WEBVTT - BI Weekend: Visa Lawsuit, Climate Week 0:00:00.600 --> 0:00:07.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:10.560 --> 0:00:14.360 This is Bloomberg Intelligence with Alex Steinhl and Paul Sweeny. 0:00:14.520 --> 0:00:17.720 The real app performance has been in US corporate high yield. 0:00:17.880 --> 0:00:20.239 Are the companies lean enough? Have they trimmed all the fats? 0:00:20.320 --> 0:00:24.119 The semiconductor business is a really cyclical business. 0:00:23.600 --> 0:00:27.200 Breaking market headlines and corporate news from across the globe. 0:00:27.240 --> 0:00:29.880 Do investors like the M and A that we've seen? 0:00:30.080 --> 0:00:31.000 These are two. 0:00:31.040 --> 0:00:33.159 Big time blue chip companies. 0:00:33.320 --> 0:00:36.920 The window between the peak and cut changing super fast. 0:00:37.080 --> 0:00:41.680 Bloomberg Intelligence with Alex Steinehl and Paulsweeny on Bloomberg Radio. 0:00:43.240 --> 0:00:45.680 I'm Alex Steele and I'm Bailey Lepschotz filling in for 0:00:45.680 --> 0:00:46.320 Paul Sweeney. 0:00:46.400 --> 0:00:49.120 On today's Bloomberg Intelligence Show, we dig inside the big 0:00:49.159 --> 0:00:51.919 business stories impacting Wall Street and the global markets. 0:00:52.080 --> 0:00:54.400 Each and every week we provide in depth research and 0:00:54.480 --> 0:00:57.040 data on some of the two thousand companies and one 0:00:57.080 --> 0:00:59.640 hundred and thirty industries our analysts cover worldwide. 0:00:59.680 --> 0:01:01.800 It is Climate Week, and today we look at how 0:01:01.800 --> 0:01:04.560 oil and gas are playing into the energy transition. 0:01:04.840 --> 0:01:07.840 Plus we'll discuss how the resulting emissions from wildfires are 0:01:07.880 --> 0:01:09.560 threatening to make global warming worse. 0:01:09.760 --> 0:01:12.520 But first we dive into that anti trust space. This week, 0:01:12.560 --> 0:01:15.280 the US Justice Department suit the world's second largest card 0:01:15.319 --> 0:01:18.120 payment organization, Visa, over an anti trust matter. 0:01:18.319 --> 0:01:20.680 The case was filed in federal court in Manhattan on 0:01:20.760 --> 0:01:23.560 Tuesday or tild. The US Anti trust enforces have been 0:01:23.560 --> 0:01:26.520 preparing a case accusing Visa of taking steps to keep 0:01:26.640 --> 0:01:29.680 rivals from challenging its dominance in the debit card market. 0:01:29.560 --> 0:01:30.039 And for more. 0:01:30.120 --> 0:01:32.840 Guest host Jess Menton and I were joined by Justin Teresi, 0:01:32.920 --> 0:01:36.360 Bloomberg Intelligence, Anti trust litigation and policy analysts. We first 0:01:36.360 --> 0:01:39.319 asked Justin whether this week's news surprised him at all. 0:01:39.440 --> 0:01:42.720 The following itself wasn't too surprising. We know that DOJ 0:01:43.000 --> 0:01:46.600 opened an investigation in twenty twenty one related to Visa 0:01:46.720 --> 0:01:49.320 and its deepit card practices, so we thought something might 0:01:49.360 --> 0:01:52.240 be coming. The timing before the election makes sense, we'd 0:01:52.240 --> 0:01:55.320 see it now rather than later on this year. The 0:01:55.360 --> 0:01:58.440 complaint itself, it seems fairly strong, as the Attorney General 0:01:58.560 --> 0:02:02.440 said in his press conference. Basically, they're alleging that after 0:02:02.560 --> 0:02:05.559 Dodd Frank and rules came into place about being able 0:02:05.600 --> 0:02:09.239 to route debit transactions over more than one network. Visa 0:02:09.400 --> 0:02:12.640 entered a series of contracts with merchants and banks that 0:02:12.680 --> 0:02:15.280 allowed it to favor its own network over those of 0:02:15.320 --> 0:02:18.959 its competitors. Seems like some true antitrust activity here that 0:02:19.080 --> 0:02:20.079 DOJ's alleging. 