Stripped to its core, the game of chess combines calculation and psychology. Starting with the pieces as they lie on the board, a player mentally analyzes the current position, works through a series of candidate moves, and ponders the resulting options their opponent would face in each scenario. Depending on the complexity of the game, dozens of lines might be considered, and how likely an adversary is to find good countermoves is typically a prime consideration.

While a machine can use raw compute to always find the best path forward, humans are far from omnipotent, which makes appraisal of an opponent’s skill all the more critical. Are they likely to find the one obscure move that rescues the position? If they do, how much of their clock are they likely to burn searching for it, and what are the best responses? Having worked through as many scenarios as time constraints permit, you make a move. What your opponent does next is all that matters.

We’re not sure what game political leaders in Washington, London, and Brussels are playing as they navigate World War III, but nobody would confuse it with chess. On their board, opponents not only don’t matter, but how they might respond to a move seems a foreign thought, brushed aside as the stuff of so-called “panicans.”

For a crushing example, consider what could possibly have been going through the minds of European Union (EU) leaders when they decided to include 14 large Chinese businesses in the bloc’s 21st sanctions package against Russia, ostensibly for providing dual-use goods that feed Moscow’s war machine. It didn’t take long for Beijing to hit back where it hurts:

“China announced it will add export restrictions on 14 EU defense and technology companies after the EU added 14 Chinese businesses to its Russia sanctions lists. This marks Beijing’s most direct and forceful response yet to EU sanctions listings, which it denounced as ‘egregious.’ Recent studies estimate that up to 90 percent of sanctioned goods still reaching Russia transit through China.

Germany’s rapidly expanding defense company Rheinmetall is among 14 firms that Chinese exporters are now barred from supplying with dual-use goods — products that have both civilian and military applications — China’s Ministry of Commerce said Friday. The list also includes Czech truckmaker Tatra, Dutch naval engineering firm IHC Merwede, and several optics and laser companies.”

Amazingly, China’s utterly predictable response seems to have shocked those in Brussels, who must have assumed the world’s biggest and most powerful economy would beat a hasty retreat. It wouldn’t take much more than a passing familiarity with how Beijing operates to divine its countermove:

“This indicates a carefully planned strategy. Rather than aiming for immediate economic restrictions, Beijing selected firms involved in Europe’s dual-use technology and defense manufacturing sectors. The message is clear: If Chinese firms can be sanctioned for allegedly supporting another country’s military efforts, European companies in similar strategic areas should not expect to be immune from reciprocal actions.

The speed of China’s response is also noteworthy.

While sanctions diplomacy often drags on for weeks, Beijing acted in under a day. This shows not just political determination but also the growing effectiveness of China’s legal framework, including its Export Control Law and Anti-Foreign Sanctions Law, which now allows quick, rules-based responses.”

This is hardly an isolated event confined to the military-industrial sector. Given the central role energy has played in the ongoing global conflicts, we foresee that critical commodities are at risk of succumbing to similar fallacies of one-dimensional thinking, with potentially disastrous results. Let’s tour the combat zones and highlight a few telling examples.

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2026 is the Year of the Fire Horse in China—an apt image that symbolizes the country’s confidence and independence. Indeed, China recently amazed the world when it deftly weathered the storm of the Iran War’s disruption to energy flows, seemingly without any slowdown or hit to its economy. In July’s Pro Tier presentation, Fir…

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For as long as US shale gas has been a thing, energy pessimists have feared that the country will soon run out, perpetually predicting a supply cliff just around the next bend in the pipeline. To us, the historic and seemingly unending flow of new gas brought to market in the face of rock-bottom prices argues otherwise. If the US can more than double its domestic gas production in just over 15 years in exchange for next to nothing, imagine what the industry could deliver for slightly more than next to nothing.

When total US natural gas production in the lower 48 states smashed through 70, 80, 90, and 100 billion cubic feet per day (bcf/d), the goalposts were merely moved outward, only for the industry to reward once again those who had bet the over, at least intellectually. It feels like it’s been about 5 bcf/d since we last addressed our expectations for further growth:

Against this backdrop, our skeptical instincts went on elevated alert when many of you forwarded a podcast appearance by Matthew Smith, founder and CIO of Chronometer Partners, on Patrick O’Shaughnessy’s popular show, Invest Like the Best. O’Shaughnessy’s promotional tweet carried a distinctly seen-this-movie-before feel:

“Matthew Smith has spent the last 18 months modeling every well, pipeline, storage facility, and power plant in the American natural gas system. His conclusion is that the US is heading toward a natural gas shortage with no precedent, beginning in 2028. By 2030, he believes we could exhaust our working natural gas storage entirely. The fuel everyone in AI is counting on, and that everyone assumes is abundant, is not there.”

Having been a guest on many a podcast ourselves, we know that once a recording is in the can, how it is marketed by the host is largely beyond one’s control. Always interested in understanding opposing views, we gave the show a full listen and read Smith’s June letter laying out his thesis that, while natural gas production in the US is far from exhaustion, fast-growing demand will nonetheless create a high-price crisis.

Surprisingly, we found much to agree with and only a few points worthy of skepticism—albeit important ones. Let’s summarize Smith’s thesis and evaluate his big predictions.

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For those unfamiliar with how China fuses industrial policy with its geopolitical objectives to astonishing effect, the following two news articles might seem unrelated. First up are reports that the country will soon be exporting cars at a pace greater than America’s entire capacity to make them. We turn to The Guardian for the stunning details:

“China’s monthly car ‌exports topped 1m for the first time in June as overall overseas shipments from the world’s second biggest economy rose 27%.

Official Chinese customs data showed that a stronger-than-expected trade performance kept China on track to match or beat last year’s record trade surplus of $1tn (£748bn), achieved despite Donald Trump’s curtailed tariff war.

Sales of Chinese brands ranging from BYD to Jaecoo are booming, eating into the market shares of long-established brands, particularly in Europe.”

