Why Japan Needs a US Alliance

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The Japanese have looked into their crystal ball and figured out that a close relationship with the Americans is the only way forward. Before Japan is welcomed in with open arms, they’ll have to prove their worth…

Between trade issues, economic challenges, and demographic crisis, it makes sense that Japan wants to join the AUKUS group (a defense focused coalition made up of the US, the UK, and Australia).

Japan has some big changes to make. While their naval capabilities are solid, they have to make the cultural and political shift toward taking a more active role for themselves and their region. They also lack real world combat experience and have plenty of cybersecurity concerns to overcome. I wouldn’t expect to see the green light anytime soon, but eventual collaboration looks to be in the cards.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody. Peter zeihan here coming to you from Colorado. Today we’re going to talk about the recent batch of up to up meetings between the Japanese and the Americans. In mid-April, we had a very large number of contacts up to and including Japanese Prime Minister Kushida, as well as, US President Biden. at issue is the Japanese are angling for a much closer relationship. 

So the back story Japan in the 80s up until the 80s was a huge trade country, but then they had a demographic bomb and a debt crisis at the same time. And over the next 30 years, their competitiveness basically tanked. And so they spent the next 30 years. I don’t want to say gutting, but changing the way their industrial processes worked with as much of the manufacturing as possible. 

Closer to the end, consumers in countries that didn’t face a demographic bomb. And in doing so, they went from one of the most trade weighted heavy countries in the world to one of the least involved with today, only about 10 to 15% of GDP based on where you draw the line. comes from international trade in any meaningful way. 

Toyota says, you know, we build where we sell, and that has basically become the national motto. Now, that requires a degree of openness in the country that you’re trying to sell it. And so when the Japanese over the last 20 years saw the United States becoming more and more isolationist when it came to its economic issues, they’re like, wow, we need to we need to get ahead of this. 

So they reached out to none other than Donald Trump and cut a trade deal from the Japanese point of view, was borderline humiliating. But they knew that that was the price to pay for a long term strategic and economic relationship. And in the aftermath of Trump’s fall, the leadership of Japan has been to the United States to make it clear to Joe Biden that unlike a lot of the other countries that signed trade deals with the Trump administration, Japan wasn’t looking for any changes. 

Something that the Biden administration greatly appreciated anyway. So with that in your back pocket, we can now talk about the relationship moving forward. specifically, the Japanese are angling for membership in a group called Aukus, which is Australia, the United Kingdom and the United States, countries that are now pooling parts of the defense budget. And a lot of the defense technology to build a new generation of weapons. 

the Australian specifically will get out of this nuclear attack subs and medium range air launch cruise missiles, which are, you know, very blimey. And it will tighten what is basically already one of the the tightest security relationships among any three countries in the world. the Japanese would like to get into that. and if you look at what the primary concerns of the anchor steel is China, you can see how that would be a really, really nice fit. 

  

but it’s not going to happen in the near term. Three problems. Number one, culture after World War two, when the Japanese were recovering from those twin atomic blasts. The Japanese made the very serious and probably very correct decision that we never want to be in a position again where we might even theoretically, be on the wrong side of the United States. 

So we have to have a Navy. We’re an island country. We don’t have a good land network because it’s so mountainous. We have to have a navy just for, normal commerce, maritime for us anyway. And so we’re going to have a naval force. And even today, the Japanese are the second most powerful navy in the world. 

But we have to make sure that that’s cast in a way that will never make the Americans ever blink, that we might be anything other than an ally that does as it’s told. that worked during the Cold War, that worked in the post-Cold War era. But it’s not going to work now, because if the Japanese are going to be part of an alliance with the Australians, the Brits and the Americans, then they need to take some initiative on themselves. 

They need to patrol their own zones. They need to contribute to the greater whole. And that requires a lot more aggressiveness, and especially a culture of having a military that is not looked down on. Basically, in Japan until recently, if you went into the military because people thought that you couldn’t do anything else. that needs to change, because the Japanese do have one of the most technologically advanced systems in the world. 

