Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, It's April and ninth, nine, five am. There's a
Speaker 2: ceasefire ish, it's sort of there's been something announced that's
Speaker 2: called a ceasefire. There does not seem to actually have
Speaker 2: been much of a cessation of fire per se. Maybe
Speaker 2: it's slowed down a little bit. Some of the headlines
Speaker 2: this morning are about Israel continuing to strike hard in Lebanon,
Speaker 2: Iran saying that, well, if there's no ceasefire in Lebanon,
Speaker 2: there's no ceasefire at all. But you know, overall, at
Speaker 2: least as of right now. You know, the market, et cetera.
Speaker 2: We saw that huge drop in oil Tuesday night. You know,
Speaker 2: the market's still sort of still sort of buoyant, right,
Speaker 2: still sort of resilient.
Speaker 3: Well, I think the important thing for the purposes of
Speaker 3: this particular discussion is if you take a look at
Speaker 3: what's going on in the strait of war moves, it
Speaker 3: still seems to be shut more or less and shout
Speaker 3: out to the Bloomberg function. You can hor Moves go.
Speaker 3: You can see the number of ships that are going
Speaker 3: through that particular choke point, and I have two as
Speaker 3: of today, which is basically not likely to today.
Speaker 2: There was some there were some headlines about how maybe
Speaker 2: even in the good case, they would let through ten
Speaker 2: to fifteen, which is still sort of nothing compared to
Speaker 2: normal ship traffic, so like nothing's back to normal.
Speaker 3: I was gonna say to your point, I think the
Speaker 3: thing that's confusing everyone is we keep seeing these headlines
Speaker 3: about like a billion barrels lost of world supply or
Speaker 3: twenty percent of the world's oil supply now choked out
Speaker 3: because of the Horror Moves situation. And yet if you
Speaker 3: look at the oil price, you know WTI Brent definitely up,
Speaker 3: but they're not up as much as you might think
Speaker 3: given the scale of disruption.
Speaker 2: I think many people feel intuitively the price should be higher.
Speaker 2: And then of course there's the whole refined products situation,
Speaker 2: which is more extreme, and a lot of the prices
Speaker 2: that feel really extreme in general have happened in or
Speaker 2: we see it in East Asia, whether it's like Singapore
Speaker 2: jet fuel, et cetera. Or a lot of the headlines
Speaker 2: that you see about extreme rationting come from East Asia.
Speaker 2: I forget which country was. They were, like, you know,
Speaker 2: they're doing that classic thing of only drive to work
Speaker 2: if your license plate ends in an odd number on
Speaker 2: this day.
Speaker 3: Whatever, very nineteen seventies.
Speaker 2: Yeah, and we're seeing a lot of these types of headlines,
Speaker 2: some in Korea, some Thailand, et cetera. So it also
Speaker 2: then raises the question, you know, the straight and formosa
Speaker 2: is closed, maybe it'll be open, But does this change
Speaker 2: future energy trajectory in some way? Does this mean there's
Speaker 2: going to be more comfort with coal mining over the
Speaker 2: long term? Does this mean that economies are going to
Speaker 2: try to accelerate decarbonization efforts more intensely. Could this be
Speaker 2: a huge boon for the American leng industry, where we
Speaker 2: know we're building a lot of export terminals, et cetera.
Speaker 2: And if you know impair there's some sort of impairment
Speaker 2: to Katari llng than huge questions about even just setting
Speaker 2: aside market price it right the second or this week
Speaker 2: the future of energy.
Speaker 3: One thing about our current market moment is we are
Speaker 3: getting like a crash course in real time about the
Speaker 3: flow of energy throughout the world. And as we will
Speaker 3: see in this conversation, like it is still very much
Speaker 3: geographically constrained East versus West, and so as you say,
Speaker 3: the big question is whether or not the east kind
Speaker 3: of I don't know, scrambles even harder to adapt to this.
Speaker 2: Well, I'm very excited to say we do, in fact
Speaker 2: have the perfect guest, someone who knows about all this stuff,
Speaker 2: someone who's been on the podcast before, but we have
Speaker 2: talked to him in years, which is really sad because
Speaker 2: we really liked the guy and so very excited to
Speaker 2: welcome back onto the show. Alex Turnbull. He's an investor
Speaker 2: based in Singapore, but he's also a researcher with the
Speaker 2: Australia National University focused on energy security. Really knows the
Speaker 2: energy scene very well, spends his time thinking about the
Speaker 2: present and future of energy. So Alex, thank you so
Speaker 2: much for coming back on Outlaws.
Speaker 4: Thank you very much. It's great to be back on.
