in West Asia is triggering a global energy shock and now America is feeling the heat
00:11with Americans paying over $4 per gallon for gas, the highest since 2022
00:17and oil prices hovering above $100 per barrel.
00:21The Strait of Hormuz, a key artery carrying nearly 20% of the world's oil
00:26sits at the center of this crisis with much of its supply heading to energy-dependent Asian markets
00:32like Japan, South Korea and India.
00:35Analysts, in fact, now warn that if disruptions persist, the world could face fuel shortages,
00:41rising inflation and broader economic instability.
00:44The question now is that is the world at large staring at an energy crisis?
00:51Before I bring in the guest, here's a report.
00:59It's a war that many Americans disapprove.
01:02But for Donald Trump, it's a prestige battle.
01:05In America, the economic pain is clearly visible.
01:09Hit by high living costs, Americans are now paying over $4 per gallon for gas,
01:14the highest level since 2022.
01:17Fuel prices have also surged sharply in recent weeks,
01:21driven by rising tensions in West Asia and fears of supply disruptions.
01:26In fact, oil prices have settled above $100 a barrel for the first time since 2022.
01:32The warnings are only growing louder.
01:3610,000 kilometers away from Washington, even Cairo is feeling the heat.
01:40The president of Egypt has cautioned that crude could even cross $200 per barrel if the war intensifies,
01:47calling the risk not an exaggeration.
01:53I fear that targeting energy facilities, whether production sites or existing refineries,
01:59would have extremely serious repercussions on the global economy and fuel prices.
02:03Prices could surge dramatically.
02:05Some analysts and observers believe that if these facilities were disrupted,
02:10the prices of a barrel of oil could exceed $200.
02:13And that's not an exaggeration.
02:22At the heart of the crisis lies the Strait of Hormuz,
02:26a narrow but critical route through which nearly 20% of global oil supply follows.
02:31Any disruption here sends shockwaves across global energy markets.
02:36Experts warn, if the conflict drags on, the world could face fuel shortages, rising inflation and economics instability.
02:45And the impact won't be evenly spread.
02:47Asia is particularly vulnerable.
02:49More than 80% of oil passing through the Strait of Hormuz is headed to Asian markets.
02:55Countries like Japan and South Korea depend on the Gulf for over 60% of their crude imports.
03:00India too faces significant exposure.
03:02India relies on the Strait of Hormuz for approximately 40% to 45% of its crude oil imports,
03:08which equates to roughly 2.5 to 2.7 million barrels per day.
03:13But the government maintains India's energy situation remains stable and under control despite global volatility.
03:20You are seeing that many countries are falling from the world, peace, and peace.
03:47And as gas and oil supplies tighten globally, countries are turning back to the black gold.
03:52From Japan to Europe, nations are reviving or expanding coal-based power to offset rising fuel costs.
03:59Even countries that had phased out coal like Germany and the Netherlands are reconsidering its use.
04:04Once seen as a fading fuel, coal is now making a comeback driven by energy security concerns.
04:10And at the centre of this shift is China, which accounts for over half of the world's coal production,
04:17reinforcing its dominance in the global energy landscape.
04:20With coal, also comes the environmental concerns.
04:25As the war continues, one thing is clear, this is no longer a regional conflict.
04:30It's the global energy crisis in the making, and the world may not be ready for this yet.
04:37Bureau Report, India Today.
04:41And joining me now is Bob McNally.
04:44He is a former White House energy advisor.
04:47He served in that role in George W. Bush's administration.
04:52Thank you so much for your time here, Bob.
04:55One month into this war, are markets still underestimating the risk, or have we already entered a new oil reality?
05:08I think that the markets are beginning to move away from hope and optimism, almost denial, at what they were
05:18seeing,
05:19and into a more realistic appreciation of the seriousness of this crisis.
05:25In the first few days, many thought that the disruption would only last a few days.
05:33Before the crisis, few people could even imagine that anyone would be allowed to shut the Strait of Hormuz to
05:42traffic for as long as it has.
05:44Rapidan was aware of that. My firm, Rapidan Energy Group, and I analyzed a Hormuz military conflict in depth last
05:54June,
05:54and warned our clients that this is going to last many weeks.
05:58And that's assuming the United States prioritizes securing the Strait of Hormuz from the very beginning, which it did not.
