Energy, supply chains, data centres, and the world in a pressure cooker. Where is the release valve?

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The still quiet last week of August, when city dwellers only begin their slow return to repopulate deserted Paris, makes the global context seem almost surreal in contrast. The context of two wars, an energy crisis, the writing of economic and financial trouble on the wall, intensifying social and political tensions, an AI disruption speeding along, and climate change stress makes the world look like a giant pressure cooker, its release valve nowhere to be found.

What is certain is that September, which arrives next week, starts a packed agenda, with energy, climate, and policy events, parliamentary elections in Russia, the US midterms in November, and a number of major policy decisions expected. Chances are most in those rooms will be looking for the same release valve, and many will be selling their version of it.

This edition of the Situation Room is thus written to help you hit the ground running with an assessment of the global factors that set the temperature and shape the narratives around your operations. For source material, I reviewed almost 70 short-listed stories across major global and Eurasian news sources.

Before we get into it though, I have a very exciting thing to share about the new offer we've been cooking up during the summer, and it's ready to come out of the oven.

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On to the context brief.

1. Energy and the industrial supply chain security is deteriorating with at least three vectors of impact, and none of them have tactical fixes.

Taken one at a time, each of these is a difficult but manageable operational problem, but the combination has no playbook. We are inside chaos theory play, where the variables are both hard to predict and impossible to control, so the best strategy is vigilance, flexibility, and being prepared for different combinations of outcomes.

Vector 1: Physical disruptions

Two wars damaged infrastructure and reduced supply flow and access

The Russia-Ukraine war continues to widen to civilian economic targets deep inside each country’s territory. Russia signalled openness to discussions this week through official channels, but Ukraine may be betting on escalating its pressure tactics to force Russia to negotiate in a weakened position (Reuters). The only observable reality is that as attacks and counter-attacks escalate, the level of aggression that feels acceptable is also unfortunately continuing to grow.

Caspian Pipeline Consortium shipments fell 7.4% in the first half, to 33.3mn tonnes from 36mn a year earlier, and July drone attacks cut loadings by more than 20% (Türkiye Today). The Sheskharis terminal at the port of Novorossiysk suspended crude loading for three days in mid-August after storage filled up.

The escalation also runs through global food supply. Ukraine struck all three grain terminals at Novorossiysk, which handle more than 40% of Russian grain exports. Russia has hit Ukrainian Black Sea ports and sunk vessels bound for Odessa. The two countries hold 27% of global wheat exports, and prices are already more than 25% above 2025, with the most exposed countries in the Middle East and North Africa. Economically, the grain export impact is more painful in Ukraine where it constitutes a larger share of income. (FT)

Putin was quoted saying that Kyiv opened “Pandora’s box” and should expect the response to target its most sensitive economic sectors (Reuters).

On the Iran stage the war has moved from military to economic and threats last week without de-escalating. Washington declared an economic warfare operation, the UAE has cut all economic ties after missiles reached its waters (Bloomberg), and Iranian crude exports have fallen to 294,000 b/d in August from 1.7mn b/d last year (Reuters). Iran is not without its leverage, with a border that runs 5,500 kilometres across seven neighbours, rail links to Russia are expanding, and China still buying more than 80% of the crude Iran manages to get onto the water. It appears that Tehran has put hardliners into the top security posts and is setting terms for reopening Hormuz that Washington cannot accept.

The hardliners are making wider threats. Tehran has assessed strikes on US assets in Bulgaria and Cyprus, and on the subsea fibre-optic cables running through the strait (FT). A small UK peaker plant was taken down for four days through its programmable logic controllers by Iran-linked hackers, who hit water infrastructure across twelve US states at the same time (FT).

The energy supply access problem this creates is now structural rather than episodic. Hormuz flows have fallen from about 18mn b/d before the conflict to around 2mn b/d in August, although there are disputes about numbers, and with ships going dark, these are difficult to verify. The point remains that it is still high risk and high cost, even if less constrained for some shipments to get through.

Physical control of ships has become an asset in its own right, which is why Adnoc bought eleven vessels for $1.3bn and why just 29 tankers now account for more than half of all Hormuz transits (FT).