Speaker 2: Yeah, really really appreciate it. Talk about like right now,
Speaker 2: you know this phenomenon that we talk about where yeah,
Speaker 2: prices are up, but you know, by some measures, still
Speaker 2: within some sort of historical range, Whereas the headlines that
Speaker 2: you see about rationty, et cetera, like, well, this is
Speaker 2: extremely dire, et cetera. Give us your lay of the land,
Speaker 2: from the from the from the Asian perspective, from the
Speaker 2: perspective of East Asian country, it's like, how dire are
Speaker 2: things just like right now? Without that without that flow
Speaker 2: terrible Franklin.
Speaker 4: The challenge right now for Asia is that most of
Speaker 4: their crede supply does come from the Middle East, or
Speaker 4: there are some countries which do have some domestic production Malaysia,
Speaker 4: China of course, but broadly speaking, Asia is a massive
Speaker 4: crude import, and principally from the Middle East because it's
Speaker 4: the most proximate supply and generalize the chapest shipping distances
Speaker 4: and costs. So Asia is very heavily exposed right now
Speaker 4: and more acutely thinking about what the impacts might be,
Speaker 4: how they might want to preenser than the United States,
Speaker 4: of course, which produces a lot of oil but still
Speaker 4: needs Middle East in grades for blending and refining. Also Europe,
Speaker 4: which has access through its quite readily.
Speaker 3: How much do the spot prices actually matter at this
Speaker 3: moment in time, because you know, you can look up
Speaker 3: something like Dubaioman or some type of oil that you
Speaker 3: would assume would be maybe flowing into East Asia, and
Speaker 3: you can look at the spot price, but like if
Speaker 3: it's not actually moving, does that like moving out of
Speaker 3: the Strait of War, moves into Asia? Does that mean anything?
Speaker 4: It does certainly for some ride So for Amani Crode
Speaker 4: can still be loaded and is being loaded those a
Speaker 4: real price is prompt Brent, there's a and those sorts
Speaker 4: of trades are real. So you're often saying even for
Speaker 4: loadings from Yandu and Saudi Arabia OSPs, which cause you know,
Speaker 4: indications of price are anywhere from twenty to twenty five
Speaker 4: dollars above whatever the prevailing bread contract is.
Speaker 2: So in terms of like the knock on effects on
Speaker 2: the economy mentioned some of the rational thing. Okay, yes,
Speaker 2: this is very they're highly exposed to it. What is
Speaker 2: it hitting now? Is the economic destruction already taking place?
Speaker 2: Like talk to us about like just sort of like
Speaker 2: I guess on the ground figuratively and literally, what are
Speaker 2: some of the ripple effects that we're seeing.
Speaker 4: You're certainly saying aious constraints on consumption where they don't
Speaker 4: really have a lot of refining capacity, and where there is,
Speaker 4: they just don't have large amounts of crude story. So
Speaker 4: places like the Philippines and Vietnam are already under some
Speaker 4: significant stress. A lot of it is also driven by
Speaker 4: the factors. It's kind of a question of whether you
Speaker 4: can get credit lines to be able to pay these prices.
Speaker 4: And ultimately the decision of the refineries is if they
Speaker 4: don't have inputs, they have to shut the refinery down,
Speaker 4: which incurs a large amount of fixed costs and downtime
Speaker 4: and so forth. So a lot of these players are
Speaker 4: kind of living hand in mouth and trying to get
Speaker 4: whatever they can to stay open as long as they can.
Speaker 4: So that's how you have this extreme willingness to pay
Speaker 4: for prompt cargoes in order to keep these assets operating
Speaker 4: and running. But then you know the future's cove is
Speaker 4: about thirty sixty days, and that's a long time in
Speaker 4: the current febrile context where you could get resolution or not.
Speaker 4: And so that that disconnector is going to remain. I think,
Speaker 4: so long as there is no sense of a clear
Speaker 4: path here.
Speaker 2: Who's not getting energy? Because all right, if there are
Speaker 2: some entities that are almost going to be completely priced
Speaker 2: and sensitive, they have to keep the lights on, they
Speaker 2: they're going to just pay whatever. So you get these
Speaker 2: huge short term spot prises. But volume is volume, and
Speaker 2: so who is actually being forced to turn off the
Speaker 2: lights or not run a refinery or whatever because they're
Speaker 2: getting out bid If there are fewer molecules, there are
Speaker 2: fewer molecules.
Speaker 4: Yeah, I mean certainly less high income countries in Asia.
Speaker 4: You'll start to see quite an acute crunch in the Philippines.
Speaker 4: So they've recently secured some cargoes from China on one
Speaker 4: off basis, some Vietnam the same. You know, places like
Speaker 4: the Pacific Islands, like they're in a not very good place.
Speaker 4: So it's already starting to begin the demand destruction starting
Speaker 4: mostly of course, mostly buy income.