06:05So I would say the crisis, the disruption is going to last longer than even we expected, and we are
06:12the only ones I'm aware of who saw this coming.
06:15But the market is beginning to, I think, downplay reassuring verbal comments, and is beginning to insist on seeing action
06:29in the form of more tankers being allowed through the Strait and really signs of a real ceasefire, of which
06:37we don't really have any yet.
06:38So, yes, I think the markets are becoming a little more realistic about the gravity, both in terms of scale
06:46and duration of this, which is the world's largest energy disruption.
06:51So if the Strait of Hormuz stays under pressure as it is right now, are we looking at $100 oil
07:00as the floor now, not the ceiling?
07:05No, I don't think that $100 will be a new floor.
07:09The price of oil is driven by supply, but also demand.
07:15And what we tend to see in history, and I would expect, again, is that when you have supply disruptions
07:23like this, big ones, and oil price spikes,
07:27what happens is demand is weakened, particularly economic growth is slowed, because economic growth is very oil and gas intensive.
07:38And so when you have recessions or downturns, that tends to quickly destroy growth and demand, and that causes oil
07:49prices to fall.
07:50You see this time and time again, 2008, the early 1980s, many recessions were caused or contributed to by an
08:02oil price spike.
08:02So no, it's the balance of supply and demand, and we can go well above $100 a barrel.
08:09We already are.
08:09And I think we'll go higher in crude prices.
08:12But at some point, I think there will be a rebalancing.
08:15I think demand is going to be hurt.
08:17And I think we will go down below $100 a barrel again.
08:20Okay.
08:20So, Bob, since you have tracked crisis like this before, but this time we are hearing about permanent damage to
08:29oil infrastructure.
08:30Would you say that permanent damage will be now seen as a game changer?
08:37Does that mean that the world no longer has the cushion of spare capacity it thought it did earlier?
08:49It's a great question.
08:50So, so far, we are looking at some permanent or long-term damage.
08:56That comes from attacks on the Ras La Fan LNG plant.
09:03A couple of its trains have been damaged.
09:05It may take years to repair.
09:07Also, it's not clear how quickly we will be able to return all of the oil fields that are being
09:16shut in in Gulf Cooperation Council producing countries.
09:20So, it's hard to estimate right now.
09:23But so far, there likely has been some long-term damage.
09:28But it's been fairly modest so far, and it could get worse.
09:33A real worst-case scenario would be that the restraint that Iran and the U.S., Israel, its allies, have
09:41been showing so far erodes.
09:43And they begin to expand attacks on critical energy infrastructure, terminals, stabilization plants, power plants.
09:52And that could make this modest, so far, long-term supply outage much bigger.
10:00One month on, what's your assessment?
10:02Who is actually blinking first in this war?
10:05Is it the producers, consumers, or markets?
10:12Well, right now, it's a staring contest, if you will.
10:17But I think in Asia, we are starting to see consumers blink, if you will.
10:23We're seeing demand destruction through government policies to mandate four-day work weeks, reduce air conditioning use.
10:32We're starting to see price caps and other policies put in place.
10:37But the hardship is going to come to Europe and eventually the United States, especially through much higher oil prices.
10:43So I think, right now, the supply outages, again, are bigger and longer-lasting than many expected.
10:52Many hope they will somehow be resolved soon.
10:55My colleagues and I at Rapid End Energy Group are not optimistic, at least about a near-term resolution.
11:02So oil prices will have to rise higher and, I'm afraid, help balance the market through what we call demand
11:09destruction, which another word for that is lower economic growth.
11:14Unfortunately, this is the unfortunate reality of global oil markets.
11:17But if you ask me sort of how this ends, if that's your question, too, I think it ends in
11:23terms of oil prices going up in three ways.
11:26So there's three ways we can see oil prices peaking.
11:31One would be if we have a ceasefire.
11:35And as part of that ceasefire, we have a resumption in transit through Hormuz without major damage.
11:43That would be the best case scenario.
11:45Another way is that the U.S. military eventually will degrade Iran's ability to threaten shipping in the Hormuz Strait,
11:54which then can resume.
11:56But that'll take, I'm afraid, more weeks.
