1 00:00:02,520 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,760 --> 00:00:11,080 Speaker 2: Jeff Carry of Carlile writing this, even if a ceasefires 3 00:00:11,119 --> 00:00:12,960 Speaker 2: reached in the coming days, it would take time to 4 00:00:13,039 --> 00:00:17,320 Speaker 2: restart the energy supply chain. A legend of energy research 5 00:00:17,360 --> 00:00:19,840 Speaker 2: joints around the table, Jeff joints is for Morejef go morning, 6 00:00:19,840 --> 00:00:21,840 Speaker 2: got to see great to be here. We've got time here. 7 00:00:21,880 --> 00:00:24,000 Speaker 2: So let's take a step back. You believe that even 8 00:00:24,040 --> 00:00:27,760 Speaker 2: if there's a ceasefire tomorrow, right now, the next five minutes, 9 00:00:28,040 --> 00:00:28,800 Speaker 2: the world's changed. 10 00:00:30,080 --> 00:00:33,600 Speaker 3: What's changed. For one, you've disrupted global supply chains. This 11 00:00:33,760 --> 00:00:37,400 Speaker 3: is not just a disruption oil. It's gas, it's fertilizers, 12 00:00:37,479 --> 00:00:40,280 Speaker 3: it's metals, it's petrochemicals. The list goes on and on, 13 00:00:40,680 --> 00:00:43,159 Speaker 3: and then you've disrupted supply chains in countries all over 14 00:00:43,200 --> 00:00:45,960 Speaker 3: the world. The ships are in the wrong places, the 15 00:00:46,040 --> 00:00:49,479 Speaker 3: insurances are being canceled. You've taken the pressure out of 16 00:00:49,520 --> 00:00:52,600 Speaker 3: the fields that you've shut in in places like Saudi 17 00:00:52,640 --> 00:00:57,200 Speaker 3: Arabia or Iraq or even in the uae I can 18 00:00:57,240 --> 00:00:59,160 Speaker 3: just the list goes on and on. The damage is 19 00:00:59,160 --> 00:01:02,320 Speaker 3: going to take months unwined, but I want to bring 20 00:01:02,320 --> 00:01:06,880 Speaker 3: it to the immediate. There is no policy response that 21 00:01:07,040 --> 00:01:10,000 Speaker 3: can stop this assent and crude none and yes you've 22 00:01:10,200 --> 00:01:13,600 Speaker 3: paid this four hundred million barrel headline flow rate is 23 00:01:13,640 --> 00:01:17,080 Speaker 3: what matters. You know, the maximum sustainable flow rate is 24 00:01:17,120 --> 00:01:20,000 Speaker 3: two million barrels per day, so four hundred That will 25 00:01:20,080 --> 00:01:23,840 Speaker 3: take them two hundred days to get that out. And 26 00:01:23,920 --> 00:01:26,720 Speaker 3: you put that in the context of a disruption of 27 00:01:26,880 --> 00:01:28,800 Speaker 3: you know, let's net it out of disrupt house. It's 28 00:01:28,840 --> 00:01:31,200 Speaker 3: got to be somewhere around eighteen million barrels per day 29 00:01:31,240 --> 00:01:35,400 Speaker 3: right now. You're just a minuscule in terms of offsetting it. 30 00:01:35,480 --> 00:01:37,640 Speaker 3: So again, there's not any options here. 31 00:01:37,720 --> 00:01:40,039 Speaker 2: What would you call this then a pan campaign. 32 00:01:40,560 --> 00:01:42,800 Speaker 3: In terms of doing this. It's all they have. They're 33 00:01:42,800 --> 00:01:44,560 Speaker 3: going to do whatever they can't. But I think the 34 00:01:44,640 --> 00:01:48,040 Speaker 3: key issue here keep the hoarding down because we know 35 00:01:48,080 --> 00:01:50,440 Speaker 3: what happened in the nineteen seventies when you got the hoarding. 36 00:01:51,200 --> 00:01:54,320 Speaker 3: You know, it created an increase of demand somewhere around 37 00:01:54,360 --> 00:01:57,000 Speaker 3: two million barrels per day in the size of this market, 38 00:01:57,000 --> 00:01:59,360 Speaker 3: try three million barrels per day on top of the 39 00:01:59,360 --> 00:02:01,840 Speaker 3: disruption of somewhere around eighteen. 