|
By Nick Tselikov Interview  Scott L. Montgomery is a geoscientist, author, and lecturer at the University of Washington. Having worked for over two decades in the energy industry, he is the author of over 70 scientific papers and 100 monographs. He has been widely published in online journals, such as Newsweek, Forbes, Marketwatch, History Today, and others. Montgomery has additionally served on panels relating to global energy and sustainability, and has given public talks on the same topics. In this interview, conducted in April 2026, Professor Montgomery discusses the energy implications of the Iran War. He examines various aspects of the conflict, such as OPEC’s increased centrality, Iranian strikes on Persian Gulf nations, and Chinese geostrategy. He considers how the conflict has ameliorated China’s image in the Middle East and how it has, in his view, strongly favored oil-exporting countries, including U.S. rivals. Montgomery further illustrates how new energy partnerships may emerge from ongoing instability in order to decrease dependence on Middle Eastern resources. Finally, he considers the conflict’s implications on U.S. domestic prices, industries such as aviation and shipping, and how it may influence the upcoming 2026 midterm elections.
Tselikov: Professor Montgomery, thank you for agreeing to participate in this interview. The Middle East has been central to the global economy due to its natural resources. How has this conflict reshaped global oil supply expectations? Montgomery: I’m very glad to be here and have this opportunity to talk about current events in the energy world. It’s a very important time. Though we can talk about some of the impacts, of course, the future will take care of those. In terms of the Middle East and its centrality to the global economy, it hasn’t been as central as I think a lot of people feel, for quite a while. It kind of lost its control over oil prices several times, but particularly after the price collapse in 2014. That was due to the shale revolution in the United States, which had few limits on its production growth, and wound up flooding the global market, driving the price down, and taking away a significant amount of market share from OPEC. And OPEC has never really regained it, even though a couple of years later it teamed up with Russia and about nine other oil suppliers to create OPEC+ and try to seize back control of the market. In the meantime, the U.S. has become a larger exporter of both oil and gas, and the world’s largest producer of both those resources. So, OPEC is important for sure, but compared to its market share, which was close to 50% in the early 1970s, a little bit after the first oil crisis, it’s now well below 40%, somewhere around 36-38%. And the U.S. is not far behind—it’s in the 20s, about 25% or so, but that’s large enough to offset OPEC trying to manipulate things. The problem now, of course, is that OPEC is large enough, its major suppliers are in the Persian Gulf, and the Persian Gulf is closed. So, this is having a major impact on the global economy, and it is putting OPEC back at the center. The U.S. cannot compensate for all of this. OPEC again is—I would say—crucially important, but not for reasons of its own choosing. How this will play out is not clear. I think I can say one thing that is very interesting about this conflict—at least, it is to a number of experts. Iran was never really taken seriously in terms of its many threats, its repeated threats, for more than 30 or 40 years, to close the Strait of Hormuz, because it was always going to be in its economic self-interest not to do this. But that has proven to be naïve. Iran is managing this by allowing its own tankers to go through and those of its allies, since a Russian tanker went through there today. So, this seems to be a new era; it is an interesting example of a country that is able to use its energy geography as a weapon. And not just as a threat, but as an actual weapon that causes great damage. This continues a pattern that has happened in the 21st century much more. Russia using its natural gas connection with Europe to try to manipulate and weaken Europe before its invasion of Ukraine is another example of using the energy weapon to actually cause damage rather than just a threat. No one ever thought Russia was going to do that because Europe was its largest customer. It had the great majority of the export share from Russia, both in oil and gas, but also coal, and a number of minerals. But Russia did this—and then Europe used its import power to try to eliminate Russia as a supplier. And so, importers have power too—we kind of forget that. They can use the energy weapon also, and Europe has certainly done that against Russia. Now, the other aspect to deploying energy as a hard power weapon has certainly played out in the Russia-Ukraine War, where each side—though losing thousands of combat soldiers at the front —is really targeting with its missiles and drones the energy infrastructure on both sides. So this is an era when energy is not just a threat, it doesn’t just increase a risk premium; it increases a hard power premium, an actual attack—energy use for violence between states. A new weapon that is being used in military combat. So, this is all quite interesting. Tselikov: Many countries in the Persian Gulf have been hit by Iranian airstrikes and have otherwise suffered from the conflict. Which countries are most vulnerable to sustained price volatility? Montgomery: Here, we’re talking about oil and gas. This is something new. The price volatility certainly affects Saudi Arabia to