1 00:00:02,720 --> 00:00:16,160 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:18,640 --> 00:00:22,520 Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast. 3 00:00:22,640 --> 00:00:25,119 Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway. 4 00:00:25,280 --> 00:00:28,040 Speaker 2: Tracy, did you see that oil is already technically in 5 00:00:28,040 --> 00:00:28,720 Speaker 2: a bear market? 6 00:00:30,560 --> 00:00:33,440 Speaker 3: I did, I did so. I think the definition of 7 00:00:33,440 --> 00:00:34,560 Speaker 3: a bear market is down? 8 00:00:34,760 --> 00:00:36,280 Speaker 4: Is it ten or twenty twenty percent? 9 00:00:36,400 --> 00:00:38,080 Speaker 2: Remember correction? 10 00:00:38,440 --> 00:00:38,920 Speaker 4: That's right? 11 00:00:39,000 --> 00:00:42,120 Speaker 3: Okay, So it's down twenty percent from the high of 12 00:00:42,360 --> 00:00:44,559 Speaker 3: I think brent was it something like one hundred and 13 00:00:44,560 --> 00:00:46,240 Speaker 3: twenty per barrel. 14 00:00:46,000 --> 00:00:48,680 Speaker 2: Almost one hundred and twenty one, nineteen fifty. 15 00:00:49,040 --> 00:00:53,320 Speaker 3: So yeah, it's coming down. However, it's still up quite 16 00:00:53,320 --> 00:00:55,480 Speaker 3: a bit from where it was like a week ago. 17 00:00:55,680 --> 00:00:58,520 Speaker 2: Oh yeah, absolutely, I mean it's still up eight percent 18 00:00:58,640 --> 00:01:02,080 Speaker 2: from Friday. I mean, that's how crazy the oil market 19 00:01:02,280 --> 00:01:03,800 Speaker 2: is right now there. 20 00:01:03,840 --> 00:01:06,360 Speaker 3: Well, at that moment in time where numbers kind of 21 00:01:06,440 --> 00:01:08,640 Speaker 3: lose on a meaning, I feel right. 22 00:01:08,640 --> 00:01:12,720 Speaker 2: Yes, And obviously, look, we all know the context. Just 23 00:01:12,800 --> 00:01:15,640 Speaker 2: extraordinary surge. I think one of the things that's surprising 24 00:01:15,680 --> 00:01:19,160 Speaker 2: to me or not maybe not surprising, but notable to me. 25 00:01:19,360 --> 00:01:21,280 Speaker 2: And we'll get into this with our guest of course 26 00:01:21,400 --> 00:01:25,400 Speaker 2: in a minute, is that Iran war risk was well known. 27 00:01:25,520 --> 00:01:28,560 Speaker 2: The price of oil had already been creeping higher a 28 00:01:28,600 --> 00:01:31,720 Speaker 2: bit even prior to the first attack, so this was 29 00:01:31,840 --> 00:01:35,440 Speaker 2: already a concern. But it sort of goes to show 30 00:01:35,880 --> 00:01:38,679 Speaker 2: like how I don't know exactly what the term is, 31 00:01:38,680 --> 00:01:42,480 Speaker 2: how unexpected or the degree to which basically this was 32 00:01:42,600 --> 00:01:45,720 Speaker 2: not priced in the fact that traders were already very 33 00:01:45,959 --> 00:01:49,160 Speaker 2: keen and aware that there was a very high possibility 34 00:01:49,200 --> 00:01:51,960 Speaker 2: of a strike in Iran, and yet we've just seen 35 00:01:52,000 --> 00:01:55,480 Speaker 2: this absolutely massive surge in just the span of you know, 36 00:01:56,040 --> 00:01:56,640 Speaker 2: ten days. 37 00:01:56,720 --> 00:01:59,840 Speaker 3: Really well, the other thing that's happening now is because 38 00:02:00,080 --> 00:02:03,920 Speaker 3: we had pretty good oil supplies out there at the 39 00:02:03,920 --> 00:02:06,960 Speaker 3: beginning of the year, that's kind of become I guess 40 00:02:07,000 --> 00:02:09,320 Speaker 3: of vulnerability because you had a lot of oil in 41 00:02:09,400 --> 00:02:13,720 Speaker 3: floating storage, for instance. But that means now the floating 42 00:02:13,760 --> 00:02:16,560 Speaker 3: storage is filled and it can't go anywhere because you 43 00:02:16,560 --> 00:02:19,160 Speaker 3: can't get through the strait of hor moves, and therefore 44 00:02:19,360 --> 00:02:21,679 Speaker 3: all the new production is getting shut in a lot 45 00:02:21,800 --> 00:02:24,520 Speaker 3: faster than it would be otherwise. So it feels like 46 00:02:24,600 --> 00:02:27,120 Speaker 3: some of the buffers that we had are kind of 47 00:02:27,160 --> 00:02:29,680 Speaker 3: turning into I guess vulnerabilities. 