So, number one, culture cringe. number two. Experience. Part of being a pacifist. No matter what your equipment looks load looks like means that you don’t shoot. And so, since 1945, the Japanese functionally have had no combat experience. And this is going to sound really weird. The war on terror for a lot of countries was an opportunity to get experience interfacing with the United States and get limited combat experience on an issue that, for them was not really top tier. 

So, you know, if something went disastrous, there might be some political fallout, especially with the Americans. But it’s not like Japan would face a threat to the home islands from Al-Qaeda. Well, now that the Americans have wrapped up the war on terror, that opportunity, if that’s the right word, is gone. And the Japanese, if they want to look around and get some practice, you know, you got the Russians and the Chinese, but if there’s a fight with them that is not small scale, that does not have a low risk. 

so it’s not clear how. Aside from drilling, drilling, drilling, drilling with your own forces, with the Americans, with Australia, it’s not clear how they can get that experience before they get to a real fight. The third problem, luckily, is something that is a little bit more short term and a little easier to fix, and that’s cybersecurity. If you are a pacifist and if you believe that military activity is passé. 

Well, you don’t really worry about your information control. And I would argue that aside from the Chinese, where a lot of cryptography is functionally illegal, so the government can hack its own population. The Japanese people are probably the most hacked people on the planet. That’s got to change if they’re going to be part of any sort of deep information and technical sharing, because nobody wants to develop a new nuclear submarine. 

Share the plans with the Japanese and you see it on TikTok the next day. Luckily, there’s plenty of ways to get experience combating that, and I have no doubt that the Japanese are already working on multiple cylinders in order to get that experience built up. But still, that’s not something you do in three months or six months, or nine months or 12 months. 

It’s also your process. So will this happen in some version? I think almost guaranteed. But the question is how fast can the Japanese make? The changes are going to be necessary so that the rest of their would be allies are willing to trust them? That’s not the case here. 

America’s Nuclear Supply Chain

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Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

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We’re finally seeing signs of life in Congress with the recent progress made on the establishment of a domestic uranium supply chain. This move aims to cut dependence on the Russians – who dominate global uranium processing.

This will be easier said than done though. Much of the nuclear infrastructure in the US is outdated and will need to be modernized in order to ensure a steady fuel supply. We’ll likely have to call in some favors from others who are already in the process of developing their own domestic supply system, like Canada and Australia.

This new development coming out of Congress is a step in the right direction and begins to address two major concerns facing the US: energy and national security.

Prefer to read the transcript? Click here

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey, everybody. Peter Zeihan coming to you from Colorado. the news at the moment is that late last week, we finally got the first functional laws through committee. and actually getting action on the congressional floors for building out a domestic uranium supply chain system. the idea is that if we can refine enough fuel to enrich enough fuel, being the technical term, we will be able to cut the Russians out of the mix. 

It’s all together. the Russians are the world’s single largest producer of enriched uranium. and they are responsible for nearly half of the global market in about one quarter of ours. the process is you take raw uranium from somewhere with Kazakhstan being the single biggest player and the Australians being the biggest up and comers. You then spin it up so that the fissile component makes up somewhere between 3 and 5.5% of the mix. 

You take that enriched uranium and build it into a fuel rod that eventually ends up in a nuclear power reactor. the issue that we have is peace. Ironically, at the end of the Cold War, the Americans and the Russians were left with literally tens of thousands of nuclear weapons. And we collectively decided that we were going to get rid of them. 

So the question was, what do you do with all the enriched uranium that is in a bomb? Now, the enriched uranium that’s at a bomb is at 3 to 6% enriched. It’s like 90 to 95% enriched because you want it to go kaboom. And so we basically spend that stuff down instead of up and used it to make fuel rods going from the other direction. 

