Navy Combat Vet: HORMUZ BLOCKADE NIGHTMARE /Lt Col Daniel Davis & Steve Jermy

Added: 2026-05-05

[00:00:01]President Trump is doing everything he can to try and bring this war to an end with Iran and to try and salvage the problem that we have with our economics and the lifeblood of the global economy and especially that of the Americans and that is oil. Or at least that's what it should be the case. But based on what we're observing, I'm not completely sure what it is. Uh we're going to have Commodore Steve Jeremy on with us here today. We're having some connection problems, but he's going to join us here in just a few minutes trying to work through those. want to go ahead and get started because we want to be a respector of your time. But do stick with us because he's got some information here that's going to show you from some of his analysis and study that shows we may be in a lot more of a precarious situation than we think. The if you just look at the price of oil today based on these comments that there's going to be another round of negotiations on Thursday uh has has settled the market some and the price actually came down a little bit. Last time I checked it was like $92 a barrel.

[00:00:55]So it had gone down a little bit. that makes people think, okay, maybe everything's going to be settled in.

[00:00:59]Maybe everything's going to be okay. But when you look at the fundamentals underneath, the economic fundamentals, just like we do all the time with the military fundamentals about what war and peace looks like and what what makes national combat power, there's similar kinds of fundamentals in the e economic realm that say there could be something uh we could already have baked in already. If this if Thursday turns into a miracle and there's actually a negotiated settlement, we may already have baked in a 5% reduction in the global economy which could set in a recession. If this continues to go on for uh two or three more months even, then we could get into depression territory that that's as bad or worse than the dels of 1929. That is a very stark statement, but something Steve Jeremy is going to talk about here in a minute. But let's get to let's kind of walk us into this situation. why we may be more in risk of the latter than the former because of the guy that's calling the shots in the United States.

[00:01:57]President Trump yesterday was asked about the objectives that he has for this war. What what is the outcome look like? What does success look like? And and you'll notice his answer doesn't exactly make you think this guy is confident and knows what he's looking for.

[00:02:11]>> What's the endgame? Is it to force Iran back to the negotiating table? Is it to open up the straight so that gas prices ultimately come down?

[00:02:19]>> Maybe everything. I mean, you know, both of those things certainly and more. Uh we can't let a country blackmail or extort uh the world cuz that's what they're doing. They're really blackmailing the world. We're not going to let that happen. And they've never been blackmailing anybody. They've been trying to survive. So, there's no truth to that part there. And you see, President Trump is like, "Yeah, sure."

[00:02:41]Both of those kind of things. And if and if the president himself isn't sure what he's trying to accomplish, then getting a positive outcome is not exactly high on the list of probable things that we can see and things that we can have out with us. Now, we have I think I see down there Steve Jeremy uh is back with us. Uh good to see you, Steve. Glad we got all that stuff worked out because I've been eager all day for this show and I'm really eager to hear what you have to say. First of all, welcome back. Glad to have you.

[00:03:07]>> Yeah, good good to be back, Danny. I'm sorry. I'm sorry I'm a bit disorganized.

[00:03:11]I'm in the middle of moving, having retired from a chief exec job into my third portfolio career and I'm I've had one of those nightmare days when all of my it's gone wrong. And in the old days, like you, I would have had a sergeant major or a a chief petty officer who would have sorted all that for me, but I'm doing it myself. Not very well.

[00:03:29]>> I see. Uh, if I could get you to remove a little bit of your headroom, you can pull your camera down there a little bit. That would be >> Yeah. In fact, Steve, can you turn your camera horizontal so we get a landscape instead of a vertical? Yeah. And then Danny, uh, remember about the being able to hear the S? He's gonna have to hit his camera.

[00:03:45]>> Yeah. Since you're on your phone, when we play a sound bite, you have to tap this thing to for it for it to unmute, just so you know.

[00:03:52]>> Okay. That's what your That's what your chief petty officer would say. So, let's get right into it. Um listen uh part of the other problem here is that uh and and just before you got on we were talking about the potential economic ramifications for this but we got to first kind of set the stage for why we're in a potential problem that this could go anywhere from what you told me before from potentially a recession may already be too late to avoid that but it could get into a depression if we don't get this solved pretty quick. Let's take a look at what we're doing to try and get it solved. Um, and that right now, President Trump has said, "You know what? The the negotiations didn't work the other day on Saturday in in Istan Islamabad. Maybe they'll work Thursday, but if not, let's have a a a blockade, an oil blockade, and and we'll unblock the Iranian blockade with our own blockade, and that'll show them uh now that sounds a little odd when you say it out loud, and apparently to Professor Michael Clark, it kind of baffles the British. It's a move which has baffled a lot of America's allies and people in the region. They say, "Why are you trying to break a blockade by establishing your own blockade?" It's brinkmanship. We were at the edge of Armageddon last week on the 7th of April when President Trump threatened to destroy the civilization overnight. And we thought we were on the verge of this war spinning right out of control. He declared a two-e ceasefire which would expire next Tuesday, exactly a week from today. And so in the middle of that ceasefire, he's going in for brinkmanship to say, "Okay, well, I will actually squeeze Iran very very tight."

[00:05:22]Now, he he won't squeeze Iran any more tightly in a week. That will make them change their view. But by squeezing the people that Iran is sending oil to, I think he's hoping that they will put pressure on the Iranians to blink first before we get to the next deadline. But it is a strange thing. and a blockade is overtly an act of war and it is of questionable legality.