40 00:02:01,840 --> 00:02:05,840 Speaker 2: That word comes up in your research repeatedly. Holding China 41 00:02:05,880 --> 00:02:09,520 Speaker 2: has been rewarded for doing absolutely over the last twelve months, 42 00:02:09,560 --> 00:02:11,520 Speaker 2: you think count this will follow now. 43 00:02:11,360 --> 00:02:14,359 Speaker 3: They already are, you know where there's places like Japan 44 00:02:14,440 --> 00:02:16,600 Speaker 3: and Korea. They're hoarding anything they can get their hands 45 00:02:16,639 --> 00:02:19,160 Speaker 3: on at this point. And it even happens down to 46 00:02:19,200 --> 00:02:21,440 Speaker 3: people driving. Keep your tank filled up, by the way, 47 00:02:21,680 --> 00:02:25,200 Speaker 3: that's meaningful in terms of the demand pulls. You know, 48 00:02:25,280 --> 00:02:27,440 Speaker 3: most people drive and they take it down to about 49 00:02:27,440 --> 00:02:29,680 Speaker 3: a quarter filled and then refill it. Now they're going 50 00:02:29,760 --> 00:02:31,600 Speaker 3: to be going into the gas station filling it back 51 00:02:31,680 --> 00:02:33,320 Speaker 3: up every time it gets to a half or even 52 00:02:33,360 --> 00:02:34,000 Speaker 3: three quarters. 53 00:02:34,080 --> 00:02:35,760 Speaker 1: So what kind of premium Mary talking about? 54 00:02:35,800 --> 00:02:36,399 Speaker 3: Longer term? 55 00:02:36,480 --> 00:02:39,240 Speaker 1: We were just speaking with Steve Ath, a Federated Hermes 56 00:02:39,240 --> 00:02:41,760 Speaker 1: earlier saying that if oil prices goobe of ninety dollars 57 00:02:41,840 --> 00:02:43,720 Speaker 1: for a prolonged period of time, that will cause real 58 00:02:43,800 --> 00:02:45,560 Speaker 1: damage to the underlying economy. 59 00:02:45,880 --> 00:02:47,359 Speaker 3: Is that a base case for you, by the way, 60 00:02:47,480 --> 00:02:51,239 Speaker 3: is the one thing? And we're going through a regime change. 61 00:02:51,240 --> 00:02:53,640 Speaker 3: This is not a trade. This is a regime change. 62 00:02:53,639 --> 00:02:57,040 Speaker 3: We're moving from that world that was defined from twenty 63 00:02:57,040 --> 00:03:00,480 Speaker 3: fourteen to twenty twenty four you know. Is the new 64 00:03:00,480 --> 00:03:04,360 Speaker 3: economy boom driven by mag seven is a technology boom 65 00:03:04,400 --> 00:03:07,920 Speaker 3: asset light somewhere to what wesaw the dot com boom? 66 00:03:07,960 --> 00:03:09,720 Speaker 3: What came after the dot com boom? I remember, it 67 00:03:09,840 --> 00:03:13,239 Speaker 3: was the exact same thing. You had a geopolitical event 68 00:03:13,560 --> 00:03:16,400 Speaker 3: switched you in two thousand and one. And then actually 69 00:03:16,440 --> 00:03:20,640 Speaker 3: directly connected to the nine to eleven was China's admission 70 00:03:20,639 --> 00:03:24,480 Speaker 3: a WTO. By the way they were connected, George Bush 71 00:03:24,560 --> 00:03:27,040 Speaker 3: Junior needed to use force in the Middle East. He 72 00:03:27,080 --> 00:03:30,040 Speaker 3: needed a vote in the UN Security Council. He traded 73 00:03:30,120 --> 00:03:33,480 Speaker 3: a mission of China into the WTO to get that vote. Boom, 74 00:03:33,480 --> 00:03:35,680 Speaker 3: You're off to the races. You were in an asset 75 00:03:35,720 --> 00:03:38,840 Speaker 3: heavy boom that lasted for over a decade of twenty fourteen. 