# Lunch Money with Paul Krugman and Heather Cox Richardson

An episode of [Paul Krugman Podcast](https://invisiblenetwork.ai/podcast/1877144831), 11 Mar 2026, 31 min.

Audio: https://api.substack.com/feed/podcast/190636469/fee80e2acd0e794d403e3eb3e500b666.mp3

Thank you Teresa Hanafin, Lisa Gonzalez, Stephanie G Wilson, PhD, Nenad Georgievski, Diane Osgood, and many others for tuning into my live video with Heather Cox Richardson! Join me for my next live video in the app. Get full access to Paul Krugman at paulkrugman.substack.com/subscribe

## Transcript

[0:05] SPEAKER_00: Hey, everybody.
[0:07] SPEAKER_00: Thanks for being here.
[0:08] I'm so excited to be having a chance to talk with the
[0:13] extraordinary Paul Krugman.
[0:16] And I wanted to say,
[0:17] Paul,
[0:19] one of the reasons I'm so excited about doing this is because
[0:24] SPEAKER_00: in the period when I started studying history,
[0:27] SPEAKER_00: economics and politics were almost considered the same thing.
[0:31] SPEAKER_00: That is,
[0:32] it was understood that the American people had to understand
[0:36] the economy in order
[0:37] SPEAKER_00: to make good decisions about politics.
[0:39] SPEAKER_00: So in the newspapers,
[0:41] SPEAKER_00: they would explain every financial decision,
[0:44] SPEAKER_00: every tax decision,
[0:45] SPEAKER_00: every kind of decisions they were making about the kind of
[0:48] SPEAKER_00: of economy they were trying to build.
[0:51] SPEAKER_00: And that changes really dramatically after the depression,
[0:56] SPEAKER_00: because all of a sudden it seems like the politicians,
[0:59] SPEAKER_00: especially on the Republican side,
[1:02] SPEAKER_00: are not actually explaining what they're doing.
[1:04] They're trying to hide what they're doing until by the time you
[1:07] get to the 1970s,
[1:09] SPEAKER_00: I just don't understand what they're trying to do.
[1:12] SPEAKER_00: And the chance to talk to you about the
[1:15] SPEAKER_00: All the,
[1:16] SPEAKER_00: you know,
[1:16] SPEAKER_00: the extraordinary confusion,
[1:18] SPEAKER_00: for me anyway,
[1:19] SPEAKER_00: in the papers every day about the economy,
[1:21] SPEAKER_00: I just,
[1:23] SPEAKER_00: I'm beside myself.
[1:24] SPEAKER_00: So thank you so much for carving out the time to do this.
[1:27] SPEAKER_01: Thanks for having me on.
[1:28] SPEAKER_01: And it's, yeah, I mean, that's afflicted everything right now.
[1:33] SPEAKER_01: I mean,
[1:33] SPEAKER_01: it's,
[1:34] SPEAKER_01: you know,
[1:35] I remember a time when you did not sort of assume that
[1:38] everything coming from the
[1:40] SPEAKER_01: administration was a lie.
[1:42] SPEAKER_01: But it seems like a long time ago.
[1:45] SPEAKER_01: I mean,
[1:46] SPEAKER_01: I'm even nostalgic for George W.
[1:48] SPEAKER_01: Bush when at least they were,
[1:50] SPEAKER_01: they put some care into the lies.
[1:52] SPEAKER_01: But anyway,
[1:52] SPEAKER_01: it's a very,
[1:53] SPEAKER_01: but on economics,
[1:55] it's been sheer nonsense from at least half the political
[1:59] spectrum since around
[2:01] SPEAKER_01: 1980.
[2:03] SPEAKER_00: And it shouldn't be.
[2:04] SPEAKER_00: You know,
[2:05] SPEAKER_00: at the end of the day,
[2:05] SPEAKER_00: at least from the stuff I did,
[2:09] SPEAKER_00: there's some pretty basic concepts.
[2:11] And obviously,
[2:12] we're trying to figure out how a lot of them work on a micro
[2:15] scale.
[2:15] SPEAKER_00: But honestly,
[2:16] you should be able to understand what your politicians are
[2:18] trying to do with the
[2:19] SPEAKER_00: economy,
[2:19] SPEAKER_00: it seems to me.
[2:21] Yeah,
[2:21] there are parts of economic policy that are technical and
[2:25] difficult.
[2:26] SPEAKER_01: I mean,
[2:26] SPEAKER_01: at some level,
[2:29] at least it takes some effort to understand what the Federal
[2:33] Reserve is up to.
[2:34] SPEAKER_01: But that is also,
[2:35] SPEAKER_01: at least has been historically,
[2:37] SPEAKER_01: a technocratic institution,
[2:38] SPEAKER_01: and they do try to communicate what they're up to.
[2:41] SPEAKER_01: But on spending,
[2:44] SPEAKER_01: taxing and spending,
[2:46] SPEAKER_01: and basics about who bears the burden,
[2:49] SPEAKER_01: that shouldn't be...
[2:51] SPEAKER_01: you know, the public should be informed about that.
