Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. It's kind of amazing
Speaker 1: since we hear so much about the President's relationship with
Speaker 1: the oil industry. While we may not be seeing a
Speaker 1: lot of additional drilling, it's kind of a vibes thing
Speaker 1: that there's just more positive energy in the energy space
Speaker 1: when it comes to this administration. But stopping down to
Speaker 1: call him out, what are we looking at for a
Speaker 1: gallon of gas today? Kley four dollars according to Triple
Speaker 1: A and eight cents nationally. And we wanted to talk
Speaker 1: this out with Mike Summers. I'm guessing he was listening
Speaker 1: to this as well. Mike, of course runs the American
Speaker 1: Petroleum Institute, where he's president and CEO speaking for the industry.
Speaker 1: It's great to see you, Mike. Great and welcome back
Speaker 1: to Bloomberg. Is this an argument within the family. How
Speaker 1: would you describe the relationship between this administration and your
Speaker 1: industry and what's you looking for here?
Speaker 2: Well, first of all, I give the President a lot
Speaker 2: of credit. His energy dominance agenda has really made the difference.
Speaker 2: We've opened up the Gulf of America again for production,
Speaker 2: we have more production on federal lands, and of course
Speaker 2: in federal waters. Their regulatory agenda has been very positive
Speaker 2: American oil and gas industry. There's no question this president
Speaker 2: has been focused on more production here in the United States,
Speaker 2: and that has provided a buffer during this time when
Speaker 2: the strait of hor Moves has been effectively closed. So
Speaker 2: I give him a lot of credit for his energy
Speaker 2: dominance agenda. At the same time, we know that this
Speaker 2: industry is a price taker, not a price maker, and
Speaker 2: because the trade of hor moves has been shut down
Speaker 2: for basically five months, we're of course going to be
Speaker 2: dealing with higher prices at the pump.
Speaker 3: So, in other words, is higher profit not a choice
Speaker 3: or could they make a different choice.
Speaker 2: Well, of course, this is an industry. As I said,
Speaker 2: we are price takers, not price makers. And as a
Speaker 2: consequence of the strait of Hormus, which has been twenty
Speaker 2: million barrels of oil a day not making it through straight,
Speaker 2: you're going to have to deal with higher prices. I'll
Speaker 2: remind you though, in twenty twenty, I was actually in
Speaker 2: a meeting with the President in the cabinet room where
Speaker 2: this industry was actually dealing with low prices, in fact,
Speaker 2: negative thirty two dollars prices and that was a time
Speaker 2: when this industry was making virtually zero earnings. So this
Speaker 2: is a commodity business. Prices go up, prices go down.
Speaker 2: We have to deal with the price swings, and on average,
Speaker 2: this industry actually makes a fewer earnings and other large
Speaker 2: industries like tech, like finance. So this is an industry
Speaker 2: that we do have to deal with those highs and lows,
Speaker 2: and high prices now mean investments for future production. One
Speaker 2: example of that is during the two thousand and eight
Speaker 2: twenty twelve period when we were dealing with significant earnings
Speaker 2: at that point too. That was allowed us to finance
Speaker 2: what eventually became the shale revolution, the fracking revolution, which
Speaker 2: allowed us today now produce about fourteen million barrels of oil. Everything.
Speaker 1: Surely the president understands everything we're talking about here, right,
Speaker 1: I mean, he knows that there's a refining bottleneck in
Speaker 1: this country, that there's a disconnect. We talk about crack
Speaker 1: spreads between the price of crude and what we pay
Speaker 1: at the pump, that distilled products are their own story.
Speaker 1: Is he just sounding the populist alarm in an election season?
Speaker 1: I feel your pain.
Speaker 2: Well, I do think that everyone is concerned about high
Speaker 2: prices at the crump for American consumers and high electricity.
Speaker 1: Calling you guys out by name though excelln Mobile and Chevron.
Speaker 2: Absolutely, But what we understand that, you know, we're in
Speaker 2: an election year and we're gonna have to deal with
Speaker 2: that kind of incoming. But at the same time, American
Speaker 2: consumers have to understand that during this time of high earnings,
Speaker 2: this is the time when we invest for future production
Speaker 2: going forward.
Speaker 3: Well as Joe's talking about the political considerations here, that
Speaker 3: arguably is why we've seen the President flowed things like
Speaker 3: a gas tax holiday for example. Do you fear that
Speaker 3: he could even go so far if we see prices
Speaker 3: permanently above four dollars a gallon, for example, to suggest
Speaker 3: that maybe there should be export bans put in place
Speaker 3: in this country, what would that do well?
Speaker 2: We would also be very concerned about any kind of
Speaker 2: an export ban. I will say that there are a
Speaker 2: lot of policies that they put in place that have
Speaker 2: provided some kind of a buffer. For example, the Jones
Speaker 2: Act waiver that they put into place. There are other
Speaker 2: things they could do. There are changes that they could
Speaker 2: make to the renewable fuels standard right now that are
Speaker 2: providing a higher price at the pump that we don't
Speaker 2: need to sustain right now given the kind of challenges
Speaker 2: that we have. But we would be concerned about an
Speaker 2: export ban primarily because there is a mismatch between the
Speaker 2: kind of production that we have in the United States.