[00:05:45]>> So, aside from the legality issue and and I think uh it's pretty evident that it's not legal, at least not according to the international law, which I don't even know if it exists anymore, but let's look at the effectiveness of it.

[00:05:56]Uh how difficult is it from a naval perspective with the the firepower that we have in the region that you're aware of? How hard is it going to be for the United States to actually effectively blockade traffic coming out?

[00:06:09]>> Um, I think it's I mean it's it's entirely feasible, Danny. I think the question is how at what distance that blockade needs to happen because um if it's a close blockade uh you know that's within visual sight of the straits or not far off then that's one thing. And if not, I say that's one thing because a close blockade means that it's actually um you have warships which are going to be very vulnerable to counterattack because of course um the Iranians could argue and I think they could argue with with justification this isn't a war and that's a blockade which is an an act of war and blockade is indeed an act of war. If it's a distant blockade um the difficulty with that of course is that your ships start to actually spread out and they go off in whichever directions they want to but again it's not possible to actually maintain a distant blockade.

[00:06:53]I mean the the British did it um in the first world war uh against the German Navy uh and um achieved it with a with a a degree of success. Blockade takes time there. But the I mean the fundamental issue there is whether or whether or not it's successful. Fundamental issue is that it's only going to make things worse economically because um if you're blockading then you're taking more oil out of the world market. And so it's bound to have a detrimental effect which is even worse than the effect that it's currently having because of course all the oil that's coming through the straits at the moment be it Chinese or or Indian or those who've got an an agreement with the Iranians is actually going um to satisfy their needs and so they don't won't take oil from elsewhere in the world market. So it can only have a detrimental effect uh on the world oil market and I can't see any benefit from it whatsoever. Um, and it'll be interesting to see whether it's distance or close, but dis distance um less effective, but still potentially effective. But if it's close, then that that could well become a shooting match uh between uh Iranian land forces and ballistic missile forces and drones and uh US vessels which are in the close blockade. Very uncomfortable position to be. Now that that of course would greatly complicate the situation, push any kind of resolution much much further off which would be more of a disaster.

[00:08:18]And you you talked about this the effectiveness of it. A lot of it is not not necessarily even the military utility of it but the political utility of it because we've already had one Chinese owned vessel the Rich Stari uh has uh pushed through and apparently the United States was aware of it certainly was tracking it but made a political decision to let it go through. Uh the Chinese have said, "Listen, this is uh uh Beijing issued its most forceful criticism yet, calling the blockade dangerous and irresponsible." Um and even though they didn't come right out and say it would be an active war if you do anything to our ship, made it very clear that the Chinese are paying attention to it. So then the question is what is this blockade going to accomplish in terms of getting the war over with? and that straight opened up so that the flow comes back to normal, which is what's necessary to avert some of the dangers you're about to tell us about. Now, here's what President JD Vance said. He seems to think, "We've got all the cards."

[00:09:14]>> The president of the United States says, "We have the cards. We have the military advantage. We now have additional economic pressure that we're applying on them through the blockade that we've imposed on their oil coming out of the Straits of Hormuz." So, we have a lot of cards. we have the leverage and we're going to see what the Iranians do with that.

[00:09:32]>> He said that very confidently, but I'm, you know, looking at the situation, I I don't see it that way. How do you see it?

[00:09:39]>> Not at all. I think it's almost the other way around, Daniel. Not not that um this can't the blockade can't be put in place. Um but in terms of answering your question, how does it help? I can't see how it helps at all. Um uh it's uh going to upset a lot of um key players in this uh in particular the Chinese but not only the Chinese including the Pakistanis I think for example are negotiating the blockade the Spanish and the French are actually talking to the Iranians and um at what stage where is the cut off for which ships are intercepted and which are not? Are Chinese ships to be intercepted? Are French ships to be intercepted? Spanish ships. Um, you know, it starts to have the look of a sort of rogue rogue piracy state actually seeking to to sort of just muck things up. Frankly, I I really can't see any utility. And indeed it's the other way round because actually the there is an opportunity I think to close this war down providing that people are cognizant of what the the Iranians have said consistently um for at least the last four or so weeks about what they see to be their their conditions and it's a question of accepting those conditions. uh if if um uh the president is unwilling to accept those conditions, then all it will do is extend the war uh and it'll extend the war towards a a more catastrophic defeat. And I mean the catastrophic defeat not in terms of the implications for America in the same way that Vietnam was a catastrophic defeat but much more so and this is what makes this so different to the Vietnam campaign is the consequences in the world economy which will be profound.

[00:11:27]Um, so you know, President Trump seems to be cognizant of some of that risk. U, but he does not seem to I I don't think recognize the the significant difficulty and and the near-term pressure that could be already being applied. He was asked on Fox News, I think it was yesterday, uh, by Maria Barto Romo, uh, what about gas prices because are they going to keep going up all the way to the midterms because that's going to cause some problems. So, do you believe the price of oil and gas will be lower before the midterm elections?

[00:11:59]>> I hope so. I mean, I think so. It could be. It could be or the same or maybe a little bit higher, but uh it should be around the same. I think this won't be that much longer.