For the second part of our narrative, we click over to the South China Morning Post, where we are introduced to Wang Wenfei, a 30-year-old chef from central China’s Henan province. Like most Chinese consumers, Wang is in the market for an affordable, well-built car he can count on for his modest daily needs. Before he could finalize his acquisition, he learned that Beijing had pulled the rug out from under the subsidies he had been counting on to make the purchase, causing him to put off the decision. The Post sees a trend developing:

“Wang is far from alone. China is now the world’s largest car exporter, but sales at home have hit the skids in recent months, as the government scales back its subsidy programme and consumers remain reluctant to spend amid a shaky job market and prolonged property downturn.

The trend is creating a headache for Chinese carmakers like BYD and Chery Automobile – pushing them to lean more heavily on overseas markets at a time of rising trade tensions – as well as complicating Beijing’s efforts to rebalance China’s economy towards domestic consumption.”

For most of the developed world, ensuring a healthy domestic market for strategic industries is usually the top priority, with import/export balances used as a valve to dampen the impact of economic cycles on local champions. As we have tirelessly pointed out over the years, this is simply not so for China, which regularly flips the script. When the goal is global domination, the domestic market is used as the toggle.

This play follows a familiar script. In the early stages, local champions are heavily subsidized on the home front until they have either developed or pilfered the necessary technology to compete on a global scale. Then the world is flooded with excellent products offered at impossible-to-compete-with prices, with the goal of quite literally putting the competition out of business. If this means the likes of Mr. Wang have to wait to get their shiny new vehicles, so be it. There’s a greater national interest at stake, and Chinese leaders will pursue it with ruthless efficiency.

Were this just a story condemning the likes of General Motors, Ford, Toyota, Honda, and Volkswagen to ruin, it would be bad enough, but this exact sequence is playing out in the all-important artificial intelligence (AI) industry, only at an even faster pace. From cutting-edge semiconductor chips to frontier models, Beijing is tracing a familiar pattern, and we see no evidence that Western leaders properly understand what is happening, let alone are capable of doing much about it.

As far as pieces on the board go, this particular arrangement is critical for all investors to understand and prepare for. Let’s take inventory of where things stand now, where they will inevitably soon be, and what it all portends.

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Three years ago, the Energy Institute inherited custodianship of the authoritative and widely cited Statistical Review of World Energy from its original publisher, the company formerly known as British Petroleum, an oil enterprise that never should have changed its name.

Judging by the recent press conference the Energy Institute held to accompany the release of the 2026 edition, the organization risks going the way of the International Energy Agency under Fatih Birol. Long on platitudes, short on neutrality, Institute leaders waxed profusely about renewable sources of electricity, the need to accelerate away from oil, gas, and coal, and how its data support all the right conclusions. Amazing progress is being made in the climate fight, but simultaneously, it is not nearly enough.

In short, the cure to what doesn’t ail us is more of what isn’t working.

We have not yet reached the data-manipulation phase of this otherwise predictable narrative arc, as evidenced by what the supporting documents actually confess. Although one now has to cough up an email address to get the thick spreadsheet of source data behind the slick summary presentation, it is still made available to the public for free. What do we learn? Hydrocarbons provided 86.24% of all global primary energy in 2025, down markedly from 86.65% the year prior. Won’t be long now!

Despite this rounding error of so-called progress—and the inconvenient fact that each of the major hydrocarbons experienced record-setting consumption in 2025—all manner of statistical jujitsu was applied to convince the casual observer otherwise. Among the tired tricks of the trade were the casual conflation of electricity with total primary energy, an expansive grouping of “renewables” that includes burning wood, and divvying up the wedge of global energy growth to amplify the incremental contribution of wind and solar. That renewables accounted for a third of global primary energy growth in 2025 sounds impressive, until you consider that the latter grew by just over 1%.

Another clue that the Energy Institute is drifting away from neutrality is the unmistakable greenwashing of China’s energy policies. Objectively, Beijing is by far the world’s naughtiest carbon sinner, accounting for 56% of worldwide coal consumption and 31% of all carbon emissions last year. By way of comparison, the US checks in at just 5% and 13%, respectively. Yet a simple keyword search for “China” in the summary report reveals these three early gems, a mere sampling of what is sprinkled throughout the report:

“China is deploying renewables at unprecedented scale while stockpiling fossil fuels as insurance.”

“In absolute terms, the increase in US emissions was four times greater than that of China.”

“In China, coal consumption was flat year-on-year, as a result of slower demand for coking coal and a significant increase in solar generation.”

As the last of those gems signals, China’s solar industry is enshrined on a particularly prestigious pedestal by the Bishops of the Church of Carbon, for no sector in any country is so regularly bathed in unearned adoration. Yes, new solar installations in China set records in 2025, but—as we have been predicting in these pages for some time—that year will almost certainly set the metric’s high-water mark for many years to come, for reasons the data buried in the Review make abundantly clear. Let’s elucidate why, and write a story that few others are willing to type.

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As a logical sequence, our interest in Bloom Energy’s solid oxide fuel cell (SOFC) technology makes perfect sense. Natural gas is a core theme of these pages, and its potential to fuel America’s artificial-intelligence (AI) efforts is, by now, self-evident. The stampede in demand to convert abundant US gas supplies to electricity has led to a shortage of the machines needed to do it efficiently, creating a multi-year backlog for difficult-to-manufacture gas turbines. This sparked an urgent search for alternative architectures that circumvent the traditional process altogether, and into this lucrative void stepped Bloom Energy.

As we described in last November’s “Taleb’s Law,” Bloom Energy’s SOFCs induce natural gas and air to interact with different sides of specialized solid ceramic materials at high temperatures, and a subsequent series of chemical processes converts the gas into a clean stream of electricity and CO₂. Although the technology was previously considered too expensive for anything beyond niche applications, nothing papers over an economic challenge or two like a good mania.