Speaker 3: So you mentioned refineries there, and one of the headlines
Speaker 3: that's come up recently is Asian refining margins slip into
Speaker 3: negative territory, which would seem like a bad thing if
Speaker 3: you're a refiner. And I take the point that you
Speaker 3: need to keep these assets going because it's hard to
Speaker 3: shut them down and then restart them again. But if
Speaker 3: you're not making any money, how long are these refiners
Speaker 3: actually going to keep going for?
Speaker 4: Well, for some Chinese tape hod refiners, just smaller private ones.
Speaker 4: They live in a different political slash economic context and
Speaker 4: as that's told to stay on, they will. You know,
Speaker 4: it depends on which In many of these countries you
Speaker 4: don't have purely market priced fuels, So whether that's Vietnam
Speaker 4: or China. In places where you have market pricing pass
Speaker 4: through like Australia, the price of fuel is getting very
Speaker 4: expensive in date.
Speaker 2: So in those situations basically where Tracy mentioned, a refiner
Speaker 2: might be actually operating at negative Mergin. That's in an
Speaker 2: environment in which the retail price of fuel is not liberalized.
Speaker 2: There's a set the government sets the price of fuel
Speaker 2: or sets the band or something like that, and the
Speaker 2: refiners just have to keep operating until the next time
Speaker 2: that band has changed. Yes, okay, got it. So what
Speaker 2: are you seeing Let's talk about you know right now,
Speaker 2: is this is there? What's happening with US energy? Is
Speaker 2: it all being taken up by Europe as you'r is
Speaker 2: Asia trying to get in on the action or bidding
Speaker 2: for cargoes like what's happening with American flows.
Speaker 4: American plays ago in Asia quite sharply right now. So
Speaker 4: Asian prices spot in the JackAM futures about European TTF
Speaker 4: or title transfer facility futures for the next period. That
Speaker 4: could change quickly, but at the moment, Asia has a
Speaker 4: much higher urgency and willingness to pay as like into summer,
Speaker 4: higher powered amount from cooling, air conditioning, and also just
Speaker 4: a much more acute dependence upon energy in certain countries.
Speaker 4: In Europe, you've so you're going into summer, you have
Speaker 4: this solar wind, and it's not quite panic stations just yet.
Speaker 4: So I think Europe will be a little bit more
Speaker 4: slow to fill its storage, but then by just goes
Speaker 4: on till say June or July. Then that that's when
Speaker 4: the real panic was set up.
Speaker 2: For Asia.
Speaker 3: How much of a role does Russian oil play right
Speaker 3: now in terms of replacing last Middle Eastern supply.
Speaker 4: I mean, most of the Russian crew has already been
Speaker 4: sold anyway, and it has been sold very heavily into
Speaker 4: Chinese refineries and Tipa, so it's not like it some
Speaker 4: of them was sitting offshore when it was going through
Speaker 4: a period of more robust US sanctions. The offshore barrels
Speaker 4: of oil and water has been dropping very sharply as
Speaker 4: all that crude has been absorbed into various places India, China,
Speaker 4: like I said, so, yeah, so I think I think
Speaker 4: that's sort of that that has provided something of a
Speaker 4: buffer to this shock because there was this backup of
Speaker 4: Russian crew that couldn't know. I'm was quite sure whether
Speaker 4: they could pay for it without a did sanction by
Speaker 4: the US. But of course that's melted a way in
Speaker 4: the current context.
Speaker 2: You mentioned that the Philippines has imported some gas from China,
Speaker 2: and I'm curious, like, what has has China. We know
Speaker 2: they've been a big accumulator over the years, generally of
Speaker 2: natural resources, and they have strategic stockpiles and so forth.
Speaker 2: But right now, what are they doing and are they
Speaker 2: trying to play some role in stabilizing or easing to
Speaker 2: crunch for a region overall?
Speaker 4: I think they've been very strategic. Then they're not. Certainly
Speaker 4: there's more or less control on exports of oil products
Speaker 4: right now, which is not very helpful for the region
Speaker 4: because they have a time been large exports. They are
Speaker 4: clearly doing this in a very targeted fashion, and I
Speaker 4: would assume there's other considerations behind that.
Speaker 3: Oh wait, say more, Well.
Speaker 4: For example, China has territorial distributes with the Philippines and
Speaker 4: Vietnam and the South China Sea, and they've now got
Speaker 4: something oh so interesting.
Speaker 2: Okay, that makes sense.
Speaker 3: Yeah, oil is geopolitical tool. Is a tail as old as.
Speaker 2: Is all as time.
Speaker 3: I was gonna say time, but I guess as old
Speaker 3: as what two hundred years or something like that. Okay.
Speaker 3: So we were talking about the potential for an energy
Speaker 3: crisis to actually hasten decarbonization efforts in Asia, and this
Speaker 3: is something that came up before on an episode we
Speaker 3: did on China's teapot refineries. Are you seeing rumblings of
Speaker 3: that at the moment or are people still in sort
Speaker 3: of weight and see mode.