[00:12:09]>> So, it won't be that much longer. Uh but, uh let me show you one other soundbite here. uh, Professor Morandi from the University of Tehran, he was on our show a couple of days ago and he was uh, asked this morning on a different show, uh, what are the Iranians actually thinking about here? Do they think this is going to result in something or do they think that this this whole um, ceasefire has just been a chance for the US to rearm and reload? And here's what he said.

[00:12:39]>> Iran is preparing day and night very swiftly. And just as Iran defeated this massive coalition against it, which included proxies in the Persian Gulf, the Israeli regime, and of course the United States, the Iranians are confident that they will ultimately force the United States to uh face a strategic defeat. And for Iran, this is an existential war.

[00:13:06]>> So he he lays it out there for them.

[00:13:08]This is an existential war. They are not going to do anything to just get this over with as soon as possible and agree to whatever which implies that President Trump may not be so right that the price could only go up a little bit between now and November. That's quite a long way away from here. Uh but now tell us what your research and your study has shown about where we are right now.

[00:13:28]Let's let's say that with the best case scenario happens and this weekend we get this thing turned off. You were telling me and some correspondents earlier that we may already have baked in a recession from this. Can you explain?

[00:13:40]>> Yeah, I've done a couple of slides. I won't take them first. Um, Danny, but the um for once I'm going to disagree very slightly with John Mishimer, who I'm a huge fan of, but John Shimmer, I think Mish might have been with you yesterday. It might have been the day before yesterday. He said that um we're we're like the Titanic in the globe running towards the rocks and Trump is just accelerating things. I think it's different to that, Danny. We've already hit the rocks. So we've hit the rock in terms of the consequences. And what's now happening is if we accelerate, we're just making the hole bigger and bigger.

[00:14:12]So if you if you um if if um Gary can put the first slide up, it's a very simple slide, but this is a slide which shows the relationship between GDP, energy, and population. I'll talk about population in a bit, but what that shows you mathematically um is that those three things are extremely closely correlated. And indeed the correlation mathematically is higher than 0.9 which mathematically is extremely high. And in my view um uh GDP is essentially a consequence of energy use and that's the way I think about I don't tend to do my economics although I've been trained in it. I don't do it using currency. I do do it using energy. Now what that means is that when you suddenly take a lot of energy out of the system out of the global system then so too does GDP depart. So I think the second slide I think I've actually done my first um this is a very rough and ready Danny. So but what I've done in here is a growth trend which is the trend from about 2022 all the way through to 2029. And you can see that dip um which is uh when the straits for Mosa closed and what I've got modeled there is about a month before the uh impacts happen. And then I've assumed that about we have about a four-week closure which is what we're probably talking about. And you can already see that the the um the the dip is equivalent to a deep recession. So it's in excess. So you can't see it quite on the screen, but 2022 is 100. So you can see that percentage wise we're probably talking about seven or eight% perhaps even higher in terms of the reduction in in GDP at that moment. And then what I've assumed is about a four-week, sorry, an 8week um overall um closure of the straits. And then after that, I'm using um Sam Mogliano. I don't know if you've come across Sam. He does runs a very very good podcast called um all about shipping or might be what's up with shipping. I think if you get a chance, Danny, get him on on. He's a fantastic uh commentator on this. But actually he makes the point that if you go back to the Evergreen scenario where the Evergreen actually um plugged the sewers canal that for every one day of um problems in the sewers canal there was a six day recovery period for the whole uh global maritime system to get back in shape. So I've assumed that multiple and what that shows is that even at this moment that if we were to to stop in the time time frame that I've said we would not be seeing seeing significant improvements in GDP or anywhere back to trend until the um the early 2027. So it run through the rest of this year recovery time. Um if you do the next one Gary there I've modeled um a 16week closure and you can see that the consequence of that long recovery period takes us well into the late 20 2027 2028 period.

[00:17:17]>> I we can't I can't see those those numbers on the bottom when the red line reconnects with the blue line up there. What date is that?

[00:17:25]>> Yeah, that that that's late late mid mid to late 2028. D.

[00:17:31]>> So you can see that. Yeah. So this is a long long period of recovery. And what's going on?

[00:17:35]>> Can you help us understand why that would be whether it's this one or the previous chart because one would think and certainly the markets seem to that hey if you just get the thing back open up everything will be fine. We'll just get back to the way it was. Maybe there'll be a month or two to get all the the tankers back in in system but after that we'll be fine. But you're saying this could go on many many months already. Why is that?

[00:17:55]>> Yeah. Well, it it's it's a number of reasons, but one of the primary reasons that the whole of the global transport system, which is predominantly when it comes to to to weight, so to mass, is predominantly maritime. And so all of the vessels and all are all over the place. So it's and we'll talk about the energy system, but we'll talk about LNG and we'll talk about all they're all over the place. And it takes a significant amount of time for the market to get back back to its its position. But it's it's not just that because of course the other thing that's going on at this is that we're starting to see breakdowns in the global supply chain and as those breakdowns occur then a number of things happen. Firstly we we know that as um refined fuels start to um uh break down then of course that's bound to have an effect on prices and that's the thing that we're seeing at the moment. But other things are going on as well. So, uh, supply chain breakdowns, for example, we'll start to see, um, uh, uh, increase shipping fuel.

