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The U.S. and Iran reached a deal of sorts to open the Strait of Hormuz. That’s a huge relief for energy markets, and the task of getting ships moving through the Strait of Hormuz is already underway.

Yet the main issues President Trump and Israeli Prime Minister Benjamin Netanyahu cited for starting the war remain.

The Islamic Republic still has a large stockpile of near-bomb grade uranium. The ceasefire comes despite Iran retaining a formidable ballistic missile capability. The country remains a vocal enthusiast of allied militias in Lebanon (Hezbollah), Iraq (the Hashed al Shabi), Yemen (Houthis) and even Gaza (Hamas).

Iran agreed to discuss the first of these concerns — its nuclear program, as it did with the Obama administration — as part of a 60-day negotiations period while the cease fire remains in place. Israel, a primary instigator of the war, was not included in the negotiations and is deeply unhappy with the framework.

It’s really more an attempt by Trump and Iran’s leadership to try to reach an actual deal over the next 60 days — but with the strait open in the meantime. That’s something both sides need. The next 60 days, and well beyond, will likely prove to be a very tough slog, the threat ever-present of the conflict between Iran and Israel reigniting and throwing the Gulf back into turmoil

So we’ll see just what “open” means when applied to this new reality.

Iran has not backed off its claim of “control” over the passageway, or sworn off shutting it again in the future if it, or its regional allies, are attacked.

Trump says the strait won’t have a “toll.” But don’t be surprised if the new Hormuz reality includes a fee of some sort — environmental protection, reconstruction, maintenance, whatever it’s called — some of which goes to Iran.

Meanwhile, there’s the colossal task of re-starting the flow of stuff from the Gulf — crude oil, liquified natural gas, refined hydrocarbon products like naphtha, fertilizer, helium, etc. Although oil and gas prices fell sharply after the deal was announced, it will take many months for energy flows to return to pre-war levels, even longer in the case of liquified natural gas. Assuming it ever does.

Whatever “open” turns out to mean, the strait won’t be anything like the no-fees, low-risk, never-really-worry Strait of Hormuz that existed before the war in the minds of shippers, insurers, oil and gas producers and buyers around the world.

So the question we’ve been digging into over the past few posts remains critical: how will the crisis — the largest disruption to energy markets in history — shape the energy system over the long term?

Asia remains the place to watch.

As the first and hardest hit by the Hormuz shutdown — about 90% of shipments from the Persian Gulf go to Asia — Asia’s response, especially now that the strait has reopened, remains the key to understanding the shifting landscape.

First we looked at China. Its renewable energy capacity helped absorb the shock and leaves China poised to capitalize on it. We looked at Southeast Asia, the region hardest hit and least prepared. And we looked at North Asia — Japan and South Korea — where the crisis has raised big questions about the viability of their fossil-fuel based energy plans, even as they have weathered the crisis fairly well to date.

Now we look at India, returning to where this substack began five years ago. My thesis then — launching a six-month, 5,000-mile rail journey across the subcontinent — was that India is the single most important country for the energy transition.

This is more true today in the aftermath of the Persian Gulf crisis. India has the renewable energy resources, the financial and technological wherewithal, and the incentive to now shape the global energy transition in ways few countries, or even collections of countries such as the European Union, can do.

The closure of the strait underscored to Indian leaders — and regular Indians — the vulnerability India’s current energy policies impose on the country. India imports well over 80% of its crude oil, a large share of its fertilizer and virtually all of its natural gas.

When commodity prices soar — whether due to Russia’s invasion of Ukraine in 2022 or the conflict in the Gulf today — India pays through the nose.

The government has been forced to cut taxes on fuel use to help consumers, forgoing $12 billion in revenues. India burned through more than $174 billion to import oil and gas last year, the bulk of it from the Gulf. The country is the world’s second-largest net importer of oil, after China.

”We must curb our use of petrol and diesel,” Prime Minister Narendra Modi told a crowd of supporters recently.

Modi has urged Indians to use public transport and work at home to help stem oil and gas imports. He even implored them to avoid purchases of gold for weddings and celebrations — cultural bedrock in India — as a way for the country to preserve foreign exchange for energy purchases.

But Indians increasingly understand that the long-term route to reducing dependence on foreign imports, and building a sustainably growing economy, lies in growing the share of cheap domestic energy they use.

That means electrifying transportation, from the massive Indian railways to the motorcycles and rickshaws most Indians use to get around. And it means meeting nearly all new energy demand with renewable energy, especially solar power, now far and away the least expensive source of new electricity in the country, including compared to domestically mined coal.

When I first visited India in 2015, solar power was virtually non-existent. Over a decade, this has changed dramatically. Last year, solar power provided almost one-tenth of India’s electricity generation and the share is rising steadily with rapid growth in the amount of electricity India uses.

Meanwhile, coal-fired generation, still more than two-thirds of the country’s electricity, has leveled off. It actually fell last year, by 3%, for the first time in history, not counting the covid pandemic. This is happening even as the country builds more coal-fired plants and mines more coal to assure its energy security, as the facilities are actually used less and less.

Still India’s go-to domestic energy resource, coal may yet get a boost from the Gulf crisis as India boosts coal-fired generation during and in the aftermath of the strait closing.

Yet increasingly, the country is choosing to install batteries on a massive scale to soak up free solar power during the day and distribute it after the sun goes down. The price of these batteries, along with the cost of solar panels, has fallen stupendously in just the last few years, to the point where they provide electricity even cheaper than coal plants that have already been built and paid for in some cases.

Gautam Adani, whose corporate empire is closely aligned with the Modi government, is building the world’s largest battery outside of China to augment what’s planned to be the world’s largest solar facility in northern India.

Surfing the tsunami of cost declines in renewable technology — solar, batteries and electric vehicles — over the past decade, is achieving greater levels of electrification at far earlier levels of economic development than China, the current global clean-tech leader, the think tank Ember has pointed out.

This chart shows how India is turning to electricity far earlier in the development of its energy system than either the U.S. or China.

As the urgency of the Gulf crisis dovetails with the dirt-cheap prices for solar power, batteries and electric vehicles, the pace of this evolution is very likely to gain momentum in the world’s largest fast-growing economy.

That, in many ways, will not just move the needle of the global energy transition. It will also make India a critical model for the other emerging economies generating much of the world’s new energy demand.

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With the Iran conflict stuck in a shaky stalemate that’s left the Strait of Hormuz still largely closed, we’ve been looking at the region most impacted by the war beyond the Persian Gulf itself: Asia, where 90% of the energy resources produced in the Gulf head after crossing through the Strait of Hormuz.

Asia is where the near-term fallout from the crisis is hitting most directly, and where the long-term impacts on the global energy system are beginning to emerge.

In previous posts, we looked at China, better prepared for the energy crisis caused by the war than any country and now finding ways to take advantage of the crisis. We looked at Southeast Asia, where countries simply aren’t big or wealthy enough to meaningfully prepare for a crisis of this scale. They’ve declared energy emergencies and reacted in ways that will shift the global energy landscape in favor of China’s renewable energy technologies and away from globally traded fossil fuels over time.

This post looks at North Asia — Japan and South Korea. They are the biggest, most industrialized, most fossil fuel import dependent economies in Asia.

Japan and South Korea have been fully integrated into America’s global power structure every bit as much as Europe.

That’s made these nations — treaty allies the U.S. has promised to defend, hosts of massive, permanent U.S. military bases — critical far eastern outposts of the industrialized democratic world often referred to as the “West.”

Over the last half century, their economies have become especially enmeshed with America’s financial and economic might, both at home and abroad.

Their sophisticated manufacturing industries play key roles in an international chain of semiconductor production controlled by the United States. Japanese and South Korean companies also have enormous American manufacturing operations, from car factories in Tennessee and Kentucky to battery plants in Georgia and Michigan

Their strong U.S. ties have helped lull both countries into a profound dependence on Middle Eastern energy supplies. Just as the U.S. is treaty bound to defend them, America had also vowed to ensure the free flow of energy and other trade from the Persian Gulf through the Strait of Hormuz and on to any global destination.

The shattering of that assurance has left the two north Asian powers reeling.

Both Japan and South Korea are wealthy and well-provisioned enough to avoid the full-scale emergency measures seen across Southeast Asia to reduce energy use. But their dependence on shipped oil and gas has left them scrambling to secure oil and gas shipments from where ever they can get them, bidding up prices for oil and gas globally in the process.

Longer term, their challenges are further complicated by their own fraught histories and rocky relations with China, a rising global power that offers some of the most obvious ways to reduce dependence on fossil fuels from the Persian Gulf.

And dependent they are:

— Japan relies on imports of coal, oil and gas to meet more than 85% of its energy needs. More than 94% of the country’s crude oil and 11% of its natural gas came from the Middle East last year. Nearly all it passed through the Strait of Hormuz.

— South Korea imports 95% of the energy it uses. More than 70% of its oil comes from the Middle East, nearly all of it transiting the Strait of Hormuz. A fifth of South Korea’s natural gas passes through the strait.

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So dependent are they, in fact, that they have long struggled to articulate, or even envision, a path towards greater energy independence as opposed to simply attempting to diversify their dependence.

Nuclear power, their biggest domestic source of energy, has been a particularly rocky journey for Japan.

Nuclear reactors provided close to a third of the country’s electricity before the 2011 Fukushima Daiichi nuclear plant disaster and were slated to climb to 40%. After Fukushima, the entire nuclear industry shut down. Imports of Liquified Natural Gas (LNG) largely replaced it, aside from a significant but short-lived surge in solar power installations.

Throughout, the country’s large fleet of coal-fired generators have continued to produce electricity. They are also fed by shiploads of coal from abroad, mostly Indonesia and Australia. A few weeks into the Persian Gulf crisis, rules restricting coal use were temporarily relaxed so these plants could fill in for LNG that remains bottled up in the Gulf.

In the past decade, nuclear power has climbed back to account for a little over 10% of electricity generation in Japan. Reactors are coming back on line sporadically, the most recent being the Kashiwazaki-Kariwa nuclear facility that became the 15th reactor to restart last year.

Another 10 reactors are in the process of gaining approval to fire up again. But to make a real dent, Japan would have to start constructing an array of new plants, not simply fire up old ones. Right now, only three of those are under construction.

So far, Japan’s overall response to the Persian Gulf crisis has been to adjust how and where it gets its fossil fuels from, rather than diversify away from fossil fuels.

With the government’s encouragement, Japanese companies have invested more in American natural gas projects, from drilling and pipelines to facilities that turn gas into its highly chilled, shippable liquid. The government has also stepped up to provide $10 in financial support to help southeast Asia nations purchase U.S. and other oil and gas at higher prices to replace disrupted Persian Gulf supplies.

What Japanese leaders have not done that other countries increasingly seem to be doing is accelerating adoption of renewable energy.

Whether it’s easing adoption of electric vehicles or encouraging more renewables — both steps renewable energy advocates have touted — Japanese leaders and policy making bureaucrats still seem unconvinced.

That’s where the contrast with South Korea is noteworthy. South Korea has eased coal restrictions and moved to restart nuclear reactors like Japan. It’s adopted urgent measures to tamp down energy use like many countries in southeast Asia.

Increasingly, though, the country’s leadership is highlighting the crisis as a historic pivot point:

“The Republic of Korea as a whole must move very quickly toward renewable energy.” President Lee Mae Myung told a regional town hall meeting in March. “Our future will be at serious risk if we continue to rely on fossil fuels.”

A week later his cabinet unveiled an accelerated plan to put renewables at the center of a long-term energy overhaul. It includes boosting renewables to above 20% of power generation, transitioning from natural gas-fired heating to renewables.

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Reverberations continue from a Persian Gulf crisis whose instigators figured would last weeks but now drags into its fourth month.

Negotiations between Donald Trump and Iran’s leadership seem stalled. The Strait of Hormuz remains almost completely closed.

Asia has taken the biggest direct hit from the crisis, since so much of the region’s oil and natural gas supplies comes directly from the Persian Gulf. We looked at China in the last post. This one delves into Southeast Asia’s struggles.

But it’s critical to understand how the fallout in Asia is shifting the global energy landscape in ways that undermine U.S. power over the long haul, even if U.S. oil and gas companies are some of the biggest beneficieries right now.

China, as we saw, is the most important country best prepared to weather and ultimately capitalize on the crisis. The countries of Southeast Asia were among the most important countries that were least prepared.

These emerging economies are sprinkled from Malaysia and Singapore in the west to Indonesia to the East. In between, they include Vietnam, the Philippines and Thailand.

Their economies are growing fast and account for an outsized share of global energy demand growth. And they are deeply entrenched in the global supply chains of Europe, the U.S. and, increasingly, Chinese companies.

They largely depend on coal, the dirtiest of fossil fuels, to produce electricity. But they’re mostly keen to reduce that dependence in the coming decades. They plan to do that through some combination of importing natural gas in its liquified form, known as LNG, and building out renewable energies such as solar, wind, and geothermal, increasingly alongside storage from batteries.

They face the classic choice between fossil fuels and renewables. The Gulf crisis is tilting the balance towards renewables and batteries.

Why? Economics and energy security.

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Unlike China, with its massive crude stockpiles, or the U.S. with its own oil and gas reserves, these countries have basically one shock absorber have to protect their vulnerable poor and lower income middle classes. Their governments subsidize the difference between the import price of oil and gas and the price consumers pay.

To what extent has varied. In Indonesia, the government has, painfully, absorbed nearly all of the higher import costs. The government of the Philippines, on the other hand, declared an energy emergency and allowed retail prices to spike, effectively forcing a rationing of available supplies.

You can see in the chart below the range of responses. The yellow bar represents the price consumers paid before the Iran war. The blue bar is afterwards, as of early April. Where the two bars are the same, the government paid the difference between what it cost to import the products before and after the war. Where the bars diverge widely the governments passed the pain on to consumers along with emergency measures to force cutbacks in non-essential energy use.