While our treatment of Bloom Energy was mostly positive, we did note how peculiar it was that the company claimed its supply chain had essentially no China-related risk despite its heavy reliance on rare earth metals. We are no longer alone in our skepticism, as that curiosity was the basis of a full-blown short report last week that sent the company’s shares materially lower:

“Bloom Energy Corp. shares fell as much as 12% on Wednesday after short seller Hunterbrook published a report challenging the company’s statements about its supply chain and production capacity. The report focused on Bloom Energy’s reliance on scandium, a rare earth element used in the company’s fuel cells. Hunterbrook said the company depends on Chinese scandium despite repeated statements from Bloom’s CEO since February 2025 claiming the company has ‘no China supply chain’ and is ‘not dependent on China for scandium.’

Hunterbrook said it traced four China-linked routes into Bloom’s supply chain using global trade data, Chinese corporate filings, and satellite imagery. A sales representative from Hunan Oriental Scandium, which claims over 50% of the global market for fuel-cell-grade scandium oxide, told Hunterbrook the company is ‘BE’s largest supplier of scandium,’ according to the report.”

In its report, Hunterbrook argues that to meet the aggressive growth plans baked into the stock’s valuation, the company would need multiples of the current global scandium supply just for its own needs, leaving nothing to satisfy demand from the military defense sector. In essence, Hunterbrook’s case is that Bloom Energy’s growth plans are thus impossible to achieve, and China, which nearly monopolizes global scandium oxide production, holds a sword over its future. The company was quick to reject the accusations outright in a brief 8-K filed with the Securities and Exchange Commission (SEC), which pointed investors to a blog post explaining how it sources scandium. This is from the SEC filing:

“As to the claims regarding scandium oxide in the Report, we reject the conclusions. We have sufficient supply of scandium oxide to meet our current fuel cell demand and backlog, and our supply is not dependent on China. We are also not dependent on China to scale scandium oxide to meet future demand growth. We have clear visibility into our supply chain to support production of 25GW of fuel cells per year, and we will continue to expand this capacity.”

The fate of single-company stocks is not normally our focus, but given the centrality of the technologies at issue, Bloom Energy is worthy of a return look. Which side holds the better argument, and how will things play out from here? It’s more complicated than it might seem.

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The two most significant kinetic battles of the ongoing fight between the US and its allies against the world’s most important energy exporter, Russia, and the recently paused attacks against Iran in the beating heart of the Middle East—in other words, of World War III—are deeply intertwined with global hydrocarbon flows. Cutting through propaganda thus has become at least as important to the oil-and-gas analyst as counting rigs. The two are wildly different skills, of course, which likely explains why commentary on these events by energy specialists has been so varied in quality and focus.

Approaching the challenge requires a wide aperture for inbound information, especially from sources that represent a range of beliefs, and giving greater weight to sources that consistently provide useful information, regardless of their nationality, political orientation, or pedigree. Absent such discipline, critical context can regularly be missed.

Consider Ukraine’s ongoing drone and missile campaign against Russia’s oil and gas infrastructure. On June 18, a large-scale attack on a major refinery on Moscow’s outer edge made global headlines, with video footage shocking many analysts. Here’s how the British-based Financial Times described the aftermath:

“Ukraine hit Moscow with nearly 200 drones in its largest-ever attack on the city on Thursday, striking the Russian capital’s largest oil refinery and sending huge plumes of smoke billowing over the city’s south.

Sergei Sobyanin, Moscow’s mayor, said anti-air defences had shot down at least 194 Ukrainian drones on Thursday morning in the third consecutive day of attacks.

The apocalyptic images of flame and smoke engulfing the Russian capital were a remarkable demonstration of Ukraine’s increasing capacity to strike deep behind enemy lines with its largely homegrown long-range drones.”

Were those “apocalyptic images” testimony to the strike’s efficacy and an ominous sign of trouble for Russian President Vladimir Putin, or might there be more to the story than the widely circulated visual evidence suggests? For clues, we turn to Simplicius’s Garden of Knowledge on Substack, which regularly puts forth a pro-Russian vantage point on global events. While nobody would confuse its 56,000-plus subscriber base with the readership scale and investigative resources of the Financial Times, an article published there a few days later seems to add important context:

“There continues to be growing confirmation that [Ukrainian President Volodymyr] Zelensky has been waging his accelerated psyop campaign of empty strikes to conceal a worsening crisis in his own country. Today we were treated to footage which revealed how his latest magician’s parlor tricks work.

It turns out yesterday’s mass strikes on Moscow which were meant to coincide with the Euro Council meeting were pure Hollywood spectacle: the drones themselves were stuffed full of kerosene mixtures in the way Hollywood stages car explosions to look more ‘dramatic’ by producing thick plumes of oily smoke.”

The blog then linked to a video clip of a purported drone interception that had been circulating on Twitter/X, screenshots of which are reproduced here:

While we cannot testify to the veracity of the above footage, the prospect of Hollywood-style amplification cannot easily be dismissed, and would itself be a clever use of propaganda if true.

A few weeks after the attack, another British outfit, Reuters, was out with a report that would seem to lend credence to the efficacy camp. In it, we learn that Russia is turning to the import market to cover shortages of gasoline, allegedly a direct result of Ukraine’s drone campaign:

“An industry source said at least 60,000 metric tons of gasoline have been dispatched from India to Russia. Another source said that two tankers, with parcels of 30,000 to 40,000 tons each, have been sent.

A third source said that in total, Russia plans to import 400,000 tons of gasoline from various countries each month, including from neighbouring Belarus, which has already been exporting fuel to Russia.

Gasoline consumption in Russia is at least 110,000 ​tons per day in summer, when demand for fuel is high.”

What to make of this news? Whether intentionally or not, Reuters exaggerated the scale of the volumes involved. Recast in more familiar units, 400,000 tons of gasoline imported in a month is roughly 115,000 barrels per day, while 110,000 tons per day of peak summer demand is about 935,000 barrels.