[2:54] SPEAKER_01: I mean,
[2:54] SPEAKER_01: the public should be informed about all of it,
[2:56] SPEAKER_01: but that really doesn't require a lot of technical background,
[2:59] SPEAKER_01: but it does require some honesty on the part of people talking about it,
[3:02] SPEAKER_01: which is very much sort of a,
[3:05] SPEAKER_01: that's a historical virtue that we forgot about these days.
[3:10] SPEAKER_00: Well, today, why don't we jump into energy policy?
[3:13] SPEAKER_00: Because I think that's where you began your career.
[3:17] SPEAKER_00: And oh, my, is it in the news today?
[3:20] SPEAKER_00: So how did you start?
[3:23] SPEAKER_01: Yeah, I started as an undergraduate.
[3:27] SPEAKER_01: I got Bill Nordhaus at Yale, took me on as a research assistant.
[3:34] And it was a glorious introduction,
[3:36] a great mentor and had me working on energy in 1973.
[3:41] SPEAKER_01: Actually, he was a little bit ahead.
[3:44] SPEAKER_01: He had started a big project on energy that was before,
[3:49] SPEAKER_01: just before,
[3:50] SPEAKER_01: a few months before the Arab oil embargo after the Yom Kippur War.
[3:53] SPEAKER_01: But turned out to be, of course, incredibly timely.
[3:56] SPEAKER_01: So there I was.
[3:58] SPEAKER_01: spending,
[3:58] SPEAKER_01: you know,
[3:59] SPEAKER_01: in the geology library,
[4:01] SPEAKER_01: thinking of Bureau of Mines circulars and all of that stuff.
[4:05] SPEAKER_01: And,
[4:06] SPEAKER_01: you know,
[4:06] SPEAKER_01: it was it was I got to say,
[4:10] SPEAKER_01: in some ways I'm feeling young again,
[4:11] SPEAKER_01: because once again,
[4:12] we have a global energy crisis brought on by by insanity in the
[4:17] Middle East.
[4:19] SPEAKER_01: And it feels like like old times.
[4:22] Except in some ways what's happening now is actually worse by
[4:27] the numbers.
[4:28] SPEAKER_01: At least if it goes on for any length of time, it's a bigger shock.
[4:31] SPEAKER_01: But anyway, it is kind of amazing how this keeps on happening.
[4:35] SPEAKER_01: Yes.
[4:37] SPEAKER_00: So,
[4:37] SPEAKER_00: you know,
[4:38] SPEAKER_00: I thought we maybe would start with the Strait of Hormuz,
[4:41] SPEAKER_00: but if you talk about 73 and then go back,
[4:45] SPEAKER_00: this is actually the big question for me from,
[4:48] SPEAKER_00: you know,
[4:48] SPEAKER_00: the turn of the last century onward,
[4:51] SPEAKER_00: beginning,
[4:51] SPEAKER_00: I think,
[4:52] SPEAKER_00: in 1916.
[4:54] The United States government began to subsidize fossil fuels
[4:57] with the argument that
[4:58] SPEAKER_00: you needed to give tax breaks,
[5:00] SPEAKER_00: for example,
[5:01] to oil producers because cheap energy would dramatically
[5:06] increase the size of the
[5:07] SPEAKER_00: economy and would make the economy boom.
[5:09] And do you want to walk us through how we get from that idea at
[5:14] the beginning of
[5:16] SPEAKER_00: the 20th century through this dependence on,
[5:20] SPEAKER_00: not really dependence on Middle Eastern oils in a sense,
[5:23] SPEAKER_00: because we are now exporters of oil,
[5:26] but why we're tied to the oil across the globe and why we're in
[5:32] thrall now to the
[5:33] SPEAKER_00: Strait of Hormuz today?
[5:35] SPEAKER_01: Okay, so let me give a, say that it's not all bad policy.
[5:42] SPEAKER_01: Until very,
[5:43] SPEAKER_01: very recently,
[5:44] if you want to have a moving vehicle and you want an engine
[5:49] with reasonable,
[5:50] SPEAKER_01: amounts of weight.
[5:52] SPEAKER_01: There's a lot to be said for petroleum as a way to fuel vehicles.
[5:58] It's only in the last few years that electric cars powered by
[6:04] renewable energy have
[6:05] SPEAKER_01: become a real possibility.
[6:07] SPEAKER_01: Until then, it really was no way around.
[6:12] SPEAKER_01: What the US stands out for,
[6:14] SPEAKER_01: which is pretty much unique among,
[6:17] SPEAKER_01: almost unique among wealthy countries,
[6:19] SPEAKER_01: is that we have kept fossil fuels extremely cheap.
[6:23] SPEAKER_01: In fact, I'm working on that probably for something in the next few days.
[6:28] SPEAKER_01: The United States is actually substantially more dependent on oil,
[6:31] SPEAKER_01: about twice as dependent on oil relative to various things as Europe is.
[6:38] And you might think that that's because they are further ahead
[6:41] of us on renewables,
[6:42] SPEAKER_01: which they are.
[6:43] SPEAKER_01: But that's really not the big thing.
[6:44] SPEAKER_01: The big thing is that they just drive much more fuel efficient cars.
[6:49] SPEAKER_01: And the question is, why do they do that?
[6:51] SPEAKER_01: And the answer is,
[6:52] SPEAKER_01: well,
[6:52] SPEAKER_01: if you've ever looked at gas prices in Europe,
[6:54] SPEAKER_01: they're enormously higher.