Another chokepoint, the Red Sea is increasingly being avoided, with Asian refiners asking to lift Saudi barrels from the Mediterranean rather than sail the Bab el-Mandeb (Bloomberg). Argus calls it “the single greatest disruption that the shipping market has seen on record”, ahead of both the pandemic and Russia sanctions (FT).

Energy infrastructure normalised as the war and threat target

This is the element that changed character this year. In both theatres, energy infrastructure has stopped being collateral and become the primary target.

Zaporizhzhia nuclear station in Ukraine lost external power when a 330kV line was cut and switched to backup diesel (RBC). Romania scrambled F-16s to destroy an explosive marine drone a few hundred metres from Neptun Deep, the field due to make Romania the EU’s largest gas producer in 2027 (Reuters). Kuwait’s national oil company is still working out of temporary premises after its headquarters was hit (Bloomberg).

This is a new operating risk line item that energy companies may need to consider much more routinely than they’d like.

Climate and heatwave impacts on grids, generation assets and waterways

Cernavoda nuclear station in Romania, which supplies about a fifth of the country’s electricity, is still shut on historically low Danube levels, with emergency measures now approved to get it cooling again (Reuters).

The Panama Canal is becoming another chokepoint, but due to climate, as it cuts daily transits from 36 to 32 on 15 September because of El Niño drought, after having already forced ships to lighten loads (FT).

Rhine barge rates, meaning the cost of hiring the flat-bottomed vessels that carry cargo up the river into Germany’s industrial heartland, are at their highest since 2012, because when the water drops each barge carries less and the price per tonne climbs (FT). Ukraine’s ability to redirect grain to Danube ports is limited this year for the same reason.

On the grid side, the problem is no longer only peak demand. Extreme heat makes every part of the system less efficient, so air conditioners, transmission lines and power plants all lose performance when the grid must meet the highest demand. Hot nights matter more than hot days, because equipment needs the overnight cooling to avoid overheating (Axios). Local distribution networks and transformers are the most exposed, which means more redundancy and more spare kit sitting in storage, and that costs money.

The mild spring and autumn windows when plants normally go offline for maintenance are also closing towards each other, shifting at about 2.4 days per decade in Texas, and are projected to converge on December and January by the mid-2040s. This raises the cost of operation and capital for the grids just to adapt to the weather, until technologies adapt.

Vector 2: Economic disruptions and affordability

Brent crude oil price sits around $90 a barrel, while European diesel is up more than 70% since February and the US diesel margin set a record above $102 a barrel (Reuters). Gulf to Asia oil freight hit $15.22 a barrel, the highest since assessments began. Container rates from the Far East to the US East Coast are up 234% year on year (FT).

More than a fifth of the Middle East’s 9.6mn b/d of refining capacity is out, with more than twenty Gulf refineries needing repairs, Russian throughput is down nearly 30%, and US distillate stocks are at their lowest for the time of year since 1996 (Reuters). These are behind the fuels price hikes.

Petrochemicals are continuing to get more squeezed too, as Russian refiners are pulling aromatics out of the petrochemical stream and into petrol blending, which has pushed phenol to record prices and left wood-processing plants close to shutdown. Moscow is now weighing an export ban on benzene, phenol, toluene and xylenes to keep them at home (Kommersant). Russia’s diesel export ban already runs through January. And when refining goes short, the chemical chain goes with it.

Meanwhile, Africa’s prolific Dangote raised $400mn ahead of a $2bn IPO to double capacity to 1.4mn b/d and is offering East African states 30% of a planned Kenyan refinery (Bloomberg). Against that, western refining is still forecast to shrink around 20% in Europe and 7% in the US over a decade, despite the best margins in living memory (FT).

Vector 3: Electricity infrastructure planning and deployment lagging new demand and the integration of new supply

This one is a planning and market design failure rather than an event, which is why it is often misattributed and will last longer.

Transmission constraint costs on the US PJM, the grid serving 67 million people, nearly tripled to $6bn in the first half of the year, an increase that exceeded the rise in gas fuel costs over the same period. Average wholesale power went from $51.75 to $72.54 per MWh (Reuters). The bottleneck is wires, not generation.