This is the second major spike in the price of imported energy in the past five years, after the price shock when Russia invaded Ukraine in 2022. These countries are realizing that importing almost all of their energy is not sustainable; And unlike past crises — such as the oil shocks of the 1970s — there are real, economical alternatives in renewables. That’s especially true when tied, over the longer haul, with moving to electric vehicles — which essentially turn demand for oil-based fuels into demand for electricity that can come from renewables.

This transition isn’t easy, simple or fast. No doubt, when the Strait of Hormuz opens demand for imported oil and gas will snap back in these countries and elsewhere. More domestic coal could be burned to meet demand spikes from the rising use of air conditioning and growing manufacturing, including from new companies that assemble solar modules and electric vehicles.

Higher interest rates and rising costs, both direct results of the Gulf crisis, will challenge renewable energy projects. Virtually all of the investment in wind farms and solar power comes upfront, though they can be far less expensive than building natural gas or even coal plants over their full lifetime.

After they’re built, the fuel is free.

That’s what’s likely to make the difference going forward for these countries. They put off transitioning their energy sources when that meant paying more simply to address climate concerns by reducing emissions. Hard as it still may be, they’re far more likely to jump aboard a transition that brings greater energy security and lower import bills while restraining their coal use.

The Philippines, where the crisis quickly reached a boiling point as consumer energy prices skyrocketed, offers a view of what’s likely to play out elsewhere in the region.

Rooftop solar installations were already rising quickly before the Gulf crisis, doubling last year, according to Ember, a think tank that analyzes clean energy trends.

Now the most expensive electricity prices in the region are accelerating solar uptake even more. This chart shows that the Philippines has been the biggest importer of solar panels from China after the Netherlands, whose ports are the entry point for nearly all the panels shipped into Europe.

Of course, these are imports, too. But they are different than dependence on oil and gas, which need to arrive every day — at whatever price they cost that day — forever.

These solar panels begin saving consumers’ money as soon as they’re put up on rooftops — or even lawns and balconies — as we’ve seen recently in Pakistan, not to mention Germany. Even as they are welcome relief for their owners, they can also complicate and ultimately undermine the country’s overall electricity infrastructure, the sort of problems Pakistan’s has also faced.

The Philippines government is already introducing programs to spur more renewables while effectively integrating them into the grid. More of this will be needed.

But the change is underway.

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The standoff between President Trump and Iran’s leadership in the Persian Gulf remains a tense stalemate.

Trump is caught between his desire to end the war and his need to have something to show for it. Having survived the war’s first round — as a regime if not individually — Iran’s leadership sees no reason to give in.

So shipping traffic from the critical Strait of Hormuz remains virtually frozen, blocked from the inside by Iranian drones and mines and on the outside by the U.S. navy.

But shockwaves from the standoff continue to reverberate around the world.

Fuel shortages have hammered Asia and could spread to Europe in the coming weeks. An even more serious food crisis is brewing, as well, as the ingredients of much of the world’s fertilizer production remain bottled up inside the Gulf with planting seasons already underway. What once looked to many like a short and ultimately manageable conflict — an “excursion” Trump called it — has turned into an epic economic crisis for most of the world.

Especially Asia.

I explained in my last post how this combined with the 2022 Russian invasion of Ukraine have become for the rapidly developing economies of Asia what the historic 1970s oil shocks were for the rapidly developing economies of that era, the United States, Europe and Japan.

In this post and two more to follow, I want to dig deeper into the various parts of Asia to better understand the profound geopolitical and economic shifts the crisis is accelerating. These tectonic changes are reshaping the international energy landscape. They’ll undermine America’s dominant role if the U.S. doesn’t find a way to push beyond the global fossil fuel order it has built over the past century.

While all the tensions are focused on the Gulf, the critical country in this country is China. A decade ago, the Chinese economy would have been immediately crushed if its main source of oil had been throttled as it is now. Today, although the Chinese are the world’s largest importer of crude oil both overall and from the Gulf, the ongoing closure of the Strait of Hormuz presents a manageable challenge.

That’s partly because China purchased and stockpiled vast amounts of oil over the past few years. This was mostly to protect themselves against America imposing sanctions or cutting off their oil supplies, as the U.S. has repeatedly done to Russia, Iran, Venezuela, North Korea and, most recently, Cuba. Those reserves — enough to last close to a year — have provided a critical cushion during the Gulf war.

China remains heavily dependent on oil. But the auto industry shows how the government’s multi-decade effort to nurture an innovative, home-grown and globally competitive electric vehicle industry has significantly mitigated that dependence.

For two decades, the government subsidized dozens of electric carmakers and then set them against each other in competition. The share of EVs sold each year the rocketed upward, from 6% in 2020 to almost 55% last year, when 13 million electric vehicles were sold.

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The pace plateaued toward the end of last year and early this year after the government removed some of most powerful incentives for switching from gasoline-powered cars. But the share grew again in April, cracking 60%.

That’s because after all the subsidies and competition they’re less expensive, better products than conventional cars. Last year, 70% of the small electric vehicles sold cost less than comparable conventional cars in China. The IEA projects that nine of ten vehicles sold in China in 2035 will be electric.

As the number of EVs skyrockets — growing over 75% annually between 2020-2024 — the overall share of EVs on the road edges higher. From virtually none in 2020, in one in ten cars on the road in 2024 was electric. Last year it edged up to 13%.

That meant China consumed around 1 million fewer barrels of oil in 2025, about 15% less than if there had only been conventional vehicles on the roads.

That’s a huge chunk of avoided oil demand for a country that imported a record 11.5 million barrels per day. Those savings, roughly $110 million a day at current prices, grow with each EV sold. By 2035, EVs will displace 2.7 million barrels a day of oil consumption, the IEA predicts.

None of these trends stop at China’s shores.

Even before this year’s Persian Gulf energy crisis, Chinese EV makers were beginning to send their vehicles overseas, taking markets from Southeast Asia to Europe to Latin America by storm.

Sales last year jumped 30% in Europe, where more than one out of every four cars sold had a plug. Sales in Southeast Asia doubled with one in five vehicles sold being electric. Latin America saw sales grow 75%, led by Brazil and Mexico.

Overall, EV sales grew 20% globally last year, surpassing 20 million sold. More than 100 countries saw sales of electric cars grow, one third of them with EVs representing 10% or more of sales. About 60% of all the EVs sold globally last year were made by Chinese companies.

The charts below tell the story. On the left, the rising number of EV sales globally. On the right, the growing share of EVs compared to traditional vehicles.

With Chinese EV makers determined to grow exports and expand overseas production, the IEA projects that the global fleet of EVs will expand six-fold by 2035, reaching 510 million vehicles. And that’s not even counting the tens of million more electric motorcycles and three-wheeled rickshaws across the developing world.

All this was before the Persian Gulf crisis, which has rocked global energy markets like none before.

Almost half the oil used today is for road transport. The gains to be had from switching to EVs are glaringly obvious to both consumers — the savings from driving an EV ballooned by more than third in Europe — and import-dependent countries rapidly depleting their foreign currency reserves.

With few EV offerings, traditional U.S., European and Japanese carmakers are poorly positioned to compete, to say the least.

Even in the U.S., where Biden-administration EV incentives died with the arrival of the Trump administration and Chinese vehicles are blocked by tariffs, EVs still account for one in ten car sales. Fast expanding fleets of autonomous cars operated by Google’s Waymo and other companies in an increasing number of U.S. cities are entirely electric and always will be. Tesla just launched a highly competitive new battery powered electric heavy duty truck.

The ability of U.S., European and Japanese carmakers to offer competitive electric cars in global markets will be the single biggest factor defining their health in the coming decades. Increasingly, they’re finding that the only way to do that is produce those cars in China, or team up with Chinese companies to produce them in their increasingly underutilized factories at home.

I recently listened to Jim Farley, head of Ford Motors, deliver a message to a conference room full of oil industry executives in Houston, the seat of America’s oil and gas industry.

Farley, an American car guy to his bones, gushed over the design, features and performance of Chinese electric vehicles, which he has gone out of his way to drive and study extensively.

Ford, like other traditional automakers in the U.S., has backed off many of its most ambitious EV plans with the rollback of Biden administration incentives.

Yet he essentially told the oil executives that this must be tactical retreat. The company will have to remake itself around EVs over the long run. Because competing with Chinese EV makers — overseas but also inevitably at home — is, as he put it, “existential” for Ford.

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It’s hard to imagine a better situation for the U.S. oil and gas industry than what’s happening in the Persian Gulf today — or a worse one for the industry’s future.

Few observers expected the clampdown on shipping the war has wrought, perhaps least of all U.S. oil and gas companies.

Still, their timing couldn’t have been better.

American production of both commodities climbed to all-time highs over the decade since the U.S. began sending crude oil and LNG, or liquified natural gas, overseas.

Now the closure of the Strait of Hormuz has bottled up their biggest competitors — Qatar for LNG; Saudi Arabia, Kuwait, Iraq and the United Arab Emirates for oil.

The result for U.S. fossil fuel companies has been a confluence of additional sales at higher prices.

Trouble is, this is the second giant global fossil fuel shock in five years, after Russia’s invasion of Ukraine in 2022. This shock is even worse, not just because it’s the largest energy disruption ever, but also because it has shaken the foundation of global energy markets, the Persian Gulf.

Under American protection the gulf has been the world’s most reliable font of fossil fuels for a half century, critical to the economy of every country on earth.

Oil and gas will again flow from the gulf, perhaps even soon. Months will be needed to return to oil to full volumes, years for LNG. Prices will fall from their current war-induced heights. Over time, some new ways to get around the strait will be erected, via pipelines and new sources of supply.

But an aftertaste among buyers will linger, even more so than during the decades after the 1970s oil crises that reshaped oil demand globally. That’s because two pillars of global energy stability — the Organization of the Oil Exporting Countries (OPEC) for oil and Qatari LNG facilities — have fallen into question, more or less for good.

Decades-long LNG supply deals with Qatar were the industry gold standard before the war. They’ll no longer be considered rock-solid after shipments stopped when Iran shut the strait and attacked Qatari production facilities. Qatar has no feasible way to get its LNG to global markets other than the strait.

OPEC, whatever one thinks of cartels, has worked to stabilize the global oil market, striving to keep prices in a range that has worked over the years for both buyers and sellers. The UAE, arguably OPEC’s second most important member, unceremoniously abandoned the group.

Oil prices will be subject to more stomach-churning booms and busts going forward.

So both oil and gas will be riskier and more expensive.

In the near term, more coal might get burned. Japan, for example, loosened coal restrictions out of concern over LNG supplies. But so far, little evidence has emerged to indicate the dirtiest of fossil fuels will come roaring back, even in the short term.

What has jumped is renewable energy deployment. That’s thanks to the only industry with better timing than U.S. oil and gas: clean technology in China. Chinese manufacturers largely have the solution in hand after two decades building renewable energy at a furious pace at home.

They’re now exporting at a furious pace as the global energy crisis spurs action.

In March, the first full month after the Hormuz closure, 110 countries imported more solar technology from China — which dominates solar production globally — than in any of the six previous months, according to Ember, a think tank that tracks renewable energy. Fifty of those countries imported more solar than ever before.

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Three quarters of China’s March solar exports went to Asia and Africa, fast-growing regions heavily dependent on fossil fuel imports.

China’s battery exports surged in March, as well, up 44% over February, including especially large shipments to Europe, Australia and India. Many of these batteries were ordered before the war, as were some of the solar technologies.

But they’ve arrived at a critical moment, and point to the longer-term changes the Persian Gulf crisis will only accelerate.

Renewable energy costs have been falling for decades, with solar, wind and now batteries having plunged well over 90% in the past decade. Battery prices may have fallen as much as 30% in just the pasts 18 months.

Largescale batteries can store cost-free wind and solar energy when available and dispatch it later. Combinations of renewables and batteries are increasingly able to more cheaply match gas and coal’s ability to provide power when needed, especially in countries with plentiful sun and consistent night winds.

The graph below shows the falling overall cost of combined solar and battery installations that provide power 95% of the time in seven countries on every continent except Antarctica.

In these regions — many of which are hardest hit by the Hormuz closure, South and Southeast Asia, Africa, South America, Europe and the Middle East — these combined facilities are less expensive than fossil-fueled electricity plants, according to a new study by the International Renewable Energy Agency.

In some renewable-rich locales, replacement is already underway. In the first three months of the year across most of Australia, generation from solar, wind and especially batteries rose while coal- and gas-fired generation fell.

Similar dynamics are playing out in the U.S. state of California, which has also been adding batteries at an astonishing pace.

Abu Dhabi, the capital of the United Arab Emirates, is building a solar-plus-battery project that will provide more electricity than the emirate’s four nuclear reactors twenty-four-hours-a-day, every day.

Other places are catching on, especially after the start of the war.

Over the longer haul, consumers and companies will pare use of gasoline and diesel by purchasing electric vehicles. Countries with large oil imports will encourage them.

In India, where oil imports already threatened to spiral out of control, motorcycles and rickshaws have been going electric for some time. Autos are following suit, though the slow pace of building charging infrastructure will restrain the growth. Europeans are eyeing EVs with growing eagerness amid the current crisis. Ethiopia, Africa’s most populous country, banned imports of conventional combustion-engine cars last year while welcoming imports of electric vehicles. Dozens of other countries, particularly in the developing world, are keen to see EV sales expand.

China is ready with the least expensive, best quality EVs.

Exports were already soaring and will gain momentum. China’s leading car company, BYD, builds its own ships to deliver cars to foreign markets from Mexico to Europe, Southeast Asia to Chile. It already has factories overseas in Thailand and Uzbekistan, and is building plants in Indonesia, Brazil, Hungary and Turkey.

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The game of chicken between President Trump and Iranian rulers drags on largely unchanged. So let’s return to artificial intelligence, the other major force reshaping the global energy landscape before our eyes.