[6:56] SPEAKER_01: And that's all taxes because it's historical, it's legacy.
[7:00] SPEAKER_01: In Europe,
[7:00] SPEAKER_01: at the time that they were making those decisions,
[7:04] SPEAKER_01: cars were still sort of an upper income item.
[7:06] SPEAKER_01: And so they taxed gasoline heavily.
[7:09] SPEAKER_01: And which turns out in the end to be,
[7:13] SPEAKER_01: you know,
[7:13] to their advantage because they're less dependent on this oil
[7:16] than we are.
[7:17] SPEAKER_01: And in the United States,
[7:19] SPEAKER_01: you know,
[7:19] SPEAKER_01: after years and years of not increasing the gas tax,
[7:23] SPEAKER_01: taxes are a lower proportion of your price at the pump than ever before.
[7:28] SPEAKER_01: So that means...
[7:29] SPEAKER_01: A big decision.
[7:30] SPEAKER_01: We have in some ways systematically,
[7:33] SPEAKER_01: but also to a large extent,
[7:34] SPEAKER_01: just sort of backed into a situation where,
[7:37] SPEAKER_01: yes,
[7:37] SPEAKER_01: we're auto dependent,
[7:38] SPEAKER_01: but so are lots of other places.
[7:39] SPEAKER_01: What we do is really we drive big gas guzzling cars still.
[7:44] SPEAKER_01: And that's that really makes us very exposed to this kind of shock now.
[7:49] SPEAKER_00: Well,
[7:49] SPEAKER_00: but so we subsidize oil in the United States,
[7:55] SPEAKER_00: not only by not putting taxes on it,
[7:57] SPEAKER_00: but also there are all kinds of tax breaks and subsidies,
[8:01] SPEAKER_00: not just for gasoline,
[8:02] SPEAKER_00: but also for things like home heating fuel.
[8:05] But,
[8:06] again,
[8:07] if you read the news,
[8:09] the United States actually exports oil.
[8:13] Why doesn't that give us a cushion against the kind of problem
[8:19] we're seeing in the
[8:20] SPEAKER_00: Strait of Hormuz,
[8:20] SPEAKER_00: which is the outlet to the oil?
[8:24] SPEAKER_00: that about 20% of the world's oil goes through out of the Persian Gulf,
[8:30] SPEAKER_00: and this is what Iran has now cut off.
[8:33] SPEAKER_00: Or rather,
[8:33] SPEAKER_00: actually to be specific,
[8:35] Iran has threatened and insurance companies have said they will
[8:38] no longer cover the
[8:40] SPEAKER_00: ships going through the Strait of Hormuz,
[8:42] SPEAKER_00: which means that essentially they can't go through.
[8:45] Why is this still on the table if the United States is an
[8:49] exporter of fuel?
[8:51] SPEAKER_01: Okay.
[8:52] SPEAKER_01: And the answer is that oil is very fungible.
[8:57] An oil tanker can,
[9:00] you know,
[9:00] they can choose the destination where oil goes.
[9:04] SPEAKER_01: The United States, we're both an importer and exporter of oil.
[9:06] It's actually,
[9:07] you know,
[9:08] the upper Midwest gets a lot of its oil from Canada.
[9:11] SPEAKER_01: A lot of the oil
[9:12] that comes from fracking in texas goes overseas so you know
[9:15] we're on both sides and
[9:17] in both cases the price of that oil is determined by where else
[9:22] it can be sold and
[9:23] so there are two sort of global benchmark prices of oil there's
[9:27] west texas
[9:27] intermediate in cushing oklahoma and there's brent north sea so
[9:32] there's a european
[9:32] price and a u.s price and they're always within a few dollars
[9:36] of each other because
[9:37] SPEAKER_01: it's a
[9:38] SPEAKER_01: It's arbitraged.
[9:39] SPEAKER_01: I'm trying to find ways to use normal language.
[9:40] SPEAKER_01: But anyway, there's a global oil price.
[9:44] And the fact that the US is self-sufficient makes no real
[9:48] difference to that,
[9:48] SPEAKER_01: at least under the current rules of the game.
[9:51] SPEAKER_01: If the price of oil goes up,
[9:52] SPEAKER_01: yeah,
[9:53] the United States as a whole gains as much from higher prices
[9:57] for the oil it
[9:57] SPEAKER_01: produces as it loses from higher prices for the oil we consume.
[10:02] SPEAKER_01: But the United States as a whole doesn't exist.
[10:05] Consumers are hurt,
[10:07] oil producers benefit,
[10:09] and there's no compensation there.
[10:13] The only way that we could be insulated from all of that would
[10:17] be if we had
[10:19] SPEAKER_01: something,
[10:20] SPEAKER_01: well,
[10:20] what we had in the 1970s with mixed results was we did have
[10:24] price controls on U.S.
[10:25] SPEAKER_01: produced oil.
[10:26] SPEAKER_01: And that lower price was passed on in the form of some protection.
[10:31] SPEAKER_01: of consumers from oil prices in the 1970s.
[10:33] SPEAKER_01: Now that was mishandled and there were shortages in gas lines,
[10:37] SPEAKER_01: which unfortunately I'm old enough to remember very vividly.