[00:18:54]So, I know at the moment, I was talking to a friend of mine who's who's a, uh, a master mariner, operates out of the Gulf. Uh, bunker prices at the moment are double those that they were. So, that means that that it will be less um, uh, less cost effective to ship stuff around the world if your shipping costs have gone up. I've heard prices as high as three times what they were before the straits were open. So that will reduce supply chains. Um we'll see other things happening as well. So a really good example is is that I think I'm right in saying that Taiwan's got about nine days worth of LNG. Uh the the Taiwanese um electrical system relies critically on gas and Taiwan is the surprise surprise the major producer of superconductors.

[00:19:39]um and um superconductors are critical to almost anything that's got a computer in it, which is just about every manufactured good. So don't be surprised if in about six to eight weeks time we start to see significant problems with the manufacturer of goods that um automotives, computers, you name it.

[00:19:59]Pretty much everything these days has got a superconductor in. Um we'll also see in soon after that Danny that as diesel prices go up then so um mining prices go up uh transport prices for commodities go up uh manufacturing prices go up so don't be at all surprised if actually we're starting to see significant problems in the material supply chain and of course what will also go with that with that Danny is the um companies will will go out of business and when those companies go out of business they're part of the overall economic system and they won't be brought back into business very quickly.

[00:20:37]So again, you're taking more capacity out of the system. And last, but by no means least, uh, of course, um, fertilizer is being taken out of the system. Um, and as that fertilizer is taken out, then we'll see reductions in crop yields. Uh, it's growing a season in the northern hemisphere at the moment. So don't be surprised if we see significant reductions. The figure I've heard is 40% reductions in in crop yields um in the uh in the summer and and autumn onwards. And it's worth bearing in mind as well of course that the other thing that we've already done to to promote this this is the Russia Ukraine war given that Russia is the prime is the biggest combined producer of LNG and and oil but also I think produces something like 40% of the world's fertilizers or it might be 40% of European fertilizers. So this is happening all across the system. um Danny and I think what's important to understand as well is that I don't think and I've been thinking about this for for the best part of 12 or 15 years. I don't think anybody really understand the global logistics supply chain in the sorts of detail that is needed to really understand what's happening. I've been trying to model it with a colleague and it's really really complicated and it's very very difficult to find any references on it anywhere uh in the uh in the literature. So, >> so is is it a situation uh Steve where the system I mean you're having a hard time modeling it but yet there it was it was working and it's been relatively effective but now then that it's been disrupted is is the is your concern that since we don't really know how it was working before we don't know how to take the broken parts and try to reassemble them back in so that it makes it smooth again is that the is that your concern >> yeah and I think I think the other critical issue here Danny of course the system has not been designed in by through intelligent design. It's been designed by the market. So the system is a result of the international markets and and markets are fine in making things extremely effective. Um but what they eventually do is what we'll what we've seen happen is that they make things more and more profitable which means that supply chain systems are just enough just in time and less and less resilient. So that so inventories are smaller and smaller and so you know when shocks do happen there's much less resilience in the system and it's not as if there is some great architect of the system looking down at it and saying okay you've taken the oil out you're putting it back in and what I'm now going to do is I'm going to press X Y and zed and we're going to make the system work again because there is no great architect out there the architect is the market and the market is classically um short-term responder um about the only people who probably got any idea who doing it in terms of a large percentage of the of the global population are the Chinese who I think have been thinking about this sort of thing for some time but otherwise um we're very much at the beck and call of the market and the market at the moment doesn't seem to be if I look up at the financial markets seems to be sort of sailing on um almost um on the assumption you've made that this we just need to open the straits and then it'll all come good. I just can't see it and I can't see any evidence and I can see lots of evidence of the reverse. I'm not alone in this. Um I've mentioned before Luke Gman who I'm a great follower of has um said very similar things. I mean Luke Gman said about two weeks ago he said this is all about straightfor and he said about two weeks ago if it's not open in two to four weeks then we're in all sorts of trouble. Um and uh if it is then we may have a chance and I would >> So it doesn't look like it's going to in fact we're at week I think in week seven right now of this war right now with no prospect that it's going to be opened anytime soon. So what what have what's already baked in and and what would it look like say three four months from now?

[00:24:32]>> Yeah. I think as I think a severe global recession baked in um and with all the consequences of that and if we go on for much longer a global depression is baked in. what what that modeling shows you.

[00:24:45]And do bear in mind it's what I would call wrong modeling. So it's rough order of magnitude. There's no detail in it.

[00:24:52]Um but I would I would I would um bet my modeling over that of any uh economist because they do all their modeling with with currency which is um it changes over time, it changes in region. So it's a terrible measuring in instrument. So, so if you could explain to us or describe what that looks like and and so so we're may say say July or August what is what is our economic landscape going to look like? What is recession look like right now to a consumer?

[00:25:25]>> Yeah. Recession to a consumer a deep recession is the sorts of things that happened after the um after the the oil shocks. I mean, there was the the oil shock um it was I was quite young at the time, but the old the first oil shock led to a three-day working week in Britain. Um we're already seeing um there have been um protests in Ireland.

