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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If pomp and pageantry were proxies for geopolitical heft, Great Britain would still be a global superpower. Few affairs eclipse the spectacle of the King’s Speech at the State Opening of Parliament, a tradition that dates back to at least the 16th century. On May 13, King Charles III presided over the latest.

The purpose of the King’s Speech is to lay out the government’s main policy agenda for the coming period by presenting a detailed list of the bills likely to be debated before Parliament. Among oil and gas investors, this portion of the King’s prepared remarks raised a few eyebrows:

“My Ministers believe that energy independence must be a long-term goal of national security and that the nation’s energy security requires long-term investment and reform, as demonstrated by recent events in the Middle East. Increased production of clean British energy will help to ensure that enemies of the United Kingdom cannot attack the economic security of the British people. My Ministers will therefore introduce an Energy Independence Bill to scale-up homegrown renewable energy and protect living standards for the long-term.”

Briefing documents released with the speech’s transcript make clear that new licenses to explore the North Sea would be made illegal and fracking would be permanently banned. In essence, the proposed Energy Independence Bill would gut any remaining enthusiasm on the part of the hydrocarbon industry to continue doing business in Britain, especially in light of the suffocating excess profits tax that remains in place. The company formerly known as British Petroleum foreshadowed the dour mood just two weeks before the State Opening:

“BP Plc is considering potentially exiting part or all of its operations in the UK North Sea, people familiar with the matter said, as the oil giant works to strip assets and pay down debt. London-listed BP is conducting an internal review of its upstream operations in the UK, which could fetch about £2 billion ($2.7 billion) in a full divestment, according to the people…

The company is among the last remaining oil majors operating in the UK North Sea, with peers such as Chevron Corp. and ConocoPhillips having sold assets. Others like Shell Plc, Exxon Mobil Corp. and TotalEnergies SE have moved to divest or restructure parts of their positions, including through joint ventures.”

With industry on its knees and practically no glimmers of hope on the horizon, now would be a particularly risky time to predict an imminent reversal in the energy politics in Great Britain. Despite how incredibly unlikely it might seem today, one of our most successful mental models is flashing a high probability of just such a development. Events are moving at such a pace that publishing admittedly speculative musings at this stage of their refinement warrants the risk. Let’s unwrap who we think will be the next British prime minister, and why we expect this most unlikely of heroes to revive oil and gas production in the North Sea.

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The ground is shifting again in Canadian energy, and so we return to one of the most audacious calls we’ve made in the five years of this publication’s existence. We write, of course, of the unlikeliest hydrocarbon hero of them all—Canadian Prime Minister Mark Carney and his mission to unstick Alberta’s energy.

Longtime subscribers to Doomberg will recall how we parlayed our reading of Canadian propaganda and its impact on that country’s politics into predicting the selection of Carney for the top job before it seemed conceivable to most. In a follow-up piece written last April called “The Fix Is In,” we shared what our mental model revealed about what would likely come next:

“Here’s how the play is likely to unfold in the weeks and months ahead: Carney will be elected Prime Minister on April 28 by a comfortable margin; [Alberta Premier Danielle] Smith will trigger a constitutional crisis, providing cover for Carney to strike a grand bargain that finally resolves longstanding tensions between the provinces and Ottawa; and large infrastructure permitting reform will fall into place. Protests against these developments will be surprisingly muted, and those who do take to the streets will be largely ignored by the media. The entire effort will be wrapped in a thicket of patriotism, with [US President Donald] Trump portrayed as a threat even greater than climate change itself. References to carbon emissions will slowly fade.”

Carney did win the election, albeit by a less comfortable margin than we anticipated. The Alberta separatism movement suddenly enjoys far more print space in Canada’s big newspapers, and enough signatures have been gathered in the province to hold an independence vote. Carney signed a memorandum of understanding (MOU) with Alberta’s leaders, committing himself to the task of getting large pipeline projects done. The Canadian Parliament passed the Building Canada Act, including the fast-tracking of projects deemed to be in the national interest. While there certainly have been objections to all of this by those on the progressive environmental left, their efficacy has been rather blunted, at least by historical standards. Finally, Orangemanbad has dutifully played his part, providing an endless assembly line of red meat for a notoriously anti-American press corps.

As far as prognostications go, we could be forgiven for taking our hockey puck home and calling it a good skate, but the careful reader will notice that the slippery issue of carbon emissions was conspicuously absent from our victory lap. News out of Canada on Friday, however, not only reveals how the final pieces of the puzzle will fall into place, but also lays bare the raw power behind the public-facing political leadership. The impulse to count carbons boomerangs back onto those opposed to hydrocarbon extraction in a way that not only ensures immortal midstream assets get built, but also lets bankers catch a valuable vig along the way — the ultimate chef’s kiss of cynicism. Let’s head to Calgary to indulge in the latest details.