a great degree, as well as Bahrain, Kuwait, and Oman to a certain extent. It has a natural gas side that affects Qatar and the UAE in particular—this is a bit more complex. Oil has had a global market for a long time, and there are some regional dimensions to that, but it is a fully global market. Natural gas is still, it seems to me, somewhat transitional between a set of regional markets and a fully global market. So, with a regional market, you have a lot more volatility. And with an oil market, less so. I would say at this point, all these countries are extremely vulnerable to price volatility right now. They are in a situation where they would probably very much like to take advantage of the price volatility, because the volatility is all taking place at price levels much higher than existed before the war. But, they obviously don’t have the option to do that. They are all equally vulnerable, and that’s because oil and gas are equally central to their economies. That has not really changed to a significant degree for a very long time. The Iranian airstrikes have been effective. They have taken out major facilities for Qatar, probably more than any of the other countries. They have shut down its major natural gas port at Ras Laffan, and even portions of the gigantic North Dome/South Pars natural gas field. So I think that Qatar has been hit pretty hard, and the UAE has also. But all of these states are somewhat being brought together by their vulnerability together against Iran. So, this is an interesting situation again. Divide the Persian Gulf one side against the other. I think the U.S. and European countries have been hoping against the entry into military conflict by the Arab states on the Western side of the Gulf, and that seems to have been maintained to this time. But they are hurting, and it is quite serious for them at this point. The great majority of their storage is full, and their supply pathway is cut off. So, they have actually had to turn down the spigots and stop production. Iraq has stopped a fair portion, more than half of its oil production. That’s how serious it is for them—they essentially have to reduce their economic output to a very significant degree. Tselikov: Both Democratic and Republican administrations in recent U.S. history have been prioritizing Asia. Has the conflict forced the U.S. to divert diplomatic or military attention away from other priorities, notably China and the Indo-Pacific? Montgomery: Yes, I think that’s true. That was happening, I think, to a certain degree in any case. Trump was paying a good deal more attention to Europe, and certainly to Venezuela. And then the whole Greenland dust-up, and the problems with NATO. So, I feel as if this has helped shift both political parties to focus more on the Middle East again. China is certainly not out of the picture. It has not gotten the amount of media attention that it has in the past. The Indo-Pacific as a whole is not really a focus for now. Trump is sending people, like his Vice President Vance, to Hungary because of an election there. Their favorite candidate, Mr. Orban, is slated to have a difficult time. So, I think for now, though China is playing a role in the Mideast crisis, the war in Iran has really diverted attention from the White House to that area, and to Europe. Tselikov: How is China positioning itself diplomatically and economically as the conflict unfolds, particularly in its relationships with Iran and Saudi Arabia? Montgomery: That’s a very good question. The answer is, very intelligently. China is doing things rather quietly. It is receiving phone calls and sending messages to Iran, the Saudis and several of the other Persian Gulf nations, as well as to its ally Pakistan. It is setting itself in a position of stability— reassurance that it will not do anything either to support the U.S. or to do anything that would overtly enhance the conflict. Rather, it is going to pursue diplomatic pressures, hopefully [sic] in favor of the Iranians, perhaps even giving the Iranians some advice about how to deal with the U.S. It has a fair bit of experience with that—not all of it good—of course, or successful, but experience nonetheless. This whole situation places the U.S. in the position of being a force against security and against stability in the Middle East. And stability is what the Saudis, the UAE, and the Qataris want most for their region. The war is exactly what they did not want, and were not consulted about. They would prefer to return to stability or to welcome any influence, especially from China, to try to reestablish a more stable set of affairs. China knows this, is sort of exploiting this, but shares that point of view, I think, for the region. This is actually making China look very good, compared to the United States, in this region of the world. I’m not sure that that’s going to change. It looks like a very positive opportunity for the Chinese, in fact. Tselikov: The cost of gasoline has been rising in the U.S. What mechanisms cause geopolitical tension in the Middle East to translate so quickly into higher domestic gasoline prices? Montgomery: Though the United States produces more oil than any other country, it also consumes more. We produce somewhere around 13.6-13.7 million barrels a day, but we consume over 19-20 million, and in the summer, a bit more than that. So, we import between 6 and 7 million barrels a day. That makes us a major importer—and it makes us susceptible to global price changes. In terms of gasoline in the U.S., it’s not only U.S.