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Listen on SpotifySalem’s Lot: Gulf War update; the Purge of senior US military officers; a US fossil fuel reliance fever dream
Good morning. This is Michael Cembalest with an early April 2026 Eye on the Market podcast. This one is called Salem's Lot, and it is a Gulf War update-- some comments on the purge, which I'll explain, and also a US fossil fuel fever dream. Over the last few days, as me and everybody else is reading the news on the Gulf War, including damage to Gulf state infrastructure, extensive damage to some US Army bases, and what now looks like effective Iranian control over the Strait of Hormuz, I thought of Stephen King's novel Salem's Lot. The main character in that book journeys to a town called Jerusalem's Lot, believe it or not, with the best of intentions to fight evil. But things don't quite go according to plan.
The town's eventually burned to the ground. Most of the residents are turned into vampires, and everybody ends up worse than at the beginning. It'll obviously take months, if not years, to evaluate the net result of this particular conflict. But that's just the novel that I thought of right now. Let's get into it.
The president tweeted recently, go get your own oil, which was directed at both Europe and Asia in terms of advocating for them to do more, to reopen the Strait. Rather than get into what the European and Asian reaction function might be, I thought it was more interesting to focus on the notion that get your own oil means that the United States is self-sufficient. And yes, as you can see from this chart here that we have in the piece, in contrast to India and Europe and Japan and China, the US is a net exporter of fossil fuels. When you combine them all as a share of primary energy consumption, the US is a net exporter.
The problem is in global markets, that doesn't shield you from oil and gas shocks nearly as much as you might think. This is building on the work that we did in the last die on the market. But yes, natural gas prices have not risen in the United States, and that's a pretty big deal. The US is a very large producer and marginal exporter.
But look at the rest of the commodity prices here. What we're showing is the commodity price pass-through rate to the US. So for example, jet fuel prices in the US have gone up around 70% of the increases that have taken place internationally, even though the United States is a jet fuel exporter. The pass-through rates for wholesale gasoline, crude oil, propylene, NAFTA, some other petrochemicals, and shipping fuels is over 100%. In other words, for those oil and oil and gas related refined products, prices have increased in the United States by a larger percent than they've increased internationally. And so this really does, I think, put into high relief the limits of the benefits of US energy independence. And that there's only so much of a firewall that accrues to the United States from being a net exporter.
In terms of what's going on in the Middle East, obviously, most reports suggest that Iranian capabilities have been largely degraded. But if you look at the pace of drone and missile attacks on Gulf countries since the middle of March, they're more or less steady. And so whatever those residual capabilities are, they still seem to be roughly unchanged over the last month or so. And in terms of US ammunition deployment, the Operation Epic Fury, which is going on right now, has just surpassed Operation Iraqi Freedom, which was a little over 20 years ago, in terms of tomahawks that have been used. So in this very short period of time, the United States has used a little more than 800 tomahawk missiles, which is roughly four times the amount that's expected to be delivered this year.
And then in terms of some of the things that you read about potential US military offensive operations, whether it's seizing Iran's enriched uranium supplies, seizing Kharg Island, seizing Kesm Island, pay attention to the weather. We have a chart in here that looks at peak temperatures in the Gulf by month. And once you get into May, June, July, you're talking about 120, 130-degree temperatures. Weird things happen at those temperature levels.
The Persian Gulf is the world's most thermally extreme marine environment. And once you get to the temperatures you're looking at in June, exposed metal temperatures, which absorb heat, reach 160 degrees. The interior of Army vehicles can reach similar temperatures. Radar and communication systems have documented failure rates around these levels. And you get to a point where the human body can't even cool itself in the shade. So it's quite possible that weather itself will preclude some of these offensive options from being implemented or considered. Once you get through to the end of April or so, and that may be one of the reasons why the administration is reportedly looking for a way to exit.
If the United States does exit, one of the most interesting things from an economic perspective to watch is whether Iran will be able to implement their proposed toll on the Strait of Hormuz. This is the kind of thing that would have been unimaginable before the war began but is now something that's actively being discussed, at least by the Iranians as they're speaking to themselves. One proposal I saw from Iran was that they would charge vessels $2 million each, which would, if you think about 140 vessels per day, 365 days a year, that would amount to $100 billion in revenues.
