Episode 83: Nathan Piper on Risks in the Global Energy Sector

Find out more about Nathan Piper

Today we are joined by Nathan Piper – Head of Oil & Gas Research, Investec.

Nathan Piper has over 25 years experience in the oil and gas industry across a range of commercial, financial and technical roles and previously number one ranked oil equity analyst (Extel survey). Currently Head of Oil and Gas Research at Investec focused on UK-listed oil and gas companies and sought after sector commentator across a variety of platforms. Earlier this year invited to provide evidence at UK Parliament Treasury Select Committee on impact of Russian energy sanctions on the Oil and Gas markets and UK cost of living.

Nathan Piper | LinkedIn

SUMMARY KEYWORDS

energy, gas, oil, Russia, risk, Europe, price, high energy prices, gas prices, podcast, sanctions, Ukraine, Gazprom

SPEAKERS

Nathan Piper, Dominic Bowen

Dominic Bowen  00:47

Good morning, my name is Dominic Bowen, and I’m the host of The International Risk Podcast. Today we’re joined by Nathan Piper with over 20 years experience in the oil and gas industry across various roles. I’m really excited today to unpack a lot of important international risks with Nathan he was ranked the best oil equity analyst in an Excel survey and is a regular commentator on the BBC Sky News, Financial Times The Globe and Mail, telegraph and many many others. He is currently the head of Oil and Gas Research at Investec, and the former director and President at the Scottish energy forum.

Welcome to the podcast today, Nathan.

Nathan, I’ve been speaking with clients and guests on The International Risk Podcast for almost a year now about the energy risks and the upward pressure on energy prices and we know that gas storage levels ahead of the coming. Winter has been a topic that’s been debated and discussed quite a lot over the last couple of months. And we’ll talk a little bit about that. We all know that gas prices are predicted to continue to surge well into the winter and are likely to remain high for the long term. So perhaps we could start by exploring what does this actually mean for companies and maybe even private citizens, not just the cost of fueling our vehicles, warming offices and houses. But the other second and third order effects of increased energy prices and the potentially prolonged energy shortages in some heavy energy using industries.

Nathan Piper  03:01

Thanks, Dominic, I think it’s worth bearing in mind that before when Russia invaded Ukraine, there was already a tight oil and gas market as the global economy recovered from COVID, people got active again, people started moving again. And we saw high oil and gas prices towards the end of 2021. Partly because of Gazprom, obviously restricting supply, but also through increased demand. And the under investment in oil and gas has been the case for a number of years. So all those things combined to push prices up before Russia invaded Ukraine, which is obviously exacerbated things or what you think is going to happen is prolonged period of high energy prices. And I think the big thing here is that this is not the oil crisis of the 1970s. This is an oil, gas and coal prices across a whole energy complex, including electricity. So businesses have to know contend with prolonged periods of high energy prices, so high input costs. And that can be quite significant, depending on the industry as a factor for that business. And likewise, for individuals, it’s going to cost a lot more to keep your house warm or cold, depending upon where you are, and to keep your lights on. So these are the impacts on people. And it’s one of the reasons why inflation is so high.

Dominic Bowen  04:09

Yeah, I understand that you may actually now be on track to actually reach the gas storage levels that they want ahead of this winter, potentially, but the cost of replenishing the stocks has been over 50 billion euros, which as you said 10 times more than historical average of filling up tanks for winter. What are the significant issues of high energy prices and as you mentioned, under investment and the long term contracts actually all interplay.

