>> NOW, AS WE MENTIONED THE U. S. MILITARY IS ATTEMPTING TO GUIDE SHIPS OUT OF THE STRAIGHT OF HORMUZ.

THE BLOCKADE OF THIS WATERWAY IS WREAKING HAVOC.

IT IS CAUSING THE LARGEST DISRUPTION AS EVER SEEN IN HISTORY.

ENERGY EXPERT DETAILS HOW GOVERNMENTS ARE REASSESSING THEIR RELIANCE AND HOW THE BIGGEST CRISIS HAVE NOT HIT AMERICA YET.

HE JOINS WLATER ISAACSON IN THIS DISCUSSION.

>> THANK YOU.

AND JASON, WELCOME TO THE SHOW.

>> THANK YOU, GOOD TO BE WITH YOU.

>> YOU KNOW, TWO DECADES AGO THE UNITED STATES IMPORTED, I THINK, 60% OF ITS OIL AND NATURAL GAS.

NOW, NOW THE BIGGEST PRODUCER AND EXPORTER, HAS THAT HELPED CUSHION THE BLOW OF THE STRAIT OF HORMUZ CLOSURE?

>> IT HAS.

MORE THAN I ANTICIPATED AT THE START OF THIS.

OIL IS STILL A GLOBAL COMMODITY.

GLOBAL PRICES WILL GO UP AND CONSUMERS, THE PRICE AT THE PUMP IS SET BY THE GLOBAL PRICE AND CONSUMERS WILL FEEL THE PAIN.

BELOW $3 TO WELL OVER $4 AT THIS POINT.

THERE ARE A FEW FACTORS THAT INSULATED THE U. S. MORE THAN WOULD HAVE BEEN THE CASE WHEN I SERVED IN THE WHITE HOUSE 12, 13 YEARS AGO AND WE WERE TRYING TO FIGURE OUT HOW TO TAKE IRANIAN OIL OFF OF THE MARKET TO HAVE PRESSURE ON IRAN BECAUSE OF THE NUCLEAR PROGRAM AND WE WERE CONCERNED ABOUT WHAT IT WOULD DO TO THE U. S. ECONOMY.

FIRST, THE IMPACT ON THE MACRO- ECONOMY IT IS SMALLER WHEN INCREASE CONSUMER SPENDING GOES TO DOMESTIC SHAREHOLDERS RATHER THAN ABROAD.

A DYNAMIC WITH THE TIME LAG BEFORE THE U. S. FEELS THE SAME PAIN THE REST OF THE WORLD DOES.

THE PHYSICAL SHORTAGES OF TAKING OFF 15 MILLION BARRELS A DAY WITH THE STRAIT CLOSED.

YOU SAW IT IN SOUTHEAST ASIA, PEOPLE SHORTENING WORKWEEKS, AIRLINES HAVING TROUBLE REFUELING.

EVENTUALLY THE PAIN WITH THE TIME LAG TO MOVE SHIPS AROUND THE WORLD MAKES ITS WAY TO THE U. S. BUT IT HAS TAKEN TWO OR THREE MONTHS.

A BIT OF A HEAD START WHERE WE WERE FEELING PAIN BUT NOT AS BAD.

>> LET ME DRILL DOWN, SO TO SPEAK ON THAT TIME LAG.

.

WHEN WILL IT HIT US?

>> IT IS COMING.

OIL PRICES SOARED TO THE HIGHEST PRICES AROUND $110, $115.

GASOLINE PRICES WILL KEEP GOING UP.

IT IS A GLOBAL MARKET.

AT SOME POINT THERE ARE DOZENS OF TANKERS FROM ASIA HEADED TO THE UNITED STATES READY TO LOAD UP U. S. CRUDE IF WE CAN.

AND THE PRICE IN THE U. S. WILL HAVE TO RISE HIGH ENOUGH TO KEEP THOSE BARRELS HERE AND MEET DOMESTIC DEMAND.

GLOBAL MARKET.

WE HAVE SEEN AN INTERESTING DISCONNECT WHERE THE PHYSICAL PRICE OF OIL STARTED TO BE PRETTY DISCONNECTED FROM THE SO CALL TRADED PRICE THAT YOU TEND TO SEE ON THE SCREEN.