11:59And then the third way to stop oil prices from rising, as I just described, unfortunately, would be through triggering
12:07an economic downturn globally that would destroy demand.
12:11Okay.
12:12You know, Bob, you have made an important point, you know, particularly with regards to the impact on economic growth
12:20and to be lower economic growth.
12:23Do you see that happening worldwide or will some economies be affected more?
12:29Will some economies succeed in cushioning themselves?
12:36Well, I think the world will be affected.
12:39And, however, the damage will be harder and bigger in Asia, where countries are more import dependent and vulnerable to
12:50these price shocks and even outages of oil, which we're starting to see, physical lack of supply.
12:56In Europe and the United States, we will suffer through high oil prices, reduced consumption, equity markets will go down.
13:06So the pain will be shared worldwide.
13:08But it's oil and gas consuming countries that and importing countries, particularly in Asia, I think that will be hurt
13:17the most.
13:18So are we then heading towards sustained high prices, coordinated reserve releases?
13:28Well, we are headed towards higher oil prices in the near term.
13:32But as I said, eventually it's self-correcting.
13:35We will either have a recession and demand destruction or the conflict will come to an end and flows will
13:42resume and oil prices will fall.
13:44So it's not permanent.
13:45I don't see permanently higher oil prices.
13:47So will it be like a rewiring of the global energy flows?
13:52That will change fundamentally.
13:53You know, I do think after this conflict is over with, there will be an interest in finding alternatives to
14:02the Strait of Hormuz.
14:03We can't change economic and geological realities.
14:08Hydrocarbons remain 80% of the world's energy, the lifeblood of modern civilization, and the Middle East has the lion's
14:15share of oil and gas exports.
14:18And so those realities won't change.
14:20What will change is a desire to find alternative export routes outside the Strait of Hormuz, out to the Gulf
14:29of Oman, more to the Red Sea, potentially even the Mediterranean.
14:33I think you're going to see a lot more investment outside the Persian Gulf region, in the United States, Africa,
14:41Asia.
14:42There will be a desire to invest in LNG, especially, but also oil, looking for safer places to invest.
14:50They will have an advantage when it comes to that investment dollar after this crisis.
14:54However, you can't change where the oil and gas lies under the crust of the Earth.
15:00Most of it is in the Middle East. And so we'll have to not reshape flows, but find workarounds, ways
15:07to mitigate the risk.
15:09I think you'll see higher strategic stocks held in countries, both within the International Energy Agency, but also India, Japan,
15:18China.
15:19Other countries are probably going to even increase their strategic stocks.
15:22So the world is going to prepare itself for the next emergency, I think a little better.
15:28That brings me to my last question in this conversation.
15:31What is the future of the petrodollar?
15:34What happens to the petrodollar at the end of this war?
15:41Well, in the near term, I don't see any change in the petrodollar.
15:46The vast majority of the world's oil is transacted in dollars.
15:51There is no currency that can rival the dollar yet.
15:55The Chinese would like to make the renminbi an alternative, but they don't allow capital to move across its borders.
16:03And therefore, for one reason, it's not suitable.
16:08So I think the dollar remains the basis of the petro currency.
16:15Therefore, the earnings by oil exporting countries in the Middle East will be largely recycled back into dollar assets.
16:22So I don't see that changing too much.
16:25All right.
16:26Bob McNally, really appreciate your time.
16:27Thank you for your perspective and your views on this crisis.
16:33More than a month into the Iran war, there is a clear shift in Washington's stance.
16:38Donald Trump is now signaling a possible wind down of the conflict, even at the Strait of Hormuz remains shut.
16:47But even as exit signals emerge, U.S. Defense Secretary Pete Hexith has said that all options, including boots on
16:56the ground, remain open.
16:57Is the U.S. stepping back or keeping the pressure on?
17:01Here's that report.
17:11More than a month into the Iran war, now even in America, Trump is feeling the pressure.
17:16According to U.S. media, President Trump is now ready to wind down the U.S. military campaign against Iran.
17:24Trump has reportedly told his top eights he is prepared to end the military conflict with Iran, even if Hormuz
17:30remains shut.
17:31Trump now believes a full-scale operation to reopen the waterway would drag the conflict beyond his preferred four-to
17:38-six-week timeline.
17:39Instead, Trump's focus has shifted.