Now, obviously, that seems preposterous, but think about this. Even if Iran only charged $2 million to the two or 3,000 commercial vessels which are currently stranded in the Gulf, that would raise on its own on that one-time basis $4 to $6 billion, which would match or exceed the annual toll revenues from the largest canals in the world-- Panama Canal, the Suez Canal, the St. Lawrence Seaway, the Bosphorus, and the Dardanelles. We have a little table in the piece that goes through it. So it will be interesting to see whether Iran, at least with respect to the strait, ends up with a more advantageous economic relationship with the world than when it started.
And one of the things to watch-- and the next couple of slides are from a presentation I'll be making an upcoming JPMorgan Defense Conference-- is there have been some pretty substantial changes in US Naval capacity since the 1980s. And we have some charts in here from Johns Hopkins and someone from the Naval War College that shows a sharp decline in warships in the Gulf. And the two charts that are really interesting are, one, adding up all the frigates, cruisers, destroyers and destroyers and something called a littoral combat ship-- L-I-T-TO-R, not L-I-T-E-R, littoral-- and minehunting vessels, both of which have declined pretty sharply. Minehunting vessels have gone from 21 to 4.
And then what's really interesting is the whole category of frigates has been replaced with something called littoral combat ships, which have turned out to be something of a disaster, mechanically unreliable, under-equipped for high-threat environments, unsuited for key missions. Some of the most critical articles I have ever read in the history of analysis of military procurements are articles from all points in the political spectrum criticizing the work that was done and the outcome on these little combat ships. And by the way, those are the ones that also have mind-clearing capabilities that allegedly are going to replace the minehunting vessels that the United States has.
I'm sorry if you can hear the sirens. I live in Brooklyn. It's an unavoidable part of living in this neighborhood.
So anyway, one more thing on this war, and obviously the war in between Russia and Ukraine, is I think we're all beginning to really appreciate and experience this question of asymmetric warfare. And we have a chart in here that shows the range of both missiles and drones, certain categories of missiles and drones, compared to their payload in kilograms and with some data on their unit cost. And what's interesting is that some of these drones now have the same range as tomahawk missiles and cruise missiles and things like that. Now their payloads are much lower, but their costs are even lower than that on a ratio basis, to the point where the unit cost per payload for missiles is a lot higher than for drones.
So all of a sudden, you can contemplate a drone swarm, which can accomplish what missiles can accomplish at a lower effective cost. And it also only takes a small drone swarm to do a lot of damage to port infrastructure. So I thought it was an interesting way of illustrating the changing nature of warfare.
It's hard. When you're analyzing what's going on, there's a drumbeat in the background, which is kind of hard to ignore, which are changes in the Pentagon, and it's not unprecedented. I just want to do a little bit of a history time capsule here because I think it's interesting.
It's not unprecedented for presidents to fire 4 and 5-star military officers. It's very rare, but it does happen. And there are 11 examples that I've found. And other people may find others. But there's 11 examples that I found from the Civil War to 2016. And the reasons that 4 and 5-star military officers get fired tend to fall into two categories-- competence or conduct.
So in terms of competence, you're talking about failed military campaigns. Lincoln, who fires general McClellan after the Battle of Antietam, FDR fires two admirals after the Pearl Harbor disaster-- Admiral Kimmel and Admiral Short. FDR also fires General Fredendall after the Battle of Kasserine Pass in Tunisia. It was the first major engagement between US and axis forces in 1942, and it was a disaster for the US. And then more recently, Obama fires General McKiernan for what the administration perceived as a failed military strategy in Afghanistan. So five instances of 4 and 5-star officers fired for incompetence.
Then you can find around-- I found around six examples of 4 and 5-star officers fired for conduct. What does that mean? Insubordination, public statements disagreeing with the commander-in-chief, something called the article 88 violations under the Uniform Code of Military Justice, intentional or accidental public disclosure of confidential information. So you have FDR firing Admiral Richardson in 1941, when Richardson correctly argued that the US was not ready for war in the Pacific, and who insisted that the fleet return to the mainland.
Patton gets fired due to insubordination. General MacArthur gets fired by Truman for insubordination and essentially disagreeing with Truman's efforts to try to keep the Korean War limited and avoid a shooting war with China. Truman then fired General Denfeld for disagreements over defense cuts. And then more recently, George W. Bush fires General Dugan for disclosing confidential information about Iraq airstrike plans. And then Obama fires General McChrystal for criticizing Vice President Biden and other officials. That shows up in Rolling Stone.