Speaker 4: Ah No, there's definitely been a notable pickup in certain
Speaker 4: areas where there was already a bit of momentum. So in Japan,
Speaker 4: they have been undertaking a number of nuclear restarts. They
Speaker 4: were moving very tentatively as the public got behind nuclear
Speaker 4: and the politics became less challenging. That that is all
Speaker 4: apparently accelerating now, so Japan will push very hard on
Speaker 4: nuclear restarts, and more importantly, the public polling is really
Speaker 4: strong for it, so there's not a lot of political risk.
Speaker 4: And of course Takehi had a massive election win, so
Speaker 4: she's in favor of the publics behind it, and there's
Speaker 4: a matter of necessity now, so I think that's something
Speaker 4: one could assume is only going to move faster. And
Speaker 4: then in Korea there's also more of a push for
Speaker 4: nuclear restarts, so that's that's moving quickly. China is doing
Speaker 4: some very pointed stuff to try to reduce sell and
Speaker 4: G burns and use in chemicals. It's tricky and tricky
Speaker 4: to if you've got a plastics plant, that's kind of
Speaker 4: hard to do, but they're having a red hot go
Speaker 4: at it. And similarly, you're also starting to see a
Speaker 4: staggering acceleration in IV adoption. If you do calls to
Speaker 4: auto dealers around Asia and ask them how much time
Speaker 4: electric vehicles stay on the lots down to single days,
Speaker 4: and many of them are back or now, So if
Speaker 4: there probably wasn't, maybe.
Speaker 3: What you're doing are you calling up the car lots
Speaker 3: and asking them this?
Speaker 2: Yeah, of course, wait, say more about this and what
Speaker 2: would they have said? This is actually this is this
Speaker 2: is not this is new. Uh, this is new is
Speaker 2: underground information. But talk about this, like, what would they
Speaker 2: have said a month ago? What are the type of
Speaker 2: dealers you're talking to? What would they have said? A
Speaker 2: month ago.
Speaker 4: And now, I mean, you know in January when there
Speaker 4: was yeah, you would say b white cause, for example,
Speaker 4: a couple of deals in Australia, Singapore or the pots
Speaker 4: of Asia that would be on the lot for twenty
Speaker 4: five plus days. You know, the inventory turns were kind
Speaker 4: of a bit slow and the market didn't look kind
Speaker 4: of glotted. We're down to single digit days in most
Speaker 4: places now. So anything China can't produce out of the
Speaker 4: review sector, I think we'll get solved this year. That's
Speaker 4: just really the constraint is on the supply side, not
Speaker 4: of the demand side.
Speaker 2: Now, I don't know the degree of granularity that you
Speaker 2: pay attention to American politics. Are you familiar with you
Speaker 2: know who Thomas Massey is? Is this name Ringlebell? Oh yeah, yeah,
Speaker 2: he's a Kentucky from congressman from Kentucky who drives a
Speaker 2: tesla with a bumper sticker that said this this this
Speaker 2: tesla is powered by Kentucky cole. So he's like, you know,
Speaker 2: he's a politician from Kentucky or public Aga is very
Speaker 2: pro called, but he's also a pro testla. So is
Speaker 2: his coll powered tesla? Is that basically the sort of
Speaker 2: near or medium term future of Asia, which is like okay,
Speaker 2: ellenng is impaired BYD's are flying off the lot, and
Speaker 2: so essentially we have a lot of like de facto
Speaker 2: col powered tesla's driving around or sorry, col powered BYD's
Speaker 2: flying around to.
Speaker 4: A certain extent, yeah, I mean it's also there's also
Speaker 4: very hard analytic math behind this, in the sense that
Speaker 4: there are the streets of holl moves do not aside
Speaker 4: from the East West pipeline which looks like it got
Speaker 4: pretty badly hit today over the last twenty four to
Speaker 4: forty eight hours, there is no way for that oil
Speaker 4: to make its way out otherwise. So this is very
Speaker 4: different to twenty twenty two, where you have sanctions, you
Speaker 4: have this and that, but the spice will flow if
Speaker 4: it can physically move or be moved by pipelines, by
Speaker 4: rail and what have you. And so in twenty twenty
Speaker 4: two I was pretty sanguine about the impacts on the
Speaker 4: oil market because russ has got a lot of pipeline
Speaker 4: capacity to China through Kazakhstan and there was clearly not
Speaker 4: really the appetite to do full on shadow fleet sanctions
Speaker 4: that will be requited to slow down in this case
Speaker 4: you actually just can't get it out. That's all there
Speaker 4: is to it. And so if you look at that
Speaker 4: vulnerability with oil where twenty plus percent of the market
Speaker 4: comes to the Middle East an LNG, which is about
Speaker 4: the same numbers. And then if you look at say
Speaker 4: a big network flow graph model of global coal market
Speaker 4: which I've done, the coal is not really dependent upon checkpoints.
