WEBVTT - American Petroleum's Mike Sommers Talks Hormuz Oil Flows

0:00:02.520 --> 0:00:08.840
<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. It's kind of amazing

0:00:08.880 --> 0:00:12.440
<v Speaker 1>since we hear so much about the President's relationship with

0:00:12.800 --> 0:00:14.880
<v Speaker 1>the oil industry. While we may not be seeing a

0:00:14.880 --> 0:00:18.120
<v Speaker 1>lot of additional drilling, it's kind of a vibes thing

0:00:18.200 --> 0:00:21.560
<v Speaker 1>that there's just more positive energy in the energy space

0:00:21.600 --> 0:00:23.919
<v Speaker 1>when it comes to this administration. But stopping down to

0:00:23.920 --> 0:00:25.279
<v Speaker 1>call him out, what are we looking at for a

0:00:25.280 --> 0:00:27.800
<v Speaker 1>gallon of gas today? Kley four dollars according to Triple

0:00:27.880 --> 0:00:31.880
<v Speaker 1>A and eight cents nationally. And we wanted to talk

0:00:31.920 --> 0:00:34.120
<v Speaker 1>this out with Mike Summers. I'm guessing he was listening

0:00:34.120 --> 0:00:36.040
<v Speaker 1>to this as well. Mike, of course runs the American

0:00:36.040 --> 0:00:40.080
<v Speaker 1>Petroleum Institute, where he's president and CEO speaking for the industry.

0:00:40.120 --> 0:00:42.279
<v Speaker 1>It's great to see you, Mike. Great and welcome back

0:00:42.280 --> 0:00:46.440
<v Speaker 1>to Bloomberg. Is this an argument within the family. How

0:00:46.479 --> 0:00:50.880
<v Speaker 1>would you describe the relationship between this administration and your

0:00:50.960 --> 0:00:53.160
<v Speaker 1>industry and what's you looking for here?

0:00:53.200 --> 0:00:54.920
<v Speaker 2>Well, first of all, I give the President a lot

0:00:54.920 --> 0:00:58.240
<v Speaker 2>of credit. His energy dominance agenda has really made the difference.

0:00:58.280 --> 0:01:01.040
<v Speaker 2>We've opened up the Gulf of America again for production,

0:01:01.480 --> 0:01:04.080
<v Speaker 2>we have more production on federal lands, and of course

0:01:04.080 --> 0:01:08.240
<v Speaker 2>in federal waters. Their regulatory agenda has been very positive

0:01:08.400 --> 0:01:11.680
<v Speaker 2>American oil and gas industry. There's no question this president

0:01:11.720 --> 0:01:15.200
<v Speaker 2>has been focused on more production here in the United States,

0:01:15.400 --> 0:01:18.080
<v Speaker 2>and that has provided a buffer during this time when

0:01:18.120 --> 0:01:20.720
<v Speaker 2>the strait of hor Moves has been effectively closed. So

0:01:20.760 --> 0:01:22.600
<v Speaker 2>I give him a lot of credit for his energy

0:01:22.640 --> 0:01:25.640
<v Speaker 2>dominance agenda. At the same time, we know that this

0:01:25.760 --> 0:01:28.760
<v Speaker 2>industry is a price taker, not a price maker, and

0:01:28.840 --> 0:01:31.760
<v Speaker 2>because the trade of hor moves has been shut down

0:01:31.840 --> 0:01:34.520
<v Speaker 2>for basically five months, we're of course going to be

0:01:34.560 --> 0:01:36.000
<v Speaker 2>dealing with higher prices at the pump.

0:01:36.840 --> 0:01:39.840
<v Speaker 3>So, in other words, is higher profit not a choice

0:01:40.360 --> 0:01:42.039
<v Speaker 3>or could they make a different choice.