76 00:03:39,120 --> 00:03:41,400 Speaker 3: And then we went into the current light asset one 77 00:03:41,680 --> 00:03:44,760 Speaker 3: and look where again in one of these huge geopolitical events. 78 00:03:44,760 --> 00:03:46,920 Speaker 3: And I think the big thing to watch is when 79 00:03:47,080 --> 00:03:50,960 Speaker 3: she and President Trump meet at the end of this month, 80 00:03:51,000 --> 00:03:53,040 Speaker 3: and that's going to be where the negotiation happens. 81 00:03:53,080 --> 00:03:55,760 Speaker 1: You could argue that twenty twenty was a real jump 82 00:03:55,760 --> 00:03:59,560 Speaker 1: start to the readultableization the world because people realize, oh, 83 00:04:00,120 --> 00:04:03,520 Speaker 1: and the physical world actually takes time, unlike sending things digitally. 84 00:04:03,600 --> 00:04:06,120 Speaker 1: I just wonder how much still needs to be priced 85 00:04:06,120 --> 00:04:09,040 Speaker 1: in to the physical world. And we've just been highlighted. 86 00:04:09,200 --> 00:04:11,120 Speaker 1: We've just been shown the risk in the oil markets, 87 00:04:11,160 --> 00:04:14,880 Speaker 1: but more broadly, how much are we underpricing. 88 00:04:14,320 --> 00:04:16,280 Speaker 3: Some of what I don't think we know what can 89 00:04:16,320 --> 00:04:18,240 Speaker 3: happen here and what's going to happen is we're going 90 00:04:18,279 --> 00:04:20,440 Speaker 3: to reprice everything. I mean, it started and by the way, 91 00:04:20,480 --> 00:04:22,600 Speaker 3: metals since twenty twenty or just a straight line going up. 92 00:04:22,600 --> 00:04:24,440 Speaker 3: Everybody looks at the last couple of months, but it's 93 00:04:24,480 --> 00:04:26,680 Speaker 3: just and when here's a point I like to say 94 00:04:26,839 --> 00:04:29,400 Speaker 3: is that you looked at the returns of companies in 95 00:04:29,400 --> 00:04:31,200 Speaker 3: two thousand, when we were at twenty dollars oil, they 96 00:04:31,200 --> 00:04:33,560 Speaker 3: were like twenty or thirty percent. By the time we 97 00:04:33,600 --> 00:04:35,680 Speaker 3: were around two thousand and five or six, you're at 98 00:04:35,720 --> 00:04:37,840 Speaker 3: sixty three times on the oil price. What do you 99 00:04:37,839 --> 00:04:40,479 Speaker 3: think the returns were? They were going down because the 100 00:04:40,520 --> 00:04:43,760 Speaker 3: overall cost structure the industry was rising. So we ask 101 00:04:43,839 --> 00:04:46,480 Speaker 3: about how high it can go. Metals are going up, 102 00:04:47,160 --> 00:04:50,839 Speaker 3: you know, your cost of capital's going up, the currencies weekend, 103 00:04:50,880 --> 00:04:53,320 Speaker 3: your labor goes up. All of this begins to happen, 104 00:04:53,360 --> 00:04:55,920 Speaker 3: you repriced. I don't want to speculate. I like to say, 105 00:04:56,040 --> 00:04:58,479 Speaker 3: get long, buckle your seat belt, hang on for the ride, 106 00:04:58,520 --> 00:05:01,320 Speaker 3: and we're going to reprice this thing where it reprices. 107 00:05:01,400 --> 00:05:03,279 Speaker 3: I got in trouble back in you know, the two 108 00:05:03,320 --> 00:05:05,520 Speaker 3: thousands with I'm not going to repeat the numbers again, 109 00:05:05,760 --> 00:05:07,840 Speaker 3: but I think the key point here what do you 110 00:05:07,880 --> 00:05:11,039 Speaker 3: want to own? Own the hard assets, own the halos, 111 00:05:11,160 --> 00:05:13,120 Speaker 3: own the anything that you know. And I love that 112 00:05:13,200 --> 00:05:15,120 Speaker 3: two term. The term we called it in the two 113 00:05:15,200 --> 00:05:17,960 Speaker 3: thousands was the revenge