Speaker 4: The biggest producers are places like you know, first of all,
Speaker 4: trying to produce the enormous amount domestically it's the world,
Speaker 4: it's the largest producer. India does too, Australia, South Africa.
Speaker 4: These are all places with access to open ocean, no
Speaker 4: quirky straits, and so you don't really have to worry
Speaker 4: too much about whether some geopolitical event takes out coal.
Speaker 4: That the most reliable option, of course is just producing
Speaker 4: stuff in country, whether that's solo when batteries nuclear, but
Speaker 4: in a pinch, and currently I think coal is going
Speaker 4: to have a bit of a comeback for that reason.
Speaker 3: Line, yeah, sending coal aside for a second, when you
Speaker 3: look at alternate sources of energy, do you have like
Speaker 3: I don't want to say a personal favorite, but which
Speaker 3: one which one of them? Do you think comes out
Speaker 3: on top in the sort of medium to longer term.
Speaker 3: From this particular situation, it's like.
Speaker 4: Asking someone, well, you know what one should I grow? What?
Speaker 4: What what should I plant? I'm like, well, okay, where
Speaker 4: are you? So if you're anywhere close to the equator,
Speaker 4: we'll have a good solibaries or a solaries crisy shape.
Speaker 4: And if you've got to year round batteries are also
Speaker 4: pretty cheap, because that's that's how to be. If you're
Speaker 4: somewhere in the Baltic or something, then it's wind right.
Speaker 4: So I think the appeal with sola, which is that
Speaker 4: you can roll it up very quickly, particularly with households.
Speaker 4: And it's interesting you're already starting to say the impacts
Speaker 4: of Australia's government pushing residential batteries, and that is that
Speaker 4: the interday spreads in power in Australia are very subject
Speaker 4: and the gas five generators, I'm not really pricing the
Speaker 4: market anywhere near as often as they used to, and
Speaker 4: gas burns have actually collapsed, as they have in California.
Speaker 4: So if you want to kind of decouple from gas prices,
Speaker 4: batteries plus storage, solar plus storage is a very quick
Speaker 4: fix and can be rolled out very quickly, and it
Speaker 4: seems to be working very well in Australia that the
Speaker 4: price impact of this shock is fastly less than twenty
Speaker 4: twenty two already.
Speaker 2: This is really interesting talk about that spread. So to
Speaker 2: some extent, would it be fair to say that a
Speaker 2: proxy or a gauge of how well solar plus batteries
Speaker 2: is working or affecting a market is not in lower
Speaker 2: prices per se, but in a diminishing spread between the
Speaker 2: highest and the lowest price of the day, and that
Speaker 2: you have this like growing You know that it's a
Speaker 2: sign of a sort of like pure power stability.
Speaker 4: Yeah, I mean one thing in power Marx is the
Speaker 4: spark spread. So what is the what is the cost
Speaker 4: to get out of bed for a gas fired power plant?
Speaker 4: So you take the heat rate times whatever the gas
Speaker 4: price is and you work out how many hours a
Speaker 4: day over a week are effectively priced by gas and
Speaker 4: what happens. What happened in Australia was we had a
Speaker 4: lot of solo and not much storage, and still the
Speaker 4: peaks were still very expensive because that was the gas
Speaker 4: plants knew they could set the price. What's happened with
Speaker 4: this proliferation of storage is that gas no longer reliably
Speaker 4: sets the price in those hours and sickly in Australia,
Speaker 4: where it's often somewhat oligobalistic market structure, having a lot
Speaker 4: of residential batteries tied together in a mesh network which
Speaker 4: then bids into the market is really crushing those peaky
Speaker 4: times of the day and that has a disproportionate impact
Speaker 4: on average daily prices. The problem in places like the
Speaker 4: UK is there's a lot of renewables, really nice storage,
Speaker 4: so they're not getting much benefit out it's because they
Speaker 4: still get priced on the margin by gas.
Speaker 2: Is it just because they haven't made they have to
Speaker 2: bite the bullet and buy a lot of batteries from China?
Speaker 2: Or like, what is why is there the lack of
Speaker 2: storage to complement the renewables in the.
Speaker 4: UK marketstruction design that they're fixing this right now. I'm
Speaker 4: sure they'll be in a very different place in two years,
Speaker 4: but it was something of another side, I would say. So.