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In some ways, the war in Iran has proved inglorious for those of us who specialize in energy market analysis. Had we been given the events of the past 75 days and asked to wager on front-month Brent crude at $150 per barrel, we would have greedily pledged our homes to take the over. While we wouldn’t be the first to be made homeless by the brutality of the markets, anybody who claims to have correctly predicted how oil prices would unfold is, well, almost certainly lying.

Getting the future wrong on occasion is just part of the business. Nobody bats a thousand. Learning from reality as it unfolds is the ticket to commercial longevity.

More troubling to the profession is the relentless proliferation of wrongheaded takes on the state of affairs in the oil and gas industry—especially America’s. Such claims are spread by many whose pedigrees suggest they should know better. A common theme: The US is in far worse shape than “they” are telling you, and calamity lies ahead. Here is a paraphrasing of the more widespread—and erroneous—assertions:

“The US is not self-sufficient in oil.”

“US refiners cannot process the type of crude the country produces.”

“US oil storage tanks will run empty in early July.”

If you have read such assertions and thought, “That can’t be true,” you would be right. Other than California, the US is well prepared not only to weather the storms of war but to thrive amid the maelstrom. Using nothing but publicly available information, let’s walk through the reasons why.

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Just hours after the outbreak of war in Iran, we made a deliberate decision to plug into as much foreign propaganda as possible. We repurposed the all-powerful Twitter/X algorithm to identify a new list of high-signal/low-noise accounts with a pro-Iranian bent. Using a technique previously described here, we supplemented our standard approach to information-gathering with this new feed. In doing so, we were able to draw conclusions about the war’s arc days before they surfaced in legacy Western media outlets.

Take the fate of the US military bases sprinkled around the Middle East, presumably built at least in part for an inevitable clash with Iran. During the first week of hostilities, our new feed was replete with shocking footage and satellite imagery that strongly indicated Iran had inflicted massive damage on these bases, far more than the Pentagon was admitting. Much of it seemed “leaked” from Chinese sources, having found its way to Twitter/X via popular Chinese social media outlets, and was mostly confirmed by Western-based satellite providers, at least before the Pentagon demanded they stop publishing it.

Because this material so mismatched what US and Israeli military leaders were reporting, we filed the information as a loose axiom in a developing mental model: Iran was outperforming expectations, a quick and decisive defeat of that country was not in the cards, and no amount of jawboning would alter events on the ground. Although, in many cases, it took several weeks, traditional news organizations slowly began to confirm what by then had become old news to us, culminating in this remarkable investigation by The Washington Post, published Wednesday:

“Iranian airstrikes have damaged or destroyed at least 228 structures or pieces of equipment at US military sites across the Middle East since the war began, hitting hangars, barracks, fuel depots, aircraft and key radar, communications and air defense equipment, according to a Washington Post analysis of satellite imagery. The amount of destruction is far larger than what has been publicly acknowledged by the US government or previously reported.

The threat of air attacks rendered some of the US bases in the region too dangerous to staff at normal levels, and commanders moved most of the personnel from these sites out of the range of Iranian fire at the start of the war, officials have said.”

This affair drives the importance of not only casting a wide net for inbound information but also having a disciplined process to grade it for veracity. The Washington Post has historically printed many stories we find dubious, but this one revealed sources and methods beyond the standard “people familiar with the matter” trope, adding to its credibility. In other words, it rang true under our own internally developed mosaic.

On May 2, potentially momentous news broke out of China that, if verified, might mark the beginning of the end of US dollar hegemony, the durable rise of a multipolar world, and an even greater role for gold in geopolitics and international trade. We speak, of course, of the ongoing sanctions war between the US and the other great powers, and China’s possible decision to draw a line in the sand and defy Washington in a way it has not yet been willing to do. We say “possible” because, almost immediately after the news broke, efforts were made to downplay it, putting us in a strikingly similar position to that first week of the war: We are pretty sure something incredibly important is happening, but we are getting strongly mixed signals on the matter.

With US President Trump allegedly traveling to Beijing soon for what may be a historic summit with Chinese President Xi Jinping, making sense of the conflicting headlines has never been more urgent. Let’s work through the evidence together, ponder the consequences, and get ready for the big show ahead.