0:02:20.400 --> 0:02:22.560 When you're thinking about and especially when you were talking 0:02:22.560 --> 0:02:25.240 about the current administration and the election coming up, do 0:02:25.280 --> 0:02:27.720 you think a new administration would be able to potentially 0:02:28.080 --> 0:02:29.680 amend a settlement here. 0:02:29.919 --> 0:02:32.320 There's a couple of things to consider here, the first 0:02:32.320 --> 0:02:34.640 being that is that this is not Visa's first time 0:02:34.919 --> 0:02:36.480 at the antitrust. 0:02:35.919 --> 0:02:36.960 Rodeo, if you will. 0:02:37.200 --> 0:02:40.600 The company was back in two thousand and one when 0:02:40.639 --> 0:02:44.000 it was still linked together with MasterCard before I went public, 0:02:44.040 --> 0:02:46.680 and that case ended in a settlement. In twenty ten, 0:02:46.760 --> 0:02:49.600 there was a similar anti trust suit related to credit 0:02:49.600 --> 0:02:52.240 card fees. That case also ed in a settlement. So 0:02:52.840 --> 0:02:55.760 there is some history here of these cases tending to settle, 0:02:56.040 --> 0:02:58.239 and while there or not a new administration might be 0:02:58.280 --> 0:03:00.800 amenable to that, it really remains to be seen. But 0:03:00.880 --> 0:03:03.560 I think settlement is certainly something that's on the table. 0:03:03.960 --> 0:03:06.240 And important to remember in all of this too, is 0:03:06.240 --> 0:03:09.360 that the DOJ is really after some behavioral changes with 0:03:09.440 --> 0:03:12.200 regard to these agreements. Right, We're not talking about some 0:03:12.280 --> 0:03:15.280 kind of a structural change in Visa as a result 0:03:15.280 --> 0:03:17.000 of this litigation most likely. 0:03:17.080 --> 0:03:19.079 Right, So then what does that look like? So they 0:03:19.080 --> 0:03:22.040 can't pay Apple anymore, et cetera. So Apple loses money, 0:03:22.280 --> 0:03:23.320 and then what does Visa do? 0:03:23.800 --> 0:03:26.359 Yeah, you know, it's it's a really a great question, 0:03:26.400 --> 0:03:28.160 and I think one that that really goes to the 0:03:28.200 --> 0:03:30.919 heart of Visa's debit business here. You know, DJ is 0:03:30.960 --> 0:03:33.359 alleging that as a result of one hundred and eighty 0:03:33.400 --> 0:03:36.760 of the largest of these contracts that Visa has, they've 0:03:36.760 --> 0:03:39.920 been able to shield themselves from competition on seventy five 0:03:39.960 --> 0:03:43.040 percent of the debit volume that's going through its network. 0:03:43.120 --> 0:03:45.600 So this is a big money maker for Visa. It's 0:03:45.600 --> 0:03:47.680 something to really keep our eye on here because it 0:03:47.680 --> 0:03:50.280 could result in a chalk of its business going away 0:03:50.560 --> 0:03:53.840 if these contracts were to also go away. So that's 0:03:53.840 --> 0:03:55.880 really I think what we have to scratch our heads 0:03:55.880 --> 0:03:57.880 a bad and wonder you know, is that the ultimate 0:03:57.920 --> 0:03:59.640 remedy that we see from DJ. 0:03:59.800 --> 0:04:01.840 But lots of time too, you know. 0:04:02.000 --> 0:04:04.560 Give you an example the Google Search case from filing 0:04:04.600 --> 0:04:07.240 to trial that was a three year time span before 0:04:07.240 --> 0:04:08.960 we got there, So this is going to be something 0:04:08.960 --> 0:04:10.200 that's around for quite a while. 0:04:10.560 --> 0:04:13.120 Is there any way that Visa could argue that the 0:04:13.160 --> 0:04:17.120 complaint fails to account for increasing competition from alternative payment 0:04:17.160 --> 0:04:20.160 methods if you're thinking about account to account transfers. 0:04:20.800 --> 0:04:23.279 Yeah, and I think that's exactly where we could see 0:04:23.320 --> 0:04:26.040 Visa go in its motion to dismiss arguments or later 0:04:26.120 --> 0:04:28.800 on down the line. You're right, we're seeing this increase 0:04:28.839 --> 0:04:31.760 in competition from things like Venmo or cash app, right, 0:04:31.800 --> 0:04:35.479 But the complaint is basically alleging that those forums haven't 0:04:35.480 --> 0:04:38.120 been able to scale up to be as large as 0:04:38.120 --> 0:04:40.360 they really could be because of deals. 