Oil Analysts WARN Global Depression Incoming

0:00 Joining us now to talk about the rapidly escalating economic poly crisis, we have Sorb Amari who is the uh editor of Unheard. Great to see you, Sorb. >> Good to see you, man. >> Thank you. Thanks for having me. >> Yeah, of course. So, let's start with the picture with regards to oil, which is uh not looking great. We can put C4 up on the screen here. So, as of this morning, uh right now in the markets, I think WTI is at about $11. Uh Brent is at what soccer like $15 somewhere around there. But we have this Bloomberg analysis where a lot of analysts are saying this is going to get a lot worse. That reality has not completely sunk in. So what they say is the biggest oil supply shock in history has reached the one-mon mark. Prices have surged. Growth forecasts are being cut worldwide. Shortages are emerging

0:46 across Asia, Thailand to Pakistan. But the energy industry is warning the crisis is only beginning. And they float the possibility of oil going to $200 a barrel. So, um, you know, are you in agreement with this analysis that we have not even grappled yet with the reality of how bad things are currently, let alone how bad things are going to get? >> Yeah, I I tend to agree with the more gloomy analysts out there. The reason being that um what's not taken into account is the difference between this crisis and the 1970s, you know, oil crisis that followed the the Yam Kapoor war. In that case, it was a matter of a political decision by the OPEC, the Arab uh OPEC members to shut

1:33 off or turn on the tap. Right? That's all that there was involved. And once they decided politically to turn the tap back on, oil flowed again. In this case, the reason why this could be much more severe than the 1970s poly crisis um that are related to oil is the fact that even if the political decision were there, if the political will were there to turn the tap back on, there is damage to the entire ecosystem that makes possible the flow of oil from the Persian Gulf through the straight of Hormuz uh and into the global markets. uh you have severe damage to oil facilities in uh obviously the GCC states to varying degrees. Uh some Iranian strikes have hit those in

2:19 response to I should say to to Israeli attacks on Iranian oil infrastructure. You have shut in fields in Iraq where you know a country that uh in given day you have like 4.3 million barrels uh is now down to like 1.6 6 million barrels and after a while when you when fields are shut in for a long time it takes a long time to turn them back on. So again, even if Iran tomorrow were to capitulate, which doesn't look likely at all, and were to reopen the straits of Hormuz, the fundamental structural problem, the damage, the fact that in many of these cases, for example, and now this is not oil, this has to do with LG, but the Qataris have called force majour for 3 to 5 years. So that's all going to take a long time to get back

3:05 online. And during that time, you're going to see price spikes. You're going to see uh you know right now I just read today in the New York Times that you know two Australian states two of their provinces have made public transit free in response. You're going to see more and more of that. You're going to see fertilizer plants that rely on petrochemical products go offline. That affects farming. I mean the the ramifications are huge and legitimately like Mad Max level terrifying. And the crazy thing is that it was all a choice. It was a war of choice. It was Donald Trump and his codory deciding to do this, not something that was imposed on the United States of or the world the way like the pandemic was where it was just this random freak event and okay, who whom can you blame here? There is

3:52 blame. It's like B and Donald Trump. >> Yeah, it's so crazy. S, let's put C2 up there on the screen actually to under, you know, basically to underscore what you're saying. This is from the Atlantic. Welcome to a multi-dimensional economic disaster. And what they specifically tie here is the AI boom to a lot of the cheap energy and of course the data center already build out and drain that all of these AI data centers were already having on our power grid. This does not at all reflect a situation where you're going to have massive increases not only in energy cost globally but they also talk about how the Gulf Arab states are basically the guaranurs and investors of some 100 billions of dollars into these companies. These AI companies are basically the backbone of the US stock market. And Sar, you and I, you know, we've been deeply concerned about the US