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Within the Washington establishment, few periodicals are adorned with the stature and prestige of Foreign Affairs. Published by the powerful Council on Foreign Relations, the magazine is known for its thoughtful, US-centric essays, whose ideas often gain acceptance within its elite readership. As a means to understand where US government policy and legislation might be headed, Foreign Affairs is an invaluable resource.

In a recent contribution titled “The Real Threat to Taiwan: America Is Preparing for the Wrong Kind of Crisis,” author Eyck Freymann—whose credentials quite literally could not be more pedigreed—opens with an ominous but entirely plausible hypothetical: In small but measurable steps, China begins to implement something of a soft blockade on Taiwan, all but daring the US to intervene. Although no individual provocation rises to the level of casus belli, before long, China has a stranglehold over the island—leverage it steadily uses to achieve Xi Jinping’s vision of reunification.

Suitably hooked by Freymann’s scenario, we were taken aback by the casual way in which he framed possible US countermoves (emphasis added):

“The White House quickly recognizes the core issue: the burden of escalation is now on the United States. China’s actions, although deeply alarming, do not automatically rupture any supply chains. They are not traditional acts of military aggression. Taiwan’s most important exports—the GPU chips that power the artificial intelligence revolution—can continue to flow to the United States, at least for now. But if Washington accepts this new normal, it will have been checkmated. Starved of the tools to defend itself, Taiwan will soon lose its leverage to resist China’s coercion.

Washington cannot trust that Beijing will let Taiwan export GPUs freely forever. At any point, the United States could theoretically destroy or disable TSMC’s fabrication plants to prevent China from accessing them. But such an action would trigger a financial panic. China will therefore seize the advantage in cutting-edge AI capabilities unless Washington chooses to inflict a devastating economic blow against itself, antagonizing the entire world in the process.”

After rereading the passage several times to ensure we understood the message, it dawned on us that, if this is actually what the US foreign-policy establishment is telling itself, inner Washington’s assessment of China’s AI capabilities is so wildly detached from reality as to be dangerous.

Longtime Doomberg readers will know that China’s AI strategy is of great interest to us. In April of 2024, we published “Chip Shot,” a piece detailing how China systematically works to dominate strategic industries and how Western market leaders regularly downplay the risks as events unfold. In “Is the Chip War Already Lost,” published in December of the same year, we warned that analysts were wildly underestimating the pace of innovation in China’s chip sector—a development with far-reaching consequences for global trade. In May of 2025, we released “On the Ascend,” which focused specifically on what Huawei’s new chip architecture would mean for Chinese chip independence. Finally, last December, we returned with “Trump Card,” which speculated on the potential impact of China’s growing AI capabilities on the value of global equities.

Contrary to Freymann’s framing, we believe that by the time China makes its inevitable move on Taiwan, TSMC’s assets won’t be a prize Beijing needs to close the gap with US competitors, for that gap will already be good and closed. In fact, Beijing is almost certainly waiting for such a milestone to be achieved, at which point TSMC’s facilities become a source of leverage over Washington, not the other way around. If the headlines coming out of China in the past few weeks are to be believed, we are on the cusp of entering such an era. Let’s explore recent developments through this lens.

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Just after midnight on March 24, 1989, the helmsman of the Exxon Valdez made a fateful error. In an attempt to avoid ice while navigating Alaska’s Prince William Sound, he accidentally ran the tanker aground on Bligh Reef. The maneuver ruptured eight of the ship’s eleven cargo tanks, spilling some 11,000,000 gallons of oil into the surrounding environment. (The attentive reader might wonder why 260,000 barrels or 37,000 tonnes aren’t the more widely quoted figures for this memorialized disaster, to which we would say the legacy media would quote oil spills in ounces if they thought they could get away with it.)

As tanker spills go, the Valdez was nowhere near the largest, but its impact on the oil industry was unparalleled. The outrage that followed led to a complete overhaul of how oil shipping operates, and the industry invested huge sums to improve tanker construction, port safety, and other related operations and monitoring logistics. Most notably, the use of single-hulled tankers was phased out altogether, replaced with double-hulled variants designed to be far more difficult to breach.

Once new targets are set for the oil and gas industry, they tend to be achieved, and the decades after Valdez have seen a remarkable drop in tanker-related spills. While it was not unusual to experience hundreds of thousands of tonnes of oil spilled annually in the 1970s and 80s, the 2020s have averaged less than 10,000. In particular, double-hulled Very Large Crude Carriers (VLCCs)—leviathans that can handle upwards of 2 million barrels of oil at a time—have performed exceptionally well, with no major spills on record. Let’s hope we didn’t just jinx them.