48 00:02:29,919 --> 00:02:30,760 Speaker 2: Yeah, totally right. 49 00:02:30,919 --> 00:02:31,119 Speaker 5: Now. 50 00:02:31,160 --> 00:02:34,440 Speaker 2: The thing with a lot of commodity people is that. 51 00:02:34,560 --> 00:02:37,680 Speaker 2: And I love them, so this is but the thing, No, 52 00:02:37,760 --> 00:02:40,040 Speaker 2: but a lot of them are like sort of I 53 00:02:40,040 --> 00:02:43,720 Speaker 2: don't know, like perma doomers, like sort of a little 54 00:02:43,720 --> 00:02:48,440 Speaker 2: bit crankish, a little bit more always thinking about risks 55 00:02:48,520 --> 00:02:50,519 Speaker 2: and so forth in ways that things could go bad 56 00:02:50,560 --> 00:02:52,560 Speaker 2: and how it could go back to the Stone Age 57 00:02:52,560 --> 00:02:55,600 Speaker 2: if we don't have the free flowing commodities of all sorts. 58 00:02:55,840 --> 00:02:59,200 Speaker 2: And again, I love them all, but someone else pointed 59 00:02:59,200 --> 00:03:01,880 Speaker 2: out I forget who tweeted it over the weekend, but 60 00:03:01,960 --> 00:03:05,079 Speaker 2: they said, like, even the least alarmist I think this 61 00:03:05,160 --> 00:03:07,480 Speaker 2: might have been Stintondean. Actually, he said, even the least 62 00:03:07,520 --> 00:03:11,639 Speaker 2: alarmist people in the commodity space are very alarmed right now. 63 00:03:11,680 --> 00:03:14,360 Speaker 2: And so yeah, people are talking about this being one 64 00:03:14,400 --> 00:03:18,280 Speaker 2: of the worst oil shocks ever. I mean, it's very extreme, Joe. 65 00:03:18,320 --> 00:03:21,280 Speaker 3: If you worked in an industry whose lifeblood was the 66 00:03:21,320 --> 00:03:25,720 Speaker 3: liquefied remains of prehistoric organisms and there was a finite 67 00:03:25,760 --> 00:03:27,799 Speaker 3: amount that you knew one day was going to run out, 68 00:03:27,840 --> 00:03:28,799 Speaker 3: you'd be a duomer too. 69 00:03:29,040 --> 00:03:31,600 Speaker 2: You're right, well, we need to be speaking with someone 70 00:03:31,639 --> 00:03:35,480 Speaker 2: who is not a dumer. Overall, a very pleasant fellow, 71 00:03:35,600 --> 00:03:38,000 Speaker 2: but it's someone who is quite alarmed, who thinks that 72 00:03:38,080 --> 00:03:40,840 Speaker 2: oil could actually go to two hundred dollars a barrel, 73 00:03:40,920 --> 00:03:44,280 Speaker 2: quite plausibly depending on how the war unfolds. 74 00:03:44,440 --> 00:03:45,080 Speaker 4: Have very excited. 75 00:03:45,080 --> 00:03:47,160 Speaker 2: We haven't talked to him in a while, but a 76 00:03:47,200 --> 00:03:49,000 Speaker 2: no od Lot's favorite. Here, we're gonna be speaking with 77 00:03:49,120 --> 00:03:53,520 Speaker 2: Rory Johnston, founder of Commodity Context, all around Oil Nerd. 78 00:03:53,600 --> 00:03:56,480 Speaker 2: He even teaches at the University of Toronto. So Rory, 79 00:03:56,560 --> 00:03:58,800 Speaker 2: thank you so much for coming back on Odlots. 