So over 150 years or so, I found 11. In the last 14 months, nine 4 and 5-star generals have been fired. And so I think there's some legitimate questions in terms of where does this end and what does it portend for the future and is something I think that is worth watching. OK, last comment for this podcast.
And it maybe seemed like a strange time to wonder about this, but I had a fossil fuel fever dream about the United States. Now you might say, well, why would you even think at this moment in time about the US reducing its reliance on fossil fuels? The United States just paid $1 billion to a French company to transition its investments in the US from offshore wind to oil and gas, and the EV subsidy ended. And EV sales fell from around 9% of sales to 6% of sales earlier this year.
But given the commodity price shock that we saw in the first-- earlier in this podcast, there are voices that are calling even on the US, despite its energy independence, to try to accelerate the transition away from fossil fuels that to be clear, this is a long road. The United States uses fossil fuels for 85% of its final energy consumption, similar to numbers in places like China, Japan, and India, and even in Europe, which is the world's energy transition leader. Europe is still 75% reliant on fossil fuels. But anyway, let's take a look at what my dream had in it.
So the first thing was a reduction of coal and gas shares of power generation, some pretty large declines. EV is displacing around 30% of the existing combustion engine fleet. EVs replacing around 20% of the internal combustion engine trucks and buses. And then remember, the biggest category of energy consumption in most countries is industrial heating and residential heating and commercial heating.
And so we assume some very big reductions there of 30-40% in fossil fuel based heating in exchange for heat pumps. And heat pumps are very efficient. They can convert one unit of electricity into three to four units of heat. Those are great. And similar ratios-- EVs can convert energy into motion at four to five times the efficiency of an internal combustion engine car. So the efficiencies work in your favor here.
If all of these things happen, all of them, what would that mean for the United States? Well, if all the steps happened, it would result in a 20% decline in fossil fuel consumption, not 50, 20. And so I think it's important to understand the math here. It would result in a 20% decline in fossil fuel consumption and would require wind and solar capacity to triple from current levels. And based on the current build out of wind and solar, that would take anywhere from 10 to 15 years.
Now for a country like the US without a carbon tax at a national level, gasoline tax, and declining renewable subsidies, this seems like a really heavy lift. And I know we're in this kind of anti-renewables moment right now from a political perspective. But the interesting thing about the Iran war is it highlighted the gap between being a net energy exporter and being immune from global oil and gas shocks. And since that relationship was clearly severed at this point, eventually I think the pendulum will swing back to at least a partial re-acceleration of the energy transition, if for no other reason that the United States is importing some fairly large shocks here, which are going to be hurting growth and creating challenges for the Fed with respect to inflation.
OK, thanks for listening. I hope that the war ends as quickly as the administration says that it might. And that by the next time, the market will be back to looking at tech sector multiples and the Fed and health care and some of the other things going on. So thanks for listening, and I'll see you soon.
(DESCRIPTION)
Title card: JP Morgan, Eye on the market. JP Morgan. Presentation. Title card: April 2026, Salem's Lot: Gulf War Update: the Purge of senior US military officers; a US fossil fuel reliance fever dream. Image: A large aircraft carrier emerges through dense fog on the water. A plane with bright lights approaches above the ship. The scene is muted with low visibility and soft gray tones. A video box on the right. Michael Cembalest has short hair, glasses, and wears a dark zip-up jacket. He sits in front of a virtual modern shelf that holds vases, gold decorative items, books, and geometric objects.
(SPEECH)
Good morning. This is Michael Cembalest with an early April 2026 Eye on the Market podcast. This one is called "Salem's Lot", and it is a Gulf War update, some comments on the purge, which I'll explain, and also a US fossil fuel fever dream.
Over
(DESCRIPTION)
Slide. A book cover reads Stephen King and ’Salem’s Lot. A window silhouette reveals figures inside, including a child and a shadowy figure. Text: New York Times bestselling author With an Introduction by Ira Levin.
(SPEECH)
the last few days, as me and everybody else is reading the news on the Gulf War, including damage to Gulf state infrastructure, extensive damage to some US Army bases, and what now looks like effective Iranian control over the Strait of Hormuz, I thought of Stephen King's novel Salem's Lot.
The main character in that book journeys to a town called Jerusalem's Lot, believe it or not, with the best of intentions-- to fight evil. But things don't quite go according to plan. The town's eventually burned to the ground. Most of the residents are turned into vampires. And everybody ends up worse than at the beginning. It'll obviously take months, if not years, to evaluate the net result of this particular conflict. But that's just the novel that I thought of right now.