[00:25:46]Um we know that in the Far East that there are lots of implications already happening. So, as soon as um you take energy out of the system, then you start to reduce gross domestic product. And of course, where do governments get their money from? they're from taxation of act of of GDP activity. So what I would could imagine in about sort of six weeks, six month or let's say say the summer, it would not surprise me at all if we're actually seeing the real signs of a g a deep global recession leading to a depression. um at the height of the of the um the Great Depression Danny um the global uh GDP uh reduced by about 15 15.9% is the figure I have in mind. It was worse than the states. So the states got it worse for reasons that I'm not clear. Um so um that that would be my forecast. Um and I think the difference though and this is a really um significant difference is that the way that we came out of the great depression was in part through the second world war and of course what happened in the second world war is it was a war for for all the reasons that we understand but unlike the first world war which was fought largely speaking on the basis of coal as the primary energy source. The second world war was fought on the basis of oil and in many ways it saw a a a real increase in the use of oil and a re increase in the use of energy and after the war had finished we still had significant amounts of oil available and indeed we're tapping into more oil. So actually oil um production went up and up and up but we're now on a plateau. So we enter this recession not with the capacity to significantly increase the amount of oil in the system but on a production plateau um which we're about to drop off um because of the stoppages.

[00:27:38]So the opportunity to come out of this in the same way that we did after the great depression may well be not as good. In fact, I'm I'm certain that it won't be as good because there won't be the um spare oil capacity in the system to actually do what we did after the after the Great Depression and during the first the Second World War. So, it's it's this is existential. Um Danny, it's it's possibly not so for I can think of at least three nations who are are not necessarily well prepared. Russia is extremely well prepared as the of all the great powers is the one that that is it's anarchic economy and can survive by itself. Um probably so um the Iranians as well. Um China is is well prepared but but does require external oil and gas supplies but nevertheless has I think 1.3 billion barrels of oil.

[00:28:30]Europe's exceptionally vulnerable exceptionally vulnerable. and United States you will you will have problems in the states as well but at least you've got Canada to the north of you your own shale fields and the potential or bit not that great potential in Venezuela but Europe's in deep trouble and I think the Far East will be in deep trouble as well as doesn't surprise me at all the Taiwanese talking to the Chinese at the moment because the Taiwanese will be saying to themselves criy if we're not careful you know our our whole economy is going to fall apart this is a good time to talk to the Chinese who we know have big oil reserves I think And what what about the global south and Africa?

[00:29:06]>> Global south's going to be in trouble and um it really will be. Um one of the points as well that graph that I originally showed you about GDP and uh uh uh oil. It's the one the very first one Gary um that one. Now what I didn't talk about was energy and GDP but there's an exceptionally close correlation as well between energy GDP and population.

[00:29:30]So what that implies is that if there are signific this continues for a significant amount of times we will see reductions in world population and and that won't be a pretty reduction I don't think um Danny I think it will be a reduction particularly particularly poor countries which rely on imported um uh uh imported grains and imported foods.

[00:29:54]It could be fairly catastrophic. So, it would not surprise me if we're talking about famine and famine that could run into the tens of millions. I mean, the implication is that it would be higher than that, but we are talking about significant amounts of of um famine and starvation. I I would expect a horrible thing to say.

[00:30:14]>> Where where who is at the most risk of that?

[00:30:18]>> I would say that's again very difficult to say. I've always felt that the countries that were at the most risk were the middle inome countries because they're they're countries where they're they're they're not yet starving but they're in actually fairly par not parallel states. Um and I felt that the countries which are extremely poor are have always been poor. So they're better able to to cope. But um I would expect it to be I mean sub subsaharan Africa uh the places such as Afghanistan uh and anywhere really where actually um you've got uh quite large and rising populations um without uh sufficient um or on the edge when it comes to their agricultural capacity to keep populations um uh in food. And that's where I would expect to see if people don't understand, but actually if you I'm I was brought up uh as a son on a farming um estate. My my my father um managed large rural farming estates.

[00:31:25]It's hugely energy dependent. You just got to look at these great big tractors these days, the combine harvesters. I think for every one calorie of food that's produced takes 10 calories of energy. But it's the same at sea, Danny.

[00:31:37]And I've sort of been a fishery protection officer. And if you look at the great big beam trollers and the great big uh vessels out there, they're all critically dependent on diesel. So as soon as you start to take diesel out of the system, and diesel is the transition fuel, not gas. As soon as you take diesel out of the system, then you're having effects all over the place. It's the same in construction.

[00:32:00]It's the same in mining. All the plant in mining is diesel. It's the same in logistics. So diesel is the critical one to watch here, Danny. And I'm would expect and hope that in this country we'll be rationing diesel for private consumption because I think it's much more important that we keep it available for food. That's farming and fishing.

[00:32:20]>> And how how close is is Britain to doing that do you think? Has there been any talk of it publicly yet?

[00:32:25]>> Um no, there hasn't. But um I I'm nervous about that because I'm not sure that the British government fully understand this. I'm not sure any of the European governments understand it properly. Um I I I can see signs of things going on. So um let's take aviation fuel. The last uh tanker that was full of aviation fuel landed in Britain not Thursday but the Thursday of the week before. And after that we do produce our own aviation fuel because we do have North Sea oil and gas. But I've got um I was my air base uh when I was in the fleet airarm was um it's about 20 miles away and I know that helicopters that have been up country from that air base was were finding it more difficult than they'd expect to get aviation fuel.

