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Perspectives: Energy shocks and security
97 Plays52 minutes ago
Energy markets are facing an extraordinary supply shock. Amos Hochstein, Managing Partner at TWG Global and former White House Senior Advisor, joins HSBC Senior Economic Adviser, Stephen King, in this video podcast to discuss what this major disruption to energy flows could mean for global supply chains, inflation, economic resilience and the energy transition.
Watch or listen to find out more.
This episode was recorded on the sidelines of the HSBC Global Investment Summit in Hong Kong in April 2026. Find out more here https://www.business.hsbc.com/en-gb/campaigns/global-investment-summit
Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
00:00:01
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto to today's show.
00:00:21
Speaker
Hello, my name is Stephen King. I'm HSBC's senior economic advisor, and I'm here on the sidelines of the HSBC Global Investment Summit 2026. And we're going to discuss all things energy. I'm delighted to be joined by Amos Hochstein, who currently works at TWG Global, ah but was an advisor, senior advisor to two US presidents, ah President Biden and before that, President Obama.
00:00:48
Speaker
um And we're going to discuss all things energy, which is currently a pretty hot topic because as we speak, the Strait of Hormuz is shut, we think, and we have what is quite an extraordinary upheaval in energy markets. Now, things are moving very, very quickly at the moment, so we can't be too sure as to what's going to happen long term. But I'd just like to get a sense of how you think about the next few months um in terms of physical energy supplies, supplies of oil, supplies of gas, um and implications for maybe different economies around the world.
00:01:28
Speaker
Well, first, thank you for having me on the podcast. It's good to be here in Hong Kong for h HSBC's important summit. Disruption that we're experiencing, the global economies experiencing from the war in Iran is the greatest disruption that the world has ever seen in energy.
00:01:46
Speaker
In the 1970s, when there was a, iran when the Iran shut down the Straits of Hormuz, it was in the Arab oil boycott.
00:01:58
Speaker
But it was only oil. Today, this disruption is oil. It's natural gas, meaning 20% of the global LNG, liquefied natural gas supply.
00:02:09
Speaker
But it's also diesel, and for all our trucks and farm equipment, and it's jet fuel for aviation and shipping And it's helium gases that come from natural gas that go into things like making semiconductors and MRI machines and CAT scans and plastics. And so all of those things today come through the Strait of Hormuz.
00:02:32
Speaker
We're not feeling the effects right away, not on the first day or even the first four weeks because it takes time to mature into system. But we are experiencing an unbelievable upheaval in these markets that will take months to fix. no I just want to question you something, because it's quite a strong statement to say this is the the biggest shock that we've really ever seen, bigger than what happened in the 1970s. So just to remind viewers and listeners, um in 79, oil prices doubled, thanks to the Iranian Revolution. And in 73, oil prices quadrupled, thanks to the Arab oil embargo after the Yom Kippur War. We haven't seen oil prices quadrupling. Admittedly, we're less dependent in many ways on oil than we were back then. But
00:03:19
Speaker
It's quite a big statement to say this is a bigger shock than than those two. yeah I just, could you put some extra color on that? We haven't had an energy disruption since then, since 1979. So we've priced in risk over all these years, but now,
00:03:39
Speaker
We have a lot more systems in place to deal with the disruption because of the 1970s, right? As a result of the 1970s, we built the International Energy Agency that is in is there to coordinate between countries when we have a supply shock.
00:03:56
Speaker
We built strategic petroleum reserves in the United States, in Japan, in China, and in Europe. So we've put in place systems that will help us navigate it But right now we're talking about a major percentage of the world's both oil, gas and the products.
00:04:15
Speaker
And because we had you know more supplies in different places in the world today, we're seeing that it takes time for that to mature. sure But remember, the supply shock in the 70s lasted many months.
00:04:30
Speaker
I don't know how long this is going to last. Yes. But every day that goes by, every week that goes by, becomes, the shock becomes more critical because it's not linear.
00:04:43
Speaker
No, I fully accept. But just just to push up a little bit on this, if you go back the last 30 years, yes, the world is very dependent on what comes through the Strait of Hormuz. But at the same time, both China and the US massively increased their domestic energy production over that period of time. I think in terms of oil production, the US produces three times the amount it produced 30 years ago.