[10:41] SPEAKER_01: But that's the kind of thing that we did once upon a time.
[10:44] SPEAKER_01: We also,
[10:45] SPEAKER_01: when the price controls were taken off for a little while,
[10:47] SPEAKER_01: we had excess profits taxes on oil companies,
[10:50] SPEAKER_01: which all ended up being a moot point because oil prices crashed.
[10:53] SPEAKER_01: But the point is we don't do any of that now.
[10:56] And given our money-driven politics today,
[10:59] we're not going to do any of that.
[11:01] SPEAKER_01: The fact that the U.S.
[11:02] SPEAKER_01: is an oil producer,
[11:03] great for some people who are extracting oil from the Permian
[11:06] Basin in Texas,
[11:08] but that provides no insulation at all to people who are having
[11:12] to fill their tank
[11:13] SPEAKER_01: in Boston.
[11:14] SPEAKER_00: Well, so let me step back in there.
[11:17] SPEAKER_00: You just said something that I think is also worth taking a look at.
[11:20] The excess profits tax was moot,
[11:26] as you said,
[11:26] because the price of oil dropped anyway.
[11:29] SPEAKER_00: But you made the point,
[11:30] SPEAKER_00: I think it was yesterday,
[11:32] that our politics have changed dramatically in the years since
[11:35] the 1980s in that
[11:37] The oil producers now have much more power than they had in the
[11:43] 1970s and the 1980s in the U.S.
[11:45] SPEAKER_00: government.
[11:45] And so it is unlikely to see the kinds of controls we're
[11:48] talking about,
[11:49] right?
[11:50] SPEAKER_01: Yeah, that's right.
[11:50] SPEAKER_01: You just go back to the politics,
[11:54] SPEAKER_01: the political debates of the time,
[11:57] SPEAKER_01: and there are lots of ways in which I do not miss the 1970s,
[12:00] SPEAKER_01: but there was definitely.
[12:02] Now you just assume that big money interests can be challenged
[12:07] only with great difficulty.
[12:08] SPEAKER_01: The idea that you would protect U.S.
[12:10] SPEAKER_01: consumers from a global shock by imposing price controls,
[12:14] SPEAKER_01: wise or not,
[12:15] SPEAKER_01: and it's a mixed story,
[12:16] SPEAKER_01: but now it's just,
[12:17] SPEAKER_01: well,
[12:18] SPEAKER_01: you know,
[12:19] SPEAKER_01: think of the political donations,
[12:21] SPEAKER_01: think of the revolving door.
[12:22] SPEAKER_01: It just, we're in a completely different universe.
[12:25] SPEAKER_01: I mean, in the middle of all of this, the Times just did a
[12:31] SPEAKER_01: role of billionaires in political contributions.
[12:33] SPEAKER_01: And actually,
[12:34] SPEAKER_01: I had a number from some other people,
[12:36] SPEAKER_01: and it turns out the Times said that was a little bit understated.
[12:40] 19% of the political donations in the 2024 campaign came from
[12:46] billionaires,
[12:47] SPEAKER_01: which is a few hundred people.
[12:49] SPEAKER_01: And in that kind of universe,
[12:52] the kinds of genuine populist economic policies that were at
[12:56] least on the menu 50
[12:59] SPEAKER_01: years ago are not.
[13:01] SPEAKER_01: these days.
[13:01] SPEAKER_01: And all that comes down to, well, the fact that the U.S.
[13:06] SPEAKER_01: has oil production does not help.
[13:08] SPEAKER_01: It does not help consumers in this situation.
[13:10] SPEAKER_01: It does not help the economy in many ways.
[13:12] It's just they might as well be in Dubai in terms of the impact
[13:19] on the rest of us.
[13:21] SPEAKER_00: All right.
[13:21] SPEAKER_00: So what about the strategic oil reserves that are around the world?
[13:27] The news was out today that at least some people with strategic
[13:31] oil reserves are
[13:32] releasing huge amounts of oil in the market to try and relieve
[13:36] the rising prices.
[13:38] SPEAKER_00: Yeah.
[13:41] SPEAKER_01: I was doing that arithmetic just before we got on.
[13:44] SPEAKER_01: And it's not true.
[13:47] Apparently,
[13:48] they're going to over time release,
[13:50] so they say,
[13:51] 400 million barrels.
[13:53] SPEAKER_01: And it's kind of weird.
[13:55] Barrel is a,
[13:57] you know,
[13:57] it sounds like it has a lay meaning,
[14:00] but also has a specific measurement.
[14:01] SPEAKER_01: It's actually 42 gallons.
[14:02] SPEAKER_01: I don't know why I know that.
[14:03] SPEAKER_01: But anyway, so the Strait of Hormuz,
[14:09] SPEAKER_01: Normally, about 20 million barrels a day pass through that straight.
[14:16] SPEAKER_01: And that's all denied to the world market.
[14:19] SPEAKER_01: And what the proposed release,
[14:24] that's enough to make up for the normal transit through the
[14:28] straight for 20 days.
[14:30] SPEAKER_01: which is not trivial,
[14:32] if you thought that this war was going to be over and the
[14:34] strait reopened within a
[14:36] SPEAKER_01: few weeks,
[14:37] SPEAKER_01: then yeah,
[14:38] SPEAKER_01: that can cushion the world.