Speaker 3: One of the things that stood out from a previous
Speaker 3: episode we did on the energy situation with our Bloomberg
Speaker 3: colleague Javier Blasts was he was talking about how the
Speaker 3: world is still very much divided between you know, I
Speaker 3: guess east of the Suez Canal and west of the
Speaker 3: Suez Canal. And if you're east at the moment, you
Speaker 3: have energy problems because of the situation in the strait
Speaker 3: of our moves. And if you're to the west, maybe
Speaker 3: the pressures aren't quite as acute just yet. And one
Speaker 3: of the things we keep hearing from the Trump administration is, well,
Speaker 3: we have a lot of oil here in the US.
Speaker 3: We are hashtag blessed in carbons and molecules and all
Speaker 3: of that. When would you expect or would you expect
Speaker 3: at all, the pressures from the Middle East to start
Speaker 3: really filtering into the western part of the world.
Speaker 4: Well, I mean, like I said earlier, you've already seen
Speaker 4: it in LNG. So Asian buyers are outbidding European buyers
Speaker 4: for now. That's obviously pushing up prices for Europeans. You
Speaker 4: are seeing more and more tanker traffic from the Atlantic
Speaker 4: base and move towards Asia. As Asia just is happy
Speaker 4: that there's maybe ten or fifteen dollars more shipping costs,
Speaker 4: but they are willing to bid those barrels at this point.
Speaker 4: They do not care. So the idea that any of
Speaker 4: these systems are going to be There are frictions caused
Speaker 4: by shipping and time, but if the pull is and
Speaker 4: the need is that acute in Asia will absolutely find
Speaker 4: its way to the Western hemisphere.
Speaker 2: So there is this view, and I think it really
Speaker 2: started with well, some people have had the dream for
Speaker 2: a very long time, some of the great pioneers of
Speaker 2: the industry. And then but then in twenty twenty two,
Speaker 2: with Russia's invasion of Ukraine, there's like, Okay, the future
Speaker 2: belongs to us l G exporters, that this is just weird.
Speaker 2: Can keep growing, export, adding export terminals forever because there's
Speaker 2: just going to be all that we have, all this gas,
Speaker 2: so there's just incredible demand for it all around the world.
Speaker 2: Is that story at risk? I mean again, like if
Speaker 2: part of the thing that's going to happen is that
Speaker 2: around the world there is this and the political appetite
Speaker 2: for restarting nuclear and so forth is higher. Are there
Speaker 2: any weaknesses in the us LNG growth straight up lineup
Speaker 2: forever story.
Speaker 4: I think there's a lot of problem with it. But
Speaker 4: then mostly due to overall problems with gas. First of all,
Speaker 4: the gas turbines are used to build a power plant
Speaker 4: and nasua are the same ones you use to build
Speaker 4: a data center. And the cost of a turbine is
Speaker 4: now it's over five hundred dollars per killer what it
Speaker 4: was used to be about one thousand. I mean this
Speaker 4: is that there's this crunch in gas fired turbines, is
Speaker 4: you know, well well noted, I would say, Then you
Speaker 4: have the issue of so you're kind of being your
Speaker 4: customers have been priced out of using gas for that
Speaker 4: reasonle line. Then you have this geopolitical risk attached to
Speaker 4: supply from the Middle East. There is no certainty that
Speaker 4: if there is some sort of toll on the straits
Speaker 4: of Horus that the Huthis might say, well, add like
Speaker 4: some of that too, please, and then we have another
Speaker 4: issue in the Red Sea. So I think while US
Speaker 4: supply is probably lower risk, depending on the actions of
Speaker 4: the US government. Of course, people are role looking at
Speaker 4: this market and thinking well, is this really what I
Speaker 4: want to build my powder it on? And the answer
Speaker 4: is probably so I got it.
Speaker 2: So us llen G, yes, that is this perfect substitute
Speaker 2: for LERG from anywhere else. The big question is if
Speaker 2: LLERG generally has the potential for such volatility. Then maybe
Speaker 2: a country just decides, oh yeah, okay, the US exists,
Speaker 2: but maybe a country just decides this is not the
Speaker 2: future of energy for me.
Speaker 4: Yeah, the might just look at this and say like,
Speaker 4: I don't I don't want this. This is far too
Speaker 4: much crazy in a five six year period, and I'd like,
Speaker 4: I'd like something boring place.
Speaker 3: We're all full up on crazy. Yeah. So one of
Speaker 3: the reasons we wanted to speak to you is because
Speaker 3: you are in Singapore, and you know, in Singapore you
Speaker 3: can literally see the tankers sitting out there in the
Speaker 3: street of Malacca, but talk to us about the general
Speaker 3: vibes in the city as you know, a big hub
Speaker 3: of oil trading.
Speaker 4: It's very interesting. People in the physical business are same
Speaker 4: levels of stress that are extraordinary, and then they look
Speaker 4: at their phones at equities and just they don't get it.