[00:33:10]Um I know that um what we're also seeing in Ireland for example there have been bar barricades of energy producing facilities in Ireland and again it's it's difficult to say exactly how much uh there is in the system but generally speaking uh the inventory um in places like Europe I don't know what it's like in the states but the inventory is not that great so it's by no means impossible that um that actually the shortages could be much closer than people think. There's no sign of this unfortunately in government preparations, but I took the liberty of of uh writing to my own uh local government and setting out what I thought ought to be done in terms of triage and in terms of being prepared for what I think could be an extended energy crisis. I don't think we're talking here about an energy crisis which is short and over. I think we're talking potentially about an extended energy crisis and u and um >> and are you talking about even even once the the flow has been returned?

[00:34:09]>> Yeah, I think this is going to take a significant amount of time and it may well be Danny that we won't get back to the levels of GDP that we were at before the straits were closed. Um it just may be that because so much capacity, for example, companies that go bust uh materials, capital equipment that hasn't been made, so much capacity is taken out of the the global economic system that we're unable to get back to the levels of GDP that were there. That is bound to do two other things, Danny. Firstly, it'll speed into government expenditures. So suddenly if your if your tax revenues are heading south then you and I both know uh what sort of impact that will have it especially in in debt laden western countries. Yours is a very good example of that but so so too is the rest of Europe with one or two honorable exceptions. I mean the the the best the best country in terms of debt in in Europe is actually Russia but the rest of the European nations are fairly heavily indebted. So the question is how they get out of a system where where actually they're into an economic recession uh but going into it uh with great um uh you know with significant debt. The second area is in the in the in the in the markets as well because the markets are designed on the assumption of growth and up there in the markets there are you know trillions worth of derivatives and those sorts of things all of which are working on the assumption of growth. When I was when I was did my year at Cambridge, my special subject in international economics was something called the Tobin tax was on derivatives. And uh I made the decision u after leaving that year at Cambridge come back to the neighbor which I never regretted. The way if I done it I might be a I might be a little bit better off than I am now. But the but the key point is that um the derivatives market again is something extremely complex. I I'm I would not be at all surprised as if the other thing that we see um playing out over this year is another great financial crisis. I can't say for sure.

[00:36:14]Um but it's very difficult to see how we avoid it. Um bond markets are going to be in trouble if governments can't afford to to pay the bonds. Um and if companies are starting to post losses as opposed to profits, you know, what does that say for the equity markets? So, you know, it's not a good prospect.

[00:36:32]>> So, Right now, this is I think I said this is we're in week seven of this war.

[00:36:38]Uh there's going to be a conversation on Thursday. Uh there given the entry point for the two sides, what's being publicly announced today, there's still miles away. So there's no expectation that any kind of a near-term uh solution is found. And in fact, then we have the another date of coming up of the the 22nd of April. Um so that's just barely a week away when the ceasefire the twoe ceasefire comes. Will we just simply res resume the fight? The Iranians say that they're preparing. The United States is definitely preparing. Will we keep going on? Will we say, "Well, there's a little bit of process here. Let's keep going."

[00:37:14]That's certainly the hope. But the question is, if we keep going on like this, and there's no near-term uh resumption of the the flow of oil and all the other things, ura, are out of the Persian Gulf back to 27 February dates like it was before. Um what is going to be the concern if this goes let's say I mean like like we don't even get this solved until June or July even somewhere around there. That's that's kind of in a best case scenario in my view right now. But if we go that far, what is the prospect of of a of a near-term financial crisis? Um, and because you're saying right now if it would ended today, maybe July, August, September, somewhere around there. But if the the the this flow stays cut off up until June or July, then what does that look like?

[00:38:10]>> Um, it it just make things worse. I mean, it really is simple as that. It just makes >> Would that change the onset of of the visible crisis?

[00:38:19]>> Um, I think the visible crisis will emerge in stages. And so, I think we'll see it in stages. And I think that the way that we'll see it is the unfolding bit at the moment is simply fuel prices.

[00:38:28]And people have been saying, "Yeah, cracky, it's taking me a lot more to fill up my car uh or to fill up my lorry." And we're starting to see consequences in businesses. But then these other other as yet unseen things which are already going on underneath the surface will start to emerge. So, you know, um problems with supply chains, people not being able to get spare spare parts because the just enough just in time system isn't working. Um reductions in pharmaceuticals that are being um you know sent across the world, for example.

[00:39:01]Um that Thank you, um Gary. That's a slide I I was looking at this about about um 14 or 15 years ago. That's a slide which I produced for the first time I introduced this Danny back in Oxford. And in it, I I I I um suggested a number of things would happen. I suggested that we would see much more increased political strife. And we're seeing that uh obviously because um uh people are are assuming that their governments ought to be doing better um in terms of the provision of fuel, which of course they can't do because it's been taken out of the market. I s thought we would see significant increase in geopolitical tension um in uh the places that we're seeing it. I would thought >> what can you tell us about what's going on in uh Ireland right now because that that almost seems like maybe that's I don't know if it's the canary in the coal mine or if it's just the first one or if it's even related is because it seems to have a lot to do with diesel.

[00:40:00]>> Yeah. Yeah, I think it is. Um I'm I'm not 100% sure, but the way I'm reading it is that um the ri rise in prices has led to um uh to blockades of the primary um uh the primary refined fuels distributor and I think there's just one in Ireland because of course Ireland's island's four million people so it's much smaller. So that um it's the blockading of the of the the places where or where diesel and and gasoline is is delivered from rather than the um a reduction in supplies at the moment.