[14:40] SPEAKER_01: But of course,
[14:41] you might not want to use it all up because what if the war is
[14:44] not going to be over
[14:45] SPEAKER_01: that fast?
[14:45] SPEAKER_01: And then,
[14:46] SPEAKER_01: or,
[14:47] SPEAKER_01: you know,
[14:48] SPEAKER_01: and go on about that,
[14:50] SPEAKER_01: but it's non-trivial,
[14:52] SPEAKER_01: but it's kind of,
[14:54] SPEAKER_01: in any sustained blockade,
[14:56] SPEAKER_01: it ends up being trivial.
[14:58] SPEAKER_01: So-
[15:00] So I have noticed that the United States is not talking about
[15:04] releasing its
[15:05] SPEAKER_00: strategic petroleum reserves.
[15:07] SPEAKER_00: And I am wondering if those reserves were replenished after the Biden
[15:12] SPEAKER_00: administration used them to address its own shocks.
[15:16] Is the reason they're not talking about it because they don't
[15:18] want politically to
[15:19] SPEAKER_00: admit they need to?
[15:20] Or is it because we don't have the kinds of reserves we need
[15:23] for a long-term issue?
[15:25] SPEAKER_01: Apparently, we're down to...
[15:28] SPEAKER_01: they did not replenish at all.
[15:29] So the Biden administration released oil from the reserves in
[15:34] 2022,
[15:36] which wasn't appropriate.
[15:37] SPEAKER_01: You know,
[15:37] there was a shock to the basically Russia invaded Ukraine and
[15:42] there were sanctions
[15:42] SPEAKER_01: and Russian oil exports were significantly reduced,
[15:46] SPEAKER_01: although by no means shut off.
[15:48] And it made sense that the actual price of oil went well above
[15:52] its current level in
[15:54] SPEAKER_01: the first impact of the Russia-Ukraine war.
[15:57] So it made sense to release the reserves to sort of put
[16:01] something of a lid on that price rise.
[16:04] SPEAKER_01: Last year, we should have been refilling.
[16:08] SPEAKER_01: price of oil was quite low.
[16:10] SPEAKER_01: If they should have been adding to reserve, they did not.
[16:13] SPEAKER_01: There are apparently some technical engineering issues as well.
[16:16] SPEAKER_01: And now I'm out of my breath completely,
[16:17] SPEAKER_01: but it's not that easy to,
[16:20] there were some technical issues involving using the strategic
[16:23] oil reserve,
[16:23] SPEAKER_01: but still,
[16:24] they should have been finding a way to stockpile more oil
[16:29] during when it was cheap.
[16:30] Instead,
[16:31] we had a lot of boasting about how cheap gas was and no attempt
[16:36] to refill the reserve.
[16:36] SPEAKER_01: And now all of a sudden,
[16:38] here we are and um it's that's not nothing something can be
[16:44] it's still there but it
[16:46] it's not enough to again the it's a global market the united
[16:51] states is around 20 of
[16:54] the world market so what we do can have some influence but a
[16:58] coordinated release by
[17:00] all of the by the g20 by the by the major economies can have
[17:06] some impact in
[17:07] blunting all of this,
[17:09] but only if it don't if the only if things normalize fairly
[17:13] quickly.
[17:14] SPEAKER_01: And that's very much what nobody knows.
[17:17] SPEAKER_00: Well,
[17:18] so when you think about future oil prices or where they are now
[17:22] and where they are
[17:22] SPEAKER_00: going,
[17:23] SPEAKER_00: what should we be looking for?
[17:25] SPEAKER_01: Well, yeah, well, it's really it's all about that straight.
[17:29] SPEAKER_01: I mean, if if
[17:31] SPEAKER_01: as it is now.
[17:32] SPEAKER_01: So 20% of world production is bottled up inside the street of Hormuz.
[17:41] SPEAKER_01: For the first few days, the countries there were still producing oil.
[17:48] SPEAKER_01: They were just filling up their storage.
[17:50] SPEAKER_01: And there were tankers.
[17:51] SPEAKER_01: There are tankers that are stuck inside the strait.
[17:54] So that if this had ended with some kind of settlement or
[18:00] regime change or something,
[18:02] SPEAKER_01: You know,
[18:02] SPEAKER_01: if that had happened a few days ago,
[18:05] then all of that oil would have been released and there would
[18:08] have been really
[18:08] SPEAKER_01: nothing would have happened to world supplies.
[18:11] Now countries are shutting down their oil production because
[18:13] they're out of storage.
[18:15] SPEAKER_01: So now we're in a situation where there will,
[18:17] SPEAKER_01: even if the strait is reopened,
[18:19] SPEAKER_01: we will still have a significant hit to global supply.
[18:22] SPEAKER_01: And the longer it goes on, the worse that gets.
[18:25] SPEAKER_01: So a lot gets gets.
[18:29] SPEAKER_01: They have to shut down production.
[18:30] SPEAKER_01: This is not like turning your shower faucet on or off.
[18:34] SPEAKER_01: Turning it back on takes a while.
