The cost of a mile

A Youtube video did the rounds last week trying to explain what the United States has achieved in Iran.

• In summary, the Strait of Hormuz, which wasn't closed until after the US attacked, is now being reopened as a victory.
• The regime change that was never the stated goal is being claimed as a win.
• Iran now has more money and more leverage over the strait than it did before the old deal was scrapped for being terrible.
• On Saturday, 21 hours of face-to-face peace talks in Islamabad collapsed. The US demanded Iran surrender its nuclear programme. Iran demanded control of the strait, war reparations and a ceasefire across Lebanon.
• Neither side moved and within hours, the US announced a full naval blockade of Iranian ports starting Monday morning. Oil jumped back above $100 a barrel.
• Iran's chief negotiator posted a photo of gas prices near Washington with the caption: "Enjoy the current pump figures."

Now, they say overhead walks on two legs, meaning it's people that cost the most money in a business. However, people don't flip-flap their fees like petrol stations.

So do expect AI companies to move to dynamic pricing if such incredible shocks to energy and key resources markets, such as precious metals, become more volatile. Given everything we are seeing, I think they will.

Your employee carries the risk of inflation over the year in the hope of a pay rise at some point. That's a slow game and while some may say that's unfair, it's how it's always worked. Checkpoints spread out.

But the most aggressive tech companies in the world will not carry the energy risk. They have no intention of doing so.

That is a challenge to your business because you've probably not baked in unstable energy prices in your risk modelling - if at all - to the factor they are about to display. In fact, I would go as far to guess that many companies still see energy as a relative constant.

So where does this all head next?

Professor Robert Pape, who spent 20 years running Iran war simulations for the White House, told Steven Bartlett on the Diary of a CEO that there is a 75% chance the US escalates to stage three: boots on the ground.

Then Professor Steve Keen, who predicted the 2008 crash, warned on the same show that food prices could double because 46% of global urea supply transits the same Gulf corridor now under blockade.

I watched all of this unfold while sitting at the kitchen table working out how much it costs to drive my sons to school. The school is two miles away (yes, we will be cycling now the weather is nicer).

The car is a diesel. At current UK diesel prices of £1.91 per litre, a four-mile round trip costs somewhere around £1.50 to £1.80. Over 190 school days, that is between £285 and £340 a year. Just to move a car two miles down the road and back.

The same trip in an electric car costs about 25 to 35 pence. Roughly a fifth of the price. A diesel doing 50 miles per gallon costs around 17 pence per mile. An EV charged at home on an overnight tariff costs two to seven pence.

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March 2026 was the best month on record for UK electric car registrations, with battery electric vehicles up 24% year on year. Used EV dealerships are reporting sales increases of 60%, with queues out the door on a Saturday morning.

In Ireland, the consequences arrived faster and harder. Diesel rose 40 pence per litre in a single month, the largest increase on record. On 7 April, convoys of tractors, trucks and cars blockaded the M50 in Dublin, O'Connell Street and major motorways across the country.

By the weekend, 600 of Ireland's 1,500 filling stations had run dry. The army was deployed. The Garda declared an exceptional event. A plumber at one blockade told RTÉ he simply could not continue doing business at these fuel prices.

The Irish government had already cut excise by €250 million, but it was not enough and the pump swallowed the relief before anyone felt it.

Your AI prices are about to jump

A single AI query uses roughly a thousand times more electricity than a traditional web search. An AI server rack draws 40 to 100 kilowatts compared with five to 15 for a conventional one. Global data centre electricity consumption is projected to exceed 1,000 terawatt hours this year, equivalent to the entire annual consumption of Japan.

In March, Iranian drones struck Amazon Web Services facilities in the UAE and Bahrain, causing service disruptions across the region. For the first time in modern conflict, commercial data centres became explicit military targets. Iran's Revolutionary Guard has since threatened to destroy the gigawatt-scale Stargate data centre being built for OpenAI in the Emirates.

One academic stated that the scaling laws that drove the AI boom are "fundamentally peacetime constructs," built on the assumption that energy supply is infinitely elastic.

The war is repricing that bet.

Gulf states have committed roughly $300 billion to AI infrastructure.

That capital pipeline depends on oil export revenues now being choked by the very strait the war was supposed to liberate. The helium required for semiconductor fabrication transits the same corridor. The chips that power the servers that run the models that answer your questions trace back, eventually, to the same barrel of oil and the same waterway.

The top line: growth gets squeezed as capital that was earmarked for expansion gets sucked into paying for energy.

The bottom line: companies have never needed AI more, but if you are cutting headcount on the assumption that compute costs stay flat, think again. The pricing model you built in January is now tied to the Strait of Hormuz and that's not going to end soon.

So you might be a bit more thankful for your overhead on two legs than last month. Its pricing is steadier.

Happy Monday.

Dan

The Proposition is running free growth diagnostics for two companies this month. If something's holding you back and you can't see what it is, reply to this email.