Speaker 2: Yeah, we don't get it either.
Speaker 4: And it's also what is quite challenging. It's people who
Speaker 4: have been in the physical trade and dealing with this
Speaker 4: part of the world and have a deeper empathetic, anthropological
Speaker 4: sense of how a toll is likely to be received
Speaker 4: in a lot of that world, or whether that's a
Speaker 4: stable configuration they have their doubts on whether we can
Speaker 4: get back to normal terribly quickly. So there's that people
Speaker 4: in government are taking this extraordinarily seriously. They're very concerned.
Speaker 1: They are.
Speaker 4: Singapore, I think is more than most places as a
Speaker 4: real sense of what a wartime economy looks like due
Speaker 4: to historical reasons from the fall of Singapore of World
Speaker 4: War two, and so I can tell that a there's
Speaker 4: a real gravity and done. I think that's coming out
Speaker 4: for some of the comments of the Foreign Minister Vivian Bealaprishian.
Speaker 2: Do you think I mean talking just pure politics, like okay,
Speaker 2: the US and Israel they start a war and suddenly
Speaker 2: everybody around the world immediately has to do rationing, higher
Speaker 2: energy prices, et cetera. You know, for years it was
Speaker 2: this talk like okay, the US is going to pivot
Speaker 2: to Asia and try to have closer relationships with some
Speaker 2: of the non China Asia countries and so forth, and
Speaker 2: just generally like does this we hear about this? The
Speaker 2: version of this conversation we hear most about is in Europe, right,
Speaker 2: and like, what is the future of our relationship with
Speaker 2: the US? What is the Asian version of this conversation
Speaker 2: and thinking about the future of the US, either as
Speaker 2: some sort of like business or political partner.
Speaker 4: The problem is this is that if this is what
Speaker 4: one side of politics is going to be about on
Speaker 4: a sustained basis, which is doing stuff which doesn't make
Speaker 4: a lot of sense and is very damaging and unpredictable,
Speaker 4: and the other side is maybe a bit of a
Speaker 4: wet noodle at times a bit a bit more predictable.
Speaker 4: You kind of need to live through the full cycle, right.
Speaker 2: A Republican what you're saying, they're more, okay, more stuff
Speaker 2: like this, and the Democrats of the wet noodles many people,
Speaker 2: Yeah maybe okay, we keep going. But then I'm just
Speaker 2: trying to make sure, okay keep going.
Speaker 4: Yeah, sorry, So so I mean so so if if
Speaker 4: there's that perception that there is going to be this
Speaker 4: regular source of volatility, and also, you know, politics animated
Speaker 4: by things which do not really animate asia, like evangelical
Speaker 4: Christianity or a desire for a catacom or fighting with
Speaker 4: the pope. Like if this is kind of what the
Speaker 4: US is now, then there is going to be a
Speaker 4: natural desire to insulate oneself from it as much as
Speaker 4: you humanly can and that there are real limits to
Speaker 4: what you can do. It's a big economy, it's very important,
Speaker 4: but you know, food, fuel, you know basic material flow
Speaker 4: security I think is going to be looked at very
Speaker 4: differently going forward, and I think there is that that
Speaker 4: will lead to a drive towards much high energy security,
Speaker 4: which is not going to go well with US efforts
Speaker 4: to promote fossil exports for sure.
Speaker 3: Is China the natural alternative in that scenario? I mean
Speaker 3: we already talked about some shipments from China going to
Speaker 3: places like the Philippines. Are we seeing the emergence of
Speaker 3: that sort of energy diplomacy?
Speaker 4: I think what people have not appreciated well is that
Speaker 4: China responds well to strength. The US now responds well
Speaker 4: to strength. So who does Trump not mess with China?
Speaker 4: Because they've restricted breaths and basically threatened put Detroit into
Speaker 4: cardiac arrest and strike their shoulders. And I think what
Speaker 4: Europe in particular is missing is that there are hands
Speaker 4: they could play that maybe are nonintuitive to them, but
Speaker 4: doesn't mean they wouldn't work. The IRGC appears to have
Speaker 4: beaten the US to the most humiliating geopolitical defeats and
Speaker 4: suets and looks like they're going to get a toll
Speaker 4: out of it. So what like, what is the takeaway
Speaker 4: from how to deal with the US going forward? But
Speaker 4: similarly with China, I mean, they've been very aggressively coercive
Speaker 4: on material supply chains with technology. So I think this
Speaker 4: kind of idea that is a mid sized power you
Speaker 4: should be thinking that you need a pimp to keep
Speaker 4: you safe on the streets. I mean, actually, all the
Speaker 4: pimps are that we need, we need more panbrea.
Speaker 3: All right, you want to leave it there?
Speaker 2: I think that's a good place. That's all the pimps
Speaker 2: are bad. Strike me as a pretty good place.