[18:35] So we're now in a situation where we're going to start to have
[18:38] a significant hit
[18:39] over the course of the annual production of oil for the world
[18:42] as a whole will be
[18:43] SPEAKER_01: significantly cut because of all this.
[18:47] SPEAKER_01: If it goes on, if it's months long, then this is a really big deal.
[18:53] SPEAKER_01: I mean, I was going back to the 70s and looking at the
[18:57] The impact of first the Arab oil embargo in 73 and then the
[19:01] Iranian revolution in 79.
[19:04] And both of them reduced global oil production,
[19:06] but only by a few percent.
[19:08] SPEAKER_01: But that was enough to cause these huge price spikes.
[19:12] Now we have something which goes on de facto cuts world
[19:16] production by 20 percent.
[19:18] SPEAKER_01: So this is actually this kind of dwarfs.
[19:22] SPEAKER_01: the 70s oil shocks if it goes on.
[19:24] If it ends tomorrow,
[19:27] which doesn't seem likely,
[19:28] if it ends next week or two,
[19:31] it's not that bad.
[19:33] SPEAKER_01: But if it goes on longer than that, then it's a really big deal.
[19:37] SPEAKER_01: And in the short run,
[19:40] there are no good,
[19:41] it's not easy to switch away from oil in the short run.
[19:46] SPEAKER_01: We were talking before about gas mileage and so on.
[19:54] SPEAKER_01: worked on this ages ago.
[19:55] SPEAKER_01: But given time,
[19:59] you can use a lot less oil without even having to really change
[20:03] very much what your
[20:04] SPEAKER_01: lives are like.
[20:05] SPEAKER_01: But it's choices.
[20:06] SPEAKER_01: You have more fuel-efficient cars these days.
[20:08] SPEAKER_01: They could be hybrid cars.
[20:09] SPEAKER_01: They could be electric cars.
[20:10] SPEAKER_01: You can insulate.
[20:12] SPEAKER_01: There are all kinds of responses you can make
[20:15] given time but you know that's uh the stock of automobiles
[20:20] doesn't turn over i
[20:22] think they typically cars i don't know what the current is i
[20:25] think it's more than a
[20:25] decade a car normally remains in use um the everything else
[20:29] there so the kinds of
[20:31] choices that you can make that will reduce dependence on oil
[20:34] which is what you
[20:35] SPEAKER_01: would want to do if world oil supply is permanently
[20:38] crippled or at least damaged,
[20:41] are things that will take years to pan out.
[20:44] SPEAKER_01: And in the meantime,
[20:45] SPEAKER_01: the point of all that is that in the meantime,
[20:47] SPEAKER_01: because people need that oil and they bid for it,
[20:50] SPEAKER_01: that means the prices go extremely high.
[20:53] SPEAKER_01: So it's remarkably ugly as a scenario.
[21:00] SPEAKER_00: Well,
[21:01] SPEAKER_00: so now I want to ask you something that has bothered me since the 1970s,
[21:05] SPEAKER_00: since those gas lines.
[21:07] SPEAKER_00: And, you know, we were talking the other day, which I had forgotten.
[21:11] SPEAKER_00: I'm not sure I drove in those days.
[21:13] SPEAKER_00: I think I was too young.
[21:15] But the last number of your license plate being odd or even
[21:19] determined what days
[21:20] SPEAKER_00: you could buy gas,
[21:22] SPEAKER_00: which,
[21:22] SPEAKER_00: you know,
[21:22] SPEAKER_00: my children were like,
[21:23] SPEAKER_00: really?
[21:24] SPEAKER_00: And absolutely.
[21:26] SPEAKER_01: I remember that.
[21:27] I remember actually driving from Boston up to a conference in
[21:30] New Hampshire.
[21:30] I'm wondering if I'd be able to get back because I wasn't sure
[21:33] I'd be able to fill up my tank.
[21:35] SPEAKER_01: But yeah.
[21:36] SPEAKER_01: Because you had the wrong license plate.
[21:37] Well,
[21:37] it was just alternate numbers and just in general,
[21:40] even with the odd even.
[21:42] SPEAKER_01: I'm not sure that was enforced at the time,
[21:45] SPEAKER_01: but gas stations just put up signs saying,
[21:49] SPEAKER_01: sorry,
[21:49] SPEAKER_01: no gas,
[21:50] SPEAKER_01: we're out.
[21:50] SPEAKER_00: Yeah.
[21:51] SPEAKER_00: Oh, yeah.
[21:51] SPEAKER_00: Oh, I remember those.
[21:52] SPEAKER_00: So...
[21:55] To go back to where I began here with the idea of the
[22:01] government subsidizing fossil
[22:03] SPEAKER_00: fuels to the degree we do,
[22:04] SPEAKER_00: why,
[22:06] SPEAKER_00: you know,
[22:07] SPEAKER_00: Why aren't we either ceasing those subsidies,
[22:12] which I assume would slow the economy by making oil more
[22:17] expensive in the United
[22:18] SPEAKER_00: States,
[22:19] SPEAKER_00: or subsidizing renewables?
[22:21] Because I think I've read from the stuff that you do that it's
[22:24] actually cheaper
[22:25] SPEAKER_00: right now to produce energy based on renewables.
[22:28] SPEAKER_00: Right.