Rare though large spills may be, zero remains an emotional construct, as no risk can be wholly eliminated. Even zero is never quite zero, as one can’t be 100% assured it will remain zero in the future, the future being infinite and unfalsifiable. Environmental groups regularly exploit the asymptotic nature of a line that might approach zero but can’t ever get there, and the Exxon Valdez affair still finds its way into many contemporary advocacy campaigns.

One such campaign unfolded in Canada nearly a decade ago, with far-reaching consequences that are now causing pain too sharp to ignore. Political action inspired by the ghosts of oil-covered birds, otters, and sea lions has cost Canada’s energy sector billions in lost profits, enriched its American neighbors by the difference, and stunted its geopolitical power—even as the war in Iran creates unprecedented demand for what the country could currently be offering. It’s no exaggeration to say the fallout for the Canadian economy risks national unity, adding momentum to separatist movements in the Western provinces. With a fresh move afoot in Ottawa to undo the damage, and given the stakes involved, it’s time to assess where the political puck is headed next.

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Shortly after missiles started flying over the Middle East in the latest forever war, a most unusual set of weather phenomena captured the attention of residents across the region. In late March, a rare, slow-moving storm system brought heavy rain, thunderstorms, and strong winds across much of the United Arab Emirates (UAE). In April, Saudi Arabia closed schools after severe floods raged across the country. Last week, reports of previously empty Iranian dams now overflowing with water filled social media. A post on Twitter/X that purports to show torrents of water filling various reservoirs across the region has 3.5 million views at the time of this writing.

Iranian officials have long accused Gulf states and US-Israeli military interests of cloud “theft” or weather manipulation. Many assumed this claim was an attempt to deflect political blame for the government’s alleged mishandling of the years-long drought that has besieged the country. Iran’s gripe is not without at least some plausibility, however. The UAE has publicly acknowledged its program to increase domestic rainfall, which involves an estimated 1,000 hours of cloud-seeding flights per year. The US military is also known to have used cloud seeding as part of a systematic “weather warfare” campaign in Vietnam during Operation Popeye more than 50 years ago.

Escalating the conspiracy speculation, perhaps knowingly, Iran’s official Kabul Embassy Twitter/X account, part of a cadre of verified, longstanding embassy accounts reactivated to spread wartime propaganda, tossed a match into this online tinderbox of intrigue. As Türkiye Today describes, the Iranians assert that their successful attack against a weather control center accounts for the sudden restoration of water to their lands:

“The since-deleted post stated that following what it described as Iran’s destruction of a ‘secret cloud seeding and climate change center’ operated by the UAE, weather patterns across the region transformed ‘overnight.’ Iraq and Iran, the post claimed, were now experiencing weekly heavy precipitation and significant temperature drops as a direct consequence.

In a rhetorical flourish that drew particular attention before the post disappeared, the account included a meteorological map based on the GFS forecasting model showing dense precipitation systems stretching from Türkiye’s western and southern coastlines across to the Middle East. A red circle was drawn around rain masses passing over Syria and Iraq. The account described the cloud formations on the map as curving in the style of legendary Brazilian footballer Ronaldo Nazario, a comparison that amplified the post’s viral spread for its surreal tone.”

While such speculation could be easily dismissed as just another artifact of social-media algorithm amplification, meaningful signals are exposed as the tide goes out: the critical role water plays in regional geopolitics, the mystique surrounding Western intelligence agencies and their rumored prowess, and how Iran is more than holding its own against the US and Israel in the propaganda arc of the current war. Let’s drink it in.

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As the world focuses on the conflict in Iran, we find it instructive to take a step back to consider the state of natural gas, America’s primary energy advantage. All wars are, in essence, energy wars, and the US’s foundational strength in the fuel, and North America’s more broadly, is consequential.

In this month’s presentati…

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Prior to the war in Ukraine, the port facilities at Novorossiysk had historically handled over 30% of Russia’s oil exports, making the city one of the most important chokepoints in that country’s vast export system. Situated along the now hotly contested Black Sea—a major strategic gateway to international waters for both Russia and Ukraine, and a body of water Western powers have been aggressively seeking to turn into a “NATO lake” since Russia’s annexation of Crimea in 2014—Novorossiysk had largely been considered an off-limits target. Its role in balancing international energy markets made attacking it too risky and potentially counterproductive.

That changed in November, when Ukrainian long-range air and sea drones hit, forcing a temporary halt in the port’s oil exports, arresting roughly 2.2 million barrels per day (bpd).

