Chapter 1: What is the main topic discussed in this episode?
In theory, I knew that this kind of thing can happen in any family. Upstanding citizens are always turning out to be secret criminals, and I wouldn't even call my cousin Alan an upstanding citizen. But it's one thing to know and another thing to understand.
Alan, murder me?
What the hell was Alan thinking? From Serial Productions and The New York Times, I'm Em Gessen, and this is The Idiot. Listen wherever you get your podcasts.
From The New York Times, I'm Rachel Abrams, and this is The Daily. Since the war with Iran began, President Trump has insisted that rising energy prices would be temporary. But the strikes last week on important natural gas facilities in Qatar and elsewhere in the Gulf have made the prospect of a quick recovery seem less and less likely.
Today, my colleague Patricia Cohen explains why the economic impacts may be felt for years. It's Wednesday, March 25th. Hi, Patty Cohen. Hey, Rachel. You are a first-time guest, I think?
Yes, first-time guest, long-time listener.
That's what we like to hear. So, Patti, at the beginning of the war, so much of the conversation about energy prices focused on the Strait of Hormuz, getting oil and gas out of the Persian Gulf. And because the Strait of Hormuz has been closed, oil prices spiked super quickly because of the uncertainty about when the strait would actually open again. That is still a huge issue.
But it seems like in the last few days, the energy situation has expanded beyond the strait. So tell us what's been going on.
So I would say that the attacks that we saw last week on some of the energy infrastructure really moved the war into another phase in terms of both energy supplies and the global economy. Instead of talking about the impact in terms of days and weeks, now we're talking about it in terms of months and years. And why is that?
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Chapter 2: What are the reasons for rising energy prices since the war in Iran?
So what was destroyed were two LNG trains. And they're not really trains. What they are are plants that process and convert natural gas into a liquid.
Trains feels a little misleading.
This is a facility. Yeah, I know. Yeah, it's a facility. I know. It's a kind of a weird word, but it's kind of a facility. And... It's a very expensive facility, and it takes a long time to build. And what happens is that you take gas and you freeze it to 240 or 260 degrees below zero, and then you compress it. And so it takes up 600 times less space than gas because you turn it into a liquid.
And so... That's complicated. And then you have to transport it in the same specialized container so that you can bring it somewhere else.
It is not as simple as oil, it sounds like.
Right. I mean, oil is a lot easier to store and transport. And that's what makes this particularly worrisome because it's hard to store and transport LNG. And now you've just taken capacity offline.
So in total, whatever was destroyed in Qatar, what percentage of the global supply of LNG is this?
So Qatar is the world's largest producer of LNG. It supplies about 20 percent of the world's liquefied natural gas. It's one of the biggest exporters. So what happened at the beginning of the war, because transit was halted, Basically, it suspended its production because it just had no place to put it. The storage facilities are only so big. So that's obviously a temporary problem.
But what happened last week was that because of Iran's attack, nearly 20 percent of Qatar's ability to produce LNG was destroyed. And that will take several years to fix, maybe as many as five.
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Chapter 3: How have recent attacks on energy infrastructure changed the situation?
We've seen in places like Sri Lanka and Pakistan, schools are being closed, government offices are being closed.
And Thailand is ordering government workers to save energy by suspending overseas trips and working from home.
In Thailand, they're asking people to take the stairs instead of elevators. Work weeks are being shortened to four days.
These are countries who are taking extreme measures because they fear if the conflict goes on, they're going to be in a dangerous, dangerous situation.
But rich countries are having an impact as well.
South Korea is imposing a fuel cap for the first time in 30 years as it seeks alternative sources of energy beyond the Strait of Hormuz.
In South Korea, they've started this energy savings campaign, urging people to take shorter showers, to ride bicycles.
The price of gas in Europe is more than double the level seen before the conflict began.
And you're seeing effects in other rich countries, too, like in Europe, which also uses LNG, although it's not effective. quite as dependent as Asia, prices have gone up a lot. So what you've seen in a lot of countries are leaders talking about trying to help consumers afford heating bills so they've cut taxes on some of their energy.
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Chapter 4: What impact did the bombing of Qatar's LNG facilities have on global supply?
So think about it. So number one, what we know is that data centers, which they're building, use an enormous amount of energy. So now the cost of energy is going up. But secondly, they also require huge amounts of loans to build. They're really expensive. Just building these data centers. Just building these data centers. Exactly.
And so if interest rates go up, that means that the cost of building borrowing money to build them goes up. And what some Wall Street analysts have told me is that building these AI data centers, that's something that's very sensitive to interest rates increases. And at least for Americans, remember, AI, these data centers have been driving the U.S. economy. Right.
They've been propping up the stock market. They've been propping up the stock market. Exactly. Exactly.
Are we kind of talking around the R word, recession?
No. And I think it's important to take a moment and say, you know, we're talking about the future and we are in an incredibly volatile period. Things are so unpredictable. And it's really hard to know what's going to happen next. I should also add it's bad for business because when consumers are worried about what's happening, they don't want to spend as much. And remember, the U.S.
economy is really driven by consumer spending, 70 percent of it. Secondly, it also means that businesses are reluctant to invest because they don't know what's happening in the future. So there's a crisis of confidence a little bit. But what I will say is if energy prices stay high, if oil, let's say, goes up to $180 a barrel or higher, then it's going to be very difficult to avoid a recession.
So I don't think we're there yet. But, you know, we're in this world of uncertainty. There's a lot we don't know. How much longer is this war going to last? Are there going to be more attacks on energy infrastructure?
What if there aren't, Patty? What if the war literally ends tomorrow? No more strikes on energy infrastructure. I know you told us at the top of this conversation that people are saying just based on what's already happened, it will take months, if not years, to rebuild some of the facilities.
But given all of that, if there were no more strikes, how long would it take for things to go back to normal?
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