USUALLY THEY ARE THE SAME.

BUT, WE DID NOT SEE THAT DISCONNECT IN THE U. S. SAW IT IN EUROPE AND ASIA.

IF YOU KEEP THE STRAIT OF H ORMUZ CLOSED WE ARE HEADED TO HIGHER OIL PRICES.

EVENTUALLY IF YOU HAVE 15 MILLION BARRELS A DAY OF SUPPLY OFF OF THE MARKET.

PRICES HAVE TO RISE HIGH ENOUGH TO DESTROY 15 MILLION BARRELS A DAY OF SUPPLY OF DEMAND.

>> WAIT, WAIT, WAIT, WHY HAS THE MARKET NOT PRICED IT IN.

YOU ARE TALKING $110 FOR DOMESTIC OIL HERE.

>> THERE ARE A FEW ANSWERS TO THAT.

FUTURE PRICE THAT PEOPLE SEE AS THE HEADLINE OIL PRICE THAT IS A ONE MONTH FUTURES CONTRACT.

IT IS WHAT PEOPLE THINK THE PRICE WILL BE NOT AT THERE MOMENT TO BUY A BARREL OF CRUDE BUT A MONTH FROM NOW.

AND I THINK WHAT WE HAVE SEEN THE MARKET DOING AND PART OF IT IS TRUMP'S OWN RHETORIC IS BETTING IT WILL BE OVER SOON.

YOU HAVE SEEN THE ADMINISTRATION SET TIME LINES, OVER IN TWO OR THREE WEEKS OR SIX WEEKS OR PASSED ALL OF THE DEADLINES TO BE CLEAR AND NO END IN SIGHT.

BUT I THINK GENERALLY PEOPLE HAVE BEEN BETTING IT WILL BE OVER SOONER RATHER THAN LATER.

CUSHIONS.

WE RELEASED A LOT OF OIL FROM THE RESERVE, INVENTORIES GLOBALLY WERE HIGH, WE ARE DRAWING THE INVENTORY DOWN.

ONLY SO LONG.

WE WERE USING SANCTIONS ON IRAN AND RUSSIAN OIL THAT WAS FLOATING IN TANKERS ON THE WATER.

YOU CAN ARGUE IF IS A GOOD IDEA OR BAD IDEA.

BUFFERS IN THE SYSTEM BUT THEY ARE OUT.

>> EVEN IF YOU LOOK AT THE FUTURES FOR SEPTEMBER, WHY IS OIL PRICE SO LOW?

>> BEFORE THIS CONFLICT STARTED WE HAD LOW, RELATIVELY OIL PRICES, $60 OR $70 A BARREL.

AND ESTIMATES WERE THAT THE OIL PRODUCTION IN 2026 WOULD EXCEED GLOBAL DEMAND FOR OIL BY TWO, THREE FOUR MILLION BARRELS A DAY.

THERE WAS A BROAD THOUGHT WE WOULD USE MORE THAN CONSUME.

THAT WAS STARTED IF THE STRAIT WERE TO OPEN TOMORROW AND WITHIN A FEW WEEKS OR A MONTH OR TWO YOU GET THE SUPPLY BACK ONLINE.

WE ARE BACK TO THAT SCENARIO WHERE WE WERE BEFORE.

PEOPLE ARE BETTING IF IT ENDS SOON AND THERE IS NOT YET SIGNIFICANT PHYSICAL DAMAGE TO THE OIL THAT WILL TAKE YEARS TO REPAIR.

PEOPLE THINK IT COULD COME BACK ONLINE RELATIVELY QUICKLY AND THEN BACK TO THE OVER SUPPLIED SITUATION.

>> YOU ARE SAYING IF IT ENDS IN TWO OR THREE WEEKS THINGS GO BACK TO NORMAL AND IT HAPPENS RELATIVELY SOON.

HOW LONG DOES THE CLOSURE OF THE STRAIT OF HORMUZ LAST UNTIL WE GET TO SOMETHING WORSE?

>> IT IS LARD TO SAY EXACTLY.

--HARD TO SAY EXACTLY.

PEOPLE REACT IN STEP CHANGES.

BUT I THINK IN THE NEXT ONE TO TWO MONTHS AT MOST.