The mineral inputs for building the new energies supply, meaning renewables and batteries, have also become geopolitical. Washington is actively working to bridge the gap with China, who dominates the global minerals supply chain. It is buying up equity, guaranteeing floor prices and taking positions: a 15% Pentagon stake in MP Materials, a ten-year floor of $110 per kg on neodymium-praseodymium, around $40bn in provisional funding since 2022, another $500mn in grants this week across lithium, cobalt and battery recycling (FT, Reuters).

The EU has committed about €6bn this year and designated 75 strategic projects, but the European Court of Auditors warned in February that many were unlikely to deliver in time for the bloc’s 2030 targets. As one lawyer advising European rare earth projects put it, “in 18 months, they’ve certainly done more deals than Europe has done in the past decade” (FT). A European buyer diversifying away from China increasingly ends up dependent on the US instead.

Worth noting that oil and gas producers are entering this space, with Saudi Aramco and Maaden announcing a joint venture that covers around 182,000 square kilometres, roughly a tenth of Saudi Arabia, and runs on ninety years of proprietary geological data (Anadolu).

And there is now a competing bidder for the same materials, the army.

Massive militarisation and military technology buildup have become normalised to the extent that military drones are competing with energy systems for battery supply chains. LG Energy Solution, which had historically treated defence the way consumer companies treat tobacco, is in talks to supply batteries for US military drones, and has already repurposed five of its eight North American plants from vehicles to storage. Its North America president told the US interior secretary that America should reduce its battery dependence the way it worked to reduce its dependence on Middle East oil (Bloomberg).

2. The global energy crisis fuels risk in a fragile and already flammable global economy with its overheated financial markets, and the reverse is also true.

At the producer end, Qatar, the world’s second-largest LNG exporter, has cut departmental budgets by up to 30% and overseas aid by around 85%, against an IMF forecast of an 8.6% contraction. Lost export revenue is running at $1.5bn to $2bn a week across Qatar and Kuwait (FT).

At the consumer end, US inflation ran at 3.4% in July with energy up 14.7%, and euro-zone inflation reached 2.9% with energy up 10% (Reuters). The economy this lands on was already distressed. Troubled loans at the largest private credit funds are at levels last seen in 2017, when the industry was working through an oil price crash, and defaults set a record in July (FT). Energy did not cause that. But energy inflation hurts everyone, and it hurts a weakened economy hardest, which is the same economy that energy depends on for demand and for investment.

High energy costs are continuing to squeeze European industry out. Kazakh polypropylene exports to the EU surged by 67% in the first seven months of the year while local producers cut back (Bioplastics News).

The economy and energy interplay have always been tightly joined, so for anyone raising capital or renegotiating terms in H2, look beyond the $90 Brent and war-driven squeeze margins.

3. Data centres continue to be the main driver of electricity demand growth in the global north, while public opposition is increasing. Europe, where the publics are arguably much less tolerant to visible industry in their backyard, is underestimating this vector in its ambitions for attracting data centre investment.

Sixty planned US hyperscale sites could generate 101.5mn tonnes of CO2 a year, an FT investigation found, equivalent to about 7% of US power-sector emissions last year. Three-quarters of the utilities serving them are building new gas, and a third of those running coal are delaying retirements. Data centres now account for around 55% of utility load forecasts over the next five years (FT). As one clean energy consultant put it, “when demand spikes, utilities turn towards their easy button, which has always been adding new gas generation.”

There are two main grievances that the data centres face today: environmental and economic.

On the emissions, big tech companies made bold net zero promises, pre GenAI, which quickly became elusive post-GenAI, and no new narrative has arrived yet to clarify this situation. Despite renewables credits, which means paying for renewables generating electricity somewhere, emissions of Amazon’s were up 16% year on year, Microsoft’s up 25%, and Alphabet’s adjusted measure up 18%.

On the cost showing up on bills, while it is less the weight of any individual load, and more a transmission and system design problem, with paying for renewables integration as part of that, the optics make it easy to point the finger in this direction.