Speaker 2: This WTI that we produce here in the United States
Speaker 2: isn't necessarily refined here in the United States, So we
Speaker 2: import a lot of product from overseas, and then we
Speaker 2: export a lot of product from the United States to
Speaker 2: be refined elsewhere. That's actually to the benefit of American
Speaker 2: consumers because we buy that lower quality crude from other
Speaker 2: countries like Canada and then sell it to American consumers
Speaker 2: at a discount. So any kind of an export ban
Speaker 2: I think would be a great concern to this industry.
Speaker 1: We've talked about the refining bottlenecks in this country and
Speaker 1: the need to maintain these refineries. At some point you
Speaker 1: need to take them down and fix the heart Where
Speaker 1: in a country that hasn't built a refinery I believe
Speaker 1: since the nineteen seventies, is this the part that needs
Speaker 1: to be fixed.
Speaker 2: Well, it's one of the reasons why we're so focused
Speaker 2: on getting legislative permitting reform done because it is very
Speaker 2: hard to build anything in this country, particularly a new
Speaker 2: oil refinery. You're exactly right. We haven't built refinery in
Speaker 2: this country since nineteen seventy six. And if you think
Speaker 2: about the market that we were in nineteen seventy six
Speaker 2: compared to the one that we're in today, it's a
Speaker 2: completely different story. We were importing oil at that point,
Speaker 2: now we're exporting oil. It doesn't make any sense we
Speaker 2: should be building more refineries in this country because that's
Speaker 2: the real bottleneck right now. Even when you're dealing with
Speaker 2: lower prices from from a crude perspective, you don't have
Speaker 2: the refining capacity that you need to turn it into
Speaker 2: the products that we use on a daily basis, like
Speaker 2: gasoline and diesel.
Speaker 3: What are you hearing about permitting reform on Capitol Hill
Speaker 3: right now? Or I guess maybe a better question is
Speaker 3: are you hearing about it? Because we often don't.
Speaker 2: This should be such a layup for the United States
Speaker 2: con right now. I believe it should be a political
Speaker 2: imperative for them. You see prices going up, particularly on
Speaker 2: the electricity side, because of more demand on the electrical grid,
Speaker 2: because of data centers and the advent of an artificial intelligence. Unfortunately,
Speaker 2: lawmakers just aren't focused on it because we're in an
Speaker 2: election year. I think that this should have been the
Speaker 2: first thing on the agenda this Congress. Republicans and Democrats
Speaker 2: should be able to agree because all sides benefit, whether
Speaker 2: it's alternative energies like wind and solar, or pipelines that
Speaker 2: would benefit oil and natural gas. But unfortunately, I think
Speaker 2: they're a little bit too focused on what's coming in November,
Speaker 2: and everybody wants to wait until they figure out who's
Speaker 2: going to win to decide who's going to benefit from
Speaker 2: permitting reform.
Speaker 1: There's great hope in the markets today. We see crude
Speaker 1: oil in the seventies for the first time and some
Speaker 1: time is encouraging. How long would we need to stay
Speaker 1: at these levels or move lower to see a significant
Speaker 1: changing gas price.
Speaker 2: Here's the bottom line. Unfortunately, we're still not getting enough
Speaker 2: product through the Strait of Horror moves, even at the
Speaker 2: highest ends. They're saying that we're getting only about seven
Speaker 2: million barrels of oil through the Strait of Hermos at
Speaker 2: this point. Because of new pipeline capacity. You only need
Speaker 2: to get that level up to about eleven million barrels
Speaker 2: a day through the Strait because of a lot of
Speaker 2: that product now flowing through pipelines. That is a great
Speaker 2: news story for the Middle East, and I think over
Speaker 2: time we need to continue to build that infrastructure so
Speaker 2: that we can avoid the straight over time. But right now,
Speaker 2: we need to get that up to about eleven million
Speaker 2: barrels a day on a sustained basis if we're going
Speaker 2: to get back to where we need to be, back
Speaker 2: to where we were prior to this conflict beginning.
Speaker 3: Well, so should this administration also tap the rest of
Speaker 3: the spr drawt on that they said they would complete.
Speaker 3: I believe there's thirty nine million barrels left in that program.
Speaker 2: So there are about thirty nine million barrels left in
Speaker 2: that program. We still have product in the Strategic Petroleum
Speaker 2: Reserve that was something that they negotiated at the beginning
Speaker 2: of this that expires at the end of August. They
Speaker 2: need to think about where they are and start considering
Speaker 2: whether they're going to do another release or another exchange,
Speaker 2: which is how this program is developed. I don't know
Speaker 2: the answer to that, but yet I don't think we're
Speaker 2: going to know until we know the results of whether
Speaker 2: this potential deal in the Middle East comes through. We've
Speaker 2: seen this before, of course. I do think that that
Speaker 2: has provided an important relief valve for American consumers those
Speaker 2: targeted SPR releases, not just in the United States but
Speaker 2: throughout the world.