4:37 industrial base now for quite some time. So we could have a financial crisis, an energy shock, and we're already going through effectively an industrializ or an a reverse industrialization as a result already of nearly the last year of policy. Like what does that look like not just for Trump's agenda, but for all of us as you're saying in the health of our country? >> Yeah. So the one spot at you as you said at least on equities markets was were all these AI companies and the whole AI revolution and and the potential growth that was that it was driving even as it also threatened joblessness I should say but that was in two ways dependent on on cheap energy. One was of course you you mentioned that uh you know the the data centers take enormous energy to run. Okay, that's one. And second, it was

5:24 also dependent on just oil flowings and therefore these Arab states having money that they can then invest in these projects. They're not going to invest if they're not making money. I mean, it's very uh it's as simple as that. So, that's like a double blow to the US economy. um like one of the few bright spots in the US in a US economy that otherwise was lagging in other ways that had been way too much focused on services and and and uh uh kind of low-level services and high level financial services and so on. Okay, but now we're we're at the cutting edge of the AI revolution or we were until this war was launched. >> Well, I have my my issues with the AI revolution, but there's no doubt that if the bubble pops, it's going to be extremely painful. And let me just read

6:09 because there's one other angle of the um you know the hit to AI here that was not immediately apparent to me that the Atlantic lays out in this piece. They say um one of the clearest examples of the problems are advanced memory and training chips which are among the most important or by far the most expensive components of training any AI model. Currently most of these are produced by two companies in South Korea and one in Taiwan. That's something all of us is f have focused a lot on. These countries in turn get a large majority of their crude oil and much of their LNG which help fuel semiconductor manufacturing from the Persian Gulf. The chip companies also require helium, sulfur and bromine, three key inputs to silicon wafers largely sourced also from the region. In addition, Saudi Arabia, Qatar, the UAE, and other regional

6:54 prostates have become key investors in the American AI firms that purchase most of those chips. And I think that's a really important example. But I also think Sorb that it just underscores, you know, it's almost impossible to wrap your head around the disruptions here. I mean, the best analog we can look to is our recent past history history with the combination of the Russia Ukraine war and um COVID obviously, which just screwed up supply chains in a million ways. ways that even, you know, experts could not fully anticipate how it would, you know, create problems and backlogs that would then go on to fuel inflation and have all of these residual both real economic and political effects. >> Yeah. And it's so infuriating, dismaying, scary, terrifying. I don't know which adjective to pick, but I read

7:41 in the Times also today that President Trump had said at one point, well, I'm not worried about the oil because it's really the Asian countries that are most dependent on Persian Gulf oil. And while that may be true, it reveals such profound ignorance of what a funible commodity like oil is like, right? If you pinch supply in one corner of the world, prices rise everywhere else. and and and and and just in general that you gum up the whole economy when you do that. So unless you're willing to impose domestic for the US um export controls, right, where we don't we don't we keep our oil for ourselves and that could also cause all sorts of problems unless we're willing to do that. The fact that uh you know this very important choke point in the global economy is being

8:27 squeezed is also bad for the United States. It was just part of this broader mentality where I think the the American right and the Trumpians got too high on their own supply. Yes, the US is blessed in many many ways. We have we we became the world's largest net energy exporter in the world. We uh have these two oceans, you know, protecting us from any kind of immediately enemy or anything like that. So there's there's these natural advantages, this natural bounty that the United States has and all Americans should be grateful for it. But there are limits, right? We might want to deloblobalize and I've never been a fan of the kind of globalization that was that revealed its limits during co where it suddenly realized that supply chains were way too far-flung and at the

9:14 imposition of the slightest stra stress they would snap and you know we couldn't produce our own masks or protective equipment and so on. that was a problem and we should move toward maybe a less globalized world. I agree with that. But still we are living in a globalized world to some extent. So that you know this attitude of oh well beggar thy neighbor. It's just going to be China's or India's problem if oil stops flowing out of the Persian Gulf is is is stupid and it's arrogant and and I think we're all going to pay the consequences for it. >> And to that point uh actually I think we have a good piece here. Let's put C6 up here on the screen. How the Iran war has already rippled across the world. Now, as you said, look, it might be China or India's problem. It might be South Korea's problem. South Korea, by the way, is oh, I don't know, a top 10 trading partner. So is Japan. Last time I checked, they're pointing out South