When Iran made closing the Strait of Hormuz a key response to the US-Israel attack in March, the world was thrown into an urgent energy crisis, the consequences of which have yet to fully play out. One immediate effect was the sudden increase in the strategic value of every other barrel of oil on the planet, especially those available for export. Given this development, you might have assumed that the European countries underwriting Ukraine’s military and budget needs would have cautioned their ally against further attacks on Novorossiysk. If they did, such advice fell on deaf ears:

“Explosions were reported overnight on April 6 in the southern Russian port city of Novorossiysk, with local residents saying drones attacked an oil terminal and damaged a residential building. The attack is the latest in a string of Ukrainian long-range strikes on Russia’s most important oil terminals on the Baltic and Black Sea coasts in recent weeks, as Kyiv looks to restrict the windfall gained by Russia from soaring world oil prices.

The strike was later confirmed by Ukraine’s General Staff and a source in the Security Service of Ukraine (SBU). Six of the terminal’s seven oil-loading stands, used to load and unload tankers, were damaged, the source told the Kyiv Independent. The attack also hit key ground infrastructure, including the pipeline control unit and the oil metering station.”

The latest attacks on Novorossiysk came just days after the US Department of State took the unusual step of publicly warning against such moves, issuing a formal demarche to the Ukrainian ambassador in Washington.

Among European leaders, there still seems to be, at best, indifference to the potential second- and third-order consequences of attacks on Black Sea oil depots. In fact, a week after the latest salvos, German Chancellor Friedrich Merz hosted Ukrainian President Volodymyr Zelenskyy in Berlin, where the two signed yet another strategic defense partnership, this time focused on how Germany could further help its ally with drone production. That those drones would eventually be used in similar future attacks on Russia’s oil export capacity seems a certainty.

Whether the indifference is justified will be determined in the weeks ahead, for Novorossiysk doesn’t just move Russian crude to international markets. It is also the primary outlet for 80% of the oil exports of a landlocked country that has become the second-largest source of imported oil for the European Union (EU). Soon enough, Brussels won’t just have a Hormuz problem.

It’s time we talked about Kazakhstan.

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Over 100 million years ago, South America and Africa began to drift apart, and in the narrow seas between them, thick layers of rock and salt gradually accumulated along what are now the coasts of Brazil and West Africa. Buried beneath those layers is an enormous amount of oil, with Brazil’s pre-salt resource commonly estimated in the tens of billions of barrels. Similar formations exist in the waters of Angola, Congo, and Gabon.

Although geologists long suspected it contained a large energy bounty, Brazil’s pre-salt was historically difficult to drill because it behaves like a slow-moving, plastic material that flows and squeezes around the wellbore, constantly threatening its stability and integrity. After years of intense investment by Petrobras and its international partners, sufficient technological advances were made, and the company estimates the breakeven cost of production from such formations at $30–40 per barrel. The oil majors are nothing if not deflationary machines.

The breakthroughs have catapulted Brazil into the largest oil producer in South America and among the top ten in the world. According to the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP), the country’s production recently surpassed 4 million barrels per day (bpd). If the current growth trajectory continues, it won’t be long before Brazil passes Iran on the leaderboard:

Adding to the importance of Brazil’s oil growth trajectory is the fact that the country has historically consumed only about 2.5 million bpd of the stuff, meaning each incremental barrel is available for export—all the more precious in the aftermath of the closure of the Strait of Hormuz. Anyone with spare production capacity profits handsomely from the resulting spike in prices.

While the economic benefits of being a global top-ten oil exporter are obvious, the associated risks were laid bare when the US military removed former Venezuelan President Nicolás Maduro and waged a pre-emptive war on Iran. The cover story for these operations may have involved, respectively, drug cartels and the well-worn “weapons of mass destruction” trope, but it would be naïve not to consider what is actually going on.

The fact that Brazil is the “B” in BRICS, and that one of our operating mental models sees the US immersed in World War III against all who support the main mission of that organization, means it’s time to speculate on the odds of a major hot war in the Western Hemisphere. When the totality of the evidence we are about to present is considered, there can only be one conclusion: The risk of a military conflict between the US and Brazil is far higher than most geopolitical analysts and political strategists are currently gaming. Let’s lay out the case.

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What is the appropriate price of oil? Given a set of supply, demand, and inventory numbers, where should the world’s most important commodity trade? For obvious reasons, the war in Iran and the closure of the Strait of Hormuz have brought this question to the forefront of market analysis, and a digital avalanche of opinions on the subject now proliferates across social media. Depending on one’s viewpoint—or, perhaps more accurately, one’s level of experience in studying such matters—current action in the oil markets is either a logical reflection of the integral of market forces or the greatest conspiracy of price suppression in the history of finance. Determining which end of this thought curve is worthy of occupation motivates today’s missive.

