The Current - Is the oil crisis irreversible?

Episode Date: May 7, 2026

Dr. Fatih Birol, the Executive Director of the International Energy Agency, has been advising world leaders through this historic crisis, but he recently said that this one will have "permanent consequences."

This week on two blocks from the White House, we're talking about a Supreme Court decision that could have a big impact on American elections. The decision narrows, some argue guts the Voting Rights Act of 1965, and it's expected to lead to a major redrawing of electoral maps. Join me, Paul Hunter, and my fellow Washington correspondence, Katie Simpson and Willie Lowry, as we break down U.S. politics from a Canadian perspective. Find and follow two blocks from the White House, wherever you get your podcasts, and watch us on YouTube. This is a CBC podcast. Hello, I'm Matt Galloway, and this is the current podcast. They want to make a deal badly, and we'll see if we get there. If we get there, they can't have nuclear weapons.

You know, it's very simple. If we left right now around, it would take them 20 years to rebuild. You would call that we're in good shape, right? Fantastic. We're in good shape. Now we're doing well. Now we have to get what we have to get. If we don't do that, we'll have to go a big step further.

But with that being said, they want to make a deal. We've had very good talks over the last 24 hours, and it's very possible that we'll make a deal. It's U.S. President Donald Trump yesterday signaling a possible end to the Iran war, but there is a lot of confusion still as to when that war might actually end. Iran says it's reviewing a new U.S. peace proposal. This comes as the United States pauses the so-called Project Freedom, a military operation to move ships through the Strait of Hormuz. Greg Carlstrom is the Middle East correspondent for the economist. He's in Riyadh, Saudi Arabia, Greg, hello. Good to be with you, Matt.

Good to have you back on the program. You have said there does seem to be some progress on these issues. Are we any closer to an end to this war? I don't think we're closer to an end. I think we're closer to yet another agreement to keep talking about a final agreement. If you'll recall the ceasefire that was implemented a month ago, that was meant to be a two-week deal during which time America and Iran would talk about a 10-point proposal for ending the war. Now they're talking about 30 days of negotiations over a 14-point proposal to end the war. So nothing is resolved yet. They have, I think, both been willing to compromise a bit on some of the issues, like the idea of a time-bound moratorium on uranium enrichment for Iran.

That's a compromise from America's initial demand, which was a permanent ban, and Iran's insistence that it wouldn't accept any ban at all. So they've moved a bit, but there are still a lot of details that need to be resolved, and I don't think we're any closer to working those out. Donald Trump says the Iranians want an agreement and they want peace. The Iranians, the Foreign Policy Commission called the Memorandum of Understanding, such as it is an American wish list, not reality. So what do we know about how this is unfolding in Iran?

Parts of it do sound like a wish list. For example, another item supposedly in this MOU has to do with Iran's stockpile of highly enriched uranium. Trump keeps insisting that Iran will hand that over to the U.S. It will export its uranium to the United States. The Iranians have refused that demand consistently for many, many months now. And when Trump started bringing this up around the time the ceasefire was announced, the Iranians were furious about the suggestion that they had already agreed to it. So on that issue, on a number of other issues, the Iranians are not willing to make significant concessions.

And I think there's a difference of opinion in Iran where there are some officials who think this is their moment to take the military leverage they've accumulated over the past two months and translate that into a deal that supplies extensive sanctions relief. There are other more hardline officials who are arguing, you know, no deal with the Americans is going to be stable. And so maybe we should continue the war for a while and impose more pain. And as this is unfolding, you have Beirut yesterday, which was hit by an Israeli air strike at the first time since the ceasefire in Lebanon in April. Is that ceasefire still in place? I mean, that ceasefire is looking a lot like the ceasefire in Gaza that took hold in October or the previous ceasefire in Lebanon, both of which Israel routinely violated.

And unless the Americans tell Israel to stop doing that, then it probably will continue to do so. Broadly, it is still in place. I mean, this was a one-off event and it was newsworthy because it hasn't happened since the ceasefire took hold. And there are still diplomatic efforts to try and get maybe the Lebanese president to meet with the Israeli prime minister and try to get them towards some sort of broader agreement. Those efforts not advancing as quickly as many people would like. So for now, yes, broadly the deal is holding, but it's the same sort of very whole-ridden deal that we've seen in other wars over the past few years. We're going to be speaking in just a moment with the head of the International Energy Agency. Donald Trump has said that the spike in oil prices, in his words, a small price to pay for victory in Iran.

That price seems to be climbing, though. You were posting on social media this morning about something that a lot of people are thinking about. and that is the price of jet fuel and the availability of jet fuel. What sort of pressure is this going to put on Donald Trump to try to figure out, you have the World Cup coming, you have summer coming, to try to figure out a way to end this war? I mean, you would think the political pressure is enormous at this point. Gasoline is now more than $4.50 a gallon in the U.S.

