Armageddon deferred?

Donald Trump has, perhaps unsurprisingly, blinked again. The US President extended his deadline for destroying the Iranian electricity system by another 10 days.

Insisting that productive talks are ongoing with unspecified representatives of the Islamist regime in Tehran, Trump said the strikes – which would trigger devastating humanitarian impacts – are now deferred until 6 April.

I jumped into the studio to record a brief emergency episode of the Energy Flux podcast to bring listeners up to speed on this development, and several other matters on my mind.

Chief among these is the question of regime change in Iran.

The entire energy future of the Middle East will be defined by the fate of the Islamist theocracy; if clings on, the lingering threat of Hormuz closure could stymie oil and LNG investments for years, if not decades.

But toppling the Islamic Republic does not seem possible without a ground invasion that incurs huge casualties and intolerable collateral damage, particularly for the very Gulf states that are desperate to extinguish the Hormuz threat for good.

So, no easy choices. Here’s the episode:

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📺 On the airwaves

I was live on Al-Jazeera yesterday to discuss the worsening global energy situation amid prolonged closure of Hormuz.

The anchor was keen to explore the likely impact of further military escalation against critical energy and desalination infrastructure across the Gulf region, as well as the brewing fertiliser crisis that threatens food security.

I tried to explain that, even if the worst case scenario is avoided, the world still faces an unprecedented commodity supply shock that markets are failing to price adequately (as I explored in this week’s Chart Deck).

I’m not sure how well the message landed. Judge for yourself:

You can catch up with all my TV and media appearances on the Energy Flux website – here is the link:

Media appearances

I love talking energy. Here’s an evergreen list of recent podcast and media appearances.

💥 Energy Flux 💥Seb Kennedy

🗞️ In the news

I have been inundated with journalist requests and quoted in all sorts of news outlets over the last couple of weeks, far too many to list here.

But one in particular is worth mentioning: a very interesting Reuters report about the volume of LNG lost due to Hormuz closure and the 3-5-year outage at the two Qatari LNG trains damaged by Iranian strikes.

The report cited three big consultancies, which estimate that the market is facing the loss of around 30 million tonnes of LNG this year alone. Per the report, that is “equal ​to about 500 LNG cargoes, enough to meet over half of Japan’s annual imports or Bangladesh’s for five years.”

I see those estimates as rather optimistic, because they assume resumption of production from June onwards. I am not convinced that exports would be able to ramp up as quickly as that, even if peace was magically declared tomorrow.

The reporters were kind enough to include this quote from me:

“There's just no way to easily replace the lost volumes, and no amount of portfolio optimisation or cargo swaps will bridge the gap between the lost supply ​and current demand... which is a significant blow ​to energy security for those countries that are ⁠relying on those volumes,” said Seb Kennedy, independent analyst at Energy Flux.

To read the full Reuters article, click here.

Have a great weekend,

–Seb