The following is a lightly edited transcript of the April 29 episode of the Daily Blast podcast. Listen to it here.Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR Network. I’m your host, Greg Sargent.This week, Donald Trump rejected a proposal from Iran to reopen the Strait of Hormuz. This offer would have set aside questions about Iran’s nuclear program for now. That may be why Trump rejected it. But there’s another possible reason—accepting that deal wouldn’t make him look as if he’s winning. Yet this comes as gas and oil prices continue to rise, which isn’t making Trump look like a winner either. And partly because of that, Republicans are privately warning that their prospects in the midterms look increasingly dire. So what now for Trump?Paul Krugman has a great new piece on his Substack, arguing that Trump simply does not have the cards in the Iran situation, even though he may not know it. So we’re talking with Krugman about where all this is going. Paul, always nice to have you on.Paul Krugman: Good to be on again.Sargent: So Trump rejected that proposal from Iran to reopen the Strait of Hormuz, perhaps in part because it would not address Trump’s demand for total termination of Iran’s nuclear program. But the New York Times had an extraordinary detail about the Iranian offer: “A U.S. official also said that accepting it could appear to deny Mr. Trump a victory.” Paul, apparently that’s the single most important factor in all of this, right? Krugman: That’s what’s been holding everything up. For most of us, by about a week into the war, it was obvious that basically America lost. But Trump cannot bring himself to acknowledge that. He’s been trying—he’s threatening to bomb them back into the Stone Ages, and he’s been threatening war crimes, and he’s been imposing counter-blockades against the blockade—all of which seems to be because he cannot seem to accept that actually he screwed up badly. There is no good outcome for the United States here. All we can do is accept something that actually leaves Iran stronger than it was, but he won’t do it.Sargent: Well, we just learned that gas prices rose on Tuesday to the highest level in four years. It’s well over $4 a gallon on average. Brent crude is over $100 a barrel again. Paul, can you just walk us through the basics of how those developments are tied to the Strait of Hormuz remaining closed?Krugman: Yeah. Before this war, about 15 percent of the world’s oil flowed through that strait. And it’s other stuff too—natural gas, helium, fertilizer—but right now let’s focus on the oil. So 15 percent of the world’s oil goes through that narrow passageway, which is extremely easy for Iran to block. That 15 percent—there’s really not much of an exit. There’s no real way around the Iranian blockade. A little bit of stuff can go by pipeline, but not much. And that’s a lot of oil being denied to the world market. And of course, the price of oil has gone way up. But if this continues, he ain’t seen nothing yet. Because the really interesting thing—I cited some numbers from Goldman Sachs in the Substack—although the price of oil is way up, consumption of oil is only down a little bit. And mostly what’s happening is that they’re drawing down inventories of oil, that people who have oil in storage tanks, with oil that was already on tankers, is being used up, which is all happening out of the belief that the strait will reopen soon and prices will come down.As people start to realize that that’s not about to happen—which has been happening just over the past couple of days—then the prices have to go much, much higher. Basically, the price of oil has to go high enough to inflict enough economic damage—we have to somehow or other stop, reduce the consumption of oil by another 11 million barrels a day. Convenient thing is that right now, world oil consumption is about 100 million a day. So that’s also about 11 percent. And it takes a huge price increase to do that.It’s not easy to wean yourself off oil, in the matter of weeks, which is what we’re kind of expecting has to happen. So this can get much—it’s ugly already. It’s ugly politically, obviously, for Trump and the Republicans to have gas hitting its highest level in four years. But it’s going to get a lot uglier very soon unless Trump swallows his pride and accepts that he actually lost this war.Sargent: Well, just to clarify what you’re saying here—in other words, in order to get the world to demand less oil in keeping with the fact that there’s less supply, the prices really have to go up a lot.Krugman: I mean, think of it. There’s a certain amount of oil available, which is less than it was. You can’t burn a barrel of oil that isn’t there. So one way or another, people have to be induced to burn less oil.