Well, you do that for 25 years, which is what it took to get rid of all those weapons. And there really wasn’t much of an economic impetus for any company in the United States to do the more normal type of and other enrichment, up from uranium ore. So we basically stopped doing it altogether in the United States. It was only in places like Russia or China where was a national security issue. 

to build the stuff up, where they kept producing it. And so now we have to rebuild an enrichment system, at the civilian level. And that’s what these new laws are about now. right now, nuclear power provides about 20% of the American electricity mix. I think we’ve got 95 reactors out right there right now. the issue is we there’s only so much flexibility in that system because with a couple of exceptions, all of this reactors are more than 40 years old. 

Most of them are 50 years old. Actually, Three Mile Island was that 1973 or 1970 that I can’t remember anyway. They all predate Three Mile Island, except with two exceptions. so the idea that you can really update these things to more modern technology, and there’s not a lot of modern technology to do. So we have to go back to the old system to keep these online. 

  

on the upside. everyone has seen this coming, and they’ve been stockpiling for some time, so we probably have about two years of fuel supply here in the United States for a reactor system. And that should be plenty of time to basically replicate technology that dates back to the 50s. in order to build a domestic supply system. 

And we’ll also be getting some help from the Canadians and the Australians who are in the process of building out their own system for very similar reasons. So this Congress, while it has been difficult for it to do anything, has seemingly found an issue that is both energy related and national security related and seems to be actually progressing forward. 

So, you know, one miracle at a time. But I take my good news where I can’t these days take care. 

The State of Global Energy Webinar & The New Chinese Carriers

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Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

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The newest Chinese aircraft carrier, the Fujian, has officially hit the seas. This a major development for the Chinese Navy, but still falls short when compared to with advanced counterparts (i.e. the US).

The Fujian is intended to be a test bed, meaning the Chinese will throw all of their tech onto it and see what works. Which means we’re still a ways out from seeing an actual combat vessel hit the water.

Despite all the “advancements” we’re seeing on the Fujian, the Chinese still opted out of the nuclear power option. So with a limited range and no intention of ever seeing combat, the Fujian doesn’t drastically alter my forecast for China’s naval capabilities.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey, everybody. Peter Zeihan here, coming to you from Colorado. for those of you been watching me for a while, you know that every once in a while I do a webinar on a topic of the moment, and we’re going to be doing that again this coming Friday, May 10th, at noon eastern, which, of course, if I get the timezones right would be 11 a.m. central, 10 a.m. mountain and 9 a.m. Pacific. 

That’d be about 45 minutes of going through all the crazy that we’ve seen in the energy markets going back to the end of Covid, explaining why we are where we are now and what to expect over the next 12 to 24 months. I’ll be going for about 45 minutes, and then we’ll have ample time for Q&A at the end, so you can sign up via the link that is attached to this email or this Twitter feed. 

And I hope to see everyone there. Morning, everybody. Peter, I’m here coming to you from Phenix, Arizona. taking an entry from the Ask Peter series today. specifically, the Chinese have just floated their third aircraft carrier, the Fujian. And does this change my general assessment that the Chinese navy is kind of a joke? maybe a little, let’s give you the backdrop. 

Okay. So the United States has been engaged in carrier aviation for over a century at this point, and we have ten ships of the Nimitz class, which are the super carriers, which are typically considered the gold standard in terms of their operational capability, their nuclear powered, the carrier of dozens of fighters and fighter bombers each and their capacity, to operate around the world is unlimited and unparalleled. 

in addition, these are now the old ships. The United States is in the process of floating a new type of carrier called the Ford class, which is bigger, has more speed, has more carrying capacity and can strike faster and maintain more sorties at the same time and get them out faster. In comparison, most of the world’s other carriers are very limited. 

the Brits are in the process of trying to get two super carriers very, very loosely modeled after of the American. Nimitz is in operation right now. The Japanese have converted two things that we call helicopter destroyers into medium sized carriers. And then there’s a huge drop to everybody else. So, for example, the French do have the Charles de Gaulle, which is technically a super carrier, but it has a hard time generating enough power to get up to speed to launch fighters unless the weather is absolutely perfect. 