00:05:08
Speaker
um And if you look at some China, it doesn't produce much in the way of oil, but it does produce huge amounts, both of um renewable energy, particularly solar, um and a lot of coal production that wasn't there 30 years ago. So to what extent would you say that both the U.S. and China have not removed themselves from the risk that's associated with the closure of the strait, but rather have diversified their sources of of carbon energy from what had been the case back in the 1970s? So a couple of things on that. One, this is not an oil shock. This is an energy shock. I hear you. Yeah.
00:05:45
Speaker
two Oil does not make electricity anymore. We don't use it. 30, 40 years ago, we used oil a lot for electricity. We don't really do that anymore. So renewables doesn't solve my problem, that oil. It solves my problem from an LNG perspective of natural gas.
00:06:05
Speaker
So what do I use oil for? Yes, China has a lot more electric vehicles, and so does Europe. But if you want to fly a plane, you need jet fuel. And China had very few jets 30 years ago. sure We ship everything across the world. We're in a globalized economy.
00:06:23
Speaker
And so all those ships are running on diesel, on shipping fuel. ye Every electric vehicle, that is not pumping for gas, for gasoline, but the entire interior of the car is made of petroleum products. absolutely Our hospitals run on petroleum.
00:06:41
Speaker
The surgical gloves, the surgical masks, all the uniforms that the attendants wear in the hospital are all made of petroleum. Syringes, and the list goes on. In 1980, fossil fuels were 80% of the energy mix. 45 years later,
00:07:01
Speaker
with massive investment in capacity of renewable energy, as you mentioned, and electric vehicles, fossil fuel is now, oh, 80%. Because the pie grew.
00:07:13
Speaker
Because everything we do, we're talking about AI today. That's the most important thing that's happening in the global economy. US and China once again leading. We have to build data centers with a lot of racks of chips that require a lot of electricity. And of they have electricity intensive. And they need water.
00:07:29
Speaker
yeah And even the racks are made of products that come from energy. We are, as you said correctly, the United States and China have some more immunity, but what is it really? For the US, it's the production of oil.
00:07:40
Speaker
We're producing 13 and a half million barrels a day of oil today. And we have refining capacity in the US, less than we did in the past. We haven't built a new one in 30 years. China has coal, it has renewables, but it also has 1.4 billion barrels of oil in reserves because they're highly dependent on it still. yeah That's depleting.
00:08:02
Speaker
So what happens in an oil shock or an energy shock is that for the first few weeks, all the ships that were in the water on the way to my market are still on the way. So I still get supplies for the first few weeks.
00:08:14
Speaker
I have reserves. I have jet fuel reserve at my airport. But as the weeks go by, no new supplies are coming. No new ships are coming.
00:08:26
Speaker
And I start depleting my reserves. And that's when, and look what's happening in Asia now. Multiple countries have gone to a four day work week to conserve energy. They've sent their kids to Zoom school, not because of a COVID,
00:08:39
Speaker
but because they want to conserve energy. Airports are shutting down their domestic flights throughout Asia. Italy has shut down three regional airports. That will become the norm.
00:08:51
Speaker
This won't only be an Asia crisis. Once Asia starts feeling it very badly, we're going to see it go to Europe and eventually the United States. For the US, given its self-sufficiency that it now enjoys in oil and gas,
00:09:08
Speaker
What is the risk that faced with a big increase in the global price, ah the US effectively bans exports of carbon, gas, oil products to try to keep prices down in the US and kind of separate them from what's happening elsewhere world? Is that something that's a possible danger?
00:09:27
Speaker
It was already discussed and in the White House a few weeks ago. The market had a very bad reaction to it when it floated. But as time goes by, the US is starting to increase our exports because companies in the US say, well, I can sell a barrel for $95 in the US, s but I can sell it for $150. going to sell it for $150. And so you suddenly start importing the inflationary trend yeah in energy from outside the country.
00:09:56
Speaker
We may be self-sufficient to some degree in the US, but we're integrated into a global market. In January, when the winds of war started blowing, oil prices were $60. Today, they're at $100.
00:10:09
Speaker
And so we are already seeing that increase. And that increase is happening in global prices through Brent and in WTI, the American price. And they're rising in tandem.