It may very well hit $5 a gallon by Memorial Day later this month. Then you have jet fuel, as you mentioned, where, Airfare prices in the U.S. are up about 20 percent compared to last year and continue to climb. All of this very bad for Trump as we head towards the midterms in November. And I think the hope that that might sort of quickly turn around. We've heard various administration officials express that hope. I don't place much stock in that. I think even if they reach a sort of framework understanding with the Iranians in the coming days,

it's not going to be a permanent end to the war. And so oil and gas companies in the Gulf are going to be reluctant to restart production. Shipping companies might be reluctant to send tankers back to the region because everyone will be afraid that the war is going to resume at some point, that further talks will fall apart and the war will resume. So I think the political pressure on Trump from high energy prices will continue to mount. Greg, it's good to speak with you as always. Thank you very much for this. Thank you, Matt. Greg Carlstrom is the Middle East correspondent for the economist.

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Until then, keep on ranging. As he mentioned, this war continues to wreak havoc on global energy supplies. Gas prices have hit their highest level in years. Jet fuel is in short supply. Some experts say it could take years for things to get back to how they were if they ever do. Fatibirol is executive director of the International Energy Agency, and he's with me in our Toronto studio. Good morning.

Good to have you here. You have called this war. between the United States, Israel, and Iran, the biggest energy security threat in history. How bad could it get? So I call this the biggest energy crisis in the history because of the following reason. When we look at the last 50, 60 years, we had three major energy crisis, 1973 oil crisis, 1979 oil crisis. And after the Russia's invasion of Ukraine in Europe, we had a major natural gas crisis.

crisis. The amount of oil and gas we lost in these, all these three crises, if you put it together, is much less than the oil and gas we lost in this current crisis. So this is the major biggest crisis of energy. Plus, it is not only energy. The amount of fertilizers, petrochemicals, sulfur, the helium flowing from this very state of energy. Hormus is interrupted and this will have devastating implications especially for the developing countries and we will find out more and more how important they are for our daily economic businesses. I want to talk about some of the concerns that people have here but what are you most worried about? To be honest with I worried about many consequences of this crisis but mainly the impact on the emerging and developing countries that import a lot of energy fertilizers and their financial muscles are much weaker than the developed advanced economies. I am more worried about them.

Here in Canada, people can see, for example, the escalating price of gas because you can go past the gas station and you can see the number goes up and up and up. How much higher can that climb, do you think? You have said in some ways that Canada has been insulated from the oil shock thus far, but it will be your daily issue soon, is what you. you told Tim Hodgson, the energy minister. Yeah. So this is a global energy crisis.

Some countries are affected more than the others. You are less affected than the others. But as it stands now, no country, but no country is immune to this crisis. Through different ways, if you leave the energy aside, the direct gas prices, oil prices, the impact it is going to have on the global economy will affect everybody. In fact, if Canada is an exporting country, if your potential clients are weaker in terms of economy, they will need less commodities, less imports from Canada. So it will affect everybody.

And if the conflict is not resolved sometime soon, the impacts will be felt in a daily basis much, much more pronounced than we have now. You got a lot of attention when last month you warned that by the end of this month, you could see shortages of jet fuel. You already have airlines that are canceling tens of thousands of flights. Summer is on the horizon. As I mentioned, the World Cup is coming to the United States and Canada and Mexico. And people fly for business.

People fly to move things around. What can you tell people about jet fuel? Will planes take off this summer? So first of all about the World Cup, football is half of my life. So I hope World Cup still goes ahead. jet fuel Europe is mostly Europe is affected

because Europe normally imports about 75% of its jet fuel from Middle East and rest from China and India and even China and India have export restrictions today for jet fuel and Europe is trying to make it up from additional imports

from United States and Nigeria but these are not real solutions It is the reason I said Europe has six to eight months of time in terms of jet fuel availability. Otherwise, we will see significant problems. I said it, I think, a month ago or so. And today in Europe, the Lufthansa, Kaelim, the Scandinavian Airlines and Ryanair, they all said that they are reducing significantly their flights. And if the state of formants is not open, if we don't see refineries exporting jet fuel,

we may see a problem because not only the supply, the production is less, but when we come to summer in Europe and most of the world, the jet fuel demand increased by about 50% compared to March or April. One of the things that Craig Carlstrom just said is that you have producers and those who are moving fuel through the Strait of Hormuz who will be reluctant to put their ships into the straight if it's not guaranteed that peace is going to hold. How concerned are you about that? That even this memorandum of understanding to stop the war, such as it is, may not be worth much because people don't feel secure enough to put their infrastructure, their

ships into the danger. I think I don't want to enter the daily politics of this war, but you are completely right. If the ship owners are not fully convinced that their ships can sail without any single problem, then it will be difficult to have the same level of transportation in the state as we had before the conflict. So how long is it going to take for things to get back to normal? In some cases, it can take only a few weeks, but in some cases it can take much longer.