0:04:40.040 --> 0:04:41.000 They have with Visa. 0:04:41.440 --> 0:04:43.560 But you know, the reality is, as you and I 0:04:43.640 --> 0:04:46.839 both know, folks are using those platforms and the marketplace 0:04:46.960 --> 0:04:47.520 is changing. 0:04:47.560 --> 0:04:48.800 So I think that's probably going to. 0:04:48.800 --> 0:04:51.479 Be part of parish parcel to what we see VISA 0:04:51.520 --> 0:04:52.599 saying in its defense here. 0:04:52.760 --> 0:04:55.400 How long does something like this take, particularly as Jess 0:04:55.440 --> 0:04:57.520 was pointing out, we might have a change in administration. 0:04:58.440 --> 0:05:01.360 Yeah, yeah, again, you know, really these slow moving cases here, 0:05:01.400 --> 0:05:03.119 I think we really this is going to be something 0:05:03.120 --> 0:05:05.000 that's around, I would say, for the next two or 0:05:05.040 --> 0:05:05.559 three years. 0:05:05.839 --> 0:05:07.480 At a minimum, we're going to get through a ton 0:05:07.520 --> 0:05:08.120 of motion. 0:05:08.000 --> 0:05:10.840 To dismiss practice next year likely get over that and 0:05:10.880 --> 0:05:12.520 find ourselves in a discovery phase. 0:05:12.560 --> 0:05:14.719 So, so is this like an overhang on the stock 0:05:14.760 --> 0:05:15.640 then until then? 0:05:16.440 --> 0:05:18.279 I would say so, I mean, you know, how the 0:05:18.279 --> 0:05:20.719 stock reacts is how the stock reacts, but the overhang 0:05:20.839 --> 0:05:22.400 is something that it is a long term risk. 0:05:22.400 --> 0:05:24.080 I would say that's absolutely accurate. 0:05:24.440 --> 0:05:26.640 In what ways do you think it would impact visus 0:05:26.760 --> 0:05:28.200 earnings and revenue outlook? 0:05:29.640 --> 0:05:31.359 Again, you know, I think we really have to go 0:05:31.440 --> 0:05:33.279 to the heart of the question here with you know, 0:05:33.320 --> 0:05:36.840 the actual percentage of debit transactions that Visa has been 0:05:36.880 --> 0:05:39.840 able to shield itself from competition on. Again, the complaint 0:05:39.880 --> 0:05:42.360 if it's correct, and again you know, the government's best 0:05:42.400 --> 0:05:45.040 day is always the day they file their complaint because 0:05:45.080 --> 0:05:47.719 no one's really responded to it yet. But if the 0:05:47.760 --> 0:05:51.480 government's correct that Visas shield itself from competition on seventy 0:05:51.480 --> 0:05:55.039 five percent of its transactions from these largest contracts, that's 0:05:55.040 --> 0:05:58.640 a significant part of visas actual debit revenue. So that 0:05:58.720 --> 0:06:01.080 I think is where the concern is coming in. You know, 0:06:01.160 --> 0:06:04.040 it really goes the heart of Visa's debit business, and 0:06:04.120 --> 0:06:05.719 we'll have to see what plays out over the next 0:06:05.720 --> 0:06:08.039 couple of years here with regard to possible remedies or 0:06:08.040 --> 0:06:08.560 a settlement. 0:06:08.800 --> 0:06:11.880 Our thanks to Justin Teresi, Bloomberg Intelligence, Anti trust, litigation 0:06:11.960 --> 0:06:12.880 and policy analyst. 0:06:13.360 --> 0:06:15.440 One story from the Bloomberg terminal this week that caught 0:06:15.440 --> 0:06:17.040 our eye was about. 0:06:16.640 --> 0:06:21.000 Colleges skyrocketing tuition costs. COVID and fewer high school graduates 0:06:21.040 --> 0:06:24.440 have been straining the survival of smaller American colleges, leading 0:06:24.480 --> 0:06:27.440 many to shut down. Now some are joining a surprising 0:06:27.520 --> 0:06:29.320 path mergers and acquisitions. 0:06:29.520 --> 0:06:32.479 Northeastern University, once known as a Boston commuter school, has 0:06:32.560 --> 0:06:35.560 even formed a dedicated mergers and acquisitions team with the 0:06:35.600 --> 0:06:37.360 mission of getting big in a hurry. 