The trouble is that “it isn’t us” or “we are working on it” has never worked as a public argument, however true, and it gives all kinds of ammunition to the critics to craft their messaging and evidence for the narrative that goes public.

That gap is closeable, and there is still time to close it, but the time is running out quickly.

4. Nobody gets the public right and that’s the industry’s biggest strategic opportunity and the possible current number one blind spot.

The one thing on this list you can meaningfully change.

I won’t be breaking any news here by repeating that the public has been feeling frustrated and increasingly angry at the systems of power and influence that it perceives to be responsible for its hardening life. That is to simply say, people are feeling pretty mad, and when we feel mad, we like to have someone to be mad at.

Costs of living and ordinary affordability issues are creating tensions for people who feel helpless, and there will always be forces who will tap into this emotion to channel it against a “common enemy.”

In my own experience working with public affairs and strategy teams, it is the “public” offices not the true public that is meant, and for good measure. You are constantly trying to keep up with the policies and regulations and ensure that you are engaged in what’s coming, so your company may have a say, or at least be informed in advance to comply. So, when I say a blind spot, I really mean it in the capacity allocation sense. We can’t be everywhere, and so we prioritise the most direct authority that can regulate us out of business.

But most policy is still answerable to the public, because it is the public that elects or fires its leaders and authors of the policies, and even in the most authoritarian regimes a basic level of public support is necessary to function. So, raising the priority of public opinion in the energy and industrial boardrooms matters in a much more quantifiable way than as a CSR checkbox. It is a longer game, but the one that is worth it.

This is a lesson that oil and gas has learned again and again, and one that technology companies are learning the hard way now as they are facing mounting public opposition, which quickly translates to political moves and campaign promises.

5. The net-zero narrative has failed the physical reality test when push came to shove, and self-interest in survival has changed global actions, but the narrative hasn’t caught up yet.

This is a serious problem, because it means that strained economies and societies are being forced to drive in all directions, and there is a misalignment between stated purposes and actions.

A UK government elected on a commitment to issue no new North Sea exploration licences is expected to consent to Rosebank and Jackdaw within weeks, with officials describing the approach as less dogmatic since the energy file changed hands. Oil and gas still meet about 75% of British primary energy. At the same time, a US administration that has obstructed more than 150 onshore wind projects is presiding over a record 45GW of clean energy additions, up about a quarter on last year’s record, because solar breaks even near $38/MWh against at least $48 for gas and can be built in under two years (FT).

Then we are seeing how the supply diversification agenda is changing investment risk appetites and putting cash behind it. ExxonMobil has revived Rovuma LNG, a roughly $30bn plant in Mozambique’s north-eastern Cabo Delgado province, awarding about $1.1bn in pre-investment contracts for equipment. Work had been on hold since Islamist militants killed 800 people in the nearby town of Palma in 2021. The contracts were signed weeks after a UN special rapporteur visited the province and reported that a military solution “does not appear imminent” and that the frequency, severity and spread of attacks on civilians had worsened over the past year. Rovuma will produce roughly 18mn tonnes a year, about the same as Exxon’s Golden Pass plant in Texas, and the final investment decision is due at the end of this year (FT).

In other upstream developments news, Libya is seeking $30bn to $40bn while drones hit its Zawiya refinery and UN experts describe armed groups exerting control over the national oil company. Venezuela signed with SLB and Hunt. Continental and Mercuria are putting $4bn into Vaca Muerta (FT, Bloomberg).

In Russia, Gazprom and Lukoil announced that they will start up the Layavozhskoye field this year in the Nenets Autonomous Okrug, inside the Arctic zone, with a second Lukoil field, Komandishor, beginning oil production in September. Layavozhskoye and the neighbouring Vaneyvisskoye hold combined recoverable reserves of 27.4mn tonnes of liquids and 225.3bn cubic metres of gas, with a production plateau of up to 10bn cubic metres a year and total investment of around 200bn roubles. Gazprom won the licences in 2016. Only 34% of the region’s oil reserves and 2% of its gas have been developed (Interfax).