One significant challenge is that the question itself involves an important bit of trickery, as there is, in fact, no singular price of oil. Absent the specification of grade, location, and especially timing of delivery, the price of a barrel of oil has no meaning, and yet market reporting necessitates a gross simplification of the matter.

When quoting the price of oil in North America, commentators are almost always referring to the front-month futures contract for West Texas Intermediate (WTI) on NYMEX/CME, with physical delivery at Cushing, Oklahoma. When the rest of the world quotes the price of oil, they are most often referring to the front-month ICE Brent crude futures contract in Europe, which prices a large share of globally traded seaborne crude. To confuse matters further, because exchanges often use different expiry schedules—the mechanics of delivery are not universal, after all—the definition of “front month” is not itself standardized.

That billions of dollars are traded daily, incorporating a plethora of nuances, makes the oil markets no place for amateurs—one of many reasons you will not find us in the pits. We have far too much respect for our limited capital and for the expertise of those who do it for a living to be the fools at that particular poker table. That does not mean useful information cannot be gleaned from the market action, however, and there has been no shortage of fascinating and unexpected developments in this regard since the war broke out.

One development that caught attention in the Twitterverse is the extreme backwardation seen in global oil prices—a phenomenon in which oil that can be delivered sooner is priced higher than oil promised to arrive at a later date. That backwardation is a normal market response to shortages has been obscured by the sheer scale of what the Iran war has triggered and by how unfamiliar such behavior is to the cadre of newly minted expert oil traders on social media.

To visualize the phenomenon, consider the price spread between Dated Brent—oil with a delivery date attached to it and thus a proxy for spot prices—and its associated front-month contract. During normal times, this spread is minimal, but the Iran war pushed it to levels far exceeding those observed during the early weeks of the war in Ukraine:

To some, this price action is not normal, but instead is proof that the “real” price of oil is much higher than the “fake paper” prices “they” are allowing to print on our collective screens. There are many versions of this claim, but this particular one—sent our way by many subscribers, with several hundred thousand views at the time of writing—captures the essence:

“I’m watching the numbers flicker on the screen -- Brent crude at $92, WTI hovering near $97 -- and I feel a profound sense of dread. This isn’t a market; it’s a meticulously crafted fiction. We are being lied to on a scale so vast it defies comprehension. The current paper price for oil is a government-constructed lie, a narrative woven by desperate authorities to maintain a false sense of stability while the physical foundations of our world crack beneath us.

This manipulation isn’t just an economic curiosity; it’s a trap. While futures traders cheer a modest pullback, the real cost of a barrel -- the tangible liquid that powers tractors, heats homes, and transports food -- has already rocketed into another dimension. This divergence between paper and physical represents the single greatest threat to global order I’ve witnessed in decades. It’s a dangerous fiction masquerading as reality, and its inevitable collapse will redefine everything we know about energy, money, and power.”

There is, of course, a much more innocent explanation for these prices, one that does not involve a grand conspiracy of manipulation. Instead, it involves a fair probability-weighting of two outcomes so unprecedented in their polarity that there is no accurate historical precedent by which to model them. Once properly contemplated, not only does the recent price action make sense, but the volatility that will surely follow does as well. Let’s unravel the mystery and brace for impact.

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At its zenith, the German nuclear power sector was the envy of the world. By the turn of the century, the country operated 19 of the most sophisticated and reliable nuclear reactors on the planet, churning out 170 terawatt-hours (TWh) of baseload electricity per year. With proper care and maintenance, these facilities could have been effectively immortal, a perpetual anchor to a globally elite economy. What followed—which is well-trodden territory in these pages—was one of the greatest own goals in geopolitical history.

Those 170 TWh of power would come in handy for the European Union (EU) now, as it stares down the barrel of what looks increasingly likely to become the greatest energy crisis of this generation. While much attention will understandably be paid to upcoming regional stockouts of jet fuel and diesel—and the degradations to modern life they will trigger—a slower-rolling yet equally challenging crisis is unfolding. In a scandal that defies belief, the member states of the EU have exited the winter of 2025–2026 with disastrously low stores of natural gas just as the war in Iran has closed the Strait of Hormuz, taking 20% of the world’s supply of liquefied natural gas (LNG) offline.