Before the UAE’s exit from OPEC pulled us back into the Persian Gulf, we were visiting the Texas oil patch to answer a question: What’s caused oil and gas companies to take up for the renewable energy industry?

Answer: they want electricity. Renewables are where new generation comes from these days in Texas, with about 90% of new electricity coming from solar and batteries over the past few years.

This post tackles a related riddle: Why, then, have tech companies — whose data centers crave electricity even more than the oil and gas industry — fallen for natural gas?

And even more importantly: Is this a fling or more an engagement?

The difference matters. A dalliance between data centers and natural gas might actually accelerate the energy transition globally. A lasting, exclusive relationship could slow it down.

But let’s back up.

Natural gas was not always the apple of the technology industry’s eye.

Gas may burn cleaner than coal, the dirtiest of the fossil fuels, but it does release significant emissions when burned. And uncombusted natural gas — methane that is released into the atmosphere both routinely and accidentally throughout the industry supply chain — is an even more powerful greenhouse gas, causing 80 times more atmospheric warming than carbon dioxide for the first two decades.

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Tech companies have long trumpeted renewables. They still do. But since artificial intelligence came along, natural gas is the belle of the ball.

AI has transformed the energy needs of companies like Alphabet’s Google, Microsoft, Meta, OpenAI and Anthropic. They’re desperate to build specialized AI data centers, which have voracious appetites for energy.

Electricity demand from these artificial intelligence factories could triple by the end of the decade. Once built, they traditionally need to operate around the clock, both to meet their customers’ computing needs and pay back their huge construction cost.

Like any business, tech giants usually look to the electricity grid for that power. But most grids, including the one in Texas, can’t provide that much electricity right away, and certainly not during peak periods like hot summer afternoons or cold winter nights when existing customers also need power.

Tech companies, locked into what they see as an existential race, don’t want to wait. They’ve decided to go around the grid, at least for now, setting up their own power plants.

That’s where gas suddenly looks great.

Gas generators can be fired up whenever to produce as much electricity as needed, as long as the gas continues to flow. Gas is plentiful in the U.S., especially in West Texas, almost ridiculously so. It rises from reservoirs there as a byproduct, existing alongside crude oil already being pumped from the ground. Often the gas is simply thrown away — “flared” off or just released into the atmosphere.

Attracted by plentiful, inexpensive gas today, data centers, once built, might pay more — far more — down the road if tech companies have no other viable energy alternatives.

But won’t they have other alternatives?

There are two ways this could happen, most likely in combination:

— Jilt gas for the grid, possibly sooner than later. The main obstacle to providing data centers grid access is dealing with acute periods of peak demand, literally a few hours each year when grids wouldn’t be able to provide enough power for everyone. The rest of the time, grids have plenty of extra power that generators are keen to sell, earning money for themselves and holding down costs for other customers.

— Build other power sources, asap. Although renewable energy doesn’t work as a sole power source for data centers, tech companies are integrating what they can and finding new ways to deploy batteries to increase the share of renewables that can be used. Longer term, several tech giants hope to build small nuclear plants that can generate power for their needs and to sell to the grid during periods of peak stress.

Both these approaches face challenges.

Faster grid access will depend on both data centers and the grid becoming more flexible, able to dial back demand temporarily and draw new supply of power from data centers themselves when needed. The data center industry and the Texas grid operator, The Electricity Reliability Council of Texas (ERCOT), are working on this.

Together, they’re likely to succeed, paving the way for many data centers to plug into the grid in the next few years.

Meanwhile, data centers will be pushing hard to implement first-of-a-kind innovations into their operations at a breakneck pace. These include deploying gigantic new batteries capable of cost effectively storing electricity for weeks or even months, and gaining regulatory approval for novel nuclear reactor designs.

Progress on both those fronts could demote gas from superstar to supporting role in data centers.

More demand for grid power, especially, would spur still more solar and battery installation on a state grid where this duo already proved to be inexpensive and effective. More power generation at data centers with grid access would also bolster the reliability of the grid and cap costs at the same time.

Between these two forces, the gas generation being built today becomes tomorrow’s backup power, to be used sparingly in a pinch, not as the backbone of the system.

Texas oil and gas producers were major backers of the state grid operator’s plan to build high-capacity electricity transmission lines out to West Texas (see map above). They envisioned these providing cheap, clean power to electrify their own operations, freeing up gas for sale and decarbonizing their operations.

Texas data centers may eventually benefit even more by similarly using the expanded grid to largely get off gas. That would make the great data center gas rush a fleeting affair.

Texas natural gas, of course, would still have one more great potential growth market: overseas exports via LNG, or liquified natural gas, the shippable form of natural gas.

As we’ll explore in my next post, LNG’s once-bright future is clouding over as the Persian Gulf war drags on — even as the war supercharges U.S. exports for now.

For U.S. LNG exporters this may prove to be too much of a good thing.

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An interruption to our regularly scheduled posting on artificial intelligence to return to the ructions in the Persian Gulf.

You may or may not have heard about the decision by the United Arab Emirates to leave OPEC, the once-vaunted Organization of the Oil Exporting Countries. This is a big deal and much detailed analysis is already out there, easily searchable.

I just want to note this move squares well with my view that the closure of the Strait of Hormuz will cause — now actually is causing — tectonic shifts in the global energy landscape.

These changes are complex and take time, but they are very likely to accelerate the transition away from fossil fuels over the long haul.

The leadership in Abu Dhabi, the capital of the UAE, seems to agree, even if they’re not outright saying so.

I won’t go through a full analysis of the UAE OPEC exit here, as there are plenty of nuances about OPEC and relations between the Gulf Arab states that are amply explained elsewhere and don’t have much to do with energy transition.

Basically, the UAE’s decision has to do with long-simmering tensions with Saudi Arabia and with OPEC generally over limits on Abu Dhabi’s crude exports under the group’s quotas.

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Abu Dhabi has long wanted to export more oil, and has spent a lot of money building the capacity to do so. OPEC consistently resisted that. Until the war shut down most oil production across the Gulf, Abu Dhabi was basically ignoring the organization (as its members routinely do) and exporting what it could.

The crisis opened the door to exit. Free of OPEC, Abu Dhabi can export to the hilt not only when the strait reopens but, more importantly, over the long term, as well.

The idea is to get the reserves out of the ground and sold sooner rather than later. Use the money now to prepare for the later, when demand for oil begins falling.

That sort of thinking is exactly the opposite of OPEC thinking, which is that producers can always hold oil back until prices rise. Just keep it in the ground. If they don’t buy now, they’ll have to buy later.

Afterall, what choice do buyers really have to oil?

OPEC still officially believes that, projecting that demand for oil will grow steadily to at least 2050 and beyond.

The UAE, no slouch itself in the renewable energy business, is clearly not so sure — and using the Gulf war as a chance to get ready for oil demand to peak far earlier than OPEC is prepared or able to recognize.

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Call it the Lone Star State swap.

Oil and gas titans once deeply skeptical of renewable energy and technology giants once determined to move away from fossil fuels have effectively traded places.

ExxonMobil, Chevron and dozens of smaller drillers have been racing to electrify the extraction and pipeline operations, including going out of their way to thwart a move in the legislature aimed at hobbling the state’s renewable energy industry.

Meanwhile, tech giants, including Alphabet Inc.’s Google, Meta Platforms, Microsoft Corp and OpenAI, are rushing to adopt natural gas as their go-to fuel for the massive data centers needed to win the artificial intelligence race.

For over a decade now, I’ve watched the Texas energy story play out along two very separate, competing tracks.

The oil and gas industry flourished by drilling wells in a cascade of innovative new ways. It has pulled fossil fuels from reservoirs previously considered unreachable. As the saying goes, never doubt the ingenuity of a Texas oilman.

But the state’s renewable energy industry has proven no less resourceful. First, fleets of wind turbines sprung up across the state’s blustery expanses — an effort driven by Republican governors George W. Bush and Rick Perry and a Republican legislature, by the way. Next came giant solar arrays to leverage the state’s bountiful sunshine.

Solar is still growing fast, but these days, batteries are proliferating alongside to store low-cost renewable power for use when the sun isn’t shining and wind isn’t blowing.

Last year, renewables and battery storage met more than 90% of the new electricity demand added to the state’s grid. Through this year’s first quarter, solar and wind provided 44% of the state’s overall electricity, compared to 45% for coal and gas.

To drive through West Texas today — as I’ve done twice this year so far — is to navigate vistas pocked equally by oil derricks and wind turbines, gas flares and solar farms. All visible all at once in some panoramas — oil pumps nodding, fracking rigs rising, wind turbines spinning, solar panels splayed out glinting in the hot Texas sun.

For hard-core clean energy advocates and fossil fuel stalwarts, these two industries may seem to be locked in existential competition. That may be true over the long haul. But these days, as energy demand in the state skyrockets, the two industries can just as easily be caught cooperating.

“Hey, American Energy Dominance. ‘We got your back,’” a big solar panel manufacturer in the state proclaims on its web site, alongside a map of the Permian Basin, one of the biggest fonts of fossil fuels on the planet.

The company, T1 Solar, notes that 88% of electricity flowing into the state grid from that part of Texas comes from renewables. Drilling firms that tap into this grid save $1 per barrel of oil equivalent, it adds. That’s huge when you consider the Permian produced 11.5 million barrels of oil equivalent per day last year.

Even more eyebrow-raising, the fossil fuel industry rode to the rescue of renewables last year when anti-renewable politicians tried to hamstring wind and solar generation. The state’s powerful oil and gas lobby flexed its political muscle to make sure that didn’t happen.

Why? They need more electricity.

Renewables are where new electricity mostly comes from in Texas these days.

This shift from competition to “coopetition” is a sure sign we’ve crossed into a messy middle stage of the energy transition, one scrambled and accelerated further by war in the Persian Gulf. Wind, solar and batteries are transforming systems long dominated by fossil fuels, which are responding by reshaping the system further.

Oil and gas companies are obviously not giving up on fossil fuels. Quite the opposite. They see solar, wind and batteries as useful to cut their operating costs, allowing them to produce even more oil and gas with fewer greenhouse gas emissions per barrel. This makes their oil and gas more palatable to overseas buyers.

Technology giants, for their part, have not renounced oft-stated commitments to decarbonize, even as their greenhouse gas emissions climb steadily higher. They argue combusting natural gas is unavoidable right now in order to develop artificial intelligence that will eventually help solve the world’s climate challenge.

But their separate paths have brought them together, at least for now.

The oil and gas industry’s shifting attitude toward renewables in Texas flows directly from its own success. Starting a decade ago, the new ways drilling and extracting oil and gas revived a long-moribund U.S. fossil fuel industry. U.S. production, which had been declining for decades, reversed and soared to record levels.

So much so it opened the door to exporting oil and gas for the first time in almost a century. Oil began shipping into global markets when the Obama administration signed off on exports in 2015.

Natural gas required more than government approval to reach overseas buyers. Huge plants were built to chill and pressurize the gas into a transportable form — liquified natural gas, or LNG — that special, bulbous tankers could deliver to overseas.

Global oil and gas markets, however, are brutally competitive. Middle East oil kingdoms, especially, enjoy production costs far lower than U.S. producers. Meanwhile, some buyers — particularly in the European Union — have become increasingly concerned about greenhouse gasses emitted during the extraction, transport and processing of these fossil fuels, especially LNG.

For decades, the oil and gas industry deployed diesel engines to power the hydraulic drills, pumps, compressors and separators used to carry out that extraction, push the product through pipelines and perform that processing.

About a decade ago, U.S. oil and gas companies began switching from diesel to electricity to power their own operations. This has been especially true in West Texas, the heart of America’s oil patch and a major repository of natural gas.

“We’re trying to electrify all of our equipment,” ConocoPhillips CEO Ryan Lance told a group of industry executives last year.

To meet its own carbon emissions reduction targets, the U.S. industry needs to switch 90% of its energy use over to electricity, according to one study.

The shift, which has now begun to get real traction, implies electricity demand from oil and gas companies in West Texas will increase four-fold to 17.2 gigawatts from 4.2 gigawatts in the decade from 2022 to 2032, concluded a study that six oil and gas companies commissioned from consultant S&P Global.

Oil and gas service providers Halliburton and SLB (formerly Schlumberger), which provide and operate equipment for drilling and extraction, have made electrifying the industry a mainstay of their offerings to oil and gas companies.

Awash in oil and natural gas, the challenge, ironically, has been finding electricity.

Some companies, such as Occidental Petroleum Corp., Chevron and ExxonMobil, have built their own renewable energy, usually solar arrays along with batteries. But they and others mostly have relied upon generators running on trucked-in diesel fuel or the natural gas that co-exists with oil deposits and rises up alongside the oil.

Historically — and even today — natural gas largely has gone to waste in the Permian Basin, where it accompanies oil below ground and comes to the surface whether it’s wanted or not. Mostly not, which is why Permian gas is often burned off — a practice called controlled flaring — or even vented directly into the atmosphere, where it acts as an especially pernicious greenhouse gas.

But the technology industry has emerged as a buyer of the cheap gas.

At first, this meant the occasional cryptocurrency mining operation, which deploy cheap electricity to power computers that create bitcoin. A corporate upstart, Crusoe, even dedicated itself to building electricity generation plants to snap up the region’s gas to provide electricity to bitcoin miners flocking to the state.

Soon, however, another class of technology companies arrived with an even larger appetite for electricity: the massive technology companies whose breakthroughs with artificial intelligence were stoking a race that could be largely decided by which company can get its hands on energy fastest.

It was a fortuitous convergence, one that would quickly snowball into a stampede of data centers in to the state, many of them looking not to choose between West Texas’ smorgasbord of energy options, but rather to combine them.

In the next post, we’ll look at what that means for energy in Texas and beyond.

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The global energy system is in the midst of a once-in-a-century — maybe once-in-a-millenium — transformation.