For example, Saudi Arabia can fix the problem, if I may say so, much earlier than country of Iraq, which is much less. technical and financial capacity. So it will be different in different cases. But to get back to normal, if we say before the conflict, it would take a lot of time to go back to that level. You just said that you don't want to get into the daily politics of this. But the daily politics is what is determining this.

The Strait of Hormuz was open before this war began. I remember very well. It was open. And now it is not open. And I don't want to go between the countries, they are discussing, but I look at the consequences, consequences especially for the developing world can be catastrophic. If you remember the 1970s oil crisis, for example, it had major implications for many

developing countries, the foreign debt spiral they fell into a major recession in those countries we have seen. So how do you understand what the United States and Israel have done here? So I have no idea why it started, how it started, and how it is going. going to end, but what I can tell you, for the energy world, it is going to open a completely new chapter, and I believe the global energy map will be redroven after what happened, because state of Hormuz was providing a big chunk of oil and gas to the world. And there was always a question, can it be close? It is a theoretical thing or not. Now it is done. The vase is broken. So people will

look at alternative suppliers, alternative routes, alternative technologies, and alternative countries they import energy in the future. You're looking at Canada for some of that. You told the Globe and Mail, when I look at the world, the energy-hungry world, it needs Canada more than ever, and I believe Canada also needs the world. What do you want to see from Canada in this moment? I mean, many of the commodities we are talking now, oil, gas, and the others are... Fertilizer?

Fertilizer. They are scarce. but what is more scarce is the trust. When in the future, when countries make energy trade, buying LNG, buying nuclear power, buying oil or whatever, they will not only look how much does it cost this agreement, this contract, but they will look in the long term, this country that I am going to import energy.

Is it a reliable partner, or could it be a problem for me in the future to have a reliance on this country? Do you think Canada? And I think Canada is a very good candidate. What Canada has is trust and reliability. And I believe as such, Canada may well position itself as a major reliable energy exporter in terms of the LNG, in terms of nuclear power, critical minerals, and all of these energy sources. You spoke this week with the Prime Minister, Mark Carney.

You also spoke with the Federal Energy Minister Tim Hodgson. spoke with Tim Hodgson last month on this program. Have a listen to what he said to us. What we found is our allies are desperate for a reliable, predictable, rules-based provider of energy. They all look at Canada as a solution to a very challenging world right now. That's an opportunity for Canada to step up in the world. That's an opportunity for Canada to lead. And it's an opportunity for us to strengthen our security. Do you believe the Canada should build a new pipeline to move oil? It is Canadians to decide.

But do you believe, given what you've just said. I believe the world at this stage now where we are, the world needs Canadian energy badly because Canada will not use energy as a political weapon and I don't think that it will happen in the future and it's a reliable country. The only question I have about Canada is the following. You have a multi-layer governance system here, and you want to hear all the voices in the community, which I admire and I like very much.

But I really hope that this will not be a barrier in terms of making decisions very quickly. Both prime minister and the minister themselves assure me that they want to make very quick decisions, go ahead without compromising the standards, Canada has, which is very important, because what I believe is that after this crisis over, many countries will review their energy strategies, their energy partners in the next three, four years of time. Very important decisions will be made, strategic decisions will be made,

and Canada should be there ready to position itself as a reliable major energy exporter. We just have a couple of minutes left. I just wonder where this moment that we're in, leaves the issue of a changing climate. You have the United States, which is starting to pull out of the International Energy Agency over a dispute around climate change. Donald Trump has said it's a hoax.

You have Canada, which has canceled its EV mandate, pulled back on the consumer price for carbon, but there are also concerns as to whether this country will actually meet the 2050 goal to reach net zero. Have we, in the face of this kind of parked the fight against climate change? Has that been put to the same? side now?

So first of all, United States is a founding member of TIEA. We work very well with all of our member countries, including the United States. Just a few weeks ago, we made a major release of oil stocks and the United States, together with Canada and Europeans and Japan, played a very important role there. As far as the climate change is concerned, you know, what is a very interesting issue. I go to many meetings, international summits and so on. I see that the climate change is sliding down in the international policy agenda, while the number and the intensity of extreme weatherers are increasing.

Wildfires and what have you. Nobody should be the other way around. When this extreme weather events, wildfires or the droughts and everything, when they increase, the policy attention should increase, not the case. However, when I look at the numbers, which is what I do, I see that the renewable energy, nuclear power, electric cars are growing very strongly around the world. And I believe with this crisis, people will look at, of course, they will look at the coal as well in many countries, oil as well, but the renewables, electric cars, nuclear will get an additional boost which will

happy to addressing the emissions issue. I'm really glad to have you here in this moment. It's good to talk to you as always, but here in this moment, as we're trying to figure out a way through this crisis, it's important. Thank you very much. Thank you very much. Fatibirol is Executive Director of the International Energy Agency. He was with me in our Toronto studio. You've been listening to the current podcast.

My name is Matt Galloway. Thanks for listening. I'll talk to you soon. For more CBC podcasts, go to cbc.ca slash podcasts.