10:00 Koreans are being told by their president to take shorter showers. Uh, in Thailand, another actually vital ally in the region. They're saying you need to make sure that you're wearing short sleeves uh to work so that we can we can cap air conditioner use. I'm looking at news out of India where this is personally tragic for me and for all the white tourists in New Delhi. Butter chicken has now disappeared from Indian menus because they don't have the cooking gas uh to be able to make it. Uh dosa apparently there's a huge shortage. I talked to my family recently. They're rationing cooking gas and they're looking at it. Their Sri Lanka is taking uh you know shortages there or is shortages and they're actually encouraging the work week to reduce. and C7. This is part of the point of what you're talking about is that the Asian shortage has already hit because of the

10:46 way the tankers move across the globe. But what this map uh shows is that actually we're about two weeks away from some of the major impacts and closure simply because of length of the tankers. Now the big question as you said earlier is about Donald Trump and his hubris by getting us into this situation. But solving a crisis like this from what we saw during COVID not exactly his strong suit. So what do you think that the actual impact of this shortage will look like in terms of his administration who are clearly scrambling? Like realistically, what can they do to get us out of this? >> I I really don't know because what it comes down to is is recognizing strategically speaking that Iran has this had always this potential to c

11:32 close the straits of Hormuz that they were able to always do that and now they've exercised it and there's no return. There's no easy return to the status quo ante. In other words, the Iranians will want as part of any negotiated settlement, they will want some control over uh the state of Hammuz and we should try to negotiate that. But the point is that that looks to the US like an enormous strategic blow, right? We expended all this energy and at the end of the day, you have to grant the Iranians what they've always possessed but now have decided to exercise in response to this war. So that's a blow to US strategic prestige, a really potent incalculable blow. We can't even begin to measure the scale of it. Um otherwise you're going to be facing

12:18 obviously a blood bath in in November in the in the elections. You still going to face that. It's only a question of how bloody the blood blood bath will be. But if you think about it, there's a great tweet this morning. I saw someone said, "The objective of the war has become to restore the status quo anti before the war. Dumbest war ever. It really is like what what is the point of this operation now is to open the straight of Hormuz which was open before we went in. None of the other the regime hasn't collapsed. Its will has hardened. you know, it can still fire ballistic missiles as a front story in the New York Times today basically saying the US keeps saying, you know, 500% of Iran's capacity has been destroyed. And that very evening, you know, an Iranian missile will fall on some US facility in

13:04 Saudi Arabia and destroy a very kind of expensive um command and control aircraft. >> What so what's the point anymore? And again, I think the the end point will be some capitulation, some recognition of Iran's ability to control the straight of Hormuz. And that's like a Vietnam level debacle in terms of a of a blow to US prestige, which hurts me as an American to think that we'd have to do that. >> I wanted to sort of I wanted to get your reaction to Trump's truth this morning, which uh obviously directly relates to the war. It also relates to the uh economic outlook. uh appears to be another yet another Trumpian blatant attempt at market manipulation here. He watches the uh Treasury bond yields very closely. He watches obviously the oil market, the stock market very closely.

13:50 And so this morning he tweeted out or truth down. United States of America is in serious discussions with a new and more reasonable regime to end our military operations in Iran. Great progress has been made. But if for any reason a deal is not shortly reached, which it probably will be, and if the Hormoon Strait is not immediately open for business, we will conclude our lovely stay in Iran by blowing up and completely obliterating all of their electric generating plants, oil wells, and Car Island, and possibly all desalinization plants, which we have purposely yet not yet touched. These This is him pre-announcing war crimes, by the way. This will be in retribution for our many soldiers and others that Iran has butchered and killed over the old regime's 47-year reign of terror. Thank you for your attention to this matter. Um, I think pro people probably know you're not a fan of the Iranian