(DESCRIPTION)
Slide: "Go get your own oil!" and the limits of energy independence.A line chart titled Net imports of fossil fuels as a percent of primary energy consumption tracks trends from nineteen eighty to around twenty twenty. Japan remains the highest net importer, rising above eighty percent and peaking near one hundred percent before slightly declining. India and Europe show moderate import levels, both trending upward over time and fluctuating around forty to sixty percent. China rises from negative values to become a net importer, increasing steadily to around twenty percent. The United States declines from positive import levels to negative values, becoming a net exporter by the end of the period. The chart shows divergence with some regions increasing import dependence while the United States shifts toward export status. Source: Energy Institute, JPMAM, 2025.
(SPEECH)
Let's get into it. The president tweeted recently, go get your own oil, which was directed at both Europe and Asia in terms of advocating for them to do more to reopen the Strait. Rather than get into what the European and Asian reaction function might be, I thought it was more interesting to focus on the notion that "get your own oil" means that the United States is self-sufficient.
And yes, as you can see from this chart here that we have in the piece, in contrast to India and Europe and Japan and China, the US is a net exporter of fossil fuels. When you combine them all as a share of primary energy consumption, the US is a net exporter. The problem is, in global markets that doesn't shield you from oil and gas shocks nearly as much as you might think.
(DESCRIPTION)
Slide: "Go get your own oil!" and the limits of energy independence. A bar chart titled Commodity price pass through rate to the US compares United States year to date percent price change with non United States year to date percent price change. Bars show Shipping fuel at one hundred twenty three percent, Naphtha at one hundred twenty two percent, Propylene at one hundred fourteen percent, Crude oil at one hundred twelve percent, and Wholesale gasoline at one hundred ten percent, all above a dashed reference line at one hundred percent. Lower bars include Benzene at seventy six percent, Urea at seventy six percent, Jet fuel at sixty eight percent, Ethylene at sixty four percent, Methanol at forty nine percent, and Natural gas at zero percent. Source: Bloomberg, JPMAM, April 3, 2026.
(SPEECH)
This is building on the work that we did in the last Eye on the Market. But yes, natural gas prices have not risen in the United States, and that's a pretty big deal. The US is a very large producer and marginal exporter. But look at the rest of the commodity prices here.
What we're showing is the commodity price pass-through rate to the US. So for example, jet fuel prices in the US have gone up around 70% of the increases that have taken place internationally, even though the United States is a jet fuel exporter.
The pass-through rates for wholesale gasoline, crude oil, propylene, NAFTA, some other petrochemicals, and shipping fuels is over 100%. In other words, for those oil and oil and gas related refined products, prices have increased in the United States by a larger percent than they've increased internationally. And so this really does, I think, put into high relief the limits of the benefits of US energy independence, and that there's only so much of a firewall that accrues to the United States from being a net exporter.
(DESCRIPTION)
Slide: Ammunition deployment and defense. A line chart titled Iran attacks on Gulf countries since March 11, 2026 tracks a three day moving average across Bahrain, Saudi Arabia, Kuwait, and UAE. One line labeled Drones rises to a peak near one hundred in mid March, then declines and fluctuates around sixty to eighty. Another line labeled Missiles remains lower, fluctuates between about ten and thirty five, and peaks near the end of March before declining. The chart shows higher and more volatile drone activity compared with consistently lower missile activity. Source: Institute for the Study of War, JPMAM, April 2, 2026.
(SPEECH)
In terms of what's going on in the Middle East, obviously, most reports suggest that Iranian capabilities have been largely degraded. But if you look at the pace of drone and missile attacks on Gulf countries since the middle of March, they're more or less steady. And so whatever those residual capabilities are, they still seem to be roughly unchanged over the last month or so.
(DESCRIPTION)
Slide: Ammunition deployment and defense. A horizontal bar chart titled Tomahawks used in US military campaigns compares Tomahawks expended by the US across operations along an x axis ranging from zero to nine hundred. The longest bar represents Epic Fury 2026 near eight hundred to nine hundred. Iraqi Freedom 2003 reaches around seven hundred to eight hundred. Desert Fox 1998 and Desert Storm 1991 fall between two hundred and four hundred. Noble Anvil 1999 and Odyssey Dawn Libya 2011 appear around one hundred to three hundred. Smaller bars such as Enduring Freedom 2001 and Infinite Reach 1998 fall below one hundred. A dotted bar labeled To be delivered in FY 2026 appears around one hundred to two hundred. The chart shows higher usage in recent major campaigns compared with smaller historical operations. Source: C.S.I.S., March 27, 2026.