Nathan Piper  04:33

I think the interesting thing about Europe is that if you’re prepared to pay the highest price, you can attract volumes of LNG liquefied natural gas, which is gas that you can transport by boat, but that’s at the cost of others who want to try and transition to gas so countries like Bangladesh, Pakistan and so on who’ve been trying to transition from coal to gas gas is no too expensive and going back to call. The other thing is with it with LNG is that 70% of the global volumes are already secured under longtime country. Right. So the EU or European off takers are really competing for the final 30%. And that’s really what’s pushing prices up, when fundamentally there’s not enough LNG to replace all of the Russian imports that are coming into Europe, Russia supplied around 40% of Europe’s energy or gas demand prior to the invasion of Ukraine, so you can’t replace that with with the available energy that’s out there. There are more projects coming on. But that’s not for two or three years at the earliest. So you know, Europe is paying the highest price, they will to secure this gas. But that’s also making lots of the industries and Europe uncompetitive, and it’s generating demand destruction, which reflects these high prices. And it’s not just high prices know the forward curve, which is where companies can hedge input costs, that remains high for the next two or three years, which is kind of the limit of that you’re able to hedge. So there’s a lot of businesses which are considering shutting down their fertiliser production plants, or glass or cement or any of these industries where gas or electricity is a major input cost, because it looks like they’ll be unlikely to secure gas or electricity prices at the right level to make their industries competitive.

Dominic Bowen  06:05

When I think what is it early high school where most of us learn about the market forces of supply and demand. And then you talk about demand destruction, which is a cursory glance, we could go great if there’s less demand that will result in lower prices, both for businesses, which potentially lower inflation and potentially just as private individuals and individual consumers. But of course, we know that you know, you mentioned Germany, and Germany’s got a lot of very heavy industries fertiliser, glassmaking cement and not just Germany, right across Europe, there’s a lot of industries that are potentially no longer competitive. And a lot of publications like The Economist and others have been really predicting some significant risks in many industries. Is there any positive with demand destruction? Or is this just a negative target we have to work through to see the light?

Nathan Piper  06:46

I’m not sure it can be positive that major industries in Europe are considering shutting down. That’s the fact that so that, I mean, I guess it’s one way that the market will correct bring prices down. So to your point, then that hopefully over a time period that will help. But I think the real struggle here is there is no major new supply coming on the investment and upstream oil and gas supply is half what it was in 2014. So you know that underinvestment, you know, partly due to the energy transition where maybe we’re tackling supply before we’ve actually sorted out demand is causing these these problems. And problems aren’t going to go away quickly. And I think that’s the key thing to sort of get across today is that we’re looking at a couple of years at least maybe longer of high energy prices, particularly gas.

Dominic Bowen  07:29

When Nathan you mentioned a long duration, energy crisis and corrections within the market. We saw yesterday that West Texas Intermediate crude was trading down to below $90, compared to over 120, a few months ago. We haven’t seen these levels since Russia invaded Ukraine in February, and even Brent crude was down 3% yesterday, and I know OPEC and the US and Norway have increased production. But is there an alternative when it comes to developing countries that are at the most acute end of this energy crisis? Right that Europe is sort of paid well and paid a lot to be in a safer position. We’ve got countries like Sri Lanka that have a political crisis, social crisis, economic crisis, and an energy crisis with which are all feeding into each other. We’ve got Pakistan and nuclear armed country that’s going through its own political crisis at the moment, and both are extremely energy short, you know, what’s the picture like for some of the countries that have the purchasing power that the EU does?

Nathan Piper  08:20

It’s worse. And I think what we haven’t touched on, but it’s worth reflecting on it is is fuel costs. So the oil price is one thing and you’re right, your oil price is going to moderate it a bit more recently, but actually fuel costs a petrol and diesel because China doesn’t export what it produces in terms of petrol and diesel. And also because Russia accounts for about 50% of Europe’s diesel imports, we’re seeing some very high prices that have begun to moderate a little bit. But relative to emerging economies like Sri Lanka and Pakistan and others, these high diesel prices causing a lot of problems. And that is the equivalent diesel price is something like 150 or $160 a barrel so the oil price may be coming down. But the the fuel costs for filling your your truck or your tuk tuk or whatever it is you’re trying to, you’re trying to move around remain very high. And if you’ve got foreign exchange problems like Sri Lanka does in particular, then it’s exacerbating any underlying weaknesses in individual countries. And we’ve seen blackouts in Pakistan or restrictions and energy rationing in Pakistan as well, as a consequence. But I think the other thing, the other consequence of the Russian invasion of Ukraine, and the Fallout Fallout of that is much, much higher petrol and diesel prices.