I outlined what’s driving this in my Looking Back, Looking Ahead posts last year, which explained why the energy transition won’t stop, or even slow, despite climate change increasingly taking a back seat in public concern and government policy.

This year two huge forces have emerged to reinforce the energy transition. One represents what we want, the other what we fear. Together they have triggered an earthquake, shifting tectonic plates that were already under growing pressure.

What we want — what humans always want — is technology that improves our lives and makes us strong. What we fear — and have always feared — is economic uncertainty upending our livelihoods and the chaos of war threatening our societies.

The explosion of artificial intelligence — the voraciously energy hungry technology of our time — and the eruption of war in the Persian Gulf — causing the largest disruption of energy flows in the fossil fuel era — are clarifying events that will reinforce the transformation of the energy system over time.

Together, they are pushing the world decisively into the messy middle of the energy transition. This phase is where oil, natural gas, and even some coal remain critical but the eventual endgame is clear: a global energy system powered mostly by sustainable, renewable energy sources, not fossil fuels.

Neither artificial intelligence or the underlying tensions involving Iran originated in the past few months. Both have been building for decades, gaining steam in recent years. But they have burst forth, separately, into massive global concerns this year in ways that are becoming intertwined and mutually reinforcing for the energy transition.

I started this year with a five-city data center tour — Memphis, Tennessee; Richland Parish Louisiana; Abilene, Texas; and two locals in the Texas Panhandle.

Recently, I’ve focused on how the war in the Persian Gulf will drive the uptake of renewable energy in the same way that the oil crises of the 1970s was a powerful driver of energy efficiency globally. Those posts are here, here, here and here.

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I now want to toggle back to how the artificial intelligence race is rapidly altering the global energy calculus, starting with the United States.

The epicenter of this change is the state of Texas, the starting point for so much in the history of energy. As ever, influence ripples out from there, ultimately meeting the broader impacts of the war in Iran and closure of the Strait of Hormuz.

The focus of immediate and urgent concern in the strait has been the flow of crude oil. But the larger fallout may be the impact on the use of natural gas.

As I’ll lay out, the use of natural gas has expanded dramatically over the past decade. This was first due to the growth in seaborne trade of LNG — the liquified, shippable form of natural gas. More recently, gas has become the fuel of choice to power data centers, the “factories” that produce artificial intelligence.

But the push ahead for more AI and the pull back into energy security spurred by the Gulf war will, over time, diminish the appeal of natural gas — whether piped to data centers or shipped as LNG. Coal and oil will be poor substitutes over the long haul.

None of this means these three primary fossil fuels are headed for an immediate, steep decline. Not in a world of rapidly growing energy demand.

But the immediate edge now goes to quick, inexpensive alternatives — particularly solar combined with batteries, the cheapest, fastest new source of incremental energy available today. Later, the advantage will go to technologies less vulnerable to global disruption —- wind, nuclear, geothermal and, perhaps ultimately, fusion.

Right now, all of these sustainable technologies are getting a pronounced boost from the AI build-out and the Persian Gulf conflict — even though both have also triggered a short-term scramble for fossil fuels, especially natural gas and coal.

In my next few posts I’ll explain how these forces are reinforcing the transformation of the energy system — starting in some of the richest and most productive oil and natural gas fields in the world, the Permian Basin in Texas.

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With negotiations at a standstill, the war in Iran is now down to a game of chicken.

The current course is catastrophic for both sides — but on different time frames.

Here’s the situation: Iran is blocking shipments it opposes from passing through the all-important Strait of Hormuz while allowing shipments it favors. The U.S. is vowing to stop shipments Iran favors and allows to pass.

The result is the strait remains shut, pain all around. The world gets little oil from the Gulf, from which a fifth of all crude used to flow. Iran gets no oil revenue, choking off the regime’s biggest source of cash.

The question now is who blinks first, Donald Trump or Iran’s leaders. It mostly boils down to which side is better at holding off domestic pressure.

For Trump, that consists of convincing American voters — especially Republican and independent voters — the pain of much higher prices is worth the potential gain of bringing the Iranian regime to its knees, whenever that might happen.

For Iran’s ever-more-hardline leadership, it means maintaining the regime’s repression machine against its own population despite dwindling resources.

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Unfortunately for Trump and the Iranian people, in the short term — weeks, months, perhaps a year or more — the advantage lies squarely with the Iranian leadership. There has been no appreciable open dissent since the start of the war. As long as the regime retains total control over even shrinking revenues, it can continue funding its own base, including its brutal and effective surveillance and security services.

Despite the beating it’s taken, Iran’s military can still also restart, even escalate, the war instantly by targeting energy infrastructure in the Arab Gulf states, especially the United Arab Emirates and Saudi Arabia.

That would send global oil prices soaring again by hampering oil production in the region for years. The U.S. and Gulf states would have trouble responding without far riskier escalations like wholesale bombing of civilian infrastructure in Iran or capturing and holding Iranian territory with ground troops.

The longer it goes on, though, the harder it gets for Iran’s regime.

Over several months to several years, a successful blockade on Iranian oil exports could well bring unilateral regime concessions or its negotiators back to the table with a new flexibility. To be sure, they won’t have forgotten their basic goals of preserving the potential to rebuild their nuclear program while getting sanctions removed. But they’ll increasingly see the advantages of a tactical retreat as their ability to hold on to power wanes.

The problem for the U.S. strategy — which amounts to oil for all or oil for none — is it threatens to dramatically raise oil prices on everyone in the world pretty much right now. That very much includes American voters.

Republican politicians in the U.S. who desperately need support from independent voters in midterm elections a few short months away are already agitated. Those voters are deeply upset by a war Trump didn’t bother to explain to them, much less seek their approval to wage.

Indeed, even some Trump supporters have opposed the war or have vocally soured on it as it drags on. Trump’s MAGA voters are hard enough to lure to the polls when Trump is not himself running; they’re now even less likely to turn out.

If oil prices soar higher as shipments dry up, gasoline prices push towards $5 a gallon and air fares skyrocket further during the summer vacation season in America, Republicans could face a choice of turning on Trump or going down in his name.

Trump’s inner circle got a taste of humble pie over the weekend when their Hungarian hero Victor Orbán was trounced in elections. This despite Trump extolling Orbán’s reelection bid on social media and Vice President J.D. Vance traveling to Hungary to stump with him in the closing days of the campaign.

That hasn’t stopped the president from rolling the dice again to see if he can’t get the Iranian regime to accept his logic.

He may have to stay in the game for some time for that to happen.

Trump’s past forays into the gambling business have not ended well. He’ll need a helluva lucky streak for this one to go better.

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Even as he bellows at Iranian leaders to open the Strait of Hormuz, Donald Trump continues to talk about ending the conflict without freeing the critical waterway from Iran’s control.

That’s an earthquake in geopolitics, and marks an important moment in the energy transition.

Trump’s message gets clearer every day: no longer is the world’s most important fossil-fuel throughway important enough for the world’s most powerful nation to put its navy on the line to keep open. What’s been known for nearly a half century as the Carter Doctrine — President Jimmy Carter’s declaration in 1980 that the U.S. would use military force to keep the strait open — is on life support.

Leaving the strait under Iran’s control would effectively render that commitment mute — opening a new era of uncertainty for the world’s largest single source of oil and gas.

That alone hardly puts the fossil fuel era in the rear view mirror, of course. Coal, oil and, especially, natural gas, will be used well into the future. That’s especially true for the U.S., which has a diverse economy awash in domestic oil, gas and coal resources. For the rest of the world, fossil fuels will continue to come from the Gulf.

Still, a U.S. decision to walk away from assuring the strait is free and open to all would be among the clearest signs yet the long twilight of the fossil fuel era is upon us. It would mark the end of a century and a half when control over access to the world’s biggest source of hydrocarbons has been the sine qua non of superpower dominance.

Imperial Britain controlled the strait through the early years of oil discovery to 1971, when it abandoned the Gulf as its once globe-spanning empire slowly unraveled. The U.S. stepped in. Nine years and two Middle East oil crises later, Carter solidified the U.S. role as guarantor of global energy supplies with his 1980 declaration.

Should Washington bail, do not expect Beijing to step in militarily. As the world’s second largest economy, far and away the largest oil importer and the biggest naval power after the U.S., it might seem the logical inheritor of this geopolitical crown.

But for all its reliance on Gulf oil and gas, China doesn’t see the strait as worth putting the full force of its military on the line to defend. Its goal is to reduce dependence on imported fossil fuels.

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If Israeli and U.S. attacks stop with Iran still in control of the shipping lane, some configuration of countries — likely including the U.S. — will step up and negotiate an opening of the strait with the Iranian regime.

This won’t be simple, and presents an existential threat to Arab Gulf monarchies. We’ve looked at how their future depends on using their oil and gas wealth to diversify their economies in freewheeling trade and investment hubs.

U.S. and Israeli bombing of Iran has been sustained and devastating, but as we’ve seen, so far not enough to finish off the Iranian regime. The regime’s new leaders are harder line. An 86-year-old Ayatollah Khamenei has been replaced by his son, a 56-year-old Ayatollah Khamenei. Perhaps this interation of the regime will prove to be more brittle. We’ll see how the new bosses fare with the long-suffering Iranian people once the fighting stops and they try to explain what just happened.

But when it comes to dealing with the outside world, the regime still holds two strong cards: a stockpile of near-bomb-grade nuclear fuel and control over the strait.

It views the combination as a path out of the current crisis.

It likely sees a nuclear bomb as its best bet for long term security, a la North Korea. Regime leaders won’t give it up.

Israel won’t accept that. Nor very likely will the U.S.

Bombings, assassinations, attempts to overthrow the regime will continue. Until the regime builds a nuclear weapon, its main tool to counter such attacks will remain implicit control over the strait. It is already institutionalizing this control, picking and choosing which ships can pass and charging a toll for the privilege.

All this is a recipe for a chronically volatile Gulf — one with higher shipping and insurance costs, persistently higher prices, and the constant threat of violent interruption.

All will provide ongoing incentives for importing countries to not only diversify where they get their oil and gas from, but also seek durable alternatives.

This will accelerate the transformation of energy systems — converting transportation and heating systems to electricity and building secure domestic capacity to provide that electricity. At first, more coal will be burned, especially in Asia. But the combination of renewables and batteries — already growing fast — is now cheaper and more sustainable than coal in most places.

These will gain even more momentum.

A global order underpinned by free and easy access to hydrocarbons everywhere and at all times is coming to an end.

We have already already entered a complicated middle stage of the energy transition, one marked confusing cross-currents and seeming contradictions.

What’s clear is that security will become paramount.

A chronically turbulent Gulf under the thumb of Iran will only underscore the insecurity of the strait.

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Decision time has come for Donald Trump in the three-way war between Israel and the U.S. and Iran. Whichever door he chooses will alter global power politics far beyond the Gulf, substantially and permanently.

He may escalate, ordering the U.S. military to forcibly open the Strait of Hormuz and overthrow the Iranian regime with some form of an invasion. Or he may seek calm by ending the fighting — at least by the U.S. — and hope oil flows and markets settle.

The first choice carries a high risk of large-scale casualties at worst, U.S. military vessels navigating mines and fending off attacks at best. But the biggest risk is that none of this works. Less, not more, oil may reach global markets in the end — leading to much, much higher energy prices for far longer, despite the effort.

The second choice, on the other hand, requires serving up some very thin victory gruel: the Islamic regime still in charge, still with a large stockpile of nearly bomb-grade nuclear fuel, still menacing the most important energy corridor in the world. The strait may open, but not by dint of U.S. power but rather a lack of it.

Either of these two paths leads to a transformation of the security and energy landscape more profound even than the energy crises of the 1970s, the last time anything close to this magnitude took place.

Of course, other outcomes can’t be completely ruled out.

The Iranian regime could deplete its fire power over the next few weeks and give up, perhaps even collapse from within. That would also be a major change for the region, though not one that would fundamentally change the world.

The U.S., Israel and Arab Gulf states could run so short interceptors and air defenses that they’re overwhelmed even by Iran’s much-diminished offensive capacity and fracture into incoherent squabbling. This wouldn’t alter global realities, either, since coordination between these three is far less than complete and effective as it stands.

Most likely, though, where the conflict goes now lies with Trump.

Time is not on his side.

So far, he’s been fairly successful at keeping headline oil prices from skyrocketing to unbearable levels, at least in the U.S.. Most of the rest of the world is suffering far more, especially poor energy importers or those with little to no cushion — countries like Bangladesh, Pakistan, Vietnam, Thailand and India.

Enough oil is flowing, by hook and by crook, through workarounds to the Hormuz Strait and releases of stockpiled crude supplies, to keep a lid on prices — especially the all-important U.S. benchmark, West Texas Intermediate grade oil. Americans aren’t feeling too much direct pain yet.

Beneath the surface, though, the prices of specific products derived from oil — jet fuel, diesel for factories and logistics, maritime fuel for shipping everything needed for everything — are reaching much higher price levels.

The volume of oil reaching global markets isn’t close to enough to replace what’s blocked from leaving through the Strait of Hormuz. Markets will inexorably move from prices set by best guesses for when the conflict will end to a scramble for actual oil.

This will push prices far higher. High enough that consumers — drivers, flyers, factories — are forced to cut back, a lot. What oil continues to be purchased will prove very dear, perhaps $175 a barrel (West Texas Intermediate crossed $100 per barrel for the first yesterday since the crisis started), perhaps $200 a barrel.

Conceivably higher.

This would cause a world-wide recession.

So Trump will have to do something soon — either escalate or climb down.

Escalation consists of pushing U.S. military ships, starting with mine sweepers, through the Strait. Until they, at least, are able to pass unmolested, no commercial ships will even contemplate making the passage without Iranian permission.

To assure they pass unmolested, U.S. ground troops may well be needed. At the very least, Iran’s Kharg Island would probably be taken. This could give the U.S. control over Iran’s ability to export much of its own oil, like holding a hostage. At most, more troops would be needed to gain control over Iran’s mountainous coastal region along the Strait — in other words, a full-scale invasion force.