0:01:42.120 --> 0:01:44.720
<v Speaker 2>Well, of course, this is an industry. As I said,

0:01:44.720 --> 0:01:47.400
<v Speaker 2>we are price takers, not price makers. And as a

0:01:47.440 --> 0:01:50.160
<v Speaker 2>consequence of the strait of Hormus, which has been twenty

0:01:50.280 --> 0:01:53.480
<v Speaker 2>million barrels of oil a day not making it through straight,

0:01:53.760 --> 0:01:56.440
<v Speaker 2>you're going to have to deal with higher prices. I'll

0:01:56.480 --> 0:01:59.600
<v Speaker 2>remind you though, in twenty twenty, I was actually in

0:01:59.640 --> 0:02:02.200
<v Speaker 2>a meeting with the President in the cabinet room where

0:02:02.200 --> 0:02:05.800
<v Speaker 2>this industry was actually dealing with low prices, in fact,

0:02:05.960 --> 0:02:09.520
<v Speaker 2>negative thirty two dollars prices and that was a time

0:02:09.560 --> 0:02:13.040
<v Speaker 2>when this industry was making virtually zero earnings. So this

0:02:13.080 --> 0:02:16.040
<v Speaker 2>is a commodity business. Prices go up, prices go down.

0:02:16.280 --> 0:02:19.880
<v Speaker 2>We have to deal with the price swings, and on average,

0:02:19.919 --> 0:02:23.160
<v Speaker 2>this industry actually makes a fewer earnings and other large

0:02:23.160 --> 0:02:26.760
<v Speaker 2>industries like tech, like finance. So this is an industry

0:02:26.760 --> 0:02:28.639
<v Speaker 2>that we do have to deal with those highs and lows,

0:02:28.840 --> 0:02:32.880
<v Speaker 2>and high prices now mean investments for future production. One

0:02:32.880 --> 0:02:35.040
<v Speaker 2>example of that is during the two thousand and eight

0:02:35.040 --> 0:02:38.239
<v Speaker 2>twenty twelve period when we were dealing with significant earnings

0:02:38.280 --> 0:02:41.160
<v Speaker 2>at that point too. That was allowed us to finance

0:02:41.200 --> 0:02:44.639
<v Speaker 2>what eventually became the shale revolution, the fracking revolution, which

0:02:44.639 --> 0:02:48.320
<v Speaker 2>allowed us today now produce about fourteen million barrels of oil. Everything.

0:02:48.400 --> 0:02:51.079
<v Speaker 1>Surely the president understands everything we're talking about here, right,

0:02:51.120 --> 0:02:53.960
<v Speaker 1>I mean, he knows that there's a refining bottleneck in

0:02:54.000 --> 0:02:56.160
<v Speaker 1>this country, that there's a disconnect. We talk about crack

0:02:56.240 --> 0:02:58.880
<v Speaker 1>spreads between the price of crude and what we pay

0:02:58.880 --> 0:03:03.079
<v Speaker 1>at the pump, that distilled products are their own story.

0:03:03.639 --> 0:03:07.400
<v Speaker 1>Is he just sounding the populist alarm in an election season?

0:03:07.440 --> 0:03:08.240
<v Speaker 1>I feel your pain.

0:03:08.440 --> 0:03:11.280
<v Speaker 2>Well, I do think that everyone is concerned about high

0:03:11.280 --> 0:03:13.959
<v Speaker 2>prices at the crump for American consumers and high electricity.

0:03:14.080 --> 0:03:17.079
<v Speaker 1>Calling you guys out by name though excelln Mobile and Chevron.

0:03:17.480 --> 0:03:19.840
<v Speaker 2>Absolutely, But what we understand that, you know, we're in

0:03:19.840 --> 0:03:21.440
<v Speaker 2>an election year and we're gonna have to deal with

0:03:21.480 --> 0:03:24.600
<v Speaker 2>that kind of incoming. But at the same time, American

0:03:24.600 --> 0:03:28.280
<v Speaker 2>consumers have to understand that during this time of high earnings,

0:03:28.320 --> 0:03:31.320
<v Speaker 2>this is the time when we invest for future production

0:03:31.480 --> 0:03:32.079
<v Speaker 2>going forward.