Dominic Bowen  09:30

So, you know, Russia’s position as a reliable energy supply has certainly been questionable, I would argue since maybe 2007, when Putin made his view of the world clear, and he’s now famous Munich speech at the Munich Security Conference. But if we look today, you’ve talked a lot about these high fuel costs. You know, what does the recent moves by Gazprom in the last couple of weeks I mean, for the European Union and the UK for this year has been tough, but I think perhaps more importantly for the long term,

Nathan Piper  09:56

Europe and particularly Germany has placed a one way bet on Securing cheap gas from Russia to fuel its industry. That’s clear because Germany has no LNG import terminals. So they have no way of getting significant volumes alternative gas, because they place a one way bet on Russia for potentially good altruistic reasons arrest originally trying to keep the Russia close to having these commercial relationships, however, was completely broken down. And Russia can no longer be considered a reliable energy supplier. But at the same time, it’s a significant energy supplier. And you can’t then flip as the I think the EU is trying to do through rhetoric, but it’s actually not what’s happening in reality to try and flip to alternative supplies. Because as I said earlier, there just isn’t the volume of gas from other sources to replace the Russian volume. So Gazprom and President Putin are in a very strong position. So they can reduce and increase the amount of gas that they put through Nord Stream one, despite that they have other pipelines available where they could still send the gas using the turbines as the excuse, and it’s the wrong day of the week. It’s the pipelines are on colour, I mean, anything will be used as an excuse not to send the gas down that pipeline, because they know they’ve got Europe in a very uncomfortable position economically. So as the EU tries to implement sanctions, particularly around oil through the course of this year, that will be where I think Russia will use their strong position as a supplier of gas to put pressure back on EU to sort of watered down the sanctions. And to allow Russian oil volumes to flow. I mean, the important thing to keep in the back of the mind is that oil is far more valuable to Russia, than gas oil generate something like three quarters of the tax revenues that gas does. So they can play tunes with gas, and it has a much less impact on the Russian economy than oil does. And the other thing is, if you push up the prices like they have, and deliver less volumes, while you probably still need the same revenue, so there’s a lot more that they can do with gas where it can get a direct response, threatening to restrict supplies to Nordstrom one has pushed prices to where they are today, which are unprecedented. Gas prices normally go down in the summer, so you can fill your storage before it goes up. Again, the winter is sort of cyclical, seasonal, but you know, we are hitting record gas prices in the middle of summer, all because Russia is no longer a reliable supplier. They used to deliver 40%, delivering about 10% at the moment and what they did last year, as they put more and more economic pressure on Europe. So I guess Gazprom as a tool of Putin doing just that. The German chancellor was pictured in front of the turbine in Germany yesterday with with the CEO of Siemens, it’s ready to go all that stuff. But Russian said we still don’t have the right paperwork. So as I say, they will use any excuse not to get volumes going through North Korean one of the moments particularly because as you said earlier, dominate Europe has made quite good progress on getting gas into storage.

Dominic Bowen  12:49

I mean, this standover of that return turbine that was linked to Nord Stream, one that I think was in Canada for maintenance that Russia says is holding back gas supplies to Europe is still not showing any signs of being resolved. Is this turbine actually that important? Clearly, turbines are quite important. And there’s not a huge amount of companies that repair and maintain them. But is that actually the cause of energy slowdowns? Or is this purely political?