(SPEECH)
And in terms of us ammunition deployment, the Operation Epic Fury, which is going on right now, has just surpassed Operation Iraqi Freedom, which was a little over 20 years ago, in terms of tomahawks that have been used. So in this very short period of time, the United States has used a little more than 800 tomahawk missiles, which is roughly four times the amount that's expected to be delivered this year.
(DESCRIPTION)
Slide: Weather and the war, Seizing enriched uranium supplies, Kharg Island and Qeshm Island. A bar chart titled Persian Gulf expected peak temperatures in 2026 shows monthly temperatures in Fahrenheit. Bars rise from April at one hundred eight degrees to a peak in August at one hundred forty degrees, then decline to one hundred twenty five degrees in September. The chart shows a steady increase into extreme summer heat followed by a slight decrease. Source: Climate & Capital Media, WMO, NOAA, USARIEM, WHO, March 2026.
(SPEECH)
And then in terms of some of the things that you read about potential US military offensive operations, whether it's seizing Iran's enriched uranium supplies, seizing Kharg Island, seizing Qeshm Island, pay attention to the weather. We have a chart in here that looks at peak temperatures in the Gulf by month.
And once you get into May, June, July, you're talking about 120, 130 degree peak temperatures. Weird things happen at those temperature levels. The Persian Gulf is the world's most thermally extreme marine environment. And once you get the temperatures you're looking at in June, exposed metal temperatures, which absorb heat and reach 160 degrees, the interior of army vehicles can reach similar temperatures. Radar and communication systems have documented failure rates around these levels.
And you get to a point where the human body can't even cool itself in the shade. So it's quite possible that weather itself will preclude some of these offensive options from being implemented or considered once you get through to the end of April or so. And that may be one of the reasons why the administration is reportedly looking for a way to exit.
(DESCRIPTION)
Slide: Iran's proposed Strait of Hormuz toll.
(SPEECH)
If the United States does exit, one of the most interesting things from an economic perspective to watch is whether Iran will be able to implement their proposed toll on the Strait of Hormuz. This is the kind of thing that would have been unimaginable before the war began, but is now something that's actively being discussed, at least by the Iranians as they're speaking to themselves.
One proposal I saw from Iran was that they would charge vessels $2 million each, which would-- if you think about 140 vessels per day, 365 days a year, that would amount to $100 billion in revenues. Now, obviously, that seems preposterous.
But think about this. Even if Iran only charged $2 million to the 2,000 or 3,000 commercial vessels which are currently stranded in the Gulf, that would raise on its own on that one-time basis $4 to $6 billion, which would match or exceed the annual toll revenues from the largest canals in the world-- Panama Canal, the Suez Canal, the St. Lawrence Seaway, the Bosphorus, and the Dardanelles. We have a little table in the piece that goes through it. So it will be interesting to see whether Iran, at least with respect to the Strait, ends up with a more advantageous economic relationship with the world than when it started.
(DESCRIPTION)
Slide: Changes in US naval capacity. Three bar charts compare United States naval presence over time in the Gulf region. The first chart titled US warships in the Gulf region shows a decline from thirty ships in nineteen eighty six to twelve ships today. The second chart titled US frigates, cruisers, destroyers and littoral combat ships shows a decrease from two hundred fourteen ships in nineteen eighty six to one hundred twenty ships today, with categories labeled Frigates, Cruisers and destroyers, and Littoral combat ships. The third chart titled US mine hunting vessels shows a drop from twenty one vessels in nineteen eighty six to four vessels today. Source: Johns Hopkins SAIS, March 25, 2026.
(SPEECH)
And one of the things to watch-- and the next couple of slides are from a presentation I'll be making an upcoming JPMorgan Defense Conference-- is there have been some pretty substantial changes in US Naval capacity since the 1980s. And we have some charts in here from Johns Hopkins and someone from the Naval War College that shows a sharp decline in warships in the Gulf.
And the two charts that are really interesting are one adding up all the frigates, cruisers, destroyers, and something called a littoral combat ship-- L-I-T-T-O-R, not L-I-T-E-R, littoral-- and minehunting vessels, both of which have declined pretty sharply. Minehunting vessels have gone from 21 to four.