In either case, U.S. troops would be highly vulnerable.

An even taller order: destroying or removing a cache of highly enriched uranium that, if you’re the regime, now appears to be the best long-term defense. The country’s nuclear program has been all but destroyed by Israeli and U.S. bombings. But this fuel could be fairly quickly turned into several nuclear bombs if Iran retains, or rebuilds, even a limited uranium processing capacity.

That’s all they may need to prevent more attacks if North Korea is any a guide.

But finding and removing or destroying all this nuclear material while the regime retains control of the country is something approaching a mission impossible.

And even if all of these challenges could somehow be met — Kharg Island taken, the Strait reopened by force, nuclear fuel dealt with — there’s no guarantee the whole risky operation would accomplish its goal of getting more oil on the market.

The Iranian regime has made clear any of these moves would be met with uninhibited attacks on oil and gas infrastructure around the region. The Revolutionary Guard has already proved capable of this, launching selective but damaging attacks on oil and gas installations in Qatar, Saudi Arabia, the United Arab Emirates and Oman.

Houthi fighters in Yemen — closely aligned with, and trained by, Iran — reared their heads over the weekend with what I would call a shot over the U.S. bow with an attack on Israel. The Houthis have already shown they can shut down shipping lanes on the Red Sea, including the narrow Bab al-Mandeb strait, through which most of Saudi Arabia’s oil is now transiting with the Gulf of Hormuz closed.

They are capable of directly hitting Saudi oil installations.

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In other words, combined retaliation by Iran and their Houthi allies might take as much or more oil off the international market than any U.S. military operation in the Hormuz strait would bring back.

Iran’s regime could wind up with an effective veto — directly and via the Houthis — over any and all crude oil and gas shipments through either channel — not to mention the whole array of other essential goods that traverse both of these sea lanes.

Faced with all this, Trump may well climb down.

In the short term, the down sides could be downplayed and mitigated, at least rhetorically in the short term. Once attacks on Iran stopped, Europe and perhaps even eventually China could be pulled into an internationalized effort to open the strait that Iran might actually go along with if involved.

The regime won’t allow its enriched uranium to leave the country. But it’s not impossible to imagine the regime at some point allowing inspectors in to account and inspect its remaining nuclear material.

Loosening of sanctions — the inevitable Iranian quid pro quo demand — would be a hard pill for Washington’s Iran hawks to swallow to say the least, but perhaps less so for Trump given the alternatives.

What he would get is immediate relief. Oil and gas flowing. Prices falling.

By the time the dust settles the new reality might begin to feel normal.

But in this scenario, too, the region’s underlying power balance would be dramatically changed: the total U.S. military dominance over the Middle East will have wavered for the first time since it was first established during the Suez crisis in 1956 and bolstered during Britain’s 1971 withdrawal from the Gulf.

With Iran’s defenses weakened and the U.S. pulling back, Israel would surely feel compelled to return to bombing Iran whenever necessary, the so-called mowing of the grass it has subjected Lebanon and Gaza to over the past two decades.

To try to fend them off — or at least assure some pressure could be brought to bear upon them from the rest of the world — Iran would maintain at least a veto on shipping in the Strait of Hormuz and through the Bab al-Mandeb.

This would be entirely unacceptable to the Arab Gulf states, whose prospects depend almost entirely on unfettered access to global markets for their oil and gas.

They’ve traditionally hosted U.S. bases to assure that unfettered access. But either door Trump chooses, that’s not likely to be the outcome.

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America’s largest conference of oil and gas executives doesn’t get planned overnight. A global energy crisis, on the other hand, can unfold in a heartbeat, particularly when it involves the most critical chokepoint for oil and gas flows on the planet.

This week I’m attending CERAWeek by S&P Global in America’s energy capital of Houston. The event is the oil and gas industry’s biggest annual corporate jamboree.

This year executives and analysts have found themselves caught between two realities: one that existed when most of the planning for the event took place through the past year, another rapidly setting in as the scale, implications, and intractability of the current crisis in the Strait of Hormuz becomes clearer.

It’s created an odd vibe here at Houston’s largest conference and convention center.

One minute attendees are gathering in ornate ballrooms to applaud America’s recent rags to riches energy journey. The industry worked hard to deliver this and has every reason to celebrate. Alarmingly dependent on energy imports a decade ago, the U.S. is now a powerhouse exporter of oil and gas.

In a session on drilling and production prospects, executives gushed over the innovation and ingenuity that have coaxed ever more hydrocarbons not from traditional fluid reservoirs but from solid rock in places like Texas’ Permian Basin.

They saw no reason the growth couldn’t continue indefinitely, despite less can-do conventional assessments that U.S. crude production has probably peaked, or soon will.

At an evening reception, Secretary of Energy Chris Wright — who participated in that revolution as founder of an oil services business — raised a glass to a pioneering U.S. company.

A decade ago, Cheniere finished a historic pivot from importing chilled natural gas when it launched its first export shipment. The liquified gas, better known as LNG, has since become a mainstay of global energy and the U.S. economy. U.S. LNG outright saved Europe when Russia invaded Ukraine and the E.U. suddenly needed a new source of natural gas to replace what was coming from Russia.

At the reception — as attendees dug into a buffet of crawfish sliders, Louisiana jambalaya and spiced pork belly pralines — Wright predicted still greater growth for the industry.

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Yet Iran’s closure of the Strait of Hormuz — through which a fifth of the world’s oil and LNG normally flows — has also injected a disorienting uncertainty into this year’s gathering.

By the conference’s third day, Martin Houston, a long time leader in the LNG industry whose last name seems appropriate as an oracle for the gathered oil and gas executives, opened one session like this:

“A lot has been said in a lot of panels over the past few days. I’m going to try to say something a little different. Nothing’s going to be the same from now on in this industry. A red line has been crossed. We need to remember that. A Sword of Damocles will sit above the Strait for some time, maybe a very long time…This is a war that is quite different than many we’ve seen, where we can sit back, watch it on TV, not really care about it. This is affecting everybody.”

But how, exactly, will the industry and the world be affected? What will prove to be the lessons of a crisis that may only be in its beginning stages:

Will Iran’s closure of the strait ultimately underscore for Americans and the world the importance of U.S. energy resources, what the Trump administration trumpets as “energy dominance,” in a chaotic world?

Or will the crisis serve to warn of the inherent vulnerabilities of all energy resources that require shipping across seas and over borders— particularly those resources burnished and wielded as weapons of political dominance?

Houston (the LNG executive-oracle), joined nearly all the LNG industry leaders in concluding that in the end the global gas industry benefits from the turmoil. He noted several new American LNG projects he’d never even heard of before now ready to go ahead and build new export plants

Others see a prolonged crisis looming that could tilt the global energy landscape decisively towards more local, secure energy sources that can be built and controlled within countries. Ones that cannot be easily disrupted by trade battles or military conflicts.

For many countries that means burning more coal for longer, especially those in Asia with their own reserves. Longer term, it means more electric vehicles, more solar and wind generation, more nuclear plants.

Should the Strait of Hormuz remain largely closed, then something like 10-20 million barrels per day of crude oil won’t reach global markets and won’t be used, said Jeff Currie, a legendary commodities analyst now with Carlyle Group, one of the world’s biggest private equity funds.

“We’re going to have energy transition forced upon us in a very painful way,” he told one session, raising eyebrows. “And it’s going to happen very quickly.”

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Iran has fired missiles and drones at all manner of targets in the Arab Gulf countries.

They’ve hit oil and gas infrastructure, hotels, residential towers, military bases and defense installations. But one target stood out to me: data centers owned and operated by Amazon in the United Arab Emirates and Bahrain.

These strikes were aimed at more than the UAE’s economy, or even the physical security and well being of its population. They targeted the vision Gulf Arab nations harbor for transforming the Middle East — and their success so far in accomplishing it.

These are the stakes, ultimately, in the current showdown with Iran’s regime:

Can the Arab Gulf states continue to remake themselves into a force for prosperity and advancement in the region? Or will this new whirlpool of strife — created, as always, by a swirl of regional and global forces — suck the Gulf into a downward spiral of the sort that has stunted prosperity and aspirations in the region for so long.

What does the Arab Gulf vision look like?

I got a vivid view of it at the Dubai Flower Exchange two decades ago.

Leveraging the largest flight network in the world, the exchange each day flew in fresh-cut flowers from literally all over the world — tulips from Holland, begonias from Africa, roses from South America — bundled them into a bouquets and shipped them back out to to restaurants, luxury hotels, and wedding venues across the Middle East.

“We’re consolidating all the orders of the Arab world here,” Hussein Hashem, an executive of the region’s largest parcel-delivery service in the Middle East, told me.

He wore a heavy winter jacket on the floor of the chilled facility as we watched the flowers flow in from one side, bouquets depart from the other. Outside, the temperature was 110 degrees Fahrenheit.

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Dubai was pushing the limits of conventional wisdom, even practical possibility, in a region so much better known for its internecine wars and ancient conflicts.

The UAE was applying that same logic to a fast-expanding array of businesses: Shipping, at what had recently become the world’s largest port; air travel, with massive expansions of a collection of airports across the region; petrochemicals, leveraging the Gulf’s plentiful oil and gas reserves.

Even media.

I moved to Abu Dhabi — the richest and most powerful of the seven clan-based “emirates” that came together in 1971 to form the country — in 2007 to help launch a newspaper called the National. The project was typical: audacious, wildly overfunded, wholly unrealistic in its stated goal, in this case introducing a Western-style news outlet into a tightly controlled information economy headed by what was essentially a silk-gloved, monarchical autocracy.

The National ultimately faltered as a useful news source, perhaps inevitably crashing on the shoals of Dubai’s financial crisis of 2009 and the Arab Spring uprisings in 2010.

And yet, despite falling short of its stated aims, the National was one of the many ways the rulers — and people — of the UAE learned, grew, matured, uplifted themselves to become sophisticated players in an ever-more-complex global economic, political and military landscape.

Their learnings have, in turn, been taken up and built upon by tiny but tenacious Qatar and more recently the much larger, globally consequential kingdom of Saudi Arabia.

This newfound global sophistication has in recent years been aimed squarely at turning themselves into global players in artificial intelligence, biotechnology, renewable energy, and advanced manufacturing.

This requires executing a tricky strategy of leveraging vast revenues from oil and gas sales today to drive investments in these new industries of tomorrow.

And when I say “drive,” I do not mean they can do it on their own. Vast as it is, their wealth will produce transformation only if exponentially more investment can be attracted from elsewhere.

They need the rest of the world to buy in.

And for that, they need long-term stability, a steady-state calm in which investments can manifest, mature, and multiply. Until the current crisis, these countries were making progress convincing major global investors this goal was within reach.

Here data centers were exhibit A. The Amazon facilities were among the first of many Arab Gulf states have been planning, from the UAE’s gargantuan Stargate deal with OpenAI and Softbank to a plethora of centers in for Saudi Arabia.

It’s not just the sudden spasms of violent bombings and drone strikes that has disturbed this calm. Those have been highly destructive, to be sure, damaging natural gas production facilities in Qatar and the UAE, setting ablaze tourist hotels in Dubai and residential towers in Bahrain, threatening chaos in Saudi Arabia’s capital of Riyadh.

With the current U.S.- Israel and Iran clash, the Arab Gulf suddenly faces its biggest regional challenge since 1971. That’s when the British withdrew from the Gulf after overseeing — or, if you prefer, dictating or meddling in — in the affairs of the Gulf to one degree or another for more than two centuries.

What the British called the Trucial States fundamentally reorganized. Seven came together under the leadership of Abu Dhabi to become the United Arab Emirates. Bahrain became a full-on protectorate of Saudi Arabia. Qatar and Oman remained independent. America stepped in back then, as well, offering protection and a guarantee their oil would be able to reach international markets. Since the 1979 Iranian revolution, that’s meant thwarting threats from the Islamic Republic and keeping the Strait of Hormuz open to all international shipping.

The current crisis is raising profound questions about the solidity of this arrangement going forward.

There are essentially three ways the crisis could end:

• The Iranian regime capitulates.

• The regime collapses.

• The regime rules on, crippled but menacing.

In the first scenario — unlikely though it may be at this point — the Arab Gulf states would have to reckon with an America suddenly in cahoots with their historic nemesis, managing the country’s oil production and manipulating oil and gas flows.

The second scenario is potentially worse. It would likely result in a fractious Iran with heavily armed revolutionary guard factions harassing shipping channels just as they’ve trained Houthi militants in Yemen to do in the Red Sea.

The third scenario is worse still — an angry, vulnerable regime in possession of highly enriched uranium, the U.S. unable or unwilling to deliver either protection or guarantee the ability to sell oil and gas on international markets.

For now, Arab Gulf states are putting on a brave face.

“All I can say is we were not intimidated,” Saudi Foreign Minisiter Faisal bin Farhan told reporters after the kingdom intercepted eight ballistic missiles fired at Riyadh.

Speaking to an international group of journalists, one of the UAE’s top diplomats underscored how his country’s leaders feel after their concerns about the current onslaught were dismissed by U.S. and Israeli leaders.

“Considering us just as a pawn on a chess board is something we don’t accept,” said Anwar Gargash, minister of state for foreign affairs, repeating the point for emphasis.

And yet, that is precisely where they find themselves.

Qatar’s LNG production center at Ras Laffan — a facility that produces virtually all the nation’s wealth — was seriously damaged by an Iranian ballistic missile fired in retaliation for an Israeli strike on Iran’s main natural gas field.

On the same day, the U.S. treasury secretary announced that the U.S. was considering, of all things, temporarily lifting sanctions on some Iranian oil. This was an attempt to make crude oil Iran is allowing through the Strait of Hormuz for China and India available to desperate Asian and European countries. Iran so far has succeeded in blocking their shipments from Saudi Arabia and the UAE.