0:06:37.480 --> 0:06:40.200 It's the subject of a Bloomberg Big Take story titled 0:06:40.360 --> 0:06:43.960 a college taps Wall Street playbook to rival Ivy's on admissions. 0:06:44.120 --> 0:06:45.960 Guests host Jess Menton and I were joined by one 0:06:46.000 --> 0:06:49.839 of the authors, Francesca Maglioni, Bloomberg Personal Finance and Higher 0:06:49.960 --> 0:06:52.720 education reporter and mean first asked Francesca to walk us 0:06:52.720 --> 0:06:53.880 through the legs of the story. 0:06:54.400 --> 0:06:57.880 Northeastern University has been known for years as a commuter 0:06:57.960 --> 0:07:02.799 school mostly attended by low students, and since twenty eleven 0:07:02.839 --> 0:07:06.400 they've kind of been expanding their brand. They now have 0:07:06.560 --> 0:07:11.080 fourteen campuses across the world, with three campuses abroad. What 0:07:11.120 --> 0:07:13.920 we thought was interesting is that since twenty nineteen they've 0:07:13.920 --> 0:07:18.040 been buying up other struggling schools, kind of tapping in 0:07:18.080 --> 0:07:20.560 that private equity playbook and get M and A. Yeah, 0:07:20.560 --> 0:07:22.760 like they've been merging with They've merged with three different 0:07:22.800 --> 0:07:25.520 schools so far and kind of embedded the North Eastern 0:07:25.560 --> 0:07:28.320 brand on these schools and now can offer to students like, hey, 0:07:28.360 --> 0:07:30.800 you can study for a semester in California, you can 0:07:30.840 --> 0:07:33.040 do a semester in New York. And this is very 0:07:33.040 --> 0:07:36.480 different from those schools like Princeton and Harvard, which just 0:07:36.520 --> 0:07:39.680 want to stay small and delete. They want to expand 0:07:39.720 --> 0:07:41.120 their brand as much as they can. 0:07:41.000 --> 0:07:42.880 Because there's a lot of schools, especially in the South 0:07:42.880 --> 0:07:44.640 where I'm from, where you had a lot of magnet 0:07:44.680 --> 0:07:47.040 schools and then satellite schools, whether it was like the 0:07:47.120 --> 0:07:49.160 University of Texas or Texas A and M, so you'd 0:07:49.160 --> 0:07:51.920 have not just the main campuses, say in Austin, Texas, 0:07:51.960 --> 0:07:54.600 you had ones in say Dallas and outside of that. 0:07:54.640 --> 0:07:57.240 So I'm wondering is this is there a particular playbook 0:07:57.240 --> 0:07:58.400 when it comes to kind of like the M and 0:07:58.440 --> 0:08:00.400 a type of feel it comes to something like this, 0:08:00.560 --> 0:08:02.760 or is there different not apples and apples. 0:08:02.760 --> 0:08:04.240 I guess yeah, I guess. 0:08:04.280 --> 0:08:06.520 What's interesting with the Northeastern is that High D is 0:08:06.520 --> 0:08:08.680 going through a very hard time. There's a lot of 0:08:09.040 --> 0:08:12.360 smaller schools that are closing all over the US, and 0:08:12.440 --> 0:08:14.960 so Northeastern is growing at a time when all these 0:08:15.000 --> 0:08:18.360 other colleges are shrinking. Colleges are competing for students. The 0:08:18.400 --> 0:08:21.120 number of students across the US is going to drop 0:08:21.160 --> 0:08:23.840 by ten percent, the number of students going to college. 0:08:24.720 --> 0:08:26.480 So why what's the driver there? 0:08:26.600 --> 0:08:29.000 It's just a demographic cliff and. 0:08:29.400 --> 0:08:33.200 The costs and it's. 0:08:32.160 --> 0:08:33.600 Extremely expensive as well. 0:08:33.760 --> 0:08:38.160 COVID was really bad for the college enrollment numbers as well. 0:08:38.200 --> 0:08:41.160 And so Northeastern is kind of growing at a time 0:08:41.160 --> 0:08:43.880 when all these other schools are shrinking. And when looking 0:08:43.920 --> 0:08:48.160 for schools, they want valuable real estate. The latest acquisition 0:08:48.240 --> 0:08:50.400 that they have is in New York. Now they have 0:08:51.000 --> 0:08:52.679 three buildings in Manhattan. 