-produced oil that goes to the refineries, which produce gasoline, diesel, jet fuel, and other fuels. Some of the crude we import from other countries, particularly Canada and Mexico, is more expensive, and so are the fuels that come out of it. That is why we are still vulnerable to price changes on the global market. We are not energy independent. That’s very important; we have never been completely energy independent since well before 1945-1950. And we certainly aren’t now. Tselikov: Due to the global surge of oil prices, may the conflict be said to be benefiting U.S. rivals that heavily rely on oil exports, like Russia and Venezuela? Montgomery: The short answer is, absolutely. It’s not just Russia, though Russia has benefited considerably. That is one reason why Ukraine is firing more missiles, trying to damage more of Russia’s oil and gas infrastructure, and ports. But high prices will benefit any exporter—whether Kazakhstan, Guyana, or Colombia. And certainly Venezuela and the companies that are there should be able to increase production significantly. In the short term, there are some questions about that, but most likely it can to some degree. So, any country that is exporting, or any company that’s exporting, will benefit from these higher prices. It doesn’t mean that they wish they would remain in place for a long time, because there’s a great deal of volatility, as we were discussing before. And it’s hard to have business when the prices are going up and down by 10%, 20%, even 30% on a daily basis—that’s pretty crazy. But, as long as the prices stay above $90, exporters are going to make more money than they did before. Tselikov: Could the conflict reshape global energy alliances and partnerships in ways that favor U.S. rivals? Montgomery: Again, the short answer is yes, possibly with some contingencies. Interestingly, Europe has opened itself up again to some Russian natural gas, after just considering new laws that would require terminating all gas from Russia by next year. Could we call this an alliance? I don’t think so. I’m not sure that Europe is going to accept Mr. Putin’s reassurance that Russia will play nice from now on. But Europe will be looking significantly to other areas of the world than the Persian Gulf. It’s gotten a fair bit of its liquified natural gas (LNG) and some of its oil from there, but it is interested in getting more from the United States. That is a possibility, because the U.S. is definitely ramping up its LNG capabilities on the Gulf Coast. There is some more capacity coming up this year, and there will be a significant amount more coming online in 2027 and 2028. The U.S. will be, by far, the world's largest LNG exporter. No one will come close by the end of this decade. Europe, even though it would like to move away from its dependence on natural gas overall, is realizing that it is proving to be more difficult. And so, it will look to the U.S. as much or more. It will also look at Canada. Canada is itself ramping up building export terminals for LNG, particularly on the Pacific side. So you know, those nasty Canadians up there are competing directly against the U.S. LNG exporters. I don’t think either side resents the other, but Canada sees itself taking a global position. It’s producing more oil and more gas than it has ever before, and is looking to sell those overseas to Asia and to Europe. This is happening also at a time when Australia’s capabilities for LNG have been reduced to a certain degree. Australia was a major player—it still is—but certainly is not in a position like the United States is. Australia is kind of looked at as having mostly maximized its export capacity. Another potential energy alliance would be LNG coming from Mozambique and going to Europe. Also from Guyana, from the north coast of South America, and potentially Venezuela as well. All of those countries have gas export capabilities. We also shouldn’t overlook Israel, of all countries, which was once thought to be the only country in the Middle East that had not been given the blessings of oil and gas riches. But it turns out that’s not the case; they have some significantly large offshore fields. There is a discussion between the EU and Israel about building a pipeline underneath the Mediterranean, possibly to Greece or into Italy to supply Europe. So, there are a number of different shifts that are potentially coming. And with this war in the Persian Gulf, that is probably going to accelerate some of these. There is another potential that I would imagine is being discussed. Actually, there are two others. And they are very important, were they to come to fruition. One of them is a pipeline that goes underneath the Caspian Sea, between Turkmenistan and Azerbaijan. Turkmenistan is one of the gas giants. We don’t hear about it that often, because almost all of its gas is used domestically or goes via pipeline to China. But, it has a significant interest in servicing Europe at a higher price than it’s getting from the Chinese. That would be a significant amount of natural gas, and it would compete directly against the U.S. But that could be quite significant—that gas would go through an existing pipeline from Azerbaijan across Anatolia into Europe. Turkey might be able to get a certain amount from that as well. So, that’s a different alliance there. The other one, which has been talked about for quite a while, started, stopped, restarted, and is now in a somewhat holding pattern because of the conflict between Pakistan and India more recently, and Pakistan and Afghanistan very recently. And that is the Turkmenistan, Afghanistan, Pakistan, India, or TAPI, pipeline, that runs from