Is Russia importing 12% of its peak summer gasoline demand all that unusual? Not according to Alexander Mercouris of the popular YouTube channel The Duran. In a broadcast published on July 3, Mercouris argued that Russia refines far more diesel than gasoline, and regularly turns to imports to paper over seasonal shortages of the latter fuel across its far-flung regions. While plausible, that claim seemed dubious enough to warrant further investigation. As it turns out, the United Nations (UN) tracks annual import-export data for gasoline at the country level. Here’s Russia’s:

The UN data at least partially validates Mercouris. Russia does indeed import gasoline on a semi-regular basis, and the dispersion of refinery construction across the former Soviet republics would not necessarily have been planned to optimize the needs of a future Russian state on a standalone basis. On the other hand, the need to supplement Belarusian imports with those from India, along with the scale of the 2026 purchases, is almost certainly a direct result of the Ukrainian attacks.

Our verdict—subject to change should new inbound information arrive—is that the drone attacks on Russia’s refineries are a manageable nuisance for the Putin regime. For the purposes of this dispatch, that conclusion itself is not nearly as important as the methodologies used to arrive at it, as showing our homework has long been a hallmark of these pages.

We close with a lament that Western governments are actively working to make performing such analyses more challenging and, in some cases, outright illegal. This is especially so for the European Union (EU) and its leaders in Brussels.

Almost immediately after the Russian invasion of Ukraine in early 2022, the EU moved to suspend broadcasting and distribution of Russia Today (RT), Sputnik, and, over subsequent sanctions packages, additional state-aligned outlets. That made it largely illegal for any operator to publish such content in the EU via television, online platforms, and apps.

Many were alarmed by the wide net cast by the ban. The issue was recently put to the test in Germany, where three individuals were criminally charged for running afoul of the sanctions. The case made its way to the EU Court of Justice, which just handed down a rather shocking ruling (emphasis added):

“The Court replied that it is irrelevant whether or not the broadcasting of the prohibited content takes place in the course of an economic activity. The concept of ‘operator’ covers, in the present context, any person responsible, directly or indirectly, for making the prohibited content available, including in the context of a non-remunerated activity or in the operation of a website financed by voluntary contributions from third parties. The Court also clarifies that that classification depends neither on the extent nor on the duration of the broadcasting.

Only that interpretation makes it possible, as envisaged by the EU legislature, to prevent the broadcasting of the propaganda put in place by the Russian Federation and, consequently, to protect public order and security in the European Union.”

We often quote a paragraph or two from a variety of sources in these pages, even if just to argue against what is being written. A straightforward reading of the new ruling would appear to make doing even that a violation of EU law. We put the question to the artificial-intelligence chatbot Perplexity, which advised significant caution against continuing that practice with the likes of RT, and explains why no coverage from that outlet was included in this article:

“For a US-based analysis business with readers in the EU, the legally safest posture is to treat the RT ban as effectively constraining what RT material you systematically re-publish to EU-reachable channels.

Paraphrasing RT’s narratives and attributing them to ‘Russian state media’ while avoiding re‑broadcast of RT videos and long verbatim excerpts is the lower-risk way to preserve EU accessibility without asking EU operators or readers to run afoul of sanctions.”

How long before the likes of Simplicius and The Duran are similarly sanctioned, and their key enabling platforms—Substack and YouTube, respectively—are pressured to remove their content?

As soon as they accumulate a big enough audience, no doubt. Ironically, that parameter tends to scale with how accurate they are over time.

“♡ Like” this piece but keep it on the down low!

Although it has taken a little longer than we might have anticipated, many of the data-center trends we foresaw in a series of articles published nearly two years ago are beginning to manifest. As the artificial intelligence (AI) boom was spooling up, we posited that the future would be characterized by giant buildings into which natural gas entered on one side and data left the other, both on an enormous scale. Given the speed and scope of what would be needed, much of this activity would invariably have to occur in isolation from the broader electricity grids that form the backbone of modern economies, or “behind the meter” in industry parlance.

Despite the burgeoning excitement about an AI-driven nuclear power renaissance, we cautioned in “Bridge Burning” that “there is a significant timing mismatch between the speed with which nuclear plants can be brought online for AI and the urgency of the industry’s electricity demand.” We further noted that since natural gas is “the cleanest-burning hydrocarbon capable of producing a steady supply of baseload electricity,” it is “inherently well-suited to meet the application’s needs.” We then speculated about how all this might impact future price action.

In “Irreconcilable Differences,” published a few weeks later, we emphasized why dedicated power plants built behind the meter were practically unavoidable. We further predicted that an “immediate consequence of such developments would be a surge in demand for gas turbines and associated power equipment, products already in short supply,” and producers of natural gas in the Permian Basin would find themselves on “the winning side of the ledger” because spot prices for the fuel persistently traded for negative prices.

Despite the inherent logic behind these predictions and the growing excitement among a cross-section of industry participants, progress toward full realization has been slow. Because of a variety of environmental concerns, Texas and federal regulators have tightened rules around big behind-the-meter projects. Hype notwithstanding, none of the big-ticket off-grid projects has reached final investment decision (FID) status, and Permian natural gas has spent much of 2026 in negative spot-price territory.

Among the parade of gas-to-data projects making their way through various stages of development, one stands out for its sheer size, the quality of the corporate giants behind it, and the likelihood that it ultimately gets built. Slated to be twice the size of the much-hyped Project Stargate in Abilene, Texas, and only months away from final investment decision (FID), Project Kilby looks likely to disrupt Permian oil and gas flows in meaningful ways. Let’s go to the heart of the basin and quantify the impact.

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Proverbs achieve durability when they combine a kernel of truth with memorability, authority, and cultural fit. As a means of passing wisdom between generations, proverbs were quite useful, and it was only recently that storytelling was displaced by the internet as the primary means of transferring such knowledge. That good sailors aren’t made in calm seas, that the strongest steel is forged in the hottest fires, and that something that doesn’t kill you only makes you stronger are all metaphorical variants of the same proverb, close cousins of “if you come for the king, you best not miss.”

Such proverbs capture the essence of our main critique against the use of financial sanctions as a means of geopolitical coercion, for they rarely achieve their stated objectives. Even when they are superficially effective—against weak countries like Syria and Cuba, for example—the vast majority of the pain is borne by the broader population, making such levies financial weapons of mass destruction. When powerful countries are sanctioned, they respond in the same way a partially treated cancer might, emerging far stronger for the experience and in a fighting mood. Those doing the imposing rarely duck in time to dodge the boomerang as it returns.