[00:40:38]So I think that's price related as opposed to supply related. And the point about price related is at least you can still buy some where where you get into great difficulty is when it becomes when you've got security of supply. So there isn't the oil there. Uh we had a fireman strike. It must have been about oh about 15 years ago uh here in in Britain. Um uh Danny from what I remember I think we had got down to about nine days left of oil of petrol and gasoline. Yeah that's that's a very very short time before the whole of the economy starts to to to shut and at some stage you need to triage it. So I think that's what I think that's the case in Ireland. maybe supply as opposed to price, but I think it's a price um it's a it's a price um blockade as opposed to >> but correct me if I'm wrong if whether it's price or supply when it's when they can't get the the amount of oil at the price that is allowing them to do their their jobs and their business and their life as it has been, then that's going to make people angry and they're going to start doing stuff like this. So whatever the cause of it, if this starts to manifest in in a reduction in the amount of diesel or the or or andor the price because those probably would go in tandem, then I think I'm asking I guess rather can we expect to see this kind of popular uprising elsewhere in Europe.

[00:42:01]>> Yeah, for sure. In fact, um it's been happening before. So do you remember the riots in Sri Lanka? That was all about fuel. So, and if you start to look around the riots around the world, I mean, I used I've got a slide somewhere which I didn't send, but it it showed um Peru was another place where where there were rising fuel prices were starting to to um to to lead to political instability within countries. And we're almost bound to see more of this. And the reason that we're bound to see more of it, Danny, is that our populations are generally energy blind. They don't understand the role the centrality of energy to to how we do everything. And um you know when you um take a um if you take a a a barrel of oil, it has about the same amount of physical work in it as about 4.6 years worth of human work to do the same amount of physical work.

[00:42:58]So it's like having billions of slaves um on our side. And um people often say, well, the great improvements in um the economy have been due to technology. I simply don't think it's true because technology doesn't work without energy.

[00:43:15]And as I say, the central and the most important fuel by far, I would say, is diesel because diesel runs just about everything. I mean, people um in my I've worked in the offshore energy sector, most recently the offshore wind sector, but I'm I'm neutral to to both. I just love the offshore energy um place. But people say, "Well, our our technology is the most uh the cheapest." Now, you'll hear that around Europe, renewable energy is the cheapest. I say, "No, it's not. It's cheap because we've got cheap diesel, which is a key input cost and the cost of capital has been right down on the floor because of course our interest rates have been down on the floor. So, so other than other than open up the straight of Hormuz back to 27 February levels, uh, which like I said doesn't seem to be happening anytime, what are some mitigation that countries can do? Like it if you were made the energy zar of the world tomorrow morning and you could wake up and all you have to do is tell people in any country what to do and they would just do it to try and mitigate against some of these things as long as the straight stays closed. What what would you recommend?

[00:44:22]>> Yeah. Um, it depends where you are. Um, Danny, because if you're in countries, again, this is another thing I said in that Oxford lecture all those years ago.

[00:44:31]I said, um, they're going to be lucky countries and unlucky countries, and the lucky countries are those with, um, are are the energy exporters. Um, it for some it'll be a little bit difficult, but the energy exporter countries will be those who can they can still run their their societies. Um if you take um let's put Russia on one side, but if you take Europe, the country that's probably the best off in Europe is Norway. Um it has about 95% renewable energy because it's got hydroelectric dams and it's got um been exporting um oil and gas and still has oil and gas reserves left. So it's energy independent and and will be okay. But those countries which are not energy independent, they will struggle and it's difficult to see exactly what could be done. I think essentially what we've got to work out is how we actually move from a society which is ready for being used to cheap energy prices.

[00:45:26]Cheap. I say that energy that is cheap, high quality and plentiful to societies where the energy is is scarce, low quality and expensive. And that's the the transition with which we're faced.

[00:45:40]Um if if you ask me what I'd be doing if I were um in Europe um or or if I were in the Far East and the two things I'd be doing or particularly in Europe would be quite counter to the culture that I currently seeing in Europe. I hear often I've heard our prime minister this morning here in Britain say that uh British security is his his foremost um foremost concern and it's obviously not true because the foremost concern should be to make sure this country has adequate energy supplies and to actually help ensure those energy supplies. The first thing I'd do um or the first two things I'd do, not sure which order I'd do them, the first thing I'd do is I would um I'd be talking to my European colleagues and saying we need to bring this Russia Ukraine war to an end and start to ensure that Europe has access again if the Russians are content with this to Russian oil and gas. Russia until the war produced 40% of Britain of Europe's refined diesel. And the second thing I would do is to reach out with others and take the lead from the Spanish and the French and reach out to the Iranians and say that we want to cut a deal with you and to start to get European uh energy flowing through the Straits for Mo according to your terms and and if um uh the White House didn't like it, I would just get on with it anyway. I would make clear to um the American population that this wasn't an argument between Europe and and the United States, but rather an argument between Europe and the White House uh which clearly does not have Europe security interests at heart and indeed is doing something which is having an existential impact on Europe and the Far East. People talk about the existential war which on the one hand is existential for uh Iran and it's existential for uh um uh for Israel but the truth is now because of the way that it's moving it's also I think existential for Europe and a number of far eastern um G7 countries and I think I think again Australia is another place where actually where they're into diesel rationing so all over the world countries which had nothing to do with the decision to um to launch the war uh are now picking up all the consequences. So, it's a it's an irony when we hear um when we hear President Trump say um that Europe should sort itself out. I mean, my my message if I were were um were in Europe to President Trump would be um you broke it, you fix it. And meanwhile, we're going to get on and work with the um work with the Iranians to try and uh open up the fly the the the Iranians and the Russians and open up the supply of hydrocarbons that our economy so critically need.