80 00:03:59,320 --> 00:04:00,000 Speaker 4: Thanks for having me. 81 00:04:01,040 --> 00:04:04,320 Speaker 2: Let's start with this idea that Iran war risk was 82 00:04:04,440 --> 00:04:09,640 Speaker 2: already very much on the radar of traders long before 83 00:04:09,720 --> 00:04:12,040 Speaker 2: the strikes. The price had been creeping up, and now 84 00:04:12,040 --> 00:04:14,800 Speaker 2: we've seen this huge surge. So we were at about 85 00:04:15,000 --> 00:04:17,520 Speaker 2: I'm looking at the Brent chart, we're just over seventy 86 00:04:17,600 --> 00:04:21,080 Speaker 2: two dollars a barrel the weekend before the attack, currently 87 00:04:21,480 --> 00:04:25,919 Speaker 2: right around one hundred. What has happened in the last 88 00:04:26,040 --> 00:04:28,840 Speaker 2: you know, just over a week. That's been so far 89 00:04:28,880 --> 00:04:31,839 Speaker 2: beyond what traders might have been anticipated. 90 00:04:32,200 --> 00:04:35,120 Speaker 5: Yeah, so I think you very kindly described me as 91 00:04:35,160 --> 00:04:37,920 Speaker 5: a reasonable person. I agree that I think a lot 92 00:04:37,960 --> 00:04:40,120 Speaker 5: of people in the commodity space have a kind of 93 00:04:40,160 --> 00:04:42,480 Speaker 5: a permit foolish bias. And I think for many of 94 00:04:42,480 --> 00:04:45,120 Speaker 5: the reasons Tracy mentioned, when I first got into the industry, 95 00:04:45,160 --> 00:04:47,160 Speaker 5: I was very much like that, Oh my goodness, you know, 96 00:04:47,480 --> 00:04:50,719 Speaker 5: Isis took mazzle in Iraq and twenty fourteen we're going 97 00:04:50,760 --> 00:04:53,240 Speaker 5: to you know, crazy levels. But I think what we've 98 00:04:53,240 --> 00:04:56,840 Speaker 5: discovered and what's been reinforced repeatedly over the past half decade, 99 00:04:57,360 --> 00:05:01,080 Speaker 5: is just how flexible and resilient the oil market is. 100 00:05:01,080 --> 00:05:05,360 Speaker 5: We've dealt with everything from COVID to Russia's invasion of Ukraine, 101 00:05:05,440 --> 00:05:09,279 Speaker 5: to houties in the Red Sea to full blown attacks 102 00:05:09,400 --> 00:05:12,880 Speaker 5: with Iran and Israel last year. It's gone through a lot, 103 00:05:12,960 --> 00:05:16,279 Speaker 5: and despite that, the market has been shockingly, shockingly resilient. 104 00:05:16,360 --> 00:05:17,560 Speaker 4: These are all the things that we used to kind 105 00:05:17,560 --> 00:05:18,479 Speaker 4: of stress the market with. 106 00:05:19,040 --> 00:05:21,200 Speaker 5: But I think the difference is and I think this 107 00:05:21,279 --> 00:05:23,719 Speaker 5: is kind of almost in some ways, the market's gotten 108 00:05:23,839 --> 00:05:25,520 Speaker 5: used to the wrong lesson here, you know, rather than 109 00:05:25,520 --> 00:05:28,320 Speaker 5: being doomers, we've gotten overly sanguine because the market is 110 00:05:28,320 --> 00:05:30,120 Speaker 5: able to fix all of these problems. And I think 111 00:05:30,120 --> 00:05:32,919 Speaker 5: the market is shockingly shockingly good at this. But this 112 00:05:33,040 --> 00:05:34,800 Speaker 5: is one of those problems. The closure of the straight 113 00:05:34,839 --> 00:05:39,560 Speaker 5: ufore moves is something that can't really be fixed by markets. 114 00:05:39,560 --> 00:05:41,680 Speaker 4: It's so large and so physical. 