To quantify the scale of the challenge, it is best to combine the production and consumption statistics of the EU, Great Britain, and Norway (collectively, the EU+2). The latter two, the largest natural gas producers in Europe, are not members of the EU itself but are fully connected to it via pipeline. A quick perusal of the Statistical Review of World Energy indicates that the EU+2 produces less than half the gas it consumes, a gap of roughly 20 billion cubic feet per day (bcf/d). This is approximately equivalent to the entire natural gas output of the mighty Permian Basin.

As the refilling season begins in earnest, there is little room for error and no tolerance for a long, drawn-out war in the Middle East. A bad outcome is all but guaranteed—energy prices will rise, and deindustrialization will continue—but whether a true catastrophe can be avoided is the question at hand.

Gauging the EU’s progress on its upcoming journey requires mapping major gas inflows, assessing whether those pathways are in significant jeopardy, and listing the risks to keep a close eye on as geopolitical developments evolve. Having done this work over the past week, we present our findings here.

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Few practitioners enjoy wrapping linguistic complexity around straightforward concepts more than biologists, which explains how Nietzsche’s 1888 truism on resilience came to be rebranded as “stress-induced mutagenesis” a century later. Among those who study living organisms and life processes, the term is applied to situations in which external stresses trigger an increase in mutation rate that boosts genetic diversity and can accelerate adaptation.

The phenomenon is especially evident in the field of oncology research. When doctors treat cancer with novel therapies, the treatments themselves place tumor cells under intense stress. In response, some cancer cells switch into a kind of “error-prone” mode in which they start making more genetic mistakes than usual. Most of those mistakes are useless, but a few can give cells the ability to survive the very drugs meant to kill them. Over time, this stress-driven trial-and-error process can leave behind a tougher, more drug-resistant cancer that is harder to treat, let alone cure.

As Nietzsche astutely observed, this concept thrived in the theater of war long before it was discovered in the lab. Consider the impact of the sanctions war on the Russian economy after the conflict broke out in Ukraine. The avalanche of sanctions was historic, forcing Russian President Vladimir Putin to oversee the selection of “resistant” traits across nearly all aspects of Russia’s domestic economy by rapidly hacking together parallel imports, homegrown substitutes, and yuan-denominated finance to emerge as a stronger industrial power than before the war began.

The war with Iran can be modeled as a set of two competing attempts to impose sufficient stress to overwhelm mutagenic responses: (1) the longtime sanctions against Iran, which have forced an unexpected resiliency, and (2) the current oil blockade in the Strait of Hormuz, which will come to strengthen energy markets against future concentrated points of control. Each side is racing to adapt at a pace that dulls its opponent’s efforts. Which camp prevails will undoubtedly shape the next several decades of geopolitical evolution. Let’s contextualize the metaphor further in search of clues as to how this war will ultimately end.

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Although it is difficult to say with certainty, there are strong indications that the war in Iran may be past its apex. Yes, the current ceasefire is shaky, hostilities will likely continue in fits and starts, and the reopening of the Strait of Hormuz is unlikely to be accomplished in a linear manner, but the odds of worst-case outcomes—the complete destruction of critical oil, gas, and civilian water infrastructure in the Middle East, or the use of nuclear weapons—seem to be ebbing. Predictably, the deluge of after-action assessments has begun.

There are many questions to ponder. Here is a partial list of some of the big ones: Who won the war? How did the war impact America’s global standing? Iran’s? Israel’s? Was the NATO alliance strengthened or weakened by the war? What does the war teach about the effectiveness of modern weaponry? How will it impact the relationship between the US and Israel, or shape President Trump’s standing on the global stage? What will become of the US dollar, its dominance in global trade, and the effectiveness of sanctions as a tool of coercion? Is the aircraft carrier era over? What other military technology might be made obsolete because of advanced missiles and drones?

Much ink will be spilled in pursuit of the answers to such questions, and we certainly have thoughts on many of them, but our mission is to contemplate how the war impacted energy markets. Some of the price action across the hydrocarbon complex has been downright confounding, leaving many investors frustrated that things didn’t go as they had predicted, or wagered.

History teaches that while price signals are imperfect, they often reflect hard and unforgiving truths. Having studied the behavior of various oil and gas markets throughout the war, we arrive at three important conclusions that energy investors should internalize before committing their capital going forward. Let’s take each in order.

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We begin with two objective facts. First, no country should be more vulnerable to an oil shock than China. To a rough approximation, China consumes 16 million barrels per day (bpd) of oil while producing only 4, relying on imports to close the gap. Despite Herculean efforts spanning decades, the country has yet to crack the technical challenges associated with exploiting its vast shale oil resources, nor have its ultradeep drilling efforts borne significant fruit. According to the Statistical Review of World Energy, China produced only as much oil in 2024 as it did in 2014, while consumption grew nearly 50% over the same period.