Speaker 4: Yeah, sorry, that's wrong.
Speaker 2: It's like it's like a good uh, it sounds like
Speaker 2: a good spot to leave it. Alex Turnbull, it's always
Speaker 2: great catching up with you. Really appreciate you taking the time.
Speaker 2: Very interesting conversation.
Speaker 4: Thank you about.
Speaker 2: Setting everything aside, And there's a lot in that conversation
Speaker 2: to talk about. I think a story that I want
Speaker 2: to do more coverage of is essentially like how solid
Speaker 2: is the US energy story?
Speaker 3: Actually?
Speaker 2: Yeah, because I think there is this view that okay,
Speaker 2: we're we have achieved oil independence basically. I know, we
Speaker 2: still refine bring in some blends of crude from our
Speaker 2: kinds of crude from anywhere else, but we have plenty
Speaker 2: of oil, and then we're going to have plenty of gas,
Speaker 2: and gas exports are going to go to the moon.
Speaker 2: And I think that, like you know, Alex prison sense
Speaker 2: an argument, and there are good reasons to think that
Speaker 2: maybe the future isn't going to be a gas related
Speaker 2: and there are reasons to not for economies to not
Speaker 2: build an LERG dependent economy. And then you know, I
Speaker 2: think there are like questions about like, well, what what
Speaker 2: if the oil depletes a little bit faster than people
Speaker 2: think and so forth. So I just want to do
Speaker 2: more on actual like stress testing the assumptions about American
Speaker 2: domestic energy.
Speaker 3: Absolutely, And it's really interesting what Alex was saying about
Speaker 3: just the EV dealership. Yeah, right, like you can see
Speaker 3: some of this starting to happen, and like the alternative
Speaker 3: so far is not you know, turning to us gas.
Speaker 3: It's not even buying a tesla, it's let's buy a
Speaker 3: buid right. The other thing just on like a pure
Speaker 3: basic oil and gas basis, I think to Alex's point, earlier,
Speaker 3: Like there are these interconnections in the overall market which
Speaker 3: we haven't necessarily seen, like the pressure from one half
Speaker 3: of the world come into the other half of the world. Yeah,
Speaker 3: just yet, and there's an open question over like how
Speaker 3: that happens. Sorry, the reason I'm not expressing myself well,
Speaker 3: but one of the papers I was reading from Alex's
Speaker 3: substack actually, or one of his substack contributions is a
Speaker 3: paper from twenty twenty two called the Myth of US
Speaker 3: Energy Independence. And so I think there is this like
Speaker 3: open question just on a pure hydrocarbon basis. Yeah, how
Speaker 3: much of the hashtag blessed America story actually it is true?
Speaker 1: Yeah?
Speaker 2: No, I mean, like, you know, a lot of things
Speaker 2: don't seem to be going great for some things are
Speaker 2: going better for the US than others these days, So
Speaker 2: not so much. I do think a lot is like, well,
Speaker 2: you know, at least we have energy, at least we're not.
Speaker 3: Like it's not a relative basis, sure, but like.
Speaker 2: If that were to change, if they if they were
Speaker 2: sort of get a reassumption, sort of reassessment about America's
Speaker 2: energy stability or energy independence or that would be like
Speaker 2: a very that'd be a really big story. I also
Speaker 2: just think, you know, it's very interesting that the nuclear reacceleration,
Speaker 2: et cetera that's happening, that there's.
Speaker 3: Political will insia. There's nothing like an energy crisis to
Speaker 3: change like political will towards nuclear power.
Speaker 2: And on that political will. His last point, which is
Speaker 2: like what is the lesson that we keep learning? Is
Speaker 2: like strength matters, and you know, it's like Trump hasn't
Speaker 2: gone very hard against China because China went very hard
Speaker 2: against the US. Iran may end up in a situation
Speaker 2: in which it comes out stronger than it was two
Speaker 2: months ago, where it actually is collecting a toll, you know,
Speaker 2: getting a cash cow for the straight of hor moves.
Speaker 2: So it's interesting is his point where it's like, okay,
Speaker 2: Europe other parts of Asia, like what is the lesson
Speaker 2: that they learned from this? And maybe the lesson is
Speaker 2: that sort of like biding your time and trying to
Speaker 2: be friendly and uh, obsequently is it Maybe that's not
Speaker 2: the answer. Maybe maybe stronger lines are the answer for
Speaker 2: global diplomacy right now.
Speaker 3: Also, the pimps are bad. Pimps are bad. All right,
Speaker 3: shall we leave it there.
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the Authlots podcast. I'm
Speaker 3: Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our guest Alex Turnbull. He's at Alex b H. Turnbull.
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Speaker 2: Bennett at Dashbot and Kilbrooks at Calebrooks. And from our
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