Nathan Piper  13:09

It’s purely political, because you have pipelines that go through Ukraine, you’ve got pipelines that go through Poland, that all could take additional volumes of Russian gas. And indeed, when they have gone through periods of turbine maintenance on Nord Stream one, which is, you know, it’s normal chorus they have they put extra volume through the pipeline, but I think what Russia is trying to do again, you know, this is what they’re trying to say publicly as they want to have one agreement that which means that any turbines can be maintained at any time. So that’s their excuse, why they don’t want to just make one turbine, they want to make all turbines able to circumvent sanctions and be repaired whenever it whenever they want to. But

Dominic Bowen  13:47

I mean, I suppose the short answer to questions on it is yes, it’s completely political. You mentioned Germany is one way but investing exclusively almost exclusively on Russian energy, which turns out to perhaps not being the best decision, which if you work in the risk sector is perhaps quite predictable. But you know, we understand that these are more than just his political decisions. And there’s a there’s quite complex, but if we look at the corporate sector, you know, I remember in December, January, and even in early February, I just come back from Ukraine, actually, and I speak to a lot of corporations and I was speaking to them about, you know, this isn’t just a risk of war. This isn’t just a refugee crisis that’s potentially going to happen if Russia invades there’s clearly an energy crisis as a foreign exchange crisis, there’s going to be flow on effects to companies that do fertiliser, heavy metals, you know, it’s gonna really come across that transport. You know, all companies, whether you’re in the banking, finance, telecommunications, it’s going to have impacts on you. There were definitely a lot of companies that put their hands up and said, Okay, let’s look at our crisis management plans. Look at that. Let’s look at our business continuity, but there were so many companies that weren’t willing to do that and your role as an advisor, did you find that there were companies were putting their head in the sand or did you find that leaders were were quite forward leaning and forward looking about how to mitigate the risks

Nathan Piper  14:59

are suddenly for the banking side? The volatility was was difficult to handle. So gas prices in particular. So any any financial instruments where you did some hedging for someone around gas, typically, the gas price does not move around that much. So the volatility exposure that you take home with a hedging position doesn’t move around terribly much that suddenly an investing Summit, some of our biggest exposures were our hedges or gas hedges, where, because of the gas price moved up 500%, suddenly, this small hedge position suddenly became one of the biggest liabilities on our Lumberg. So yes, there were there are lots of sort of things like that happening. And as actually, as a consequence, not just us, but banks in general, are now not prepared to take those hedging positions, whether whether it’s for producers who want to hedge the price or off takers, who wouldn’t want to hedge their exposure as well. So I think one of the following consequences of this is inability for people to manage risks through hedging instruments. So that’s one side, I think, looking at the economy more broadly. And we’re even seeing it with the Bank of England where the Bank of England’s communicating inflation today, I mean, a lot of people had their head in the sand about how long this gas crisis might last. And I think now, you know, now that were in the middle of the summer was record gas prices, people can see it’s going to last for quite some time. But I think there was an inability to accept how difficult it was going to be and how painful it is going to be. So you can’t cut off the country that delivers for it. Certainly the gas and your significant most of your oil and diesel and so on, and expect no no consequences. So I think the economic trends consequences are now being felt. I’m not sure everyone was prepared to recognise that early on, like, like you’re talking about going?

Dominic Bowen  16:41

No, that’s a really valid point. And for those that hadn’t seen, you know, the Bank of England raising interest rates on Thursday, and also, at the same time warned about possible recession risks in the UK is a very clear and present international risk for corporates and individual citizens alike. But actually,

Nathan Piper  16:55

before Christmas, the governor of the Bank of England was talking about it being a short term gas crisis, all these sorts of things. So yeah, so because quite often economists look at the forward curve, and the forward curve, typically six or nine or 1212 months out, will show prices going down. So quite often, quite sometimes economists get these things wrong is that they put in the forecast. So they always assume that prices will go down, and therefore inflation will reverse. But anyway, I guess in hindsight, it’s easy to say pointed out, but I think they were being a bit too definitive about it being short lived crisis.

Dominic Bowen  17:26

Yeah, I think that really is critical. And one of the things that we do is Hindsight is forecasting. So looking at back and sort of going into what were the indicators we should have been seen, and then trying to use that as an interplay when we look forward. Like I literally use those same indicators, and we look forward so we don’t sort of keep tripping over our towers when we’re doing that analysis. Are you able to speak about how the supply cuts you mentioned? I mean, how are these energy disruptions in the supply of energy actually disrupting and affecting the Russian economy? How’s the Russian economy likely look this time next year?