Cash is pouring into diversifying supply sources, and in the spirit of the time, risk tolerance to serious security threats appears reduced. Yet companies are still being measured against a story that no longer describes what anyone is doing, including their critics.

So, is there a release valve?

Not a single one that fixes everything and turns chaos to order, and not in September. No one company can solve for so many global systemic challenges at once. But you can prepare for combinations, stay flexible, look farther ahead.

The worst thing about chaos is that it’s unpredictable, and the best thing about chaos is that it’s unpredictable. The best thing is then to surf the wave and know how to act if it knocks you down, but still enjoy the ride.

And also take the one lever genuinely in reach. The public is the pressure most in the industry treat as weather, while today, it is every bit strategy. It is the biggest influencer of what the policy does next.

The Select Stories We Reviewed

Wars, infrastructure and chokepoints

• Putin says Ukraine opened 'Pandora's box' with strikes on economic targets, Reuters, 22 Aug

• Russia is ready for new ideas on Ukraine peace, but with conditions, senior diplomat says, Reuters, 21 Aug

• Global food security may be collateral in Ukraine war, Financial Times, 19 Aug

• Внешнее питание Запорожской АЭС было отключено из-за повреждения линии (External power supply to Zaporizhzhia NPP was cut off due to a damaged line), rbc.ru, 23 Aug

• Romania destroys marine drone near Neptun Deep gas project, minister says, Reuters, 20 Aug

• CPC oil shipments fall 7.4% in first half of 2026 amid Black Sea escalation, turkiyetoday.com, 23 Aug

• Iran eyes military targets in Europe if Donald Trump escalates war, insiders say, Financial Times, 19 Aug

• Iran says new sanctions threatened by 'desperate' US will fail, Reuters, 23 Aug

• Trump threatens to isolate Iran. Who are its trading partners?, Reuters, 20 Aug

• Choking Iran's Economy Is the Least Bad Way to End the War, Bloomberg, 20 Aug

• Trump Says US Starting 'Economic Warfare' Operation Against Iran, Bloomberg, 20 Aug

• UAE Cuts Economic Ties With Iran After Missiles Target Territory, Bloomberg, 19 Aug

• Lebanon Flare-Up and Gaza Strikes Dent Mideast Peace Prospects, Bloomberg, 17 Aug

• On Front Line of Iran War, Kuwait Digs In for a Familiar Fight, Bloomberg, 20 Aug

• UK energy companies on alert after 'Iran-linked hackers' shut down 'peaker' plant, Financial Times, 23 Aug

• Trump Takes Hard Line on Iran as Hormuz Standoff Drags On, Bloomberg, 18 Aug

• Two Chinese Supertankers U-Turn in Hormuz as Risks Remain High, Bloomberg, 19 Aug

• Iran grants permission for a number of Iraqi oil tankers to pass through Hormuz, Reuters, 22 Aug

• Demand for tankers soars as Gulf oil producers search for ways to export cargoes, Financial Times, 20 Aug

• Oil Supertanker Earnings on Mideast Route Near $510,000 a Day, Bloomberg, 18 Aug

• Asian Refiners Ask to Pick Up Saudi Oil Outside Risky Red Sea, Bloomberg, 17 Aug

• War and climate change drive surge in global shipping costs, Financial Times, 17 Aug

• Panama Canal to cut daily transits as El Niño grips region, Financial Times, 21 Aug

• Romania adopts new measures to boost Danube waters to cool Cernavoda nuclear plant, Reuters, 22 Aug

• Why the U.S. grid's extreme heat problem is changing, Axios, 19 Aug

Prices and refined products

• Oil market starts pricing in a prolonged Hormuz crisis, Reuters, 18 Aug

• The Iran war energy crisis is just getting started, Reuters, 20 Aug

• US diesel crack surpasses $100 a barrel for the first time on supply disruptions, Reuters, 17 Aug

• US, Indian fuel exporters profiting from supply uncertainty during wars, Reuters, 19 Aug

• China boosts imports of Russian crude, stymieing India's refiners, Reuters, 20 Aug