IF YOU CONTINUE TO SEE 14 OR 15 MILLION OFF OF THE MARKET PRICES ARE GOING TO CONTINUE TO MARCH UPWARD.

THERE IS NO POLICY TOOL IN THE TOOL KIT TO DEAL WITH POLICY SUPPLY DISRUPTIONS LARGE ENOUGH TO COPE WITH SUPPLY LOSS THERE FAR.

BY FAR THE LARGEST DISRUPTION WE HAVE SEEN IN HISTORY EVEN BACK TO THE OIL EMBARGO.

>> THE LARGEST DISRUPTION WE EVER SEEN IN HISTORY AND YET IN SOME WAYS IT HAS NOT EFFECTED THE ECONOMY OF THE UNITED STATES.

ARE WE MORE INSULATED THAN SAY ASIA?

>> I THINK WE ARE.

WE ARE NOT IMMUNE TO BE SURE.

BUT, I THINK WE ARE MORE INSULATED THAN PARTS OF THE WORLD THAT ARE VERY HEAVY OIL IMPORTERS WHERE THOSE PHYSICAL SHORTAGES SHOW UP MORE.

DYNAMIC WITH NATURAL GAS WHERE THE PRICE OF NATURAL GAS IS TOTALLY DISCONNECTED.

BELOW $3 HERE AND AGAIN TO $15 OR $20 IN EUROPE AND ASIA.

THERE ARE OTHER BUFFERS THERE, TOO, THAT IS IMPORTANT.

SAY IN CHINA.

THEY HAVE A STRATEGIC OIL RESERVE OF A BILLION BARRELS AND THE U. S. HAS BEEN SELLING OUR RESERVE OFF.

BOTH SIDES OF THE AISLE, MIND YOU, FOOLISHLY, OUT OF THE SENSE THAT IT GIVES US NEW FOUND SECURITY.

AND CHINA HAS BEEN, FOR ENERGY SECURITY REASONS NOT JUST ENVIRONMENTAL OR CLIMATE REASONS TRYING TO REDUCE OIL IMPORTS FOR DECADES BY ELECTRIFYING MORE OF THE ECONOMY.

HALF OF THE NEW CARS SOLD IN CHINA ARE ELECTRIC BECAUSE THEY DON'T WANT TO BE DEPEND ANT ON OIL.

IF YOU ARE IN SOME AREAS, PAKISTAN, THAILAND, VIETNAM, THE PAIN IS PARTICULARLY ACUTE RIGHT NOW IN THOSE PLACES.

MUCH MORE SO THAN WE ARE FEELING HERE.

>> WHY IS JET FUEL SO EXPENSIVE ESPECIALLY IN EUROPE NOW?

>> IT IS THE NATURE OF THE REFINING SYSTEM AND WHERE THEY IMPORT FROM AND THE WAY THEIR REFINERIES ARE OPTIMIZED.

YOU GET DIFFERENT PRODUCTS FROM IT.

GASOLINE, DIESEL, JET FUEL, OTHER THINGS AND CERTAIN CRUDES LIKE EVERYONE IS TALKING ABOUT IT, CRUDE PRODUCE MORE OF SOME THAN OTHERS.

SO, AS THE TYPE OF OIL THAT TENDS TO COME OUT OF THE STRAIT OVER HORMUZ IS, THOSE ARE MANIFESTING THEMSELVES MORE WITH SOME PRODUCTS THAN OTHER.

JET FUEL THAN WITH GASOLINE AND MORE IN CERTAIN REGIONS.

WE SHOULD REMEMBER THE GULF WAS NOT ONLY THE STRAIT OF HORMUZ, 20 MILLION WENT THROUGH.

THAT WAS 15 MILLION OF CRUDE AND PATROLIUM.

REFINERIES IN THE GULF THAT COULD NOT GET THEIR JET FUEL, DIESEL OUT AND PEOPLE WERE SEEING SHORTAGES.

>> WHY IS IT THAT THE STOCK MARKET HAD THE BEST MONTH IN A LONG TIME?

APRIL WAS THE BEST MONTH IN MEMORY.

IT HIT RECORD HIGHS, SHOULDN'T IT BE AFFECTING THE U. S. ECONOMY?

>> IT HAS AND OTHER GUESTS YOU HAVE HAD ON IT IS A SHORT-LIVED CRISIS.