00:10:22
Speaker
Gasoline prices in the United States were at $2.80. And through this war, They've risen a well above $4. No, I fully accept that. well All I'm asking, i i think... so I think the president will want to limit exports. He'll want to do this. If it continues to a point, to a breaking point for him, yeah where the inflation and the economy, and he feels that too many barrels are leaving the United States, and maybe I should flood the American market, it will be devastating for the rest of the world. Yeah.
00:10:50
Speaker
But he'll say, I'm OK with that. i'm He's running into elections in November. and And I think I'm right in saying, I mean, just just to remind the viewers of this podcast, that if you look at what happened with LNG or gas shortages in Europe in the aftermath of the initial Russian invasion of Ukraine,
00:11:08
Speaker
um the shortfalls are made up by exports of LNG from the US to Europe. If this were to happen, a fundamentally different kind of world where there are shortfalls elsewhere, but rather than the US helping with those shortfalls, the US would be effectively going it alone in a sort of energy autarky kind of policy. Look, I led the policy for the US government during the Russian-Ukraine war.
00:11:31
Speaker
Well, good for you for helping us out in Europe. We did it before the war started, right? We had a massive surge of capacity. But look, that will come as ah as sort of a a, not a last resort, but a exhausting all other resorts and having a political pressure. This war is coming against the backdrop of some weakening economic indicators. Sure.
00:11:54
Speaker
Rising price of food and so on. But energy is unique because people think about it in terms of petrol or gasoline or diesel, but it affects so many things. yeah We are no longer the agrarian society of a you know farm to table society.
00:12:10
Speaker
We are a farm to truck to table. sure So the diesel price goes right into our food price. We go to the supermarket where all our food is refrigerated at immense cost of electricity. So electricity prices rising affects food. So all these commodities that are not related in the consumer's mind to energy get affected. Yeah. And I can see in one sense why that creates political pressure to do something about it because, as you say, it's such a widespread effect that feeds through to the broader economy. If you're sitting in the Federal Reserve, this creates an enormous dilemma.
00:12:43
Speaker
In fact, at the last FOMC meeting, the policy meeting, It looked like there was a ah very small majority in favor of cutting interest rates in response to an oil price shot because of the effects on demand and activity and uncertainty and so on and forth. But equally, there was a large minority that was saying, oh, no, no, this is ah an inflationary problem. We may need to hold off from rate cuts, maybe even raise interest rates. So it could be possible, could be possible later this year that you have a kind of almost a perfect storm of very high energy prices and a central bank that's saying, look, this is inflationary, not recessionary.
00:13:18
Speaker
Or if it is both, we have to put the emphasis on inflation. So things could be even worse under those circumstances. Look, I think we started this year before the war, we talked about a rate cut coming.
00:13:30
Speaker
I think that's pretty much off the table. It's very hard for me to imagine under the current circumstances, especially with the last numbers coming out, where even if core inflation held goods and energy were so high and food is now rising that i find it very difficult to see them agreeing on a cut as long as not only the war is ongoing but the tale of the war is understood.
00:14:00
Speaker
And so I I think probably the best the most likely is no rate cut And if the war continues for too long, a rate increase is not out of the question.
00:14:10
Speaker
I want to move on the debate a little bit, the discussion a little bit, to look further forward. and And one issue that's been discussed at this Global Investment Summit is the idea of self-sufficiency in a lot of different areas, that countries get nervous about their dependency on what's happening elsewhere in the world, whether it's choke points in terms of maritime travel, whether it's issues about um countries not being trustworthy in terms of their trading relationships with other countries. From an energy perspective, do you think that one of the lessons that emerges from this is is to say, well, actually, we need to be more self-sufficient? And is there that possibility for countries to be more self-sufficient? i mean, the Americans, in one sense, have shown this already in terms of massively increasing their oil and gas production.
00:14:57
Speaker
Do you think other countries will perhaps follow suit in some way? I wouldn't describe it as self-sufficiency, but I think there is a need for diversification where there's not a single point of failure on either the transportation, the production, and the end use.
00:15:16
Speaker
And so we see it with China is as nearly 90 to 100 percent control over certain refined products and critical minerals, metals, mineral and and rare earths.
00:15:29
Speaker
You had a smaller group on energy. You have choke points in the Strait of Hormuz or Malacca or wherever else. And so I think the lesson that we learn is that you shouldn't have a single point of failure.