Regular readers will recognize this as our core argument against using sanctions to stunt China’s semiconductor ambitions, given that it is an objectively powerful country more than capable of inventing its way around such temporary roadblocks. Huawei’s recent announcement of a new chip-design framework, which it claims can deliver transistor densities equivalent to 1.4-nanometer-class chips by 2031 without relying on cutting-edge extreme ultraviolet lithography tools, would seem to render current Commerce Secretary Howard Lutnick’s concern that China may already be in possession of such machinery rather moot. One way or another, China’s chip ambitions won’t be denied, and they will almost certainly leapfrog the best Western technology as a result.

It is also the foundation of our objections to the sanctioning of Russia, which—no matter how often British propagandists insist otherwise—is also a strong country. Here, the argument is even more straightforward, given that Russia’s all-important energy sector is the main target. Foolhardy attempts to restrain the volume of Russian oil and gas production were guaranteed to fail because of the higher global prices that invariably result, something we have been pointing out in vain since mid-2022. The world needs Russian energy more than Russia needs money, a conclusion the recent war in the Middle East made perfectly clear to all but the densest European Union (EU) leaders.

We return now with a near-perfect story that proves our main thesis beyond any reasonable doubt. It is a tale of the EU’s haphazard efforts to wean itself off Russian shipments of liquefied natural gas (LNG), which are themselves a stopgap measure to make up for lost gas delivered from the same country via pipeline at much lower prices. For Brussels, paying more for the same fuel isn’t bad enough. Let’s explore the reality those making the decisions would prefer you ignore.

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Few Americans give a second thought to how they access energy for cooking. To a rough approximation, 60% of US households cook directly with electricity—tapping one of the largest and most reliable grids in the world—with the rest largely relying on ready access to cheap natural gas delivered via pipeline. Some homes, mostly rural, leverage propane for the task, with 500- or even 1,000-gallon tanks sitting just outside, ready to supply fuel for months at a time. These options are usually so plentiful and clean-burning that fuel cost and indoor air quality rarely register as conscious considerations.

Not so for most of the world. Take India, which competes with China for the title of world’s most populous nation. As recently as the mid-1990s, most dwellings in India relied on kerosene—a middle distillate of crude oil that doesn’t burn particularly cleanly—for indoor cooking. Such indoor use is linked to higher rates of respiratory symptoms, reduced lung function, and cardiorespiratory disease, motivating the country’s leaders to encourage a shift to cleaner-burning light hydrocarbons instead.

Lacking a sophisticated natural gas pipeline network and saddled with a notoriously rickety electricity grid, India settled on the lightest and cheapest hydrocarbons that could be readily liquefied in bulk and widely distributed in consumer-friendly cylinders: liquefied petroleum gas (LPG). Sold predominantly as a mixture of propane and butane, LPG’s affordability and logistical advantages drove rapid market-share gains across much of the country. Since the turn of the new century, kerosene consumption in India has plummeted by more than 95%.

Propane and butane are major components of natural gas liquids (NGLs), the two making up approximately 40–50% of a typical NGL barrel. Concurrent with India’s broad cooking-fuel transition, the US shale revolution led to a historic explosion of NGL production, and some 8 million barrels per day (bpd) of the stuff will soon be brought to the surface in America alone. As a direct consequence, the US has become by far the largest exporter of LPG in the world.

Proponents of the erroneous concept of peak oil have largely dismissed the historic growth in NGL production, arguing that only crude oil matters in such debates. We can think of at least three reasons they hold firm to such an odd belief. First, NGLs have the word “gas” in their name, not “oil,” which doesn’t seem like much to go on, but for many, this is apparently more than enough.

Second, the pace of NGL growth exceeds the economy’s current inherent demand. It takes time to develop the requisite engines needed to convert their embodied energy into work, and this has led to depressed pricing for NGL components compared to crude, at least on an energy-content basis. Finally, the manner in which the economy spontaneously adapts to the sudden emergence of a new supply of cheap, plentiful fuel is often subtle, with the magic hand of the market working beyond the line of direct sight of many observers.

As we’ll see, the war in Iran served as an accelerant for such work, dialing up the need to increase hydrocarbon fuel fungibility across a multitude of applications. The economy that emerges from the conflict will be one better able to handle the tsunami of new NGL supply arriving in the decades ahead, a just-in-time evolution that will have a profound impact on global energy markets. Let’s stay one step ahead of the energy-abundance pessimists and explore why.

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Newcomers to the practice of lateral thinking often encounter two significant challenges. The first is getting comfortable with its most essential premise: an axiom used for brainstorming need not be true to be useful—it only has to unlock new ways to look at the world. Unable to accept this ambiguity, skeptics dismiss downstream predictions derived from such exercises, no matter how well they explain the “true” world, even if just temporarily.

The second is accepting generalized conclusions through the philosophical constructs of zero and infinity. That neither is typically possible in a literal sense doesn’t make them less useful to ponder; understanding the asymptotic direction of travel can be incredibly insightful.

Such challenges characterized some of the feedback we received from our last written missive, “Stealth Financial Repression.” In it, we posited that the need to address burgeoning government deficits might help explain the emergence of trillion-dollar initial public offerings (IPOs), as wild step-ups in valuations create future capital gains tax obligations on an unprecedented scale. Taken to a big enough extreme—and who would argue trillion-dollar increments aren’t far from infinity—an unsolvable fiscal challenge suddenly becomes more manageable.

Might the current parade of AI-hyped giga-unicorns be a short-lived phenomenon, little more than a classic bubble blow-off top? Of course. Have all the investors in the SpaceX capital table been freed to sell their shares into the frenzy? Not yet, but some have, and there are many more to come. Will some—nay, many—wealthy investors use clever schemes to minimize capital gains taxes? No doubt, and this further reinforces the drive towards higher and higher valuations.