of the old economy because it 114 00:05:18,080 --> 00:05:20,640 Speaker 3: was coming off the back of the dot com boom. 115 00:05:20,680 --> 00:05:23,719 Speaker 3: This time around, I love that term halo heavy asset, 116 00:05:23,839 --> 00:05:27,279 Speaker 3: low obsolescence. Own those assets and hang on. And I 117 00:05:27,320 --> 00:05:29,440 Speaker 3: want to own metal. I want to own gold. I 118 00:05:29,440 --> 00:05:31,640 Speaker 3: want to own oil. And by the way, again this 119 00:05:31,800 --> 00:05:34,359 Speaker 3: is a huge disruption. It's just not isolated to oil. 120 00:05:34,480 --> 00:05:36,520 Speaker 4: What do you make though about central banks right now, 121 00:05:36,560 --> 00:05:39,080 Speaker 4: some of the dwindling reserves and some of their appetite 122 00:05:39,120 --> 00:05:40,120 Speaker 4: to buy gold. 123 00:05:40,360 --> 00:05:43,520 Speaker 3: I think what you're going to see is even more 124 00:05:43,640 --> 00:05:46,680 Speaker 3: demand for gold out of this, because ultimately you're really 125 00:05:46,720 --> 00:05:49,560 Speaker 3: going to abate question. What how is the financial situation 126 00:05:49,640 --> 00:05:51,560 Speaker 3: to the US. I'm going to go talk about what is 127 00:05:51,680 --> 00:05:54,920 Speaker 3: really different about this time versus any other time in 128 00:05:54,960 --> 00:05:58,120 Speaker 3: the last fifty years. In oil, anytime the oil price 129 00:05:58,160 --> 00:06:01,719 Speaker 3: would spike pre twenty two, before the US and Europe 130 00:06:01,760 --> 00:06:06,119 Speaker 3: froze central bank assets on Russia, anytime oil prices would spike, 131 00:06:06,520 --> 00:06:09,720 Speaker 3: you would have capital rotate into the US. The recycling 132 00:06:09,760 --> 00:06:13,240 Speaker 3: that was the petro dollars, that would act like QE buffer. 133 00:06:13,320 --> 00:06:15,159 Speaker 3: It is called a shock absorber to the rest of 134 00:06:15,160 --> 00:06:18,159 Speaker 3: the economy that goes into gold. Now so ever, since 135 00:06:18,200 --> 00:06:22,200 Speaker 3: twenty twenty two, commodity prices spike, these emerging markets get money. 136 00:06:22,200 --> 00:06:25,040 Speaker 3: What do they buy. They buy gold, they buy anything 137 00:06:25,160 --> 00:06:27,920 Speaker 3: but dollar denominated assets because they don't want to get 138 00:06:27,960 --> 00:06:30,600 Speaker 3: sanctions imposed on them, like what happened to the Russians, 139 00:06:30,720 --> 00:06:32,920 Speaker 3: And as a result, you don't have that money coming back. 140 00:06:33,000 --> 00:06:35,120 Speaker 3: One other point you got to keep in mind is 141 00:06:35,200 --> 00:06:38,240 Speaker 3: now transfer payments are bigger, the US debt is bigger, 142 00:06:38,279 --> 00:06:41,720 Speaker 3: the interest payments are bigger. So when oil prices go up, 143 00:06:41,760 --> 00:06:44,479 Speaker 3: headline inflation goes up, that gets much bigger. In fact, 144 00:06:44,480 --> 00:06:46,480 Speaker 3: we estimate you go to one twenty and stay there, 145 00:06:46,600 --> 00:06:48,559 Speaker 3: you're going to crowd out one hundred and fifty billion 146 00:06:48,680 --> 00:06:51,280 Speaker 3: dollars of private credit, because you're going to have to 147 00:06:51,320 --> 00:06:54,080 Speaker 3: be basically issue that in public credit. 148 00:06:54,279 --> 00:06:55,880 Speaker 4: If you think the world is more vulnerable now than 149 00:06:55,880 --> 00:06:57,840 Speaker 4: they were in nineteen seventy three, But the US right 150 00:06:57,880 --> 00:06:59,359 Speaker 4: now isn't an exporter. 