And then there’s another huge drop to everybody else, like, say, the ties with the Indians. The Chinese are kind of in the middle, well below the Japanese, well below the Brits. they have three carriers now. The first one is actually an old Soviet carrier that was built in the 80s, but it was never completed. And then it rusted in a Ukrainian port for a decade, where the Ukrainians basically stripped it for metals, and then it got towed to China and sold and eventually rechristened as the. 

 sorry, I can’t remember the name. it was originally the patriotic, and no one in China, who is in the military, especially who’s in the Navy, will ever consider that that vessel’s anything other than a test of China’s ability to just comprehend what carrier aviation is. It is never, never, never, never intended to see combat in any form. 

The second Chinese carrier is a clone of that first one. That’s the on, and it, again, isn’t all that great. it is just a clone of an old Soviet model. And it was the Chinese attempt to see if they could take 1970s technology that did not work very well and bring it into the modern age a little bit. 

Most of the parts are the same, but they have put in some things like new avionics and sensors. And again, no one in the Chinese Navy would consider it a combat vessel. It’s a test vessel. The new one that we have, the Fujian, is their first domestically designed one. and that means that it’s certainly better and uses more current technology. 

But again, the Chinese navy is not talking about this thing as a combat vessel. It is a test bed. Think of it like for those of you who like the Navy stuff, think of it like the enterprise, not the USS enterprise of the United Federation plan, as in Star Trek. No to know the American carrier enterprise, which was designed as a test bed for a whole host of new technologies. 

This is China’s first attempt to build something that actually floats and theoretically down the road could see combat. But this isn’t the one that would do it. This would be in theory, if everything works out perfectly, which will take them years to figure out, this would be the model that other carriers would then be built on. So yes, the Chinese have three carriers. 

Yes, they are taking steps forward in their operations constructions, but they’re coming from a century behind and they still very honest with themselves here, are not claiming that any of these are combat vehicles. one more thing to keep in mind. The Fujian, the new one is a nuclear powered. So you’ve got an 80,000 ton vehicle that still has to burn fuel, which means that its range is sharply limited, and it can’t go much further than most of the rest of the Chinese navy, which is largely limited to operating within a thousand miles of the Chinese coast. 

So is this significant? Sure. And if they keep up their current pace, they will be able to have a carrier that can stand up to an American carrier that’s 50 years old in the next decade or two. Not something that changes my forecast all that much. 

Warfare Innovations: Russia’s Turtle Tanks

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Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

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The Russians are playing dress up with their tanks and it might reveal where the future of military conflict is heading. Okay, “dress up” might not be the right term, but just google a picture of the Russian turtle tanks to get an idea of what I’m talking about.

These tanks are being equipped with heavy armor to defend against the drone attacks that have become popular in the Ukraine War. This innovation reflects a larger shift in warfare strategies, as countries like Ukraine have had to come up with new (and cheaper) ways of striking targets.

Innovations like the turtle tanks are a great example of the adaptations in modern warfare. However, as aid and support hit Ukraine, we’ll likely see a new round of innovations emerge onto the scene.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody. Peter Zeihan here. Coming to you from snowy Colorado. Today we’re going to talk about a military, innovation on the Russian side of the Ukraine war. You guys may have seen some of the videos and the photos, but they have something that’s now called a turtle tank, where they take a tank and they put it in this turtle like shell of armor that covers the entire thing. 

to the point that the turret can’t even rotate. the idea is to make it relatively drone proof. it looks silly. And obviously some of the earlier iterations were destroyed quickly. but the Russians have continued to innovate it because they need it. It’s serving a very real battlefield purpose. So perhaps because of what happened with the U.S. Congress, it’s been months since the Ukrainians have gotten meaningful military assistance from the United States. 

And in that sort of environment, they’ve been forced to go kind of a do it yourself program. and so instead of relying on more traditional things like tanks and missiles, long range drones and artillery, they basically can cranking out thousands, tens of thousands of anti-personnel drones that only weigh a couple pounds, every month. And while one of those is probably not going to take out a tank, you know, a couple that get to the right spot can maybe damage or tread and immobilize a vehicle and then allow other methods to go in and take it out. 