It may eventually turn out that these pushbacks make the mental model less useful. Time will tell. In the meantime, a model’s utility derives from its ability to explain today and predict tomorrow, and little else. It is doing the former quite fittingly, and we’ll continue to use it to do the latter until it fails.

To that end, we now return to the subject of predictions to pressure-test our new financial repression construct—and this one is a doozy. Considered through the lens of financial repression, the ongoing and highly lamentable obsession with nuclear fusion suddenly takes on new meaning, and the predictions that flow from this model will undoubtedly amuse. Let’s take a look.

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After a deep dive into Guyana in May, we are returning to South America to evaluate another of the world’s high-potential, under-developed oil and gas resources. Argentina’s Vaca Muerta shale represents an enormous below-ground opportunity, stymied by the country’s persistent above-ground chaos. The formation is estimated to …

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A common angst among gold holders is the lengths the US government will go to in order to delay the eventual dollar reckoning. It seems a mathematical certainty that rising deficits and interest rates mandate money printing, that money printing begets debasement, and that debasement necessitates the accumulation of hard assets by those who would prefer sounder money. An accounting of our personal gold holdings would certainly buy us membership in that club.

History teaches that in the final stages of currency collapse, authorities get desperate, and the legal ability to steal in the name of the public treasury becomes difficult to resist. Piles of gold have regularly been seen as tempting targets.

David Rogers Webb’s self-published book, The Great Taking, codifies this concern by pointing out how the modern plumbing of sophisticated financial markets seems almost designed to enable last-second pilfering, making all financial assets susceptible to forced confiscation in the extreme. Included in scope are stocks, money market funds, bank deposits, and yes, exchange-traded funds purportedly backed by gold.

Against this backdrop, it is easy to dismiss the emergence and normalization of trillion-dollar public equities as little more than proof of how late in the game things are. That money-losing, privately held companies are not only permitted onto the public exchanges at seemingly unachievable valuations, but also their ownership is practically forced into unsuspecting retirement accounts through passive indexing, is surely a sign of some kind. But of what?

Having thought through the mechanics of what happened last Friday, we diverge from our normal programming to indulge in a bit of speculative dot-connecting.

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It’s been more than 100 days since oil was supposed to spike over $150 or even $200 a barrel. And yet, as we take pen to paper, front-month West Texas Intermediate (WTI) is struggling to catch a bid above $80. All this while the market digests whether yet another peace deal exists or whether Lucy will swipe the football away yet again, robbing those convinced that only price manipulation stands in the way of their rightful oil gains. The online debate between the price-as-truth and calamity-around-the-corner crowds rages on, seemingly without end.

Our friend JJ Johnston, writer of Market Vibes, is a leading advocate of the idea that price is the final arbiter, with narrative floating downstream of it. Johnston brought his five decades of commodities trading experience to Maggie Lake’s excellent podcast The Market House late last week, and the full behind-the-paywall listen is worth the price of admission. While we don’t agree on all things, Johnston is always a trove of colorfully pertinent words and phrases, and two of his observations really resonated:

“Money is bored with misinformation, and it is not validating anything that is going on [online] in terms of prices.”

“You just can’t push the river. The market is a very natural force. You can dam it up here and there, a little bit, but everything is going to go to its level.”

Johnston is right on both counts: Markets are ignoring the hair-pulling panic on Twitter/X, and prices are deserving of respect. The open questions are why the market came to this conclusion so early and what it reveals about the long-term arc of energy prices. The day after his appearance on Lake’s show, Reuters was out with a bombshell report that seemed to validate Johnston’s well-honed instincts (emphasis added):

“Since the start of ​the Iran war and Tehran’s announcement that the Strait of Hormuz was ‘closed,’ the market has grappled to put a figure on lost crude supply ‌and to predict the price of oil. Initial calculations were simple: add up all non-Iranian Gulf crude oil exports, some 12 million to 15 million barrels a day, and you easily have the biggest crisis in history…

But the figure could be closer to 5 to 6 million barrels per day, sources at two major trading companies said, citing internal calculations based on producers finding ways to keep cargoes moving. Iraqi exports currently stand 2.5 to 3.0 million barrels per day below normal, Kuwait’s are down by some 1.5 million, Saudi Arabia and ​the UAE by some 0.5 million each, ​according to calculations by one of ⁠the sources.”

This fresh, lower assessment of lost supply completes a mental model we have been working on internally by fully nullifying the market-manipulation hypothesis—something we never bought into as a meaningful explanation for observable prices.

Absent severe further escalation of the conflict and assuming an eventual return to some degree of normalcy, our model predicts that China has just pressure-tested a strategy that has accomplished the seemingly impossible: Despite consuming far more oil than it produces, the country has largely insulated itself—and, by extension, everyone else—from the worst effects of extreme oil supply shocks.

Let’s explore how this came to be and what it means for energy markets in the years ahead.

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We often quip that the best proof that something was predictable is having predicted it. While not totally accurate—dumb luck and broken clocks are still things—nailing a complex call in the face of cocksure counter-commentary is anything but unsatisfying. It also confirms that our mental model is still operative in the way that matters most: it remains useful for further predictions.

In August of 2025, we produced a bonus presentation for paying subscribers titled Cocktail Party Trivia: Winning the Renewables Debate With Friends and Family (available here). In it, we elaborated extensively on our current mental model in which a working understanding of electric grids became a tool for predicting when the forced introduction of intermittent renewables would cause things to break. Some 31 minutes in, we warned that China’s solar miracle was reaching the limits of feasibility, and that the breakneck pace of new construction would soon have to slow.

At the time, China was on pace to smash global records for new solar installations, and legacy media outlets were falling over themselves to heap praise on Beijing’s bold climate leadership. On social media, the Silicon Valley crowd was lamenting how the US was desperately falling behind its main competitor in the artificial intelligence race, hooked on “yesterday’s fuels” like natural gas. US President Donald Trump came under withering criticism and was pounded for his efforts to save the domestic coal industry. That China still relies on coal for the vast majority of its electricity was rarely mentioned.