151 00:06:59,320 --> 00:07:03,080 Speaker 3: Oh net exporter at the income cash loaf level, meaning 152 00:07:03,080 --> 00:07:06,159 Speaker 3: they produce as much as they consume roughly, and I 153 00:07:06,200 --> 00:07:08,560 Speaker 3: think you get an access of around eighty billion dollars 154 00:07:08,560 --> 00:07:11,560 Speaker 3: on a thirty trillion dollar economy. But let's say put 155 00:07:11,600 --> 00:07:14,240 Speaker 3: it this way. I call it the paradox of energy dominance. 156 00:07:14,400 --> 00:07:16,240 Speaker 3: Let's go to the wealth level. Let's look at the 157 00:07:16,320 --> 00:07:21,800 Speaker 3: equity market energy three percent of the market. Three. How 158 00:07:21,800 --> 00:07:24,720 Speaker 3: big are the things that are short fifty three percent? 159 00:07:24,840 --> 00:07:27,640 Speaker 3: So you're long three. It's short fifty three at the 160 00:07:27,640 --> 00:07:30,120 Speaker 3: wealth level. And what is the multiple on that three? 161 00:07:30,160 --> 00:07:32,320 Speaker 3: It's like twelve or thirteen? What is the multiple on 162 00:07:32,360 --> 00:07:35,640 Speaker 3: the other one thirty six? You're in trouble at the 163 00:07:35,640 --> 00:07:38,520 Speaker 3: wealth level. You may be safe at the income level, 164 00:07:38,560 --> 00:07:40,760 Speaker 3: but you're in real trouble at the wealth level. Then 165 00:07:40,800 --> 00:07:43,040 Speaker 3: you get at the credit level. Now you got that. 166 00:07:43,400 --> 00:07:46,080 Speaker 3: Now you've taken your shock absorber because of the sanctions 167 00:07:46,120 --> 00:07:48,760 Speaker 3: you imposed on Russia Essential Bank and turned it into 168 00:07:48,800 --> 00:07:51,760 Speaker 3: a shock amplifier. So again I agree with you one 169 00:07:51,800 --> 00:07:54,360 Speaker 3: hundred percent energy dominance at the cash flow level, but 170 00:07:54,400 --> 00:07:56,240 Speaker 3: not at the wealth level and not at the credit level. 171 00:07:56,320 --> 00:07:59,080 Speaker 2: Jeff, final question, it's on Aisha refine its there have 172 00:07:59,120 --> 00:08:01,000 Speaker 2: clearly got a bit of a Can you tell us 173 00:08:01,080 --> 00:08:03,520 Speaker 2: how big that cushion is and how quickly before we 174 00:08:03,560 --> 00:08:06,160 Speaker 2: start to see headlines across the Bloomberg on shortages? 175 00:08:06,280 --> 00:08:09,480 Speaker 3: Oh you already are jet fuel in Singapore spiked to 176 00:08:09,600 --> 00:08:12,520 Speaker 3: over two hundred and thirty dollars a barrel. Yeah, you're 177 00:08:12,600 --> 00:08:14,800 Speaker 3: you're at that point, and that's that the hoarding is 178 00:08:14,800 --> 00:08:17,400 Speaker 3: only amplifying it. And you just took out a nine 179 00:08:17,440 --> 00:08:19,880 Speaker 3: hundred thousand barrel per day refinery that was bombed in 180 00:08:20,560 --> 00:08:23,080 Speaker 3: there in the in the Gulf. So the situation on 181 00:08:23,200 --> 00:08:26,080 Speaker 3: refined products is and I think the key point here 182 00:08:26,480 --> 00:08:28,080 Speaker 3: is it's Asia is going to be the one that's 183 00:08:28,120 --> 00:08:30,360 Speaker 3: going to be in the deepest problem big time. 184 00:08:30,440 --> 00:08:32,319 Speaker 2: Jeff is going to see it right than its sutuable 185 00:08:32,360 --> 00:08:35,280 Speaker 2: day always could. Jeff carried there of Carlisle on the 186 00:08:35,280 --> 00:08:38,240 Speaker 2: commodity market with corewth this morning around ninety dollars a 187 00:08:38,240 --> 00:08:38,520 Speaker 2: barrel