0:08:53.120 --> 0:08:56.240 Do they buy Marymount or was this part of yes, 0:08:56.280 --> 0:08:59.959 they don't call it buying because still has its own brand. 0:09:00.240 --> 0:09:04.400 They just like swallow their liabilities and their assets. There's 0:09:04.440 --> 0:09:07.160 no exchange of money that changes hands. 0:09:07.400 --> 0:09:08.960 Interesting, is it working? 0:09:09.240 --> 0:09:11.679 Like yeah, is this playbook actually helping Northeastern? 0:09:11.840 --> 0:09:12.480 Yeah, it's working. 0:09:12.520 --> 0:09:16.040 Northeastern last year had almost one hundred thousand students apply 0:09:16.160 --> 0:09:19.440 to their university. They've seen their enrollment increase by fifteen 0:09:19.440 --> 0:09:22.920 percent since twenty nineteen, and they've gone from being just 0:09:23.000 --> 0:09:26.600 a local, little known brand to being known worldwide. 0:09:26.720 --> 0:09:29.120 But part of the college thing is like the experience, right, 0:09:29.200 --> 0:09:31.560 Like you go there and you live there, like maybe 0:09:31.559 --> 0:09:33.800 you take a semester abroad or something, but like you 0:09:33.840 --> 0:09:36.880 stay there and it feels a little weird and disjointed, 0:09:36.920 --> 0:09:38.040 and then all of a sudden be like you're here, 0:09:38.040 --> 0:09:39.600 and then you're there, and then you're there. 0:09:39.920 --> 0:09:40.520 Yeah, for sure. 0:09:40.600 --> 0:09:42.520 That's one of the things that Northeastern will say is 0:09:42.600 --> 0:09:45.120 changing within higher ed and that's why they've been successful 0:09:45.160 --> 0:09:48.200 in this moment. They think that students no longer or 0:09:48.200 --> 0:09:50.400 some students no longer want to, you know, spend four 0:09:50.440 --> 0:09:52.840 years in one place with a small community, and they're 0:09:52.880 --> 0:09:55.280 looking to get new experiences and be more practical in 0:09:55.360 --> 0:09:57.719 terms of their four years. How can this translate into 0:09:57.800 --> 0:09:59.480 career after college and things like that. 0:10:00.200 --> 0:10:02.120 So that's another way that they're different from other colleges. 0:10:02.240 --> 0:10:05.200 Are there other potential universities or colleges that are eyeing 0:10:05.400 --> 0:10:07.880 this type of model and they may try to do 0:10:08.080 --> 0:10:09.520 and replicate something similar. 0:10:10.200 --> 0:10:10.760 Yeah, for sure. 0:10:10.840 --> 0:10:15.199 Northeastern's told us that they've heard from almost fifty schools 0:10:15.240 --> 0:10:18.240 that have reached out, kind of interested and either merging 0:10:18.240 --> 0:10:20.720 with them or learning about their business model. We saw 0:10:20.760 --> 0:10:24.200 that Vanderbilt has now a campus in Florida that's kind 0:10:24.240 --> 0:10:26.480 of a school that's trying to do something a little similar, 0:10:26.600 --> 0:10:28.800 not at the scale that Northeastern is doing it, but 0:10:28.840 --> 0:10:30.880 there's a lot of schools watching what they're doing right now. 0:10:30.960 --> 0:10:34.079 Yeah, so is what they're doing also, though different from 0:10:34.080 --> 0:10:36.719 that Marymount thing, Like I can still go to Marymount here, 0:10:36.880 --> 0:10:39.280 say in New York City versus Northeastern, and then I 0:10:39.280 --> 0:10:41.040 go spend a semester in California. 