Imagine our lack of surprise, then, when we opened our weekend edition of the Financial Times to find Adam Tooze’s latest lament, “Wasting China’s solar panel surplus is madness”:

“The closure of the Strait of Hormuz has roiled energy markets. Consumers are calling out for alternatives to unreliable fossil fuels. And yet we are in a world of surplus solar panels. Let that sink in.

After a huge surge in investment since 2020, Chinese companies have the capacity to produce a vast 1,000 gigawatts of panels per annum. The world cannot absorb the supply. More than 40 Chinese solar manufacturers have gone bust, been bought out or delisted. A third of the workforce at the top five survivors has been made redundant.

Clean power, on a scale that would have seemed utopian at the time of the Paris climate treaty in 2015, is now within reach. The price of solar panels has fallen to rock bottom. And yet factories are idling.”

While Tooze contemplates several plausible reasons for the current mess, he ultimately settles on poor central planning in Beijing. In essence, subsidies were overdone, and the inevitable—yet temporary—reckoning is now being digested. The real mystery, apparently, lies in why other nations aren’t rushing to scoop up these bargain-basement green deals.

While not wrong at the margins, such explanations lie downstream from the root cause, and a full unraveling of what’s really happening in China would trigger a conversation few on the progressive environmental left are prepared to have. Far from being an exception that proves what’s possible, China is an exception that proves our rule: When intermittency swamps dispatchability, grids begin to break. Let’s put numbers to our argument and predict what likely comes next.

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Among the chemical elements made scarce by the closure of the Strait of Hormuz, helium certainly has the most interesting properties. Because its electronic shell is so stable, it is practically impossible to force helium to react with anything. Helium doesn’t even interact with itself in any meaningful way and must be cooled to -269°C, just four degrees above absolute zero, before it becomes a liquid. As it turns out, total non-reactivity is a rare and exceptional attribute useful across the economy, including in many high-end applications in the semiconductor and medical industries.

Because of its association with methane in geologic structures, helium is produced on an industrial scale exclusively by stripping it from natural gas streams. Since the US is blessed with a few large fields with exceptionally high helium levels and because the gas finds application in advanced missile technologies, America has dominated its production for decades. Until recently, the country even held a large inventory of the gas in a national strategic reserve.

At first blush, the rise of liquefied natural gas (LNG) export facilities would seem bullish for helium supply. After all, chilling methane produces boil-off gas with elevated concentrations of inert byproducts like helium, so much of the work involved in separation is already done. However, given the low concentration of helium in most feed gases and the sleepy nature of a market dominated by the US government, investing incremental capital to recover helium seemed unwise. Helium atoms that entered LNG facilities eventually found their way to the atmosphere, where their extreme lightness means they ultimately escape the Earth’s gravitational pull and disappear into the vastness of space.

This changed with the development of Qatar’s massive Ras Laffan LNG export facility. Although Qatar’s feed gas contains only modestly high levels of helium—the company pegs it at just 0.04%, or 400 parts per million (ppm)—the sheer number of LNG trains concentrated at one facility and the opportunity to design helium recovery assets into their original construction made the opportunity compelling. By 2025, Qatar was the second-largest helium producer in the world, holding roughly a third of global market share.

The success of Qatar’s investment evolved into a point source of industrial risk when war broke out in the Middle East. Iran’s early attacks on the Ras Laffan facility led to its closure, and the subsequent destruction of two of its 14 LNG export trains turned a temporary disruption into a true global emergency. These events unfolded into the teeth of the artificial intelligence (AI) boom, which was already tightening helium supplies and firming prices before hostilities erupted.

Like other commodities made short by the war, helium prices have exploded higher, demand has been rationed to the highest-value applications, and investors have been circling to deploy capital and potentially alleviate the crisis. Previously obscure helium plays have been thrown into prominence, with exposure to the gas seen as a bullish tailwind for equity markets. What are the likely medium- and long-term impacts of the current helium crisis? How fast can alternative supplies be brought online? Will a sustained helium shortage pop the stock balloon? Let’s survey the party store and find out.

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On the morning of September 11, 2001, a sleepy town in the Canadian province of Newfoundland and Labrador was thrown into chaos. A large runway had been built there on the eve of World War II, and as one of the few such assets on Canada’s Atlantic coast, 38 packed international flights made emergency use of it after US airspace was closed to all inbound traffic. The 10,000 residents of Gander were suddenly caretakers for more than 6,500 confused passengers and crew from all over the world, each of whom required food, clothes, shelter, medicine, and emotional comfort. Tom Brokaw’s outstanding documentary on the saga, Operation Yellow Ribbon, celebrates the community that rallied to support its unexpected guests, offering a heartwarming antidote to cynicism.

Gander came to play a critical role on 9/11 because of its equally critical role in military logistics half a century prior. The airport that served as a safe haven for so many that day was originally used as the aerial launching point from North America to Europe, shortening the distance to the next refueling stop in Iceland just 1,600 miles away. This “Atlantic Bridge” served as an essential link in Allied logistics.

One can’t help but marvel at how politicians have driven an artificial wedge between Canada and the US, brimming as both countries are with decent, caring, and giving people. The two nations share a culture rooted in pioneering independence and are blessed with a seemingly endless natural bounty that underlies their respective wealth, making the synergies of collaboration far more lucrative than the spoils of competition. Despite these inherent ties, global energy buyers increasingly view Canada as a source of diversification away from excessive reliance on its southern neighbor. Indeed, the ocean zone just beyond Newfoundland is holding an attractive energy bounty, rich with a fuel that Europe finds itself in desperately short supply of:

“There’s an estimated $400 billion worth of natural gas in an ocean basin off Newfoundland, and one analyst believes that assessment could position the province as a major player in the natural gas sector. On Monday, June 1, the Newfoundland and Labrador government released the second phase of a resource assessment for the Jeanne d’Arc Basin, a shallow-water area 350 kilometres east of St. John’s.