IT WILL BE OVER SOON.

ON RELATIVE BASIS.

WE ARE PRETTY --BETTER OFF THAN SOME OTHER PARTS OF THE WORLD.

SO, I THINK IT IS A TIMING QUESTION.

THEN YOU HAVE OTHER PARTS THAT ARE IMMUNE FROM GLOBAL SHOCKS LIKE THIS.

THE AI BOOM IS DRIVING THE ECONOMY.

CHINA ECONOMIC GROWTH FORECAST HAS BEEN REVISED DOWNWARD.

NOT CATASTROPHIC BUT DOWNWARD BECAUSE THEY DEPEND ON A LOT ON EXPORTS AND CONCERN ABOUT FOR MANUFACTURING WHAT THE GLOBAL IMPACT OF THERE IS GOING TO LOOK LIKE ON DEMAND.

>> YOU TALK ABOUT THE A. I. BOOM DRIVING THE U. S. ECONOMY.

TO WHAT EXTENT WILL IT PUT MORE DEMAND ON ENERGY NEEDS?

>> IT IS ALREADY.

YOU KNOW, WE LONG TALKED ABOUT ENERGY PRICES IN A POLITICAL ISSUE IN ELECTIONS THAT TENDS TO BE GASOLINE PRICES.

BUT, WHAT IS NEW IS WE ARE TALKING ABOUT ELECTRICITY PRICES NOW.

BIG IN ELECTIONS.

A LOT OF COMMUNITIES ARE CONCERNED ABOUT WHAT DATA CENTER DEVELOPMENT DOES TO ELECTRICITY PRICES AS WELL AS OTHER ISSUES.

ON A GLOBAL BASIS WE ARE CLEAR THERE ARE OTHER DRIVERS OF ELECTRIC DEMAND MORE, EVEN AIR- CONDITIONING BUT THE IN U. S. ELECTRIC DEMAND IS RISING SHARPLY FOR THE FIRST TIME AFTER TWO DECADES, DATA CENTERS ARE A MAJOR SOURCE OF THAT.

THE ISSUE IS MORE ACUTE IN CERTAIN PLACES LIKE VIRGINIA AND OTHER PLACES, NOT AN ISSUE IN SOME PARTS OF THE COUNTRY.

WE WILL NEED MORE POWER GENERATION CAPABILITY AND WE ARE GOING TO NEED TO USE OUR EXISTING GRID MUCH BETTER AND MORE EFFICIENTLY.

>> SHOULD THE U. S. TRY TO STOP OR HALT THE EXPERT OF LIQUIFIED NATURAL GAS?

>> I BETTER THAN FOR A LONG TIME I THINK THAT WILL BE A MISTAKE.

THE U. S. HAS A LOT OF NATURAL GAS PRODUCTION IN EXCESS OF OUR CURRENT DEMAND WHEN YOU PRODUCE OIL YOU GET A LOT OF NATURAL GAS IN THE PROCESS AND WE BECOME THE LARGEST SUPPLIER OF LNG TO THE WORLD MARKET.

WHICH HAS HELPED OUR ALLIES.

THIS WAS AN ISSUE THAT I TALKED ABOUT WHETHER I SERVED IN THE OBAMA WHITE HOUSE.

THAT WAS THE FIRST TIME SOMEONE ASKED FOR PERMISSION, THERE WERE QUESTIONS ABOUT WHAT THE EFFECT IS ON THE U. S. ECONOMY.

DOES IT PUSH UP ENERGY CRISIS?

WE HAVE A LOT OF CHEAP GAS IN THIS COUNTRY.

ENVIRONMENTAL QUESTIONS THAT ARE CRITICALLY IMPORTANT TO ANSWER AND DEALING WITH THE ENVIRONMENTAL FOOTPRINT AND METHANE LEAKS WITH GAS BUT A INTERNATIONAL SECURITY ARGUMENT, TOO.

WHAT I REMEMBER THE CONVERSATIONS HAPPENED IN THE WHITE HOUSE HOW TO THINK ABOUT THE SECURITY IT WOULD PROVIDE TO ALLIES LIKE THOSE IN JAPAN OR EUROPE IN A SITUATION WHERE THERE WAS A DISRUPTION TO GAS SUPPLIES LIKE RUSSIA CUTTING OFF THE SUPPLY TO EUROPE.