0:10:41.240 --> 0:10:44.520 Yes, so Marymount is part of their whole plan. Okay, 0:10:44.559 --> 0:10:46.000 so that is part Right now. 0:10:45.880 --> 0:10:49.400 They're still Marymount because the merger was just announced, but 0:10:49.760 --> 0:10:54.000 eventually it'll be Marymount at Northeastern or whatever brand they 0:10:54.000 --> 0:10:54.959 decide to go with ye. 0:10:55.000 --> 0:10:56.480 So then I can go to Northeastern and then be 0:10:56.520 --> 0:10:57.880 like I'm gonna spend a year in New York going 0:10:57.880 --> 0:11:00.880 in to Marymount, yes Hice, Okay, yeah, yeah, that's just 0:11:00.880 --> 0:11:04.319 so interesting. It's just a different college experience when like 0:11:05.120 --> 0:11:06.720 I would think that you go to college, you learn 0:11:06.760 --> 0:11:08.840 how to like be by yourself, do launder by yourself, 0:11:08.880 --> 0:11:12.040 get your debt by yourself, beer by yourself, and then 0:11:12.080 --> 0:11:15.080 like that's it, not like jet setting off to different locations. 0:11:15.240 --> 0:11:15.480 You know. 0:11:16.000 --> 0:11:19.120 Our thanks to Francesca Maglioni, Bloomberg Personal Finance and Higher 0:11:19.200 --> 0:11:20.320 Education reporter. 0:11:20.320 --> 0:11:23.000 Coming up a conversation with Robbie men In, Singapore's Climate 0:11:23.040 --> 0:11:25.960 Action Ambassador on sustainable financing in Southeast Asia. 0:11:26.120 --> 0:11:29.120 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:11:29.160 --> 0:11:31.680 depth research and data on two thousand companies and one 0:11:31.760 --> 0:11:34.800 hundred and thirty industries. You can access Bloomberg Intelligence via 0:11:34.840 --> 0:11:37.520 b I go on the terminal. I'm Baby Lipschals and. 0:11:37.480 --> 0:11:39.559 I'm Alex Steele, and this is Bloomberg. 0:11:48.480 --> 0:11:52.360 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:11:52.440 --> 0:11:55.160 weekdays at ten am Eastern on Apple card Playing and 0:11:55.280 --> 0:11:58.160 broud Otto with the Bloomberg Business app. Listen on demand 0:11:58.200 --> 0:12:01.920 wherever you get your podcasts are what just Live on YouTube. 0:12:03.320 --> 0:12:05.640 I'm Alex Steele and I'm Baby Liftals filling in for 0:12:05.679 --> 0:12:06.240 Paul Sweeny. 0:12:06.400 --> 0:12:09.800 Each week we look at research from Bloomberg BNEF previously 0:12:09.800 --> 0:12:12.520 known as New Energy Finance. They're the team at Bloomberg 0:12:12.520 --> 0:12:17.640 that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, 0:12:17.679 --> 0:12:19.080 and agricultural sectors. 0:12:19.200 --> 0:12:21.320 This week, we looked at how oil and gas play 0:12:21.360 --> 0:12:22.560 into the energy transition. 0:12:22.840 --> 0:12:25.440 Guest host Normal Linda and I were joined by David Doherty, 0:12:25.520 --> 0:12:28.000 head of Oil and Renewables Fuels Research, and we first 0:12:28.080 --> 0:12:30.000 asked him to discuss some of the trends that he's 0:12:30.080 --> 0:12:31.240 noticed over the past year. 0:12:31.679 --> 0:12:31.880 Yeah. 0:12:31.920 --> 0:12:33.480 I mean, if you think of the players in the 0:12:33.480 --> 0:12:35.560 oil market, they're the energy pros in the world, right. 0:12:35.559 --> 0:12:38.760 They've got the balance sheet, they've got the skills, they've 0:12:38.760 --> 0:12:41.360 got the technology, and they're already established, right, so they've 0:12:41.360 --> 0:12:43.920 got interest in seeing how this develops, how fast it goes, 0:12:43.960 --> 0:12:45.320 how it impacts their bottom line. 0:12:45.360 --> 0:12:47.360 Basically, what are the main hold ups in terms of 0:12:47.400 --> 0:12:49.840 the transition, What are some of the headwinds. 0:12:50.960 --> 0:12:55.360 I mean, capital is obviously raising capital smarts people in 0:12:55.400 --> 0:12:58.400 the right jobs in the right place, push back both 0:12:58.440 --> 0:13:00.680 political and from people. 0:13:00.760 --> 0:13:00.920 Right. 0:13:01.080 --> 0:13:03.360 People love the idea, but as soon as it costs money, 0:13:03.400 --> 0:13:05.520 that's quite a difficult to swallow, especially now in like 0:13:05.559 --> 0:13:06.400 inflationary times. 0:13:06.480 --> 0:13:11.240 Right, is the conversation that evs will eventually supplant internal 0:13:11.240 --> 0:13:13.559 combustion engines and get rid of gas demand. Is that 0:13:13.600 --> 0:13:15.959 still something that you guys are working with in modeling 0:13:16.080 --> 0:13:17.600 or has that conversation evolved? 