Nathan Piper  17:57

Well, I’m not sure I’m not I’m not a Russian economic expert. But what I would say is that the ruble has recovered to pre-invasion levels, they’re making more money than they were last year, because oil prices higher and the gas prices higher. I mean, there’s without doubt there’s going to be damaged the Russian economy, given the withdrawal of lots of Western economies or Western businesses. But I think that the impact on sanctions of sanctions and so on on Russia has been pretty muted so far. But that’s what’s going to be interesting. Going into the second half is as the EU’s. sanctions, pick them oil begin to impact and that’s through a few different ways, but the most significant will be around maritime insurance. So Will Will they remove or restrict access to the insurance market, particularly Lloyd’s and London, along with some of the other EU countries in Cyprus and Greece and so on? Will they restrict that and that would have an impact in quite a significant impact on Russia, Russia’s ability to transport oil around the world. So you Russia exports around 7 million barrels of oil and oil products. So around 5 million barrels of crude and Indian and Russian refineries can take about 3 million barrels a day of that. So there’s still another couple million barrels where as this seaborne insurance restrictions come into effect towards the end of the year, will that then mean that Russia is revenue is genuinely curtailed? I mean, we can then get into into a debate about where the oil price would be if that actually happens. But no, I think that’s up to date. There. Hydrocarbon driven economy has not been that heavily impacted because the prices have gone up. What will be interesting to see is through the end of this year, and into next year as the different dates that the EU has set for sanctions to be implemented, if they really come about, will that impact Russia’s economy and I guess we’ll have to wait and see because as soon as it gets tight, what the US tended to do is come up with exemptions. Particularly around gas. So they’re trying to mandate a 15% demand reduction across Europe, apart from everybody, if you need to gas, it waters down the impact. The same with oil. There’s one exemption for Hungary because there’s there’s one pipeline that connects into Hungary, and then to the Eastern Germany was part of his Germany, the refineries there. So all those refineries that can’t get oil anywhere, any other way, they might fall under some exemptions, or any sanctions. So as I say, it’ll be interesting to see through the second half of sanctions against Russia. And that’s when you might actually see the sanctions bite and really hurt the oil part of the Russian economy, which is the is a kind of engine.

Dominic Bowen  20:42

Now, that’s very interesting. And I think like most things, the the energy sector is probably a lot more complicated than most of us are aware of understand recently, the UK introduced a windfall tax called the Energy profits Levy, which I understand will have a long term impact on investment in the energy sector and energy infrastructure sector, which I think if I’m quoting you correctly, was already there was under investment during that during the COVID period. Now, all businesses need predictability, including the oil and gas industry, and they’re no different. Can you perhaps explain to our listeners some of the biggest risk indicators that business leaders should be monitoring when it comes to energy?

Nathan Piper  21:18

I think I think the problem with that, I mean, the politics of it was straightforward. People are people are suffering. And you know, they link that with the the money that oil companies are making, despite it being a cyclical industry. And I don’t recall a subsidy subsidy being proposed for the oil and gas companies in 2020, when oil prices went to zero, the key thing for energy investment, and when I say energy investment, I mean renewables, the energy transition, the whole thing is a stable fiscal regime. But I think what we’re seeing at the moment is obviously these high energy prices, whether it’s electricity to suppliers, or utilities, or energy retailers, or the oil and gas companies, there’s a big spotlight on all of them right now about how much money they’re making, and who’s making the money. And likewise, with fuel prices. If you remember, when, in the UK, when a litre of diesel went through two pounds, there’s a big focus on who’s gouging the the consumer. So I think that that generates a lot of risk, because politicians aren’t necessarily going to act rationally. And that makes it unpredictable. And that creates a risk, which is hard to it’s hard to mitigate, because you don’t know exactly what’s going to happen. So certainly, the business secretary was talking to the oil and gas producers in the UK North Sea, and was suggesting that they weren’t going to get windfall tax, but then leftfield, the chancellor comes to windfall tax, which was that the expectation was, it might be a one off one year thing, but actually, it was a multi year windfall tax, which they called them the energy profits Levy, which again, was a surprise. So I think what’s interesting is that these extremes of oil and gas prices are creating a political environment, which is pushing politicians to make fairly knee jerk on the hoof policy. And even though the detail around that energy price level has not, not completely been spelled spelled out by by the government, because what’s supposed to happen is it’s supposed to be removed at a certain oil price. But that particular oil price has not been defined yet. And it makes the UK a less predictable place for energy investment. Yeah. So I guess that’s the risk that comes from it is that unexpected fiscal tightening fiscal changes, puts off people from investing.