[22:29] SPEAKER_00: Yeah.
[22:30] SPEAKER_00: Can you walk me through that?
[22:31] Because this just it just doesn't make any sense to me that we
[22:34] haven't been doing
[22:34] SPEAKER_00: this since the 1970s,
[22:36] SPEAKER_00: which was,
[22:36] SPEAKER_00: of course,
[22:37] SPEAKER_00: a direction that Jimmy Carter started down and Ronald Reagan reversed.
[22:42] SPEAKER_01: Yeah.
[22:42] SPEAKER_01: So there's a couple of things going on here.
[22:44] SPEAKER_01: One is sure there's some.
[22:49] There's interest group politics that the oil industry has
[22:52] always had a lot of
[22:54] SPEAKER_01: clout,
[22:54] SPEAKER_01: not as much as it does now.
[22:56] SPEAKER_01: I mean,
[22:57] SPEAKER_01: now we're in a completely money driven political universe,
[22:59] but there's always been a lot of money flowing from fossil fuel
[23:04] companies to
[23:05] politicians to and in lots of ways in which the channels of
[23:12] influence for money.
[23:14] SPEAKER_01: are broad, some of them are subterranean, lots of stuff.
[23:18] SPEAKER_01: I mean,
[23:19] SPEAKER_01: sort of slight diversion,
[23:20] SPEAKER_01: but there was some years back,
[23:23] if you looked at people who were at alleged research claiming
[23:27] that climate change
[23:28] SPEAKER_01: wasn't real,
[23:28] SPEAKER_01: the question is,
[23:30] how many of the articles published to that effect were financed
[23:34] by fossil fuel
[23:36] SPEAKER_01: industry money?
[23:37] SPEAKER_01: And the answer basically was all of them.
[23:39] SPEAKER_01: So the whole, the climate of shaping of opinion, shaping of incentives.
[23:44] SPEAKER_01: So that's one thing.
[23:45] SPEAKER_01: So there's the cynical politics.
[23:47] SPEAKER_01: Then a slightly less cynical thing is that,
[23:50] SPEAKER_01: prices at the pump, gas prices are always a, they're highly visible.
[23:55] SPEAKER_01: They're politically salient.
[23:56] SPEAKER_01: If you want to get, want to get people mad, you raise the price of gas.
[24:02] If you want to pander to the public,
[24:05] you say,
[24:05] I want to make gasoline cheaper.
[24:08] SPEAKER_01: I mean,
[24:08] SPEAKER_01: the State of the Union,
[24:10] SPEAKER_01: which is just about two weeks ago,
[24:13] SPEAKER_01: Donald Trump was boasting about low gasoline prices.
[24:16] SPEAKER_01: And it's because that's constantly an applause line.
[24:20] SPEAKER_01: So it was difficult.
[24:22] SPEAKER_01: And it doesn't associate with that.
[24:25] SPEAKER_01: There's this kind of,
[24:27] SPEAKER_01: can I say,
[24:27] almost a kind of both sort of regular people and macho
[24:33] posturing aspect to being
[24:35] SPEAKER_01: pro-fossil fuel.
[24:36] SPEAKER_01: I mean,
[24:38] SPEAKER_01: Jimmy Carter,
[24:39] SPEAKER_01: you know,
[24:40] he looks better and better as a person and a president as the
[24:43] years go by.
[24:44] SPEAKER_01: But he did...
[24:45] When he showed up in his sweater and urged people to conserve
[24:49] energy and talked
[24:51] SPEAKER_01: about the moral equivalent of war,
[24:53] SPEAKER_01: which had the unfortunate acronym MEOW,
[24:56] SPEAKER_01: that was a lot of that back then.
[25:01] Hey,
[25:02] Council on Wage and Price Stability,
[25:04] which was in fact pronounced cow piss.
[25:06] SPEAKER_01: But anyway, the...
[25:08] SPEAKER_00: I never thought of that.
[25:10] SPEAKER_00: I'm sorry.
[25:10] SPEAKER_00: I never thought of that.
[25:13] SPEAKER_01: I was in those circles all the time.
[25:14] SPEAKER_01: But anyway, and then Ronald Reagan came along and said, we're America.
[25:19] SPEAKER_01: We're big.
[25:19] SPEAKER_01: We're strong.
[25:20] SPEAKER_01: And we're going to fill up.
[25:22] SPEAKER_01: We're going to drive big cars and have cheap gas.
[25:26] SPEAKER_01: And that always kind of appeals.
[25:29] SPEAKER_01: That's not just an American thing.
[25:31] SPEAKER_01: In France, whenever they try to
[25:34] SPEAKER_01: tax, carbon tax on fuels.
[25:38] The farmers go out there in their tractors and they block all
[25:41] the highways.
[25:42] SPEAKER_01: So this is something that happens everywhere.
[25:43] SPEAKER_01: And there's something special about fuel prices.
[25:49] SPEAKER_01: The renewables.
[25:51] SPEAKER_01: Now, renewables are just to have renewables replace oil.
[25:57] SPEAKER_01: That's a complex or it's, I don't mean complicated.
[26:02] SPEAKER_01: I mean, that it's a bunch of interactive things.
[26:04] It's both renewable electricity generation and electric cars
[26:09] and charging stations
[26:10] SPEAKER_01: and batteries.