THAT WAS SOMETHING THAT WE TALKED ABOUT.

I THINK WE SAW A REAL-LIFE CASE PLAY OUT A FEW YEARS AGO WHERE EUROPE WAS IN A BETTER POSITION THAN IT OTHERWISE WOULD HAVE BEEN BECAUSE WE HAVE AN INTERCONNECTED INTEGRATED GAS MARKET NOW.

A SUPPLY DISRUPTION SOMEWHERE MARKETS DO WHAT MARKETS DO AND IN RESPONSE COUNTRIES GET SUPPLIES THEY WOULD NOT OTHERWISE BE ABLE TO GET.

>> FOR A LONG TIME WE TALKED ABOUT ENERGY INDEPENDENCE IN THE UNITED STATES.

SORT OF A PHRASE.

YOU WRITTEN A PIECE IN "FOREIGN AFFAIRS" AND YOU, I HAPPENING SAY THAT IS NOT A GOAL WE SHOULD BE CHASING OR EVEN A CONCEPT THAT IS VERY USEFUL.

EXPLAIN WHY.

>> YEAH, IT IS A GOAL OBVIOUSLY PRESIDENTS FOR DECADES HAVE TALKED ABOUT ENERGY INDEPENDENCE.

AND, DEPENDS HOW YOU DEFINED INDEPENDENCE THE IDEA THAT THE U. S. WENT FROM A HUGE IMPORTER TO EXPORTER HELPED THE U. S. ECONOMY HELP FROM THE GEO POLITICAL STANDPOINT.

WHAT WE WROTE IN "FOREIGN AFFAIRS" THE LESSON FROM THE 1970s ENERGY CRISIS THAT MANY TOOK WAS MORE INTEGRATION, INTERCONNECTION AND GLOBAL COOPERATION INCREASES NOT DECREASES ENERGY SECURITY AFTER THE OIL EMBARGO, WE CREATED AN AGENCY SO CONSUMING COUNTRIES COULD HAVE HELP DURING CRISIS, STOCKPILES THAT WE COLLECTIVELY MANAGED AND SHARED.

OIL MARKET, INTEGRATED IT.

IF THERE IS A SUPPLY DISRUPTION, A TSUNAMI HITTING JAPAN OR HITTING THE GULF COAST, YOU CAN ACCESS IT IN OTHER PLACES THAT DID NOT EXIST IN 1970s WHEN OIL WAS SOLD IN LONG-TERM CONTRACTS BETWEEN BUYER AND SELLER.

I THINK IN THE WORLD OF GEO POLITICAL COMPETITION FRAGMENTATION THE DETERIORATING WORLD ORDER THAT WAS SPOKEN ABOUT, COUNTRIES VIEW INTERCONNECTION AS A SOURCE OF RISK NOT AS A SOURCE OF STRENGTH AND WE SORT OF WARN ABOUT THE DOWNSIDES OF THAT VIEW.

IT IS CERTAINLY THE CASE THAT COUNTRIES WANT TO PRODUCE MORE AT HOME, GOOD ARGUMENTS FOR THAT.

IF YOU TRY TO DISCONNECT.

TAKE AN APPROACH THAT LOOKS LIKE "AR-TALKIE" WHICH WE TERMED.

>> WE ARE LUCKY.

THE STRAIT CLOSES YET WE HAVE HUGE AMOUNTS OF NATURAL GAS.

WE HAVE OUR OWN OIL, WE ARE NOT DEPENDING ON THE SHIPS COMING THROUGH THE STRAIT.

>> WE ARE NOT BUT EXPOSED TO THE GLOBAL MARKET.

AS I DESCRIBED A MOMENT AGO WITH NATURAL GAS IT IS DIFFERENT BUT FOR OIL THE BENEFIT WE HAVE IN ADDITION TO MORE ECONOMIC ACTIVITY WHEN THE PRICES GO UP, THERE ARE WINNERS, THERE ARE LOSERS, NOT JUST LOSERS.

A TIMING QUESTION.

WE HAD A HEAD START AS WE TALKED ABOUT, TWO OR THREE MONTHS BEFORE WE FEEL THE PAIN THE REST OF THE WORLD DOES BUT IN A GLOBAL MARKET WE ARE GOING TO FEEL IT EVENTUALLY.