And then what's really interesting is the whole category of frigates has been replaced with something called littoral combat ships, which have turned out to be something of a disaster-- mechanically unreliable, under-equipped for high threat environments, unsuited for key missions.
Some of the most critical articles I have ever read in the history of analysis of military procurements are articles from all points in the political spectrum criticizing the work that was done and the outcome on these littoral combat ships. And by the way, those are the ones that also have mine-clearing capabilities that allegedly are going to replace the minehunting vessels that the United States has.
I'm sorry if you can hear the sirens. I live in Brooklyn. It's an unavoidable part of living in this neighborhood. So anyway, one more thing on this war and obviously the war between Russia and Ukraine is I think we're all beginning to really appreciate and experience this question of asymmetric warfare.
And
(DESCRIPTION)
Slide: Asymmetric warfare. A scatter plot titled Estimated cost, payload and range for drones and missiles compares systems by payload in kilograms and range in kilometers, with bubble size representing unit cost. Missiles appear at higher payloads and longer ranges, including Russia Kh 101 cruise missile and US Tomahawk, while drones cluster at lower payloads and mid range distances such as Iran Shahed 136 and Russia Geran 2. The chart shows missiles generally carry heavier payloads over longer distances, while drones operate with smaller payloads and shorter to mid range capabilities. Source: Council on Foreign Relations, March 9, 2026.
(SPEECH)
we have a chart in here that shows the range of both missiles and drones, certain categories of missiles and drones, compared to their payload in kilograms, and with some data on their unit cost. And what's interesting is that some of these drones now have the same range as tomahawk missiles and cruise missiles and things like that.
Now, their payloads are much lower, but their costs are even lower than that on a ratio basis, to the point where the unit cost per payload for missiles is a lot higher than for drones. So all of a sudden you can contemplate a drone swarm, which can accomplish what missiles can accomplish at a lower effective cost. And it also only takes a small drone swarm to do a lot of damage to port infrastructure. So I thought it was an interesting way of illustrating the changing nature of warfare.
(DESCRIPTION)
Slide: The Purge. A bullet point list.
(SPEECH)
It's hard-- when you're analyzing what's going on, there's a drumbeat in the background, which is kind of hard to ignore, which are changes in the Pentagon. And it's not unprecedented. I just want to do a little bit of a history time capsule here, because I think it's interesting.
It's not unprecedented for presidents to fire four and five-star military officers. It's very rare, but it does happen. And there are 11 examples that I've found, and other people may find others. But there's 11 examples that I found from the Civil War to 2016.
And the reasons that four and five-star military officers get fired tend to fall into two categories, competence or conduct. So in terms of competence, you're talking about failed military campaigns. Lincoln, who fires General McClellan after the Battle of Antietam, FDR fires two admirals after the Pearl Harbor disaster, Admiral Kimmel and Admiral Short.
FDR also fires General Fredendall after the Battle of Kasserine Pass in Tunisia. It was the first major engagement between US and Axis forces in 1942, and it was a disaster for the US. And then more recently, Obama fires General McKiernan for what the administration perceived as a failed military strategy in Afghanistan. So five instances of four and five-star officers fired for incompetence.
Then you can find around-- I've found around six examples of four and five-star officers fired for conduct. What does that mean? Insubordination, public statements disagreeing with the Commander in Chief, something called the Article 88 violations under the Uniform Code of Military Justice, intentional or accidental public disclosure of confidential information.
So you have FDR firing Admiral Richardson in 1941, when Richardson correctly argued that the US was not ready for war in the Pacific, and who insisted that the fleet return to the mainland. Patton gets fired due to insubordination. General MacArthur gets fired by Truman for insubordination, and essentially disagreeing with Truman's efforts to try to keep the Korean War limited and avoid a shooting war with China.
Truman then fired General Denfeld for disagreements over defense cuts. And then more recently, George W. Bush fires General Dugan for disclosing confidential information about Iraq airstrike plans. And then Obama fires General McChrystal for criticizing Vice President Biden and other officials that shows up in Rolling Stone.
So over 150 years or so, I found 11. In the last 14 months, nine four and five-star generals have been fired. And so I think there's some legitimate questions in terms of where does this end and what does it portend for the future? And it's something I think that is worth watching.
(DESCRIPTION)
Slide: A fossil fuel reliance fever dream. A bullet point list.