It’s hard to imagine a more stark picture of American failure on either of the two fronts the Arab Gulf states most need it for. They are exposed and unable to access markets.

The Iranian regime may still capitulate in the end, and the Trump administration may still coax the rest of the world into helping guarantee safe passage through the strait.

But with each passing day the odds the Arab Gulf states face another 1971 moment — the end of the era of fail-safe American protection of the Gulf — go up.

Their vision for the Middle East is blurring.

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A little over decade ago, as the Obama administration and Iran’s leadership began negotiating their ill-fated nuclear deal, I spent some time in Tehran hanging out with a popular musical band called The Pallet.

Their music was a kind of cross between Dixieland jazz and Iranian folk tunes. The band had raised the hackles of Iran’s hardline mullahs with a clever act of defiance.

Playing live secular music over the government-controlled airwaves was strictly banned under the ascetic interpretation of Islam enforced by the Islamic Republic’s dour clerical rulers. But the band, working in cahoots with a sly producer at the main government television station, appeared on a popular program “playing” instrumental versions of their songs — but airband style, without the instruments.

Fans of The Pallet loved it. So did legions of regular Iranians who’d never heard of the band but were sick and tired of theocratic restrictions on public life and personal behaviour.

The regime, less so. As one member of the band put it, they meant to throw a pebble in a pond but it turned out to be boulder. The show was taken off the air. The band banned from playing in public for a time.

You can see the video report I did for The Wall Street Journal at the time, including the television footage of the band fake-playing their instruments:

Looking back, the kerfuffle was a quaint, playful moment of push-back against Iran’s entrenched theocracy. The contrast with today highlights how high the stakes have climbed in a decade. Iran has careened from mass public uprisings and lethal regime crackdowns. The nuclear deal, struck with Iran by Obama, joined by Europe and even Russia and China, was abandoned by the first Trump administration. Israeli leaders cheered. Saudi Arabia and the United Arab Emirates quietly approved. Israel and the United States are at war with Iran — for the second time less than a year.

They bombed Iran last June in hopes of obliterating the country’s nuclear program, which they didn’t quite manage. Nor did the 12 days of pummeling from the air eliminate Iran’s ballistic missile program, which threatened Israeli cities and might someday be good enough to target the U.S.

Iran fought back, but not particularly hard. It launched a short, harrowing barrage of missiles at Israel, some of which caused death and destruction. It targeted U.S. military bases in the Middle East.

Supreme Leader Ayatollah Ali Khamenei must have hoped things would calm down. But in late December — six months after the bombing attacks — some of the largest ever popular demonstrations against the regime erupted across Iran.

There was nothing playful about these.

Millions of angry Iranians, many from the working class, shouted insults at the country’s top officials and fought security forces in the streets. These were Iranians suffering from the government’s grotesque mismanagement of the economy or frustrated that the regime’s overseas adventures and international intransigence elicited military attacks that had worsened their plight further.

The regime gunned down tens of thousands of them indescrimanately, without remorse.

Still the supreme leader refused to relinquish a nuclear program that Iran has long claimed — to Western eye rolls — is not aimed at building a bomb. He wouldn’t dismantle Iran’s ballistic missile program. Even on its back foot, the regime still defied U.S. and Israeli pressure.

So Israel and the U.S. are back again with an even larger and more sustained bombing campaign. Donald Trump and Israeli Prime Minister Benjamin Netanyahu have made clear they hope to topple the regime, or, even better, clear a path for the Iranian people to topple the regime.

Ayatollah Khamenei and a coterie of senior clerics and military leaders are already dead, killed in the first wave of the recent Israeli and U.S. bombings.

But the regime has not been toppled. Far from it.

Ayatollah Khamenei, an aging leader at 86, has been replaced by his 56-year-old son, Mujtaba, as supreme leader. The Iranian National Guards Corp, the Islamic Republic’s military, appears to be wholly intact. Coordination between its units and communications along its command chain may be disrupted, but it’s still fighting back.

By conventional measures the IRGC is wildly outmatched. But it’s scrappy and ingenious, and its back is square against the wall. The regime isn’t necessarily losing a war in which surviving equals winning.

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* * * *

All this has left Iran’s 95 million people — a nation of diverse ethnic and religious backgrounds, cosmopolitan elites, urban laborers, small businessmen and rural farmers, almost all of whom have been suffering under the regime’s oppression and incompetence for decades — in a very tricky spot.

I once traveled to the interior city of Yazd to attend a fire festival held by the local Zoroastran community.

Zoroastrianism is one of the great religions of ancient history — the world’s first truly monotheistic religion. It was the faith of the first great Persian empire, the Achaemenids whose kings — Cyrus the Great, Darius I, Xerxes I — split time between their ceremonial capital of Persepolis and home in Pasargadae.

But Iran’s Zoroastrian community has co-existed uneasily alongside Islam since the Muslim conquest of Persia in the late 7th century. There have been periodic bouts forced emigration and acute repression, including since 1979.

Yazd hosts a Zoroastrian temple where a flame — fire is among the four sacred “elements” in the religion — has been kept burning continuously for more than 1,500 years.

Each year, thousands of Zoroastrians gather in what amounts to a huge celebration of the grandeur of Persian civilization. Persian culture, which long precedes Islam, is a powerful force of Iranian nationalism. The clerical elite of the Islamic Republic wants to claim and control that nationalism while disowning Zoroastrianism.

This hasn’t really worked. And the powers that be in Tehran had decided to go with the fire festival that year.

The festivities kicked off with a few words from Sepanta Niknam, the first Zoroastrian ever elected to the Yazd city council. Azim Zadeh, appointed mayor of Yazd by the central government in Tehran, attended the ceremony for the first time.

Zadeh sat in the front row of a crowd of thousands to hear hours of spirited recitation from Persian classics, especially tales from the Shahnameh, or Book of Kings, by the great Persian poet Ferdowsi, who lived in the 10th century.

Here’s the video report I filed for The Wall Street Journal from the festival:

On another trip to Iran I met Hossein Dehbashi, an Iranian film maker who had put together an oral history of the Pahlavi regime from pre-revolutionary Iran — the regime of the Shah before he was ousted in 1979.

Islamic Republic hardliners have done everything possible to wholly demonize the shah’s rule, which was obviously flawed by did help bring Iran into the comtemporary world. But for the hardliners, praise for him, or anyone associated with his governance, is tantamount to treason.

Dehbashi’s lengthy, nuanced interviews with dozens of Pahlavi-era figures — government officials, statesmen and artists, many living abroad — were hardly uncritical. But he allowed his subjects to discuss what they saw as their successes and acknowledge failures on their own terms.

He invited them to talk about health care, economic development, the shah’s foreign affairs policies and how they saw Iran’s place in the world when they were in power — all topics of intense current debate in Iran at the time.

He then opened the archive to the public, much to the consternation of hardliners — virtually none of whom were willing to be interviewed or take responsibility for the declining state of the country and economy.

He pointed to a photo gallery of interviewees on his wall and praised the former Pahlavi officials’ willingness to be questioned, to account for their failings.

“I can’t speak of all the former officials of the Pahlavi regime,” he told me. “But I personally admire these people because they were brave enough to participate in this project and expose themselves to be judged by history out of a sense of patriotism.”

Here’s my report for the WSJ on the Iranian Oral History Project:

I have no idea what’s become of The Pallet or where its members are today. I wonder how the Zoroastrian community is faring in Yazd. I heard a few years after my report on Hossein Dehbashi that he’d been threatened and perhaps even arrested by the regime. But I have zero doubt that the irrepressibility of these Iranians, and many more I met, is very much still out there, likely in spades.

The trouble is, all these Iranians were motivated by a love of Iran. They felt a strong sense of nationalism and deep pride in a civilization that includes Islam but also stretches back long before Muslims came to Iran, nevermind the long-curdled religio-political experiment that is the Islamic Republic.

Right now dissenters and critics can’t come into the streets and overthrow their oppressors — or even realistically demand change. Their country is under attack by an Israeli prime minister and American president who are making them look like foreign stooges by calling them into the streets.

* * * *

For all its apparent fanaticism, the Islamic Republic has been shedding the first half of that name — the religious half — bit by bit over the decades since Grand Ayatollah Ruhollah Khomeini returned to Iran in early 1979 and was greeted by overwhelming, passionate crowds.

He set up a historically quirky form of theocracy that positioned himself, by dint of his religious authority, as the transcendent leader of the nation for all purposes — political, moral, economic, military.

The long Iran-Iran war — which ended with a dispirited Khomeini telling the nation he’d had to drink from a “cup of poison” and accept a ceasefire — did little to underscore the supremeness of the supreme leader.

But his successor — the Ayatollah Khamenei killed at the outset of the current war — wasn’t even a high ranking cleric when he was appointed in 1989.

Khamenei was thrust up the ranks as an afterthought, skipping the decades of study usually required to become an Ayatollah. His appointment, ironically, was engineered with the help of a more powerful cleric and head of the legislature at the time, Akbar Hashemi Rafsanjani, who must have bet Khamenei could be easily controlled.

But Khamenei, who had been arrested by the shah’s henchmen and injured by a bomb in an assasination attempt, used his revolutionary credentials to court and nurture the revolutionary guards. He proved to be a clever, Machiavellian politician, holding power, building vast wealth, though a network of charities, consolidating control with the IRGC’s help.

This brings me to another Iranian I met reporting: Mohammed Reza Ghadery, a mural painting revolutionary turned commercial graphic artist.

In early 2006, I accompanied Ghadery on an outing to the Imam Khomeini Mausoleum in Tehran on the national holiday that Khomeini’s death anniversary has become.

For an ostensibly anti-American hardliner, Ghadery was welcoming. He was keen to tell me his story.

As a teenager, Ghadery printed fliers with Khomeini’s image and posted them around Tehran as the revolution unfolded. After the shah was gone, he made posters of revolutionary heroes, such as those who took over the U.S. embassy. Later he fought in the Iran-Iraq war. He told me he was “deeply sorry for not becoming a martyr.”

After the war, Ghadery made a living painting murals of martyrs on buildings and facades across Iran. He took me around Tehran pointing them out.

But by the time I met him, Ghadery was 47 years old. The feverish martyrdom complex that two decades earlier had gripped the country — and tightened the regime’s grip on the country — had largely run its course.

Revolutionary mural work dried up.

Ghadery had turned largely to commercial graphic design jobs to support his family — toothpaste advertisements, fruit juice labels, that sort of thing.

Here’s one he showed me he made for packaged nuts (forgive the out-of-focus photo!):

Still, once a year Ghadery told me that he relished in joining hundreds of thousands of Iranians to visit the Imam Khomeini Shrine on the anniversary of the Ayatollah’s death.

We hopped in my car and headed for the shrine, out near the Ayatollah Khomeini International Airport. Soon we hit the traffic jam. Both sides of the four-lane freeway were clogged with cars, pickup trucks, buses and lines of people walking towards the mausoleum. Picnickers were lined up along the sides of the freeway.

As if on cue, Ghadery began weeping theatrically as the shrine came into view. This was part performance, for sure. But he was also experiencing a legitimate nostalgia for the religious meaning Khomeini had brought to the revolution and the higher purpose that had motivated the nation to pursue during the Iran-Iraq war.

Ghadery clearly missed this.

Well, this sense of purpose is suddenly back for many devotees as the bombs fall on Iran and the Islamic Republic’s enemies call for its end.

In one sense, the religious underpinnings of the government are all but gone. Khamenei the elder — second in a line of leadership that was supposed to be the opposite of hereditary — has been replaced as supreme leader by a son who has even fewer religious credentials than his father brought to the position.

In another sense, though, it seems Mojtaba Khamenei was chosen to plumb the sense of grievance, of betrayal, of profound suffering at the heart of Shiite Islam.

The central figure of Shiism is Hussein ibn Ali, grandson of the Prophet Mohammed. Hussain was killed in the Battle of Karbala in the year 680 fighting an underdog’s battle against powerful foes for his family’s rightful place.

Mujtaba Khamenei’s father, wife, and son were all killed by powerful Israelis and Americans in the initial bombing runs of this war.

Mujtaba is a career regime insider who helped build his father’s powerful edifice. It’s unclear to me at this point whether he’s the real power at the top, or simply a symbol being wielded by the powerful former IRGC commanders and longtime political heavy weights Ali Ardishir Larijani (currently secretary of the Supreme National Security Council) and Mohammad Bagher Ghalibaf (speaker of parliament).

Those who chose Mujtaba know his is a powerful narrative that packs a double punch. It will motivate the regime’s followers while at the same time undermining opposition.

They’re being asked, are you for outside oppressors attacking us? Or for the nation?

And why the real battle for the country can’t begin until the current war ends.

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First impressions often mislead, never more than along the shores of the Gulf.

These can make it tough to understand where the war in the Gulf — “Persian” to the Iranians on one side, “Arabian” to the Arabs on the other — is heading. They cloud the stakes for those most affected by the conflict: the people on its shores.

I got my first impression of the region traveling as a reporter in the early 2000s after the 9-11 terrorist attacks in New York.

Over the next decade, I visited Iran often, reporting from the deeply conservative pilgrimage city of Mashad near the border of Afghanistan, from the oil-producing and processing centers of Ahvaz and Abadan along the Gulf coast, from the interior desert around Yazd, in the historic cities of Isfahan and Shiraz and the ancient ceremonial capital of the Achaemenid Empire, Persepolis.

I also lived in across the Gulf in Abu Dhabi for more than a decade. Abu Dhabi’s ruling al Nahyan family dominates the United Arab Emirates, the nimblest and boldest of the Arab Gulf states. In 2008, I helped launch a newspaper in Abu Dhabi backed by Sheikh Mohammed bin Zayed al Nahyan, who now leads the country his father forged from a handful of patriarchal clans in 1971.