The first study of the basin assessed resources available within existing discovery and production licences. It estimated the areas contained somewhere between 8.1 to 11.3 trillion cubic feet [tcf] of recoverable natural gas. The second phase identified an additional 10.2 to 25.5 trillion cubic feet in adjacent and unlicensed areas. Combining the results and the range of estimates, the studies have determined that the best estimate is likely 27.6 trillion cubic feet of recoverable natural gas.”

While proximity to Europe would advantage the shipping of liquefied natural gas (LNG) from offshore Newfoundland, such logistical considerations are hardly determinative. Whether these resources ultimately get developed is instead a complex mix of political, regulatory, and economic considerations, the inspection of which lays bare both the opportunities and challenges that lie ahead as Canadian Prime Minister Mark Carney works to unstick his country’s energy. Will he get it done?

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At what point does the forced introduction of intermittent wind and solar power onto an existing grid begin to break things? A simple but highly effective rule of thumb is to inspect the proportion of highly dispatchable power capacity contributed to that grid by natural gas and impoundment hydroelectricity. Once intermittency swamps dispatchability, the pain can become overwhelming.

Why is this? The “free” power of wind and solar is unpredictable, suddenly showing up en masse or disappearing with equal abruptness. The dispatchability (i.e., ease of tuning up or down on demand) of natural gas and hydro allows grid operators to rapidly “load match,” and thus keep the grid running without interruption. Saddle the operators with more intermittency than the dispatchable sources can handle, and what you’re really betting on is hope.

Armed with this baseload knowledge, news of California’s shifting energy mix, for example, lands a little differently:

“California’s natural gas generation has continued a several-year decline in 2025, while the state’s utility-scale solar keeps rising, according to a new report from the Energy Information Administration.

Natural gas is still the dominant energy source in the state overall, but solar is starting to close the gap. For the first eight months of this year, utility-scale solar generation totaled 40.3 billion kilowatt hours in California, and natural gas accounted for 45.5 BkWh.”

Grids with a high proportion of hydro become juicy targets for the implementation of a state-mandated green utopia: lots of wind and solar can be piled on with little in the way of immediate negative consequences, all while the anchoring hydro power emits minimal marginal carbon to boot.

Stretching things further, hydro-heavy grids can even be counted on to help their virtue-signaling neighbors in a pinch, with dams that act like giant batteries. This is the seductive “solution” that Norway and Sweden offer the European Union (EU).

As with most things that look great on paper, reality has a way of highlighting the fine print at just the wrong time, and the inconvenient footnote that hydropower is itself an intermittent source is often overlooked until it really matters. Wet spells and droughts may be measured in months or years rather than in hours or days, but this does not make such volatility any less impactful. If anything, an extended period of copious precipitation often lulls planners into minimizing the risks associated with inevitable water scarcity.

Unfortunately for Europe, reality is bringing forth the fine print of this arrangement at just the wrong time. With the war in the Middle East simmering seemingly without end, and Qatari liquefied natural gas (LNG) facilities still hopelessly offline on the wrong side of the Strait of Hormuz, water levels across the Old Continent have fallen to lows not seen in years. A one-two punch of lost dispatchability is about to befall the EU’s shared power grid, and this winter’s inevitable Dunkelflaute—periods of simultaneously low wind and solar output—is likely to emerge as a point of crisis. Incredibly, the developing situation appears to lack requisite urgency. A perfect storm is brewing, so let’s do some storm watching.

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One of the most important hydrocarbon discoveries of the last decade is blooming off the coast of South America. For this month’s Pro Tier presentation, we’re taking a detailed look at its history and its future. Join us for a deep dive into Bonanza Republic: Guyana’s Oil Miracle and Its Global Consequences as we walk through…

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For much of the modern age, elemental sulfur has been an industrial nuisance. Produced as an unwanted byproduct on an enormous scale, sulfur certainly finds outlets in the economy—even a few critical ones—but those outlets came into prominence because there’s so much of the yellow stuff, not the other way around. When mountains of material need to find a home, homes are urgently developed, lest piles of pennies hold up production of desirable dollars.

Although sulfur can be mined directly, two of the most important industrial processes at the front end of the economy typically generate more than enough supply for global needs. Sulfur atoms primarily enter supply chains as passengers in sour hydrocarbons and sulfide ores, whose processing into useful fuels and metals involves sulfur removal.

As environmental restrictions on sulfur emissions have tightened, the supply of purified elemental material has necessarily grown. For example, with more stringent pollution controls on bunker fuels, less of the sulfur entering a modern oil refinery finds its way into the atmosphere via engine combustion, limiting what had been a major release valve and increasing supply. While some ships have installed scrubbers onboard so they can continue burning cheap, dirty fuel, it has fallen on refineries to do most of the purifying. It is a similar story with diesel, whose ultra-low-sulfur variants command a market premium.

All that sulfur has to go somewhere, and it normally does so on the cheap. As recently as 2024, the average price of sulfur in the US was under $50 per ton, or a little more than a couple of cents per pound.

The dominant use case for sulfur is to make sulfuric acid, which itself is an input into several downstream applications, especially phosphate-based fertilizers. In the case of elemental sulfur piling up at oil and gas refineries, the material is routed to sulfuric acid plants, where it is burned in air and further oxidized over a catalyst before being converted into the desired product. At sulfide ore smelters, like those that make much of the world’s purified copper and nickel, sulfuric acid is often produced in situ from furnace off‑gas, as part of an integrated work process.

Like countless other supply chains, the sulfur industry has been disrupted by the war in Iran, as Middle Eastern refineries are heavily involved in the trade. The situation has been compounded by an unexpected and highly protectionist move by China, as well as Ukraine’s relentless attacks on Russia’s refinery network. These developments are significant, and the Twitterverse is awash in chatbot-generated catastrophizing, with predictions that global food and metal production are imperiled, and famine and factory closings are sure to follow.

Is this panic justified? Has a smelly byproduct that could hardly be given away suddenly become irreplaceable? As is often the case, reality is more nuanced than many would have you believe. Let’s ground ourselves with some data and separate hyperbole from genuine concern.

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