00:15:41
Speaker
So countries should not try to be self-sufficient in everything. It doesn't work. Of course not. no But at the same time, I think the mistake that Europe made that Asia should not learn from is it it governed based on ideology.
00:15:58
Speaker
and not by facts. You talked about renewables versus in the UK, more renewables or should we have done more in the North Sea on oil production? And the answer should be from that 80% in 1980 versus now.
00:16:13
Speaker
The answer there is that the energy buy is going to grow. I think the energy transition, and I've committed a lot of my life to this, should be supported, it should be invested in, it should be incentivized. but not by believing that the ah fossil fuels are going away, that there's some kind of magical date of demand destruction and peak demand.
00:16:33
Speaker
It's growing and it's gonna continue to grow. Oil demand is not going to peak before 2040. That's 15 years away. So yes, invest in renewables. But don't throw away the keys to the other parts. What the Germans did with nuclear energy is unforgivable.
00:16:49
Speaker
That is why they became so dependent on the Russians and why they became so dependent on other actors when they had a decent, good sense of energy, from a production of energy from nuclear. The UK did let go of the North Sea for a while, probably too soon.
00:17:05
Speaker
Europe did not, it thought about the Green Deal, which was admirable, But it thought that therefore they can just walk away from fossil fuels before the world was at their own economies were actually ready for it. Asia needs to learn the lesson from that which is grow renewables but create perhaps hubs of jet fuel, of storage.
00:17:28
Speaker
And doesn't have to be a hub for each country. But Singapore is already a bunkering hub for shipping. Why not have that for jet fuel? Why not have that for diesel and gasoline?
00:17:39
Speaker
To make sure that if there's a storm somewhere, if there's a war, if there's anything happens, that there are more supplies. And on everything else, countries should cooperate with each other.
00:17:50
Speaker
to say, i will supply this if you supply the other products. And we should have those diversification of resources. There's geopolitics in energy. There always was. And so it's critical that we start coming together after this war and taking advantage of this war and saying, all right,
00:18:08
Speaker
After wars, we do some of our best work, right? That's when we did the Marshall Plan. so That's when we did the International Energy Agency and the Strategic Petroleum Reserves. And that's what we have to do here, too. We have to make the Strait of Hormuz irrelevant. The world needs to come together, asian leading Asian countries, Europe and the United States, with the Middle East, and say, we need to build new infrastructure, meaning new pipelines that will be secure, that will go around the Strait of Hormuz.
00:18:35
Speaker
and that will produce alternatives not just for Saudi Arabia and UAE, but also for Kuwait and Iraq and Qatar. And we need to build storages so that Middle East producers can store their products in other parts of the world.
00:18:51
Speaker
We have to do that now. It's going to cost what sounds like a lot of money. Do I know? 30, 40 billion dollars. It's not that much. And the governments could put a flag and put some sovereign money behind it.
00:19:05
Speaker
And so then the private sector would come in and invest in it. But we need to learn from this war because crises have to become opportunities to do things better. Europe is better positioned vis-a-vis Russia today than it was 10 years ago.
00:19:20
Speaker
But the only reason it survived the LNG from the United States was because for 10 years they built new terminals and new pipelines. I was involved in that effort. Not glamorous and nobody wanted to do it.
00:19:30
Speaker
But if we didn't build it for 10 years, when the crisis came, it wouldn't matter how much LNG was in the United States. It would have nowhere to go in Europe. So we have to do that hard work to learn from this crisis and to prepare for the next one.
00:19:44
Speaker
Let me ask you one very final question and with a nice short answer. You've talked about 80-20 1980, 80-20, 80-20 now. In 2050, 20-60, will it still be 80-20 or do you think will have moved on from... No, I don't believe so. I think it's so... We'll on from there because I think that With the support of AI also, the advancement in other technologies is advancing much faster. i think we're going to see a lot more small modular nuclear reactors, a lot more. yeah Who knows, by 2050, fusion, perhaps. yeah And I think renewables will have advanced further so storage will be cheaper and more accessible.
00:20:21
Speaker
I hope so. i wouldn't I think it's entirely possible. OK. Well, on that optimistic note, Amos, thank you very much indeed for coming along and speaking us in this podcast. Ladies and gentlemen, thank you very much for listening and watching. This is podcast from the Global Investment Summit in Hong Kong in April 2026. Thank you very much.
00:20:42
Speaker
Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.