Turkmenistan all the way into India, with the other countries being able to gain a bit of natural gas supply from this pipeline. So, what’s happening in the Middle East, is that going to accelerate this? That’s hard to say. Pakistan has a great need for natural gas. Pakistan is one of the countries that is most directly affected, both in oil and petroleum products, as well as natural gas. This might urge Pakistan to be ready to make deals with its Afghan and Indian neighbors about this. We’ll have to see—the geopolitics of energy in Central and South Asia are extraordinarily complex and dynamic. Not that they aren’t anywhere else, but this is a situation that could help all four of those countries. So, there are many possibilities for new alliances. Tselikov: Several sectors of the U.S. economy are heavily reliant upon oil to keep functioning, like shipping, aviation, and manufacturing. Which ones, in your view, are most exposed to prolonged energy instability? Montgomery: I would place them in the order of aviation, shipping, and then manufacturing. Aviation is suffering, and passing its suffering along to those of us who want to fly. Jet fuel prices are through the roof—they’ve probably increased more than almost anything, and that’s true around the world. Pretty much everywhere except in Russia. That's very serious, and when we talk about aviation, we’re not just talking about airlines and those of us who fly, but the industry where a lot of commercial transport and a lot of trade takes place, a lot of delivery, and the moving of goods within countries as well. Aviation is actually quite important. Now, shipping is kind of being caught at a very interesting moment. Marine transport is experimenting globally with a number of other materials to replace what is called bunker fuel, which is a very thick, carbon-rich type of refined petroleum. It has been used for many decades; the alternatives to that range from natural gas to ammonia and even to nuclear power. All of these are being tried at the moment, and some are proving more affordable than others, but the economics are not the same between natural gas and nuclear. Natural gas is obviously subject to a lot of price volatility now—nuclear would be expensive compared to the others to install, but it would last for a very long time without any need for refueling. Perhaps even for the life of a ship; most ships have a 15-18 year life. A nuclear microreactor could use fuel, according to some of the designs, for somewhere between 7 and 12 years, without the need for refueling. These are what is being tried in marine shipping. This is being done not just to save money or to save emissions, but it is being forced on the industry by ports that have now put new air pollution standards in place, particularly of particulate matter that comes out of heavy petroleum fuels. Ports are actually driving a fair bit of this. The U.S. has tried to resist this and tried to keep oil as a source. Mr. Trump was actually able to stop an agreement last year by the International Maritime Organization to impose new standards on ships, which dealt with new particulate matter, nitrogen, and volatile organic compounds exhaust. So that is yet to be done, but it will happen for shipping. Manufacturing is a different kind of animal, because a lot of manufacturing has shifted to gas, and more now is trying to electrify. The other two are oil-based manufacturing, which uses more natural gas, and manufacturing in China and in India, which are really its centers, where they’re using coal a lot more than they’re using gas. So these are very different sectors of industry altogether. Probably the most vulnerable of all is aviation, as I said—and I don’t think that’s going to change. Tselikov: How is instability from this conflict likely going to affect election outcomes, especially the approaching 2026 midterm elections? Montgomery: Well, signs right now are not good for the Republicans, that’s for sure. It’s not good for them even within the party. The party seems to be quite divided over this, including among Trump supporters. He made very strong promises to keep the U.S. out of exactly this kind of conflict. We’re in the sixth week of it. It’s not going to be a forever conflict, but it’s certainly not a short one. We are well beyond that. We haven’t suffered an enormous number of casualties, but people are thinking about the cost of this and the cost to replace it. And they are not necessarily going to be very favorably inclined if this is not resolved in some favorable way for the United States. And frankly, I don’t see any way that Trump is going to find a way out of this that makes him look like he’s a superhero, or even a hero. Now, is it necessarily good for the Democrats? Not necessarily; it depends on how they handle this. But a lot will depend on how this is resolved, if it is. If it continues for another month, it's definitely going to be a hangover until the elections. If it continues only for a few more weeks, it would depend on what other things happen between now and election time. Because we know there aren’t going to be months that go past without some kind of other event. So, it is tough to make predictions, especially about the future, as the famous catcher Yogi Berra said. But it sure doesn't look great for the Republicans at this point. Tselikov: Professor Montgomery, thank you again for agreeing to participate in this interview. Nick Tselikov is a Research Fellow at the Rainier Institute for Foreign Affairs and a former Marcellus Policy Fellow with the John Quincy Adams Society.
0 Comments
Leave a Reply. |