• Бензол берут в кольцо, kommersant.ru, 18 Aug

• Transcript: Why the energy crisis won't save western oil refineries, Financial Times, 21 Aug

• Dangote Offers East Africa Nations 30% Stake in New Refinery, Bloomberg, 21 Aug

• Dangote Refinery Secures $400 Million Ahead of Planned IPO, Bloomberg, 18 Aug

• Grid, minerals and new supply

• Largest US grid's transmission constraint costs surge to $6 billion in 2026, Reuters, 21 Aug

• EU slips further behind US in race for critical minerals, Financial Times, 22 Aug

• EXCLUSIVE: Trump administration to back US minerals projects with $500 million in grants, Reuters, 20 Aug

• US-Backed Group Weighs $500 Million Tanzania Nickel Investment, Bloomberg, 20 Aug

• Saudi Aramco and Maaden inks deal for mining in Saudi Arabia, aa.com.tr, 23 Aug

• South Korea's LG Energy in Talks With US for Drone Batteries, Bloomberg, 19 Aug

Economy and markets

• Qatar cuts state spending at home and abroad as war shrinks economy, Financial Times, 22 Aug

• Libyan Protests Flare as Government Struggles to Keep Lights On, Bloomberg, 19 Aug

• Private credit under strain as troubled loans swell, Financial Times, 17 Aug

• Kazakhstan PP Exports to EU Surge 67% as EU Producers Struggle, bioplasticsnews.com, 21 Aug

Data centres and nuclear

• Big Tech's data centre boom poised to drive up carbon emissions, Financial Times, 16 Aug

• Data centres drive Ireland to reopen nuclear power debate, Financial Times, 23 Aug

• The little reactors that could? How SMRs became nuclear's best bet, Reuters, 19 Aug

• На строящийся атомный ледокол "Ленинград" установили реакторы, tass.ru, 23 Aug

Transition, capital and China

• Andy Burnham faces climate test over North Sea oil decision, Financial Times, 17 Aug

• Trump tried to curb clean energy. It's booming anyway, Financial Times, 19 Aug

• Let there be sunlight: Vatican plans solar and agriculture plant to cover its electricity needs, Reuters, 22 Aug

• ExxonMobil advances Mozambique gas project despite terrorist threat, Financial Times, 17 Aug

• Libya seeks up to $40bn to develop oil resources, Financial Times, 18 Aug

• India's reliance on Russian oil hits all-time high, Financial Times, 23 Aug

• Donald Trump proposed reviving the Keystone XL pipeline. Does Canada still want it?, Financial Times, 20 Aug

• Harold Hamm launches multibillion-dollar plan to drill Argentine shale, Financial Times, 20 Aug

• Venezuela Signs Deals With SLB, Hunt in Push to Boost Oil Output, Bloomberg, 19 Aug

• "Газпром" и "ЛУКОЙЛ" готовят запуск Лаявожского месторождения в НАО, interfax.ru, 17 Aug

• China's energy strategy vindicated by Iran war, Financial Times, 17 Aug

• Chinese Refiners Snap Up Iraqi Oil as More Supplies Exit Hormuz, Bloomberg, 20 Aug

Public and reputation

• Shell Loses Five-Year Legal Fight With South African Activists, Bloomberg, 14 Aug

• Germany Revoked 'Suspicious' Carbon Credits Sold to ExxonMobil, Bloomberg, 21 Aug

• Vitol Won Exclusive Fuel Deals to Dominate Africa, at a Cost, Bloomberg, 17 Aug

Also on the radar

• Don't dismiss the mini-middle powers, Financial Times, 16 Aug

• Mauritius signs agreements to import oil products from India, Reuters, 20 Aug

• Iran says it discovered over 7.5 trillion cubic feet of gas, Reuters, 23 Aug

• Япония резко сократила закупки СПГ и угля у России, itek.ru, 20 Aug

• Дисконты на российскую нефть в августе снизились, itek.ru, 17 Aug

If you are looking to go deeper and determine your positioning, engagement, or develop communication in any of these moving topics, let's chat. Book a free call below, or send us an email.