[00:48:31]>> Well, listen uh Steve, I I think that that day is is coming. Uh I mean, you can already see some evidence that a lot in in Europe are already starting to tire uh of a lot of stuff for the Trump.

[00:48:43]I mean, you see how, you know, President Trump and JD Vance helped Victor Orban lose his race. He was probably going to lose it anyway, but it certainly dropped him in the polls because I think people are just kind of tired of the sticktick.

[00:48:54]But now you see even uh George and Milani push him back publicly. Even Kier Starmer has been unwilling to do a lot of the stuff Trump's been asking. Um, we'll see. It's got to get a little bit further before they can take some of the actions you're talking about here. But when the pain starts getting enough and some of these uh dish displeased populations start demanding more of their governments then I think that there's going to be a greater willingness to do that and and it seems to me and you correct me if I'm wrong that that that pace is probably going to start accelerating here in just within the next month or two u because of these fundamentals that are already baked in and that's that's assuming that we got it turned off which we haven't so far.

[00:49:32]>> Yeah. Yeah. the way to think about I mean um I think you know that I' I've become really um really um engaging a lot with um my favorite um energy analyst um which who is um Art Burman and he says that this is like the world having a heart attack. Um, I think another way to think about it, it's like having a it's like um if the global economy, it's like coming coming across um uh somebody lying on the on the floor bleeding out and uh what the um the White House's um actions are doing, the straight hormones is not to to actually plug the wound, but actually make it bigger. That's the the curious thing.

[00:50:15]But I think one of the other ways to think about it, it's a bit like a tsunami. And the reason I say that is the tsunami happens and the earthquake happens and then the the um the waves ripple out and they can go all around the world. Uh but the what's happening is the waves are rippling out from the consequences of this of the straits for most closure all around the supply chains and the economies in the world.

[00:50:37]But they're happening at a slower rate to which the tsunami wave runs out. So and it's happening in a way which very very few people understand because I don't think we've ever seen anything like this before. But you know I expect to see a sort of phase phases a phase of of increased prices of phases in in consequences in immediate supply chains and delivery of uh high of high weight goods um and then on and on and those you know phases as the commodities become more expensive and manufacturing goods become more expensive and so on.

[00:51:10]So I think it's going to be a phase thing, but it'll it'll happen with increased increased consequences.

[00:51:16]And what I'm just the only the only open question in my mind is is how the financial markets clo will cope with it and when they finally recognize that this is um existential for the global economy. So that's the way I'm seeing it. But but I don't think anybody Danny really really understands this. Um because I don't think we've ever seen anything like this. I was anticipating a energy transition anyway which I anticipated due to reductions in hydrocarbon supplies. But what I had not anticipated was a shock of this uh severity in such a short period of time. It's much shorter than even the oral shocks. I think it was Faith Burl who's the director general of the International Energy Authority who said that um this will be worse than the first and the second oil shocks put together and COVID put together. I might be wrong but it's that sort of uh order of magnitude and I don't think anybody can model it but but I think what he's talking about is what I'm talking about and what probably Luke Graham has been talking about as well.

[00:52:26]Well, certainly something we're going to start paying a lot more attention to and I cannot tell you how much I appreciate you coming illuminating this issue uh for us today to see that there's a whole lot more at stake here than just who's going to win or not at the negotiating table to get that straight back opened up and you know who's going to have to concede or who's intelligence is going to be called into question or whatever. This is something that could affect literally the entire globe if we don't get this solved really quick. And in fact, I mean, from what you're telling us here, a lot of it's already baked in. But let's let's get this solved quickly so that we can start mitigating, you know, ahead of time.

[00:53:01]That's uh that would be a good thing.

[00:53:03]But uh in any case, I'm like you say, a lot of people don't know about it. Now our audience at least is aware and can start looking around at other sources.

[00:53:10]Thank you so much for that.

[00:53:11]>> Yeah, it's a pleasure, D. What we must stop doing is driving the Titanic further onto the rock.

[00:53:17]>> Indeed, >> that's what we must stop doing, Danny.

[00:53:19]keep up the good work because it's so important that the audiences have this the sort of analysis that you and us and the alternative media are providing because I see not too much of it so far in the mainstream media.

[00:53:30]>> Indeed. And we very much appreciate you and we appreciate you guys too as well.

[00:53:35]Uh we're going to have a number of great shows tomorrow as we always do here.

[00:53:39]We'll definitely be tracking anything happens, any other crazy statements coming out of the White House, any developments in the war, you can count on coming to the Daniel Davis deep dive and we'll give it to you. Thank you very much, folks. We'll see you tomorrow.

[00:53:50]Don't forget to tell your friends, the ones that love to listen to podcasts, get them to add Daniel Davis Deep Dive to their podcast list. They need to know what you know. They can get it to where they already get their podcast. You just got to tell them