Well, in that same sort of environment, if they don’t have a lot of artillery, then the Russians can mass forces and make big pushes into Ukrainian positions. The turtle tank is a way for the Russians of dealing with both of those issues. So if there isn’t a lot of artillery, then the tanks can be in clusters with infantry and get a lot closer to the Ukrainian positions more or less safely. 

and then by putting all this shell of armor on it, the anti-personnel mines can’t damage the treads. No matter how many you throw at it, you’re still might be some gaps in the armor because, you know, you have to be able to see. But, it’s a much different situation where the Ukrainians would have to throw two or 3 or 400 things at one tank in order to stop it, as opposed to just a half a dozen before. 

In addition, the Russians are putting protection on the bottom of the tank so they can serve as kind of slapdash, mind clearing devices as well. So the idea is you take a couple these turtle tanks and push directly into Ukrainian positions, going right through the mines that the Ukrainians have dropped, basically ignoring the anti-personnel drones that’s getting thrown at them. 

  

And then behind those tanks, you have vehicles that are carrying infantry. So it’s designed to basically provide direct access to the Ukrainian positions. And all the while, the Russians are hitting these Ukrainian positions with artillery and glide bombs. So it’s not a stupid strategy at all. the question is whether it is sustainable, whether it’s going to be necessary in the future. 

A couple things to keep in mind here. We are kind of in a position like we were in the U.S Civil War with a whole new raft of military technology is becoming available, and we’re seeing how they do and do not mesh with the technologies. Oh, we already had. So regardless of what you think of either side of the Ukraine war, studying how both sides are adapting to this new reality is something that is going to educate us all on the nature of military conflict moving forward. 

So this is a big deal. And what the Russians are doing is they’re basically inventing a new style of warfare, whether or not this specific type of weapon system is going to last. probably not. The only reason that the turtle tank is viable is because Ukrainians don’t have artillery. And now that the US Congress has finally acted and weapons systems are being flown in at most, most, first and foremost, including a lot of artillery shells. 

You should expect things like this to just be lit up as targets, very soon. So this specific weapon system might not be the harbinger of things to come, but it’s certainly representative of a whole class of weapons systems that are going to be invented from scratch or during the remainder of this war. 

The TikTok Ban Is (Almost) Here…One Year Later

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A little over a year ago, we discussed a potential ban on TikTok in the US. Well, President Biden finally signed the “Protecting Americans from Foreign Adversary Controlled Applications Act”, which would ban TikTok or force its parent company, ByteDance, to sell it.

You can bet that TikTok won’t go down without a fight, so we’ll probably still be talking about this a year from now…but the video below is a little reminder about why I’m not torn about this ban.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
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Power Outages in Texas and Growing Energy Demands

The Webinar – The State of Global Energy – is only 10 days away!

Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

Please join us on Friday, May 10th at 12:00 PM EST.

CLICK HERE TO REGISTER FOR THE WEBINAR

Over the weekend, some Texans had a not-so-friendly reminder that their power grid doesn’t work well under stress. This is just one of many outages and electricity challenges that Texas will face in the coming years.

There’s 3 main things contributing to the state’s energy grid issues: climate change, population growth, and industrial regeneration. Some of these are bit easier to track than others, but Texas must carefully navigate each of them to keep up with demand.

As energy demands grow, the Texas grid will have to expand significantly to keep up. That means we can expect plenty of regulatory and infrastructure changes coming down the pipe.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
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TranscripT

Hey, everybody. Peter Zeihan here, coming to you from Colorado. we’re going to talk today about Texas because back on the 28th, on Sunday, the, electricity regulator of Texas called Ercot warned that there could be rolling brown and blackouts on the 29th of April. their concern was that temperatures were already expected to nudge up above 90 degrees in some parts of central and southern Texas. 