Dominic Bowen  23:21

I mean, if we if the war and sadly, it doesn’t look like the war in Ukraine is going to end anytime in the near future. But when the war in Ukraine does end, and then, you know, we can we can predict the sort of countries in Europe that will be pushing for the sanctions to be removed very quickly. And once sanctions are removed, is it just a matter of investing in the energy sector and across all different types of energy for prices to stabilise? Or are we likely to see this continue for a significant period after conflict ends,

Nathan Piper  23:50

and definitely a conflict ended prices would moderate a bit, but I still come back to what I said at the start, which is that there has been significant underinvestment in oil and gas for a number of years. And that means that we will we should anticipate higher than the 10 year average oil and gas prices for quite some time to come. So if those measures to come back to normal, for whatever reason, at some point than yesterday, moderate from these all time highs, but I think people should expect higher energy prices for quite some time to come, frankly. And you know, we started looking at that. Back in the middle of this thing last year, actually, we noticed that the UK gas price was 50% above the 10 year average in the middle of summer, which is very unusual. And that was really just the start of things to come. I don’t see that changing anytime soon, because you haven’t got significant LNG volumes coming on you haven’t got significant new volumes of gas coming on and but demand continues to go up. So I think, as I may have mentioned, you know, this year despite the energy transition, we should have record record coal demand. We’re gonna have record oil demand we’re gonna have record gas demand. So whilst demand It still goes up and supply is under invested in back to your your high school economics point at the start, price is going to go gonna stay relatively high. But if Russia was to come back on, we would probably move away from these absolute eyewatering record levels that we see at the moment

Dominic Bowen  25:16

when the international risk podcast is downloaded, from listeners all around the world, and one of the common trends we see is when we have guests on the podcast that are speaking about green climate change in environments particularly positive, we see significant increase in the amount of podcasts that are downloaded. A lot of people have been talking about the move to nucular slowing down and move away from nuclear in countries like Germany, a lot of countries putting coal power back on the table, what place do you see alternative and green energy options having in the long term when it comes to energy stability,

Nathan Piper  25:52

I mean, they’re critical, they’re critical. So you know, the energy transition has to happen. But you’ve also got to deal with the energy reality of today. So renewables are intermittent. And the way that you backup intermittent and renewables at the moment is with gas and with nuclear. And so that’s not going to change anytime soon. You know, hydrogen is part of the solution, but not for decades, on the scale that we’re talking about batteries don’t work for long enough duration, to stabilise the electricity system. So you need to have gas and nickel at the moment. So I think maybe what we’re getting at the moment is a bit of an object lesson in energy pragmatism, let’s say where energy policy must be put together in a holistic, holistic way. And it shouldn’t be a case of not this 100% renewables and zero traditional forms of thermal power generation, but actually a genuine transition where that transition is discussed. And pragmatically, and in our sort of grown up way, rather than in a binary way, because we’re not changing from DVD to Netflix here, we’re trying to completely change out the the energy infrastructure, which has been in place for decades, and there are fundamental differences between thermal power generation and renewables, and we can’t wish them away.