The second undeniable axiom is that China has done its level best to assist Iran in the current war. The two nations signed a 25-year comprehensive strategic partnership agreement in 2021, and open-source intelligence points to extensive collaboration between them as Iran resists the combined onslaught of the US and Israeli militaries. Several recent articles lay bare how China is providing dual-use industrial goods, satellite intelligence, and other technologies that enhance Iran’s missile and drone performance and air defenses. It is also providing diplomatic cover at the United Nations and undoubtedly pumping Iran with all manner of critical goods to help its population deal with the hardships of war.

These two truisms make the fact that Iran has made closing the Strait of Hormuz a central element of its war strategy a bit of an enigma. Yes, the maneuver is undoubtedly the most effective card Iran has in hand, and playing it has exacted huge pain on global economic interests and generated disproportionate leverage with a clearly frustrated US President Trump; however, it also puts serious pressure on China, dependent as it is on the flow of oil from the Middle East.

Effectively, China has decided that it is in China’s interest to help Iran hurt China.

Pulling on this string over the past several weeks has led us to a new mental model to explain the war, pointing to a post-conflict geopolitical realignment that will profoundly reshape global energy markets. Let’s explore the confines of it and see where that leads.

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Just hours before the war in Iran kicked off, North Dakota District Court Judge James D. Gion issued a final judgment ordering several Greenpeace entities to pay $345 million to Energy Transfer to compensate for their destructive role in the 2016–2017 Dakota Access Pipeline (DAPL) protests.

Among those ordered to pay was Greenpeace USA—and because the judgment is larger than its yearly revenues and far exceeds its readily available assets, the case is understandably considered existential for that organization.

For a US state with a population just under 800,000, North Dakota punches well above its weight in global energy markets. Representing one of the Union’s more conservative states, local leaders made the political decision to aggressively develop the Bakken Formation, an attractive shale play that helped push oil production to over 1 million barrels per day (bpd) in just a few years. Local politics also made it a particularly poor place for Greenpeace and its allies to pull the stunts they did a decade ago—the DAPL project got built despite their protests, and now they are effectively insolvent.

Halfway around the world and on the opposite end of the hydrocarbon political spectrum sits Australia, whose population of over 28 million could have the entirety of its oil demand met by North Dakota’s production. The Land Down Under consumes roughly 1.1 million bpd of oil, but only meets about a third of that with domestic production. Worse still, Australia is no longer a major oil refiner, with nameplate capacity to produce fuels like gasoline, diesel, and jet fuel able to cover only a fifth of its needs. It’s not that the country can’t operate refineries; it simply chose to stop building them and allowed existing facilities to wither into obsolescence. Greenpeace Australia Pacific surely celebrated those decisions.

Iran’s closure of the Strait of Hormuz has laid bare the folly of Australia’s energy stance, and the country barrels towards shortages and catastrophe. Although hardly to blame for the crisis, current Prime Minister Anthony Albanese is in the unfortunate position of having to deal with it. There are few good options available to him, and several bad ones. Recently, he bowed to political pressure and made a decision that will only make matters worse:

“Australian Prime Minister Anthony Albanese said on Monday the government would halve the excise on ‌fuel and diesel and remove the heavy road user charge for three months to help households cope with a surge in costs driven by the Iran war.

Halving the tax would reduce the cost of fuel by 26.3 Australian cents per litre, Albanese said.”

As good as such gestures might feel, cheaper fuel will boost demand and make it more difficult to allocate limited supplies to the parts of the economy that need them most. Given their critical roles at the front end of Australia’s economy, farmers and long-haul truckers would seem to need priority access to diesel, for example, but the frenzy of crisis can make rational decision-making all but impossible.

The world might be in the early stages of what will become the most significant energy shock in modern times, but that hasn’t stopped policy advocates from aggressively pre-positioning for what comes after the crisis abates. Will the coming shortages be the death knell of the hydrocarbon era and herald an acceleration of the so-called green energy transition? Or will the disastrous consequences of flouting basic physics finally convince the pro-renewables crowd that it’s time for a serious rethink? For clues to where things are headed, the twin stories of Australia and North Dakota will almost certainly be instructive. Let’s find out why.

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Throughout the month of March, we wrote extensively on the happenings in Iran, sharing our methods for seeking information and interpreting events as they unfold. For this month’s Pro Tier presentation—After Hormuz: Punctuated Equilibrium in the Energy Markets—we’re taking a longer view and speculating on the global reorganiz…

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