[26:12] SPEAKER_01: And that's something that can be done.
[26:15] SPEAKER_01: In fact, it's happening.
[26:16] SPEAKER_01: And it's happening quickly in China.
[26:19] SPEAKER_01: It's starting to happen in Europe.
[26:23] SPEAKER_01: We had a policy under Biden to do that.
[26:26] And the,
[26:27] now renewables are definitely cheaper than,
[26:32] than coal for generating electricity.
[26:35] SPEAKER_01: We don't use a lot of oil to generate electricity,
[26:37] SPEAKER_01: although we do use natural gas is actually the big driver of that.
[26:40] And there's some margin in which that's a,
[26:43] that and oil are substitutes for each other.
[26:46] SPEAKER_01: So there's a something there, but it's, it's and that,
[26:53] SPEAKER_01: I have to say that's one of the great disappointments because we,
[26:56] SPEAKER_01: when the,
[26:57] SPEAKER_01: on the whole,
[26:57] SPEAKER_01: reducing dependence on fossil fuels,
[27:00] SPEAKER_01: reducing emissions,
[27:01] SPEAKER_01: moving to the sustainable economy,
[27:05] SPEAKER_01: The gods of technology have been our friends.
[27:08] SPEAKER_01: Circa 2015 or so,
[27:11] it suddenly became that this was not only the right thing to do
[27:15] for the environment
[27:17] SPEAKER_01: and the future of humanity,
[27:18] SPEAKER_01: but also actually economically it made sense.
[27:21] SPEAKER_01: And so we kind of hoped that by having a policy that was carrots,
[27:25] SPEAKER_01: not sticks,
[27:26] SPEAKER_01: that by subsidizing green energy,
[27:30] SPEAKER_01: by subsidizing the energy transition,
[27:32] that we could do this in a way that would not be politically
[27:34] objectionable,
[27:36] SPEAKER_01: that would in fact build a constituency for green energy.
[27:41] SPEAKER_01: I think that was starting to happen, but it wasn't enough.
[27:43] SPEAKER_01: And then it confronts this.
[27:46] Now I think we really get into the realm of not just interest
[27:49] group politics and
[27:50] SPEAKER_01: corruption and all that,
[27:50] SPEAKER_01: but also just psychology.
[27:52] that renewable energy is woke and the people currently running
[27:58] America just hate it.
[28:00] SPEAKER_01: And Donald Trump has this special thing against windmills.
[28:04] SPEAKER_01: And so we're,
[28:05] SPEAKER_01: I mean,
[28:06] SPEAKER_01: in some ways,
[28:07] SPEAKER_01: you know,
[28:09] the technology is now so good that renewables are continuing to
[28:13] progress despite
[28:14] SPEAKER_01: all of that,
[28:14] SPEAKER_01: but much more slowly than they would have.
[28:17] SPEAKER_01: And honestly,
[28:19] SPEAKER_01: Even if Trump hadn't done all it could to stall renewables,
[28:24] SPEAKER_01: it wouldn't have made much difference for where we are right now.
[28:27] SPEAKER_01: So,
[28:27] SPEAKER_01: you know,
[28:28] SPEAKER_01: that's a 10 years down the road we could be largely emancipated from oil,
[28:32] SPEAKER_01: but not,
[28:33] SPEAKER_01: there was no chance of that happening in time for this war.
[28:38] I could talk to you forever,
[28:40] but this was supposed to be just for people's lunch hours.
[28:44] SPEAKER_00: So we're going to have to wrap it there.
[28:46] SPEAKER_00: And I'm fascinated by this.
[28:50] SPEAKER_00: I think this has been just absolutely fascinating.
[28:54] SPEAKER_00: And I hope we can continue to do these.
[28:57] because we didn't touch financing and we didn't touch the
[29:05] dollar and bonds and
[29:07] what's happening in all of those markets and the recent CBO
[29:11] score of the national
[29:12] SPEAKER_00: debt.
[29:13] SPEAKER_00: And I hope that we can do this again, Paul.
[29:16] SPEAKER_00: This has been absolutely fascinating.
[29:18] Yeah.
[29:18] well thanks for having me and i have to say those are all kind
[29:21] of my favorite
[29:22] subjects so i love talking about dollar crises and all of that
[29:25] so let's get to it
[29:26] as we go forward i mean this is serious business but it's also
[29:29] interesting
[29:30] SPEAKER_00: Well,
[29:30] SPEAKER_00: so I'm laughing here because apparently other people are liking it too,
[29:34] SPEAKER_00: because one of the comments just said,
[29:36] SPEAKER_00: lunch is an hour,
[29:37] SPEAKER_00: you two.
[29:38] SPEAKER_00: It's not a half an hour, but we are scheduled for a half an hour.
[29:42] So we,
[29:43] at least for now,
[29:44] I think we should call it at that because that's what we
[29:46] advertised.
[29:47] SPEAKER_00: But let's do it again soon, all right?
[29:49] SPEAKER_01: Okay, let's talk soon.
[29:50] SPEAKER_01: Take care.
[29:51] SPEAKER_00: Thank you, everybody, for being here.
[29:52] SPEAKER_00: And yes, we will do this again.

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