0:03:32.520 --> 0:03:35.480
<v Speaker 3>Well as Joe's talking about the political considerations here, that

0:03:35.560 --> 0:03:37.680
<v Speaker 3>arguably is why we've seen the President flowed things like

0:03:37.680 --> 0:03:40.960
<v Speaker 3>a gas tax holiday for example. Do you fear that

0:03:41.040 --> 0:03:44.000
<v Speaker 3>he could even go so far if we see prices

0:03:44.120 --> 0:03:47.600
<v Speaker 3>permanently above four dollars a gallon, for example, to suggest

0:03:47.600 --> 0:03:50.360
<v Speaker 3>that maybe there should be export bans put in place

0:03:50.360 --> 0:03:51.760
<v Speaker 3>in this country, what would that do well?

0:03:51.800 --> 0:03:53.760
<v Speaker 2>We would also be very concerned about any kind of

0:03:53.760 --> 0:03:55.760
<v Speaker 2>an export ban. I will say that there are a

0:03:55.760 --> 0:03:57.560
<v Speaker 2>lot of policies that they put in place that have

0:03:57.680 --> 0:04:00.480
<v Speaker 2>provided some kind of a buffer. For example, the Jones

0:04:00.520 --> 0:04:02.920
<v Speaker 2>Act waiver that they put into place. There are other

0:04:02.920 --> 0:04:05.520
<v Speaker 2>things they could do. There are changes that they could

0:04:05.560 --> 0:04:08.480
<v Speaker 2>make to the renewable fuels standard right now that are

0:04:08.520 --> 0:04:12.120
<v Speaker 2>providing a higher price at the pump that we don't

0:04:12.160 --> 0:04:14.880
<v Speaker 2>need to sustain right now given the kind of challenges

0:04:14.920 --> 0:04:17.680
<v Speaker 2>that we have. But we would be concerned about an

0:04:17.720 --> 0:04:20.760
<v Speaker 2>export ban primarily because there is a mismatch between the

0:04:20.800 --> 0:04:23.120
<v Speaker 2>kind of production that we have in the United States.

0:04:23.520 --> 0:04:26.240
<v Speaker 2>This WTI that we produce here in the United States

0:04:26.279 --> 0:04:29.240
<v Speaker 2>isn't necessarily refined here in the United States, So we

0:04:29.320 --> 0:04:32.039
<v Speaker 2>import a lot of product from overseas, and then we

0:04:32.160 --> 0:04:34.880
<v Speaker 2>export a lot of product from the United States to

0:04:34.960 --> 0:04:38.760
<v Speaker 2>be refined elsewhere. That's actually to the benefit of American

0:04:38.800 --> 0:04:42.440
<v Speaker 2>consumers because we buy that lower quality crude from other

0:04:42.480 --> 0:04:45.599
<v Speaker 2>countries like Canada and then sell it to American consumers

0:04:45.720 --> 0:04:48.400
<v Speaker 2>at a discount. So any kind of an export ban

0:04:48.720 --> 0:04:50.960
<v Speaker 2>I think would be a great concern to this industry.

0:04:51.000 --> 0:04:54.359
<v Speaker 1>We've talked about the refining bottlenecks in this country and

0:04:54.400 --> 0:04:57.800
<v Speaker 1>the need to maintain these refineries. At some point you

0:04:57.800 --> 0:05:00.440
<v Speaker 1>need to take them down and fix the heart Where

0:05:01.040 --> 0:05:03.559
<v Speaker 1>in a country that hasn't built a refinery I believe

0:05:03.600 --> 0:05:06.920
<v Speaker 1>since the nineteen seventies, is this the part that needs

0:05:07.000 --> 0:05:07.640
<v Speaker 1>to be fixed.