0:13:18.120 --> 0:13:20.800 It's evolved, I mean that is kind of the trend though. Yeah, 0:13:20.800 --> 0:13:23.040 when you look at things when they're cheaper upfront, right, 0:13:23.200 --> 0:13:26.360 consumers tend to shift towards that. If it's cheaper day 0:13:26.360 --> 0:13:29.000 one for buying an EV versus an internal combustion engine car, 0:13:29.040 --> 0:13:30.800 and all else is equally, you're probably going to see 0:13:30.800 --> 0:13:31.480 a shift towards that. 0:13:31.600 --> 0:13:31.800 Right. 0:13:31.920 --> 0:13:34.320 So we're really though US centric here and we don't 0:13:34.320 --> 0:13:35.440 see that in the same way. 0:13:35.480 --> 0:13:37.720 But elsewhere, is that truly what's happening? 0:13:38.120 --> 0:13:38.560 Yeah, you are. 0:13:38.559 --> 0:13:41.280 You're seeing a big uptick in Europe and in China 0:13:41.360 --> 0:13:44.080 for example, and even here in the US California for example, 0:13:44.080 --> 0:13:46.600 behave it's much more like a European economy. When we 0:13:46.600 --> 0:13:49.720 think about the transition to evs, we've seen really high 0:13:49.800 --> 0:13:50.920 rates of penetration there. 0:13:51.440 --> 0:13:53.439 What are some of the main themes in market dynamics 0:13:53.440 --> 0:13:55.120 that your team is focused on right now? 0:13:55.440 --> 0:13:57.960 Yeah, Like, the rate of this change is interesting. What's 0:13:58.000 --> 0:14:01.320 happening in different markets? What responses. If you take the 0:14:01.440 --> 0:14:04.040 US for example, it's a it's a mature market. So 0:14:04.040 --> 0:14:05.840 when these evs come into the market, you're seeing a 0:14:05.880 --> 0:14:09.240 decline in gasoline sales versus saying in China where it's 0:14:09.280 --> 0:14:12.559 like what could have been doesn't necessarily manifest, right, So 0:14:13.080 --> 0:14:15.679 that turns into then power in your pocket. Right, You're 0:14:15.720 --> 0:14:18.360 seeing the cost of gasoline isn't coming down even though 0:14:18.360 --> 0:14:21.280 you're expecting it to a less gasoline being consumed. There's 0:14:21.280 --> 0:14:23.520 so many more dynamics in just a four wheels on 0:14:23.560 --> 0:14:24.720 the road situation, right, And. 0:14:24.640 --> 0:14:26.440 How are all these things impacting the consumer? 0:14:27.440 --> 0:14:29.400 Yeah, I mean, if you think about costs in your 0:14:29.400 --> 0:14:31.240 pocket when it comes to driving your card, that's a 0:14:31.240 --> 0:14:33.040 big thing, particularly here in the US, particularly in an 0:14:33.040 --> 0:14:35.640 election year. You know, it trickles down into inflation. You 0:14:35.680 --> 0:14:37.920 get something delivered to your house, the cost of diesel 0:14:37.960 --> 0:14:41.160 impacts all of these things, so your consumers are super 0:14:41.200 --> 0:14:43.160 sensitive of anything to do a cost at the moment, 0:14:43.360 --> 0:14:45.520 and probably the biggest development here in the US it's 0:14:45.520 --> 0:14:49.120 been interesting is less consumptional gasoline hasn't turned into less 0:14:49.200 --> 0:14:51.360 prices at it. You know, a lower price at the pump. 0:14:51.520 --> 0:14:52.120 Why do you think that. 0:14:52.240 --> 0:14:54.160 Is Well, this is key. This is something we have 0:14:54.200 --> 0:14:56.200 to think about as you go towards transition. If you 0:14:56.240 --> 0:14:58.120 pull supply in any scenario, you're going to see a 0:14:58.160 --> 0:15:01.400 price spike. In the US, we're seeing less refinery production 0:15:01.480 --> 0:15:03.080 then we have a few years ago. So you're seeing 0:15:03.080 --> 0:15:04.920 over a million baros per day cut in the last 0:15:04.960 --> 0:15:06.880 two three years alone. And when you have a less 0:15:06.880 --> 0:15:09.200 supply of something, even if you have less demand, it 0:15:09.200 --> 0:15:12.720 really depends on which one goes first and HASP deduct changes. 