WHY THE U. S. IS BETTER OFF TODAY, NOT JUST BECAUSE WE ARE PRODUCING MORE BECAUSE WE ARE USING LESS AS A SHARE OF OUR ECONOMY.

THE ECONOMY INCREASED FOREFOLD AND OIL HAS BARELY GONE UP.

WE FEEL IT LESS, LESS OF AN IMPACT.

TRYING TO HAVE MORE ELECTRIFICATION AS CHINA DID OF OUR --USE LESS OIL THROUGH ENERGY EFFICIENCY.

THAT MAKES US MORE RESILIENT.

AND THE THING TO SAY MORE THAN ANYTHING ELSE IS THERE IS A COST TO SELF-SUFFICIENT.

WORRIED ABOUT SOLARPANELS FROM CHINA AND MIGHT BE GOOD REASONS TO WORRY ABOUT SOME OF THOSE THINGS AND MAKE EVERYTHING AT HOME.

MINE YOUR CRITICAL MINERALS, PROCESS YOUR LITHIUM.

YOU CAN DO IT, IT IS PROBABLY MORE EXPENSIVE AND THAT WILL BE TRUE FOR LOTS OF OTHER PARTS OF THE ENERGY SYSTEM.

THE QUESTION IS WHAT INSURANCE PREMIUM SOCIETY IS WILLING TO PAY IN A WORLD THAT IS INCREASINGLY SEEING GEO POLITICAL RISKS AND CONCERNS.

BUT IF YOU REALLY TRY TO WALL YOURSELF OFF AND MAKE EVERYTHING AT HOME THAT IS PROBABLY UNDERMINING YOUR RELATIONSHIPS AND DIPLOMATIC ALLIANCES AND IT CAN BE EXPENSIVE.

>> YOU SAY THAT IT HAS NOT FULLY AFFECTED THE WORLD ECONOMY YET.

BUT, OIL SHOCKS GENERALLY LEAD TO GLOBAL RECESSIONS, AT SOME POINT, CORRECT ME IF I AM WRONG.

TELL ME DO YOU THINK THAT WE MAY BE SET UP FOR A GLOBAL RECESSION?

EVEN THOUGH THE STOCK MARKET KEEPS GOING UP?

>> PROBABLY ECONOMISTS THAT WOULD HAVE A FIRMLY HELD VIEW ON THAT.

I WILL SAY FROM AN ENERGY STANDPOINT YOU ARE RIGHT.

A LONG HISTORY THAT HAS BEEN DOCUMENTED HOW MOST OIL SHOCKS FED INTO RECESSIONS.

BUT, THERE ARE A NUMBER OF BUFFERS IN PLACE NOW THAT ARE STRONGER THAN WHAT WE HAVE SEEN BEFORE INCLUDING THE FACT IS, AS I SAID, GLOBAL ECONOMY IS FAR LESS OIL INTENSIVE NOW THAN IT WAS IN THE PAST.

YOU HAVE A MASSIVE NEW SOURCE OF SUPPLY, GROWING NINE MILLION BARRELS A DAY OVER THE LAST DECADE OR SO.

THAT IS AN INCREASE IN SUPPLY CUSHIONS THE WORLD.

WE WERE A BIT OVER SUPPLIED AS I SAID BEFORE.

I THINK YOU WILL SEE A VERY, WE ARE ALREADY SEEING QUITE AN ADVERSE ECONOMIC IMPACT IN CERTAIN REGIONS.

ONE OF THE THING THAT IS DIFFERENT TODAY IN THE PAST AS I SAID BEFORE, OIL PRICES HAVE TO GO HIGH ENOUGH TO MAKE PEOPLE USE LESS TO DESTROY DEMAND.

THAT PAIN TODAY, THAT DEMAND DISRUPTION IS SEEN AND FIRST AND FOREMOST IN LOW INCOME COUNTRIES.

THE EMERGING MARKETS.

I THINK THAT IS WHERE YOU WILL SEE THE WORST ECONOMIC EFFECTS.

>> JASON, THANK YOU VERY MUCH FOR JOINING US.

APPRECIATE IT.

>> THANK YOU.