0:05:07.880 --> 0:05:09.960
<v Speaker 2>Well, it's one of the reasons why we're so focused

0:05:10.000 --> 0:05:13.559
<v Speaker 2>on getting legislative permitting reform done because it is very

0:05:13.560 --> 0:05:16.760
<v Speaker 2>hard to build anything in this country, particularly a new

0:05:16.800 --> 0:05:19.880
<v Speaker 2>oil refinery. You're exactly right. We haven't built refinery in

0:05:19.880 --> 0:05:22.640
<v Speaker 2>this country since nineteen seventy six. And if you think

0:05:22.640 --> 0:05:24.920
<v Speaker 2>about the market that we were in nineteen seventy six

0:05:25.160 --> 0:05:27.640
<v Speaker 2>compared to the one that we're in today, it's a

0:05:27.640 --> 0:05:31.600
<v Speaker 2>completely different story. We were importing oil at that point,

0:05:31.760 --> 0:05:34.880
<v Speaker 2>now we're exporting oil. It doesn't make any sense we

0:05:34.920 --> 0:05:37.479
<v Speaker 2>should be building more refineries in this country because that's

0:05:37.520 --> 0:05:40.240
<v Speaker 2>the real bottleneck right now. Even when you're dealing with

0:05:40.320 --> 0:05:43.240
<v Speaker 2>lower prices from from a crude perspective, you don't have

0:05:43.320 --> 0:05:46.080
<v Speaker 2>the refining capacity that you need to turn it into

0:05:46.080 --> 0:05:48.279
<v Speaker 2>the products that we use on a daily basis, like

0:05:48.360 --> 0:05:49.440
<v Speaker 2>gasoline and diesel.

0:05:49.720 --> 0:05:52.720
<v Speaker 3>What are you hearing about permitting reform on Capitol Hill

0:05:52.800 --> 0:05:54.479
<v Speaker 3>right now? Or I guess maybe a better question is

0:05:54.560 --> 0:05:56.800
<v Speaker 3>are you hearing about it? Because we often don't.

0:05:57.160 --> 0:05:59.680
<v Speaker 2>This should be such a layup for the United States

0:05:59.760 --> 0:06:03.040
<v Speaker 2>con right now. I believe it should be a political

0:06:03.040 --> 0:06:05.800
<v Speaker 2>imperative for them. You see prices going up, particularly on

0:06:05.839 --> 0:06:09.400
<v Speaker 2>the electricity side, because of more demand on the electrical grid,

0:06:09.440 --> 0:06:13.479
<v Speaker 2>because of data centers and the advent of an artificial intelligence. Unfortunately,

0:06:13.720 --> 0:06:16.640
<v Speaker 2>lawmakers just aren't focused on it because we're in an

0:06:16.640 --> 0:06:19.640
<v Speaker 2>election year. I think that this should have been the

0:06:19.680 --> 0:06:23.000
<v Speaker 2>first thing on the agenda this Congress. Republicans and Democrats

0:06:23.000 --> 0:06:25.680
<v Speaker 2>should be able to agree because all sides benefit, whether

0:06:25.720 --> 0:06:29.920
<v Speaker 2>it's alternative energies like wind and solar, or pipelines that

0:06:29.960 --> 0:06:33.200
<v Speaker 2>would benefit oil and natural gas. But unfortunately, I think

0:06:33.200 --> 0:06:35.560
<v Speaker 2>they're a little bit too focused on what's coming in November,

0:06:35.640 --> 0:06:38.400
<v Speaker 2>and everybody wants to wait until they figure out who's

0:06:38.400 --> 0:06:40.280
<v Speaker 2>going to win to decide who's going to benefit from

0:06:40.279 --> 0:06:41.000
<v Speaker 2>permitting reform.