17:42He may now declare that major military objectives of the U.S. have been achieved.
17:47Iran's navy and missile capabilities stand crippled.
17:51However, Trump continues to push his 15-point plan, which includes dismantling Iran's nuclear program and limiting missiles.
17:59This is a significant shift from earlier U.S. demands that the Strait must be reopened immediately.
18:04To open it up, they have to open up the Strait of Trump, I mean, Hormuz.
18:13The goals of this mission are clear.
18:15Meanwhile, Trump's top secretary Marco Rubio stated that the Hormuz blockade will end once United States military operations are over.
18:23The Straits of Hormuz will be open.
18:25When this operation is over, it will be open, and it will be open one way or another.
18:29It will be open because Iran agrees to abide by international law and not block the commercial waterway.
18:34Or a coalition of nations from around the world and the region with the participation of the United States will
18:39make sure that it's open.
18:40One way or the other, it's going to be open.
18:43While his war secretary has refused to rule out a ground invasion if needed.
18:49We're not going to foreclose any option.
18:51You can't fight and win a war if you tell your adversary what you are willing to do or what
18:56you are not willing to do to include boots on the ground.
18:59Our adversary right now thinks there are 15 different ways we could come at them with boots on the ground.
19:05And guess what? There are.
19:07The message from Trump is clear.
19:10America is possibly looking for an immediate exit and is no longer bothered if Strait of Hormuz remains open or
19:16not.
19:17Bureau Report, India Today.
19:21And even as the U.S. demonstrates its full military might, Iran is fighting a very different kind of war.
19:29One that is relying on strategy, not scale, built on low cost, high impact, designed to stretch Washington's billion dollars
19:35worth of military.
19:36Here's how Tehran is turning asymmetry into its biggest weapon.
19:42I'm leaving you with a special report. Thanks so much for watching and I'll be seeing you tomorrow.
19:48No billion dollar fighter jets. No massive aircraft carriers.
19:54Instead, swarms of low cost drones.
19:57Iran's strategy is simple. Fight smart, not expensive.
20:06This strategy has its roots in the Iran-Iraq war of the 1980s.
20:11After years of costly conflict, Iran realized it could not sustain an expensive conventional war in the future.
20:23Instead of taking on the stronger enemies in a direct battle, they came up with a strategy to make the
20:29war costlier for the opponent.
20:33And this is called the classic asymmetric warfare.
20:38Where a weaker power uses unconventional tactics to counter a stronger opponent.
20:44You hit the enemy where it hurts the most.
20:48So instead of competing with American aircraft carriers or stealth bombers, Iran turned to cheaper drones.
20:56Missiles and tactics to overwhelm sophisticated defense systems.
21:02Turning cost into a weapon.
21:06For example, a single advanced US fighter jet can cost around 80 to 100 million dollars.
21:13An Iranian drone? Just a few thousand.
21:17And it is this cost imbalance which allows Iran to launch repeated attacks.
21:22Forcing the US and its allies to spend heavily on air defense systems.
21:30Instead of investing in fighter jets, Iran invests in long-range missiles and drones.
21:37When launched in large numbers, it definitely makes the enemy tremble.
21:44Iran in fact used this strategy to target US bases in UAE, Qatar and Bahrain.
21:51Therefore making the Gulf nations bleed mathematically.
21:57Even choking the Strait of Hormuz is part of the asymmetric warfare.
22:03Here Iran, instead of building a navy similar to America, relies on smaller boats equipped with missiles and torpedoes.
22:13These small boats can move quickly and create problems for the large ships in the region.
22:20What's more interesting is Iran's military structure.
22:22It's different and can function under immense pressure.
22:27Why?
22:28Because IRGC or the Revolutionary Guards and its affiliated forces are allowed to function independently, if needed.
22:37So even if some leaders or crucial bases are targeted, Iran can function like it is now.
22:45Several key leaders, including its former supreme leader, Khamenei, gone.
22:51But Iran continues to fight.
22:54In the 21st century, war is fought not just on battlefields, but in the mines as well.
23:01Bureau report, India today.
23:03Bureau report, India today.
23:04If the American force has rivers, its transported with him at its Mexico,
23:04we Teach me everywhere.
23:04Don't RPrean.
23:042015 to Iraq.
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