0:15:12.720 --> 0:15:14.640 And so what are people thinking when will this all 0:15:14.680 --> 0:15:15.200 shake out? 0:15:15.880 --> 0:15:18.400 I mean it's shaking out already. It's already checking out 0:15:18.440 --> 0:15:20.000 in the fore court when people are buying the car. 0:15:20.160 --> 0:15:22.920 You're seeing the response some refiners, for example, some big 0:15:22.920 --> 0:15:25.160 refineries like P sixty six are switching some of their 0:15:25.200 --> 0:15:28.640 facilities to make things like renewable diesel or sustainable aviation fuel. 0:15:29.240 --> 0:15:32.120 So people are posturing. Companies are posting for the next five, six, 0:15:32.240 --> 0:15:34.560 seven years, right, which. 0:15:34.400 --> 0:15:36.120 Is such a great point because I guess the question 0:15:36.160 --> 0:15:39.400 then becomes, if we're posturing for the seven or eight years, 0:15:40.000 --> 0:15:42.600 what does the landscape in your world look like then? 0:15:43.080 --> 0:15:46.000 I mean everyone seems to say it's a yes, and 0:15:46.240 --> 0:15:49.600 we need everything above all, And is that how you 0:15:49.640 --> 0:15:50.160 model it? 0:15:50.440 --> 0:15:52.560 That is how we model it. In our sort of 0:15:52.600 --> 0:15:56.000 standard outlook twenty twenty nine, we see peak oil consumption globally, 0:15:56.000 --> 0:15:57.840 so that's still pretty far out. There's still a lot 0:15:57.840 --> 0:15:58.480 of growth left. 0:15:58.640 --> 0:16:00.480 Also, peak doesn't mean the then it goes to zero. 0:16:01.280 --> 0:16:03.240 I feel like that's something we need to also wraprimind around, 0:16:03.280 --> 0:16:05.000 like just because it's not increasing, it doesn't mean it's 0:16:05.120 --> 0:16:06.000 rapidly decreasing. 0:16:06.080 --> 0:16:06.880 Yeah, you're totally right. 0:16:06.920 --> 0:16:08.800 Even in like a net zero world, in our modeling, 0:16:08.840 --> 0:16:11.000 you get about twenty five million boos per day of oil, 0:16:11.120 --> 0:16:13.160 So you know net zero doesn't mean zero oil. 0:16:14.400 --> 0:16:15.920 So what does the growth outlook here? 0:16:17.080 --> 0:16:19.200 You're looking at about four or five million boos per 0:16:19.280 --> 0:16:21.800 day upside in our inner base case scenario. But lots 0:16:21.840 --> 0:16:24.120 of things can change that, right. Policies are the main 0:16:24.160 --> 0:16:26.600 thing to look at, particularly in big markets like the US. Right, 0:16:26.640 --> 0:16:29.800 the US consumers is about one in every five bowels globally, 0:16:30.200 --> 0:16:32.640 so if something changes here, the whole market can change. 0:16:32.680 --> 0:16:34.120 The dynamic is really upended. 0:16:34.520 --> 0:16:36.480 When we take a look at say China and India, 0:16:36.640 --> 0:16:40.120 large consumers of energy, obviously, are they jumping from coal 0:16:40.160 --> 0:16:40.480 to what. 0:16:41.000 --> 0:16:43.520 You know, gases of transition fuel? We're see seeing them 0:16:43.520 --> 0:16:46.120 shift towards I was just in Beijing last week, and 0:16:46.160 --> 0:16:48.000 there's a very different way of looking at the oil 0:16:48.040 --> 0:16:51.040 market versus if you're down in Texas, Right, it's what's 0:16:51.120 --> 0:16:53.640 the displacement? Because they need more and more energy, right, 0:16:53.640 --> 0:16:55.440 they don't want to import that energy, So what can 0:16:55.480 --> 0:16:58.160 you do domestically In the case of power, that's coal. 0:16:58.200 --> 0:16:59.960 But we're also seeing in the case of evs, right, 0:17:00.120 --> 0:17:03.000 LNG trucks, even electric trucks. So we have a lot 0:17:03.040 --> 0:17:05.280 we can learn from them. But they're just different, very 0:17:05.280 --> 0:17:06.199 different markets. 0:17:06.240 --> 0:17:08.520