Now, at the end of the day, it wasn’t too bad. We just had a few sparks and brownouts here and there. The issue here is twofold. First, the one I can’t do anything about, and that’s climate change as Texas is getting warmer, as the population is expanding and people are moving into warmer and warmer areas. you’re seeing more pressure on the system writ large. 

electricity systems can transmit as much power when it’s hot. In addition, things like water cooling systems for, say, nuclear power plants don’t work as efficiently. So hot actually doesn’t just mean demand goes up. It means sometimes supply can go down. The other problem is more industrial, and it’s going to become a bigger and bigger and bigger problem moving forward at a much faster rate than anything the climate change does. 

as the Chinese and the European systems crack. the United States is going to have to enter in a period of extreme industrial regeneration. Now, we’ve already started that. We’ve seen industrial construction spending in the United States expand by a factor of ten in just the last five years, and Texas has been an outsized beneficiary of that. 

But the bottom line is this if you’re going to add a lot of industry and manufacturing, you’re going to be moving metal and forging materials and doing a lot of stamping. And all of those are really electricity intensive. It’s not that we don’t use more electricity as we get into things like server farms, but it’s nothing compared. What happens when you forge and move stuff. 

So I estimate that the United States needs to roughly double the size of its industrial plant. And just from that, we need 50% more electricity. Well, in the case of Texas, you got a triple bind here. You’ve got the energy transition, which is more electricity dependent. You’ve got a population explosion as people move to Texas because it’s a cheaper place to live. 

There’s no taxes. Land is cheap. food is cheap. Electricity until recently was cheap. And so you’ve got just a broad spectrum demand build and then the manufacturing renaissance on top of that. So I would estimate that the Texans need to actually double the size of their grid, preferably within the next 10 to 15 years, that we have never had that kind of build out before. 

Now, there is a problem here in addition to just the sheer numbers involved, and that is the regulatory structure of Texas. It is separated from the rest of the national grid. It regulates itself, and connections between Texas and the rest of the country are very slim. So when Texas enters into a period of abject shortage, the only solution for it is to overhaul its regulatory structure, to bring in new power systems, or to link up to the rest of the grid, which means some federal regulation will come into play. 

The Texans really don’t want to do option B. The problem with option A is if the Texans are have to change their ideology of power management. Right now, the way Ercot regulates the space is you can only charge the rate payers money four times when a power plant is actually operational. Well, that sounds kind of obvious. The problem here is when you deal with situations like, say, peak demand in the evening, you have to bring in a lot of peaker plants. 

When you’re looking at solar systems. if you’re going to bring them on line, they only generate during the day. So what Texas has done partially for ideological reasons, is to penalize, companies that build systems that are not used all the time. Thing is, when you get into surge demand situations, that just means the grid goes down and that is an entire model that they are going to have to reimagine. 

Now, people will, of course, point to California as a counterpoint, and I’m not saying that Californians have figured it out either. California’s decided to go whole hog into the green transition and pull out all the coal out of their system, and now as much natural gas as they possibly can. And they’re starting to make some crazy claims about having a largely carbon free grid. 

And it is a lie. The Californians are really bad at math. basically every time the sun goes down, you know, every day they turn on this 11 gigawatt capacity cluster of lines that connects Los Angeles to, the Arizona border. And every a bed of electrons that are coming in from Arizona is fossil fuel driven, primarily natural gas and coal. 

overall, California imports over one third of its electricity. They just don’t include that data in the math. So it’s not that California has really gotten green. It’s a California has simply outsourced its carbon emissions. Both California and Texas, I would argue, are now operating on a model that is failing, and both of them need to get overhauled. 

Texas, however, is the one where this is going to be a desperate issue because no one is really thinking, oh, I’m going to build a manufacturing plant just outside San Jose. No no no no no no no. All that sort of stuff happens in Texas. So the demand to build is going to be explosive. And it’s going to force the Texans to make some uncomfortable decisions and some very large investments very soon.