Dominic Bowen  27:10

And Nathan, it wouldn’t be the internationalist podcast, if I didn’t ask you, when you go to sleep at night, or when you’re closing down your laptop, or maybe when you’re turning it on in the morning, what are the biggest risks causing you concern?

Nathan Piper  27:23

I think perhaps it is that it is that pragmatic discussion around energy. I think I think that particularly going into cop 26, it became pretty vitriolic. And you know, the access to financing and, and so on and so forth for traditional forms of energy are becoming increasingly difficult. I think the other bit is around demand, I think some pretty hard lessons and hard hard messages need to be brought around of demand. So unless we do something about demand, then we want sorted out, I guess that’s more of a broader point. But when I split on my laptop, each morning thing in the oil and gas sector, goodness knows what’s going to happen. So I don’t have a specific risk, one risk that happens, but it’s so many different risks altogether at the same time, which is probably why this doesn’t work for the podcast, but why I have the lack of a full head of hair that I have at the moment, Dominic. So it’s, it’s a worrying place to be, you know, we’re relying upon some very politically risky countries to deliver our energy sources. And I think today, it’s Russia. But even if you’re thinking about the energy transition, most of the processing capacity for batteries and so on is in China. So once you’ve solved one problem in the international energy space, there’s plenty more risks to think about after that.

Dominic Bowen  28:35

There certainly is, I mean, you know, we talk about that volatile, complex, uncertain world. And, you know, I’m increasingly advocating that, you know, really the the uncertainty in that VUCA should be removed. I mean, we can be certain that we’re going to remain in a very complex and volatile world for certainly for the foreseeable future.

Nathan Piper  28:51

I think I think you’re right, I think, you know, we think about the big suppliers. I mean, Russia is one of the is the biggest oil exporter, but the others are stable regimes like Saudi Arabia and UAE, they’ve got the most spare capacity and OPEC plus Qatar is one of the biggest energy gas exporters, you know, the really is quite an interesting group of countries, which we’re reliant upon for for our energy. And really, maybe that’s No, no, we’re moving towards the end of the time here. But that’s maybe the the inconsistency or the the issue that developed economies have got to grapple with is that you’re offshoring the production of your energy to countries where there may not be aligned with you. And I think that that’s maybe the lesson going back to your hindsight analysis that you’re talking about before doing is that if developed economies, particularly European economies, want to use various different energy sources and so on. They either have to do some maybe they have to take more responsibility for producing those those materials themselves, rather than expecting them to be produced by other countries which which are as we’re seeing with Russia, not aligned with us and then we were our vulnerabilities, our risks. are magnified as a consequence mirrors, you know, the US has maybe somewhere somewhere in the middle where it’s, you know, it produces the amount of oil that it’s not self sufficient exactly, but it’s almost self sufficient in oil. On the gas side, it’s gas prices, a fraction of the Europeans gas price. So from a competitiveness point of view, the US is in a much stronger position than Europe is because it develops its own natural resources could argue that Europe has chosen not to do that as they’ve banned exploration in various countries across across Europe and restricted activity. But they’re happy to import it from Azerbaijan, you know, Saudi Arabia and all these different kinds of dimension, which is not to cast aspersions on those countries individually. But they’re certainly not got the same value system and Outlook necessarily, or alignment as Europe does. And you know, I think that’s what we’re, what we’re looking at at the moment.

Dominic Bowen  30:54

Yeah, that’s all very, very valid, and certainly something that when you’re doing your risk analysis, understanding the environment you’re operating in, certainly is usually the first step. But Nathan, thank you very much for unpacking those very complex and intertwined issues on the podcast today.

Nathan Piper  31:08

My pleasure. Thanks for your time, Dominic. Great questions.

Dominic Bowen  31:10

Thanks very much, Nathan. Well, that was a great conversation with Nathan Piper. I really appreciate you hearing Nathan’s thoughts on energy supplies, risk forecasting and the interplay of economics, energy, and politics. Thanks very much for listening to the international risk podcast, and we’ll speak again next week.