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Hedgeye Energy Policy analyst Joe McMonigle joined Daryl Jones to tackle some of the most important questions facing energy investors today in our 22nd episode of In The Arena

Daryl jumped right in by asking Joe, "What do you see as the single greatest risk to oil markets right now"?

Joe held nothing back and detailed the current geo-political risk, "The attack on the oil processing facility in Saudi Arabia really awakened the geopolitical risk factor. I still think it’s not fully priced in yet. I think there's a lot of my more risk to be had in the oil market as a result of that middle East conflict."

Topics Joe and Daryl covered in this insightful and somewhat alarming conversation included:

  • Geopolitical Risks: Iran’s maximum chaos theory
  • Aramco IPO: the “deal of the century”, delays, and valuations
  • U.S. Energy Policy: impacts from the Presidency, fracking ban, and stock competitiveness 

 Click here to download the iTunes version of In the Arena.

Below is a key excerpt from Joe on the current Iranian policies. 

"The Iranians have decided...they're going to do this maximum chaos strategy. And that started with these tanker attacks in the Strait of Hormuz, it started with a drone attack on pipeline in Saudi Arabia that really did not inflict that much damage and again, were blamed on Houthi rebels. And now it is really escalated to the drone and cruise missile attack not just Saudi Arabia’s biggest oil processing facility, it's the world's biggest oil processing facility. And essentially the strategy is this, Iran feels number one, that Trump does not want a military confrontation and doesn't want a war so if they keep ratcheting up the military confrontation, they're hoping he will blink and ease sanctions.


The other thing - by going after oil the dual advantage is they go after Saudi Arabia who is not only an archenemy, but who they see as taking their market share. The Saudis are the only ones who could make up for the million barrels or so that have come off the market from Iran. And also they're trying to get oil prices higher because they see oil prices as something that could hurt Trump politically. Those are the dual goals of the maximum chaos policy. I think Iran is really misjudging Trump on both those points. I think he obviously doesn't want a military conflict, but he's not going to turn his back on it if necessary and Iran is starting to make it necessary."

Here is a brief look at the potential impact from a Presidential policy shift on the energy markets.

"I mean it would be a complete night and day shift, if we go from Trump to a democratic president. Essentially all of the candidates, have come out with fracking bans. The majority of them are opposed to fracking…You could imagine how much U.S. production would come offline if there was the fracking ban in the U.S. because that's really where all the growth of the U.S. production is. The U.S. is now the number one producer in the world and about half to more than half is now a result of U.S. shale and hydraulic fracturing and that's just the oil side. Of course it's going on in and natural gas as well. And so it would have a huge impact on economics, on companies, on shareholders, on U.S. energy security competitiveness."

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