14:37 regime. You are quite a viciferous critic of the current government in Iran. Um, but what do you make of what Trump is claiming here about how there's a new more moderate regime in place that he's totally working out a deal with? >> I like I don't I don't I don't know where to begin. It's that's such a like a kind of this barrage of stupidities pile of top stupidities. I don't know where to start. So first of all I watch Iranian state TV you know 24/7 just to read the mood there is no the regime is there it's called the Islamic Republic of Iran it's become more militarized what's happened is all the the the restraining forces which believe it or not as much as a fan of I was not by him he defined my life the course of my life would have been completely different if

15:22 he weren't around by Ayat was a restraining force relative to the kind of younger commanders that are in the Islamic revolutionary Guard corps. These are the people who are in charge now. There is no indication. Yes, they're taking heavy heavy blows, but they think that they have they to I'm going to use a polite word for it instead of what comes to mind. They think that they have the United States in a an economic and energy vice grip and they're going to squeeze and squeeze until there is a kind of humiliating cry to uncle. And again, yes, they're going to take enormous hits, but this is a huge, huge country of 90 million people, four times the size of Iraq. Um, it's going to take a long time for it to wear down. Long before that, Trump, the economic pain will be sort of too much for Trump. So,

16:09 that's the first thing is that his assertion that Iran is uh uh, you know, has the regime has changed. There's just no sign of that. Second, the hitting of the desalination plans. Actually, Iran relies very little on these kinds of plants. It's America's Gulf allies in Israel that are much more dependent on these sorts of facilities and they as Iran has proved it can hit those and create calamitous effects for lots and lots of people who live in those in those countries. And again, same thing with the the electricity infrastructure, the power plants. They can they can do that just as quickly except Iran's electricity system and the grid is far less centralized. So that if you hit a a single plant, it won't have the kind of effect that it would have for example if you do it did an an analogous thing. If

16:56 they did the analogous thing to a country like Israel whose uh you know power system is much more centralized. You hit one node and boom, Israel goes into darkness. So I mean these threats aren't s everyone this is not some secret intelligence. This is all this is all in the public record. So it just this stuff that he says like it was funny when it was about Rosie O'Donnell a decade ago. This kind of bluster. It's really really depressing and scary when it's you know the world a world on the precipice of geopolitical and geoeconomic calamity >> and you don't detect as you're watching Iranian state TV you don't detect any of their attempts to sort of like soften the line and create an opening to sell to the public some sort of you don't see any of that.

17:41 >> Not at all. Every night it's about revenge, the the daughters of MAB, the school that got hit early in the operation. Uh, you know, and and this is a culture that thrives on martyrdom, Shiite Islam. So, every time you kill a commander, it it be it creates like a mini the only like the closest equivalent is a Catholic cult of the saints. like it becomes some new basis or it'll be you know they they killed some they hit a police station the Israelis did and they hit a street sweeper just a guy like a random guy so of course he becomes like this you know his coffin is laid out and people line up in huge numbers to touch the coffin and then rub it on their faces to get like a blessing from his act of martyrdom that's the kind of people

18:27 you're talking about and again so much of the perception about what Iran is or the kind of people is driven by this, you know, I'm part of it. This Iranian diaspora, very secular, very embittered. I understand the embitterness about the regime, but they they led us they I think they led US policy makers for years to believe that that's how all Iranians are and forget that no, it's a Shiite Muslim country. Lots and lots of people are not cynical about their religion. When you hear when they talk about, you know, Imam Hussein and martyrdom and Carbala and all this sort of iconography of of bloodied saints who give their lives for a greater cause, they like really mean it. >> Yeah, >> they mean it. >> Hey, if you like that video, hit the like button or leave a comment below. It really helps get the show to more people. >> And if you'd like to get the full show,

19:12 ad free and in your inbox every morning, you can sign up at breakingpoints.com. >> That's right. Get the full show. Help support the future of independent media at breakingpoints.com.