0:06:41.080 --> 0:06:43.200
<v Speaker 1>There's great hope in the markets today. We see crude

0:06:43.240 --> 0:06:45.800
<v Speaker 1>oil in the seventies for the first time and some

0:06:45.960 --> 0:06:49.520
<v Speaker 1>time is encouraging. How long would we need to stay

0:06:49.560 --> 0:06:52.120
<v Speaker 1>at these levels or move lower to see a significant

0:06:52.200 --> 0:06:52.960
<v Speaker 1>changing gas price.

0:06:53.080 --> 0:06:55.960
<v Speaker 2>Here's the bottom line. Unfortunately, we're still not getting enough

0:06:55.960 --> 0:06:57.880
<v Speaker 2>product through the Strait of Horror moves, even at the

0:06:57.920 --> 0:07:00.680
<v Speaker 2>highest ends. They're saying that we're getting only about seven

0:07:00.680 --> 0:07:04.080
<v Speaker 2>million barrels of oil through the Strait of Hermos at

0:07:04.120 --> 0:07:07.360
<v Speaker 2>this point. Because of new pipeline capacity. You only need

0:07:07.360 --> 0:07:10.000
<v Speaker 2>to get that level up to about eleven million barrels

0:07:10.000 --> 0:07:12.240
<v Speaker 2>a day through the Strait because of a lot of

0:07:12.280 --> 0:07:15.840
<v Speaker 2>that product now flowing through pipelines. That is a great

0:07:15.880 --> 0:07:17.920
<v Speaker 2>news story for the Middle East, and I think over

0:07:17.960 --> 0:07:20.480
<v Speaker 2>time we need to continue to build that infrastructure so

0:07:20.520 --> 0:07:23.880
<v Speaker 2>that we can avoid the straight over time. But right now,

0:07:24.040 --> 0:07:26.000
<v Speaker 2>we need to get that up to about eleven million

0:07:26.040 --> 0:07:28.760
<v Speaker 2>barrels a day on a sustained basis if we're going

0:07:28.800 --> 0:07:30.680
<v Speaker 2>to get back to where we need to be, back

0:07:30.680 --> 0:07:33.280
<v Speaker 2>to where we were prior to this conflict beginning.

0:07:33.040 --> 0:07:36.000
<v Speaker 3>Well, so should this administration also tap the rest of

0:07:36.040 --> 0:07:39.480
<v Speaker 3>the spr drawt on that they said they would complete.

0:07:39.480 --> 0:07:42.160
<v Speaker 3>I believe there's thirty nine million barrels left in that program.

0:07:42.240 --> 0:07:44.280
<v Speaker 2>So there are about thirty nine million barrels left in

0:07:44.320 --> 0:07:47.280
<v Speaker 2>that program. We still have product in the Strategic Petroleum

0:07:47.280 --> 0:07:50.040
<v Speaker 2>Reserve that was something that they negotiated at the beginning

0:07:50.040 --> 0:07:52.120
<v Speaker 2>of this that expires at the end of August. They

0:07:52.160 --> 0:07:54.600
<v Speaker 2>need to think about where they are and start considering

0:07:54.640 --> 0:07:57.080
<v Speaker 2>whether they're going to do another release or another exchange,

0:07:57.120 --> 0:07:59.440
<v Speaker 2>which is how this program is developed. I don't know

0:07:59.480 --> 0:08:00.880
<v Speaker 2>the answer to that, but yet I don't think we're

0:08:00.880 --> 0:08:03.520
<v Speaker 2>going to know until we know the results of whether

0:08:03.600 --> 0:08:07.040
<v Speaker 2>this potential deal in the Middle East comes through. We've

0:08:07.040 --> 0:08:09.920
<v Speaker 2>seen this before, of course. I do think that that

0:08:10.000 --> 0:08:14.480
<v Speaker 2>has provided an important relief valve for American consumers those

0:08:14.600 --> 0:08:17.160
<v Speaker 2>targeted SPR releases, not just in the United States but

0:08:17.200 --> 0:08:17.960
<v Speaker 2>throughout the world.