Between 2010 and 2015, as The Wall Street Journal’s Middle East bureau chief, I reported extensively from the other Arab monarchies in the Gulf: Saudi Arabia, Bahrain, Oman, Kuwait and Qatar,

My first trip to Dubai, the commercial capital of the United Arab Emirates, came just a month after I watched two al Qaeda-piloted jets collide into the World Trade Center towers. I was the deputy foreign editor at the Wall Street Journal back then.

The souk, or marketplace, in the old center of Dubai certainly seemed exotic, a tangle of shops and alleys overflowing with cabling and construction equipment, washing machines, consumer electronics, gold jewelry, flowers, frankincense, and myrrh.

But Dubai’s showcase shopping malls made an even bigger initial impression. And here everything was disorientingly familiar. Sipping my Starbucks coffee, I thought: I could actually be in a U.S. mall.

Same store brands from Dunkin’ Donuts to Versace. Same multiplex movie theater featuring Hollywood hits. Same milling throng, albeit with a more diverse mix of Arab and South Asian shoppers, some dressed in local thobes and abayas, a few women wearing a face-concealing masks.

Some of it was surreally over the top, like the indoor ski slope inside what was then the biggest mall of them all (even bigger ones were to come).

But still, my overwhelming first take was…wow, this is surprisingly like America. How different could it really be?

I would find out.

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A few years later I made my first trip to the Islamic Republic of Iran, a multiweek reporting jaunt during the first term of firebrand president Mahmoud Ahmadinejad.

A self-appointed thorn in the side of Israel and the United States, Ahmadinejad specialized in florid castigations of the West and threats against Israel. In a 2012 speech at the United Nations he said the Jewish state would be “eliminated,” using phrasing that more usually got translated in the West as “wiped off the map.”

Even in Tehran, the bustling, congested capital, almost nothing seemed familiar. No western brands. Bearded clerics strutting confidently about, coiled turbines atop their heads. Women decked in headscarves under threat of punishment from battalions of dour, roaming enforcers. Whole building facades were plastered with bloody murals of the slain heroes of the 1979 revolution and martyrs of the brutal war with neighboring Iraq decades earlier. Iranian businessmen and government officials ostentatiously refused to wear neckties in a typically performative rejection of Western influence.

“Death to America,” featured on billboards at major city intersections, especially around the former U.S. Embassy, which had been converted into a museum of anti-Americanism.

Iran seemed outside anything in my experience.

And yet as I spent more and more time on each side of the Gulf, the nuance set it.

Arab Gulf societies feverishly embracing American brands and conspicuous consumption was partly a function of their extreme wealth. They’re the richest countries on earth as measured in per-capita wealth. But I believe this also reflected their inexperience with the wider world. In these kingdoms, modern consumerism is spread thinly atop traditional, deeply conservative tribal societies that are still sorting out for themselves where and how, exactly, they fit in the modern world.

Iran, on the other hand, has seen a quirky, paranoid, pseudo-religious regime grafted onto a storied, thousands-of-years-old, ultimately confident civilization very much of the modern world — however thoroughly the mullahs drove it into a ditch in 1979.

To outpoint one currently relevant issue where these distinctions matter, nuclear energy and weaponry:

The United Arab Emirates has a nuclear energy program — four reactors producing power — that is blessed by the United States. That blessing came with a promise by the UAE not to enrich uranium, essentially assuring it can’t make a weapon. This is a promise neighboring Arab kingdom and fellow U.S. ally Saudi Arabia has declined to make. So far, the kingdom has also refrained from starting a nuclear program, whether for energy or to build a bomb.

The point here is that as a group — and for all their very real differences and disputes, these Arab Gulf states do constitute a kind of collective — Gulf Arab nations have yet to figure out precisely if and how to proceed with nukes, a key defining technology of today’s modern world.

In Iran, at its root, the motivation for a nuclear program — started with U.S. blessing before the 1979 revolution, recklesslessly mangled by the current regime since then — has been less about warding off invasion a la North Korea and more about Iranians’ view of their rightful place in the world. If France, India, Pakistan, Russia, China and Israel can have a nuclear weapons and 26 other countries nuclear reactors, why not Iran, they ask.

That certainly does not mean the current regime should be allowed a nuclear program — it absolutely shouldn’t. But it explains why a subsequent regime, autocratic or even democratic, might insist on a return to this pursuit.

That’s a debate for a distant future with a very different regime. But it underscores where Iran is coming from, and, beneath the current increasingly deranged leadership, what it is and to what it will likely aspire if it gets out from under the current regime.

Meanwhile, the current regime is fast morphing into a straight-up military junta that will now find the North Korean path of nukes-as-invasion-protection alluring, if a way can be found. That’s why the U.S. and Israel find themselves in a sticky dilemma with a stash of hundreds of pounds of nearly bomb-grade uranium still left inside Iran after two intensive bombing campaigns. That’s an intolerable threat now defusable only with a politically unpalatable operation involving many boots on the ground.

You have many other sources of news and analysis to track the many twists and turns to come in the ongoing conflict between the U.S. and Israel and Iran.

What I’ll do in two posts over the next week or so is draw on my personal experience with the countries most affected by this conflict to explain how they are being profoundly changed in ways that will be hard to reverse.

Positive outcomes are possible. But they’ll have to emerge from the crucible of a violent conflict whose endgame is nowhere near, even if the intensity of the fighting tapers off in the coming weeks.

We’ve toured the south of the U.S. looking at some of the biggest, and most controversial, data center projects in the world. That’s included xAI’s Colossus, Meta’s Richland Parish project in Louisiana, OpenAI’s projects in Abilene, Texas and Google projects in the Panhandle. Today we’re looking at what it all means for electricity bills.

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After researching AI data centers for months and tooling across the American south for an over-the-fence look at some of the biggest, I can say this much: AI better start helping the common man or the tech bros and their backers will pay hell.

They know this. That’s why they lined up behind President Trump last week at the White House for a highly publicized event that Trump billed as an effort to provide them “a bit of PR help,” as in a public relations boost.

The immediate concern is rising energy bills, which are playing into a larger wave of anger over the “affordability” of pretty much everything after a wave of post-Covid inflation that helped bring Trump into office for a second term.

Now Trump and his Republican backers — after failing to decisively reverse the price increases — are facing the wrath of the price-hike weary population. This pressure on the administration will only grow if the oil price spike caused by Trump’s war lasts beyond a few more weeks and gasoline prices rise going into the summer driving season with midterm elections just around the corner.

Pump prices are already up about 10% after crude jumped from the low $70s per barrel to above $90 per barrel as a result of the conflict in the region.

That may take the spotlight off artificial intelligence, data centers and tech companies for now. Indeed, I plan to get back to writing about the energy fallout from what is shaping up into a historic Middle East conflict whose impacts are reverberating across the globe and will continue for years, perhaps decades to come.

But the spotlight will eventually come back around to data centers. I’m betting well before the fall midterm elections unless the Iran war turns into far wider global conflict. That nightmare scenario could happen. But most likely the conflict will recede to a low boil in the coming weeks, remaining seriously problematic but less than catastrophic for countries and people outside the region.

This will clear energy center stage again for artificial intelligence, which is shaping up to be a transformative social and economic force on the order of organized agriculture or the industrial revolution.

I spent part of last week attending an AI conference at the Dallas Federal Reserve Bank. Technology, energy and financial industry officials speaking at the event groped for words to describe the scale of the construction boom now underway to build the colossal data centers needed to keep the U.S. — and U.S. technology companies — at the forefront of the field.

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Though there was skepticism over how fast this tsunami would break and how far it would reach, the consensus was that it’s starting now and will reach very far.

I’m as hopeful as any tech-pilled futurist that AI can bring advancements in everything from medicine to climate solutions. I spend an inordinate amount of time chatting with my ChatGPT Japanese language tutor and trying to get Claude to cull through my emails and write responses.

That hasn’t quelled my unease about problems this new technology will certainly cause. My concerns start, as they do for many, with economic dislocation and job losses, continue through the electricity demand spikes caused by these energy hogs, and end, well, who knows where judging from Anthropic’s ongoing showdown with the Pentagon.

For many people, data centers are more than just really big construction projects they don’t necessarily want in their communities. They are the most obvious real-world manifestation of all these intermingled anxieties. I’m far from the only one who feels a little queasy taking in the scale of one of these Leviathan projects, despite all their space-age splendor, even just in a photo.

The White House event was a first attempt to address growing concern that on top of all these concerns the voracious demand for energy to power these data centers will send electricity prices soaring.

With Trump presiding, the gathered AI companies repeated pledges to pay their “fair share” of the system upgrades needed to produce all this energy.

But if you ask me, I think they’ll need to go further. At least if they want to avoid, or even temper, the backlash building against them. They’ll need to find ways to help others pay less.

And the good news is they can — if they’re really committed.

We’ll see if they are.

It’s critical to understand something that’s counter-intuitive to almost anyone who isn’t an expert on the U.S. electricity system. You’re forgiven if it seems inevitable that massive new demand for electricity will force the price of electricity higher. Where else could fast-rising demand chasing slower-growing supply lead?

But this is not exactly the predicament the U.S. electricity system finds itself in — at least not just yet.

Because of the way the electricity system is constructed and currently works, only about half of its overally capacity to produce power is being used. What if data centers could draw — and pay for — electricity when it’s plentiful without competing for electricity when it’s scarce?

Well, then their payments could go toward lowering costs for everyone else.

Think of an airline flight route constantly flying half-empty planes. If the airline could sell more premium-fare tickets on those flights, some of that additional revenue could go to cutting ticket prices for the other passengers, to providing better meals and service, or both.

That’s often impossible with airline routes, which is why unprofitable ones get cut. It’s even more complicated in the electricity system for an assortment of reasons. But when it comes to data centers it just might be possible. If — and this is a very big if — data centers can be made to work flexibly.

In other words, if they can be made to pay full price for electricity when it’s plentiful and buy little, or none at all, when it’s scarce.

This is a very big ask for technology companies. They generally need their data centers to operate — and thus draw power — 99.999% of the time. That’s what the industry calls the “five nines.”

It means five minutes per year without power. No more. And those five minutes they cover with emergency backup generators. So they’re actually processing data fully 100% of the time — which makes sense when you remember that the data they’re processing is being used by hospitals, driverless cars, police departments, telecommunication companies and other time-critical services.

As we saw in our tour of data centers, most tech companies have, initially at least, all but given up on the public grid for now. They’re setting up their own bespoke power generation on site. To return to our airline analogy, they’re choosing to fly private instead of on one of those half-full commercial flights.

This might work for some data centers, at least temporarily. But most of them would actually prefer to join the grid, which is very likely to prove less expensive and more reliable than building their own on-site power plants. The grid also opens far more avenues to meeting their energy demand while upholding oft-repeated vows to rein in greenhouse gas emissions.

And therein lay the makings of a deal. Accelerated grid access in exchange for a promise: pay full price for power when it’s plentiful, and use their own power when it’s scarce. The upside of data center demand without the downside.

Over time, this would maximize use of the electricity system that’s built and paid for, minimize the stress caused by growing demand for electricity, and grow the funds available for the expensive upgrades and repairs that the aging electricity system desperately needs in order to meet the future needs of everybody.

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Less than a week old, the Trump administration’s assault on the Islamic Republic is already beginning to shape a new global energy order.

In capitals around the world, the events of the week are providing a stark new reminder of the tenuousness of globally traded oil and natural gas. This may cause an even bigger paradigm shift than the two big oil crises of the 1970s.

The difference between then and now: In neither 1973 or 1979 were there obvious alternatives to these globally traded fossil fuels — President Jimmy Carter’s White House solar panels notwithstanding. Energy efficiency also became a thing, but no meaningful alternatives to coal, oil and gas were available.

In time, innovations in the oil and gas industry itself alleviated most of the stress. First it was drilling in remote regions and deep-waters. Then, most spectacularly, the “fracking” revolution that returned the U.S. to the top ranks of global oil and gas producers.

It helped that the biggest military conflicts after the tanker wars of the 1980s — the 1990 Gulf war and the invasion and occupation of Iraq starting in 2003 — never significantly interrupted the flow of oil and gas from the Persian Gulf. Even Russia’s invasion of Ukraine, which very much impacted global oil and gas markets, didn’t cause a distinct, perceptible shift in national energy strategies around the world.

What’s happening this week feels different. This war in Iran is in its very early stages, so of course many outcomes are possible and none are predictable. The regime could collapse chaos, or transform into an even more intransigent military dictatorship, or the country could suffer a series of such dictatorships. After making almost a dozen reporting trips to Iran between 2005 and 2015, I can say from first-hand experience that the best possible outcome would be a new, democratic-leaning Iranian government eager to work with the U.S. and strong enough to actually be able to do so without fatally undermining itself right out of the gate.

Regrettably, this is the outcome hardest to imagine coming to pass, at least anytime soon.

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All these scenarios would result in a weaker Iran. And it doesn’t take much strength — or rogue control over much territory within Iran — to regularly harass and hamstring shipping through the Strait of Hormuz, the narrow maritime throughway off Iran’s coast through which 20% of the world’s oil and Liquified Natural Gas passes. Just look at the havoc a rag-tag government like the Houthi’s in Yemen have been able to wreak in the Red Sea over the past two years.

But the Strait of Hormuz is really nothing like the Red Sea passageway in terms of importance. Not only does vastly more oil and gas transit through Hormuz, there are virtually no alternative routes as there are with the Red Sea, expensive though they may be. That’s why Qatar, the world’s second biggest LNG producer, had to declare Force Majeure, leaving its customers out of luck rather than simply paying more to get their shipments.

The result has been a spike in global oil and gas prices, one that is accelerating as it becomes clear the dust in the Gulf won’t be settling anytime soon.

If there’s anything that will keep energy-hungry nations around the world looking for alternatives, it’s this sort of thing. Increasingly, there are real alternatives. Solar arrays wedded to batteries are already among the least expensive choices, especially compared to LNG, for generating electricity. They don’t solve every problem, of course, but neither does importing LNG, as is becoming acutely obvious.