(SPEECH)
OK, last comment for this podcast. And it maybe seemed like a strange time to wonder about this, but I had a fossil fuel fever dream about the United States. Now, might say, well, why would you even think, at this moment in time, about the US reducing its reliance on fossil fuels?
The United States just paid $1 billion to a French company to transition its investments in the US from offshore wind to oil and gas, and the EV subsidy ended and EV sales fell from around 9% of sales to 6% of sales earlier this year. But given the commodity price shock that we saw earlier in this podcast, there are voices that are calling-- even on the US, despite its energy independence-- to try to accelerate the transition away from fossil fuels.
Now, to be clear, this is a long road. The United States uses fossil fuels for 85% of its final energy consumption, similar to numbers in places like China, Japan, and India. And even in Europe, which is the world's energy transition leader, Europe is still 75% reliant on fossil fuels.
But
(DESCRIPTION)
Slide: A fossil fuel reliance fever dream. A table titled Possible contours of a more electrified, renewable future in the US compares current status with decarbonization steps across power, transport, and heating sectors. Current shares show coal at fifteen percent and gas at forty three percent of power generation, while transport relies heavily on internal combustion vehicles above ninety seven percent. Decarbonization steps describe declines in coal and gas generation, reductions in internal combustion vehicles, and efficiency improvements. Heating sections show reductions in fossil fuel use across residential, commercial, and industrial categories. Source: Energy Institute, BloombergNEF, Department of Transportation, EPA, EIA, Energy Innovation, JPMAM, 2026.
(SPEECH)
anyway, let's take a look at what my dream had in it. So the first thing was a reduction of coal and gas shares of power generation, some pretty large declines. EVs displacing around 30% of the existing combustion engine fleet. EVs replacing around 20% of the internal combustion engine trucks and buses.
And then remember, the biggest category of energy consumption in most countries is industrial heating and residential heating and commercial heating. And so we assume some very big reductions there of 30% to 40% in fossil fuel based heating in exchange for heat pumps.
And heat pumps are very efficient. They can convert one unit of electricity into three to four units of heat. Those are great. And similar ratios, EVs can convert energy into motion at four to five times the efficiency of an internal combustion engine car.
So the efficiencies work in your favor here. And so if all of these things happen, all of them, what would that mean for the United States? Well, if all the steps happened, it would result in a 20% decline in fossil fuel consumption. Not 50%, 20%.
And
(DESCRIPTION)
Slide: A fossil fuel reliance fever dream. Two bar charts compare fossil fuel reduction and future renewable energy growth. The first chart titled Reduction in fossil fuels shows total fossil fuels declining from existing levels to a lower future level, with decreases in coal at minus forty one percent, gas at minus sixteen percent, and oil minus at twenty percent. The second chart titled Future wind and solar power shows total generation increasing, with a large portion from new build capacity added to existing capacity. The charts show a transition away from fossil fuels toward expanded renewable energy. Source: Energy Institute, EIA, Renewable Thermal Collab, JPMAM, 2025.
(SPEECH)
so I think it's important to understand the math here. It would result in a 20% decline in fossil fuel consumption and would require wind and solar capacity to triple from current levels. And based on the current build out of wind and solar, that would take anywhere from 10 to 15 years. Now, for a country like the US without a carbon tax at a national level, gasoline tax, and declining renewable subsidies, this seems like a really heavy lift.
And I know we're in this kind of anti-renewables moment right now from a political perspective. But the interesting thing about the Iran war is it highlighted the gap between being a net energy exporter and being immune from global oil and gas shocks. And since that relationship was clearly severed at this point, eventually I think the pendulum will swing back to at least a partial re-acceleration of the energy transition, if for no other reason that the United States is importing some fairly large shocks here, which are going to be hurting growth and creating challenges for the Fed with respect to inflation.
OK,
(DESCRIPTION)
Title card: April 2026, Salem's Lot: Gulf War Update: the Purge of senior US military officers; a US fossil fuel reliance fever dream. Image: A large aircraft carrier emerges through dense fog on the water. A plane with bright lights approaches above the ship. The scene is muted with low visibility and soft gray tones.
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thanks for listening. I hope that the war ends as quickly as the administration says that it might, and that by the next time, the market will be back to looking at tech sector multiples and the Fed and health care and some of the other things going on. So thanks for listening, and I'll see you soon.
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Logo: J.P. Morgan.