China is already well on course to reduce LNG imports. It’s reduced them over the past year, and cut out U.S. suppliers altogether. India, once seen as a prime new customer for LNG as electricity demand ramps up, is highly unlikely to bet its electricity future on LNG after installing a record amount of solar last year, almost all of it alongside batteries. Ethiopia, to pick a populous up-and-coming economy in Africa, is more unlikely than ever to go back to importing gas-fueled vehicles after it banned anything but electric imports two years ago.

The ship of the global energy system is very large and turns only slowly. But events in the Persian Gulf are now providing what may prove to be a decisive nudge.

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We’ve been touring the south of the U.S. looking at some of the biggest, and most controversial, data center projects in the world. That’s included xAI’s Colossus, Meta’s Richland Parish project in Louisiana, OpenAI’s projects in Abilene, Texas and Google projects in the Panhandle.

All of these data centers, and many, many more, crave natural gas, which for now their owners have decided is the fastest, best fuel to produce artificial intelligence. Other energy technologies may play a role, from solar and batteries in the near term to nuclear and geothermal beginning in a decade or so.

But for now, they’ve deemed gas the cat’s pajamas.

That means the first big result of the rush to build so many data centers so fast will be a massive expansion of the already-expansive U.S. natural gas industry. A decade from now, the U.S. could be using and additional gas equivalent to that Europe uses today if you believe one industry estimate. That may help address the artificial intelligence industry’s challenge in powering battalions of data centers.

It will also mean far more methane in the atmosphere to accelerate global warming. To better understand just why that is, I got a close look at oil and gas infrastructure through a very special lens thanks to anti-fossil fuel activist Sharon Wilson.

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The great West Texas oil and gas industry buildout over the past two decades has been explained mostly from on high, at a great remove from its dusty, dirty reality.

Love it or hate it, the story of the “fracking revolution” — which has grown oil production in West Texas 10-fold and natural gas production 5-fold — has been told as a tally of drilling rigs, accountings of crude oil barrels and cubic feet of gas, parts per million calculations of air pollution and greenhouse gas emissions, surveys of drillable acres, and reams of fossil fuel reservoirs assessments.

These accountings usually take place behind glass-paned office conference rooms and hotel ballroom room stages flanked by powerpoint slides and slick videos.

This has not been Sharon Wilson’s view of the revolution.

Wilson comes at the oil and gas from the ground up, finding and filming the many and varied installations of the Permian Basin with a high-tech “Optical Gas Imaging Camera” that can “see” hydrocarbon emissions. This includes methane, a particularly pernicious greenhouse gas that is the focus of her and other climate activists and, indeed, even the oil and gas industry itself.

It is not a pretty picture.

Wilson founded Oilfield Witness, a group that advocates against fossil fuel use, a major source of methane emissions. She regularly criss-crosses West Texas — journalists, academics and other activists in tow — to document the particularly acute environmental threat emissions of methane from oil and gas installations pose.

I recently accompanied her through the area, which is not too far from the last few stops on my recent data center tour. She worries the proliferation of data centers in Texas — nearly all of which are looking first to natural gas to power their operations — will be another setback for efforts to stem global warming.

Methane, the main component in natural gas, is both a product and pollutant.

In some cases drillers bring natural gas to the surface with the express purpose of selling it. It’s used as a heating fuel for homes, as well as the source of heat to fire gas generators, the backbone of the U.S. power system and provider of half the electricity in Texas.

But more often, especially in West Texas, natural gas comes to the surface as a byproduct alongside the millions of barrels of oil that have made the Permian Basin America’s premier oil patch.

Companies drilling specifically for gas send it through a network of designated pipelines to sales hubs or directly to power plants. Oil drillers sometimes do the same with the “associated” gas that comes along with their mainstay product.

More often, though, they send it up through a stack and light it on fire. These flares dot the West Texas landscape.

Wilson points them out every few minutes as we drive from Midland, the oil and gas capital of West Texas depicted in the recent streaming series Landman.

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When it comes to climate change, methane is the Jekyll and Hyde of fossil fuels.

Natural gas burns cleaner than coal, emitting about half the carbon dioxide. Expanded use of gas in the U.S. over the past three decades has helped drive coal use down, especially in Texas. That has significantly reduced greenhouse gas emissions, one the reason the gas industry likes to call itself a “clean” fuel.

Still, burning methane at scale can release a lot of climate warming CO2. But methan is even more problematic when released into the atmosphere without being combusted. And, unfortunately, methane regularly finds its way into the atmosphere uncombusted, often in large quantities. The gas sometimes accidently leaks from wells and pipelines for long periods, either without detection or due to negligence. But companies also routinely, intentionally — often perfectly legally — release lots of methane while repairing equipment or to relieve pipeline pressure during storms and cold snaps that shut down the flow of gas from well to market.

“We could live with the leaks, if that’s all there were,” Wilson says during a stop at a major gas processing plant. “It’s the intentional stuff that’s the real problem.”

Here’s a video Wilson made showing the gas plant. Not all of what’s pouring from these facilities is methane. Closest to the source, part of what the camera sees is heat. But much of what you see rising beyond that are hydrocarbons, often including methane.

Here’s another gas processing plant where she filmed gas turbines in operation.

Here’s a facility where waste water is being processed.

Meanwhile, the flares intended to combust natural gas released as part of drilling or processing often don’t burn all the methane passing through the stack. Other times, the flame blows out altogether and the gas simply escapes.

Uncombusted methane causes 80 times more global warming than carbon dioxide for the first two decades it floats about. The gas is responsible for about one-third of the nearly 2.7 degrees Fahrenheit (1.5 degrees Celcius) warming since the beginning of the industrial age.

The oil and gas industry has increasingly come under pressure to deal with methane releases. Or at least it had been coming under pressure before the second Trump administration.

The Biden administration passed regulations requiring the industry to improve the monitoring and reporting of releases, with significant penalities for failure to do so.

The European Union — which has rapidly increased its purchases of natural gas from the U.S. in the form of LNG, or Liquified Natural Gas that’s shipped on tankers — is implementing rules designed to track and minimize the methane emissions associated with gas purchases. Asian LNG buyers also say they would like to reduce the methane emissions associated with their LNG purchases.

But the Trump administration repealed the Biden-era methane regulations and is now pressuring Europe to water down its rules, or drop them altogether, to ease any burden on the industry.

Still, the oil and gas industry has become sensitive to methane emissions, and some companies have begun to address it. At a global climate summit in 2023, 50 oil and gas companies agreed to reduce global warming gas emissions, including methane in their operations.

The first snag they’ve run into, however, is that it turns out the problem is significantly worse than the industry has acknowledged.

That’s become increasingly obvious as monitoring tools such as Wilson’s specialized camera and an even more ambitious effort by the Environmental Defense Fund to gauge methane emissions from an orbiting satellite have come into use.

Data from a year of the Environmental Defense Fund satellite’s work showed far more methane emissions taking place than was generally understood. In the chart below, “inventories” — on the right — are what the industry and regulators report based on generalized studies of methane releases. “MethaneSat,” on the left, are what the satellite actually observed and measured.

U.S. oil and gas fields — the Permian, Appalachan, Eagleford, Haynesville and Utica regional basins below — are among the world’s biggest methane emitters, according to the EDF data.

Meanwhile, as we’ve seen in our recent look at data centers, the tech industry’s pursuit of computing power for artificial intelligence is creating a tidal wave of new demand for natural gas, in Texas and beyond. The gas industry is scrambling to build new pipelines and gas network connections to data center sites, including West Texas.

Overall, the U.S. saw plans to develop new gas-fired generation capacity almost triple last year over 2024 — a build-out that would double the size of the U.S. gas generation fleet, according to Global Energy Monitor.

Texas is the focus of much of this activity.

With gas production expanding, distribution networks exploding and governments loosening oversight, emissions are almost certain to grow.

”You’re never going to stop this if you keep expanding,” Wilson says.

Wilson worked an oil industry administrative job in Dallas back in the 1990s when she purchased a farm in West Texas. She didn’t know much of anything about the new form of oil and gas drilling that came to be called fracking, but learned fast when a driller set up shop next door to her property and, she says, began to impact her water supply and peace of mind.

Over time, she went from battling over her own property to taking on the industry as an activist. Methane emerged as an urgent issue in recent years, just as the sort of specialized equipment she now deploys came into more common use.

Prior to the specialized cameras and satellites, convincing governments and the public there was even an issue was a challenge.

”You only get a fraction of what really happens out here because methane’s invisible and they often don’t have to report it,” she told me.

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This is the fifth in a series of posts about my recent drive from Memphis, Tennessee to Amarillo, Texas looking at some of the biggest data center projects and how they are changing the world.

Earlier stops including Memphis to see xAI’s Colossus; Richland Parish, Louisiana to visit a gigantic Meta project; Abilene, Texas where OpenAI is building two huge data centers.

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Driving through the Texas Panhandle to the final stop on our data center tour — a trio of huge facilities being built for Google — a question nagged at me:

How much natural gas is too much?

If previous stops in Tennessee, Louisiana and Texas taught us anything, it’s that data centers — essentially energy hungry compute-factories — naturally crave natural gas:

They think: Cheap. Reliable. Always available. Cleaner than coal. Ticks all the boxes.

What more could an ambitious high-tech hyperscaler ask for?

But can natural gas really be all of these for everyone? Almost certainly not, given the stampede into gas that’s now underway.

The U.S. now has more gas-fired power capacity in the works than any country in the world — more than one-quarter of the global total, according to a new survey by Global Energy Monitor. More than one-third of this is intended for U.S. data centers, an industry whose professed appetite for gas has grown almost 25 fold in less than two years.

One-third of that is planned for the state of Texas alone.

Will all these data centers get built?

That partly depends on how useful AI turns out to be — how much will consumers and businesses deploy it, and at what price? It partly rests on how energy efficiently AI compute can be produced. But more than anything else, it depends whether there’s enough cheap, reliable electricity to make it all happen.

There very likely won’t be enough if every project tries to run on natural gas — putting them in direct competition with other gas buyers at home and abroad.

Natural gas prices are already pushing higher. So are prices for new gas turbines, along with the wait to get one, which for really big combined-cyle models is at least three-to-five years. The U.S., especially Texas, has a lot of natural gas reserves. But getting more out of the ground quickly could prove expensive. That’s especially true if crude oil prices stay as low as many analysts are predicting. A lot of natural gas gets produced alongside oil — but only when that oil can be extracted profitably, which it really can’t below current prices.

The AI-pilled tech giants likely will face a choice: cancel or delay projects data center projects, or find other ways to get electricity quickly. And by quickly, I mean far faster than new nuclear plants (big or small) or geothermal facilities (advanced or otherwise) can be approved and built.

Even those most enamored with natural gas and unbothered by its environmental and climate drawbacks grasp this.

Elon Musk, whose gas-fueled xAI Colossus project we looked at on our first data center stop, took the stage at the World Economic Forum in Davos recently to extol the virtues of solar power. To be sure, Musk — who, whatever his failings, has shown a knack for bringing the future abruptly forward — hankers for solar power in space, fueling data centers that orbit the earth.

Maybe one day. Never count Elon out, I guess.

Google has a more down-to-earth, here-today approach.

One of the most distinctive things about the data centers I visited in Texas is the extent to which they’re surrounded by renewable energy — wind and solar farms.

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That’s true even at our last stop, the Stargate data center project outside of Abilene, Texas, which is relying heavily on natural gas for power.

Google has gone one step further: buying a renewable energy developer. Not just renewable energy. It purchased an entire company that builds renewable energy. Basically, it’s gotten into the renewable energy business. That’s how much renewable energy Google figures it will need to power its data centers.

The company, Intersect Power, led by one of the most innovative CEOs in energy today, has pioneered the deployment of renewables for data centers.

Intersect builds solar and battery arrays, adding natural gas to round out the mix. The gas does what gas does best, providing bursts of power on demand and stepping in to provide backup as needed. The combination — solar, batteries, and gas (plus a good-old-fashioned grid connection I’ll get to) — makes for a flow of electricity that’s cleaner, cheaper and reliable.

Intersect also brings large swathes of land near Google’s West Texas projects where even larger wind and solar farms can be built. These can pour power directly into the Texas transmission grid to assure the electricity Google pulls from it doesn’t force up demand, or fossil fuel generation, elsewhere in the system.

This recipe — maximizing on-site renewables while deploying natural gas to fill gaps and step in when needed — paves the way for Google’s data centers to connect to the Texas grid quickly and with far less worry.

It allows them to use electricity from the Texas grid when it’s readily available. But they can also fall back on their own generation during a few hours a year when the grid is overloaded — generally the hottest part of the hottest days of the year, and the coldest stretches of winter weather.

Google, very promisingly, is also working with Texas to help make the state electricity grid more efficient and flexible with a program similar to one already underway in Arkansas. Using Google’s tech prowess — the sort of artificial intelligence the company’s data centers enable — the company is helping grid managers organize potentially millions of devices that use and store energy to painlessly dial back electricity usage where possible during peak periods.

These programs, known as Virtual Power Plants and Demand-Response Programs, reduce demand on the grid during stress periods, delaying or even eliminating the need for expensive new power plants and transmission lines.

None of this is simple or inevitable, even in Texas. Collectively, we may just decide that canceling and delaying data centers — however much it slows down artificial intelligence progress — is an easier path than taking on the challenge of innovating to transform the energy industry and regulatory complex.

China right now is rapidly growing its use of electricity — almost completely by deploying solar, wind and batteries in recent years — with the aim of dominating the world’s digital future.

For America, Google’s approach points to the only viable path for meeting electricity demand that is hurtling toward the limits of the U.S. power system.

It does that by tactically deploying natural gas — not fixating on it — while finding ways to quickly build what can be quickly built: wind, solar, batteries.

Gas loving, energy innovating Texas is showing the way to renewables.

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