115 00:05:42,200 --> 00:05:44,440 Speaker 5: And you were kind of mentioned, like why this kind 116 00:05:44,440 --> 00:05:46,880 Speaker 5: of confounded expectations. You had mentioned So you know, over 117 00:05:46,960 --> 00:05:48,839 Speaker 5: the prior month or so, we had built in upwards 118 00:05:48,880 --> 00:05:52,560 Speaker 5: of ten dollars a barrel, largely of IRAW risk, mostly 119 00:05:52,600 --> 00:05:55,960 Speaker 5: from speculative participants, kind of anticipating this. And again it 120 00:05:56,480 --> 00:05:58,200 Speaker 5: wasn't a secret. We had the largest build up of 121 00:05:58,279 --> 00:06:01,040 Speaker 5: US military personnel and equipment in the Middle East since 122 00:06:01,040 --> 00:06:04,080 Speaker 5: the invasion of Rock in two thousand and three. But them, 123 00:06:04,200 --> 00:06:06,520 Speaker 5: like myself, I never expected this to happen. I never 124 00:06:06,560 --> 00:06:09,680 Speaker 5: expected to see this particular shock in my lifetime. This 125 00:06:09,760 --> 00:06:12,240 Speaker 5: was the kind of this is the scenario that you 126 00:06:12,320 --> 00:06:15,000 Speaker 5: give new analysts in the industry as kind of a 127 00:06:15,240 --> 00:06:19,640 Speaker 5: thought experiment of Okay, if this happened, how would everything break? 128 00:06:19,680 --> 00:06:23,000 Speaker 5: Because I think it's actually a very illustrative and educational 129 00:06:23,360 --> 00:06:27,239 Speaker 5: thought experiment. It's terrifying to be kind of speed running 130 00:06:27,240 --> 00:06:27,920 Speaker 5: it in real time. 131 00:06:28,360 --> 00:06:31,560 Speaker 3: So on this note, when something like the events of 132 00:06:31,600 --> 00:06:35,080 Speaker 3: the past week happen, how much of an oil analyst 133 00:06:35,279 --> 00:06:40,440 Speaker 3: job is actually thinking about supply chain adaptations and where 134 00:06:40,480 --> 00:06:45,520 Speaker 3: oil could get rerooted, versus just thinking geopolitics and becoming 135 00:06:45,560 --> 00:06:49,200 Speaker 3: an armchair military expert in thinking like, well, this is 136 00:06:49,240 --> 00:06:51,200 Speaker 3: when the conflict might actually end. 137 00:06:51,640 --> 00:06:53,719 Speaker 5: I think it's more on the supply chain, and I 138 00:06:53,760 --> 00:06:55,839 Speaker 5: think when we as our alin its like look at 139 00:06:55,960 --> 00:06:58,120 Speaker 5: charts and data, what we're really trying to do is 140 00:06:58,200 --> 00:07:00,520 Speaker 5: both I mean, honestly to understand, you know, and see 141 00:07:00,520 --> 00:07:02,280 Speaker 5: where the price of oil is in any given day, 142 00:07:02,560 --> 00:07:04,920 Speaker 5: but more kind of looking at what those signals tell 143 00:07:05,000 --> 00:07:08,080 Speaker 5: us about what's happening in the underlying market. And when 144 00:07:08,120 --> 00:07:11,200 Speaker 5: you have such a massive dislocation like we're facing right now, 145 00:07:11,680 --> 00:07:13,440 Speaker 5: none of those signals. 146 00:07:13,120 --> 00:07:14,360 Speaker 4: Act like they usually do. 147 00:07:14,640 --> 00:07:18,200 Speaker 5: They're all flying in all different directions in crazy fashion 148 00:07:18,600 --> 00:07:21,960 Speaker 5: because this is such a massive, massive loss and just 149 00:07:22,080 --> 00:07:24,160 Speaker 5: kind of just a put in perspective for people what 150 00:07:24,200 --> 00:07:26,760 Speaker 5: we're talking about. Because someone that's not aware of the 151 00:07:26,760 --> 00:07:28,720 Speaker 5: market and say, oh, well, twenty percent of the market, 152 00:07:28,800 --> 00:07:31,600 Speaker 5: twenty million barrels a day that flow through hormus, Yeah, 153 00:07:31,720 --> 00:07:34,160 Speaker 5: that's we could deal with that, right, But that's actually 154 00:07:34,240 --> 00:07:38,320 Speaker 5: so twenty million barrels is the peak of COVID demand 155 00:07:38,400 --> 00:07:41,400 Speaker 5: loss in March and April of twenty twenty. That was 156 00:07:41,440 --> 00:07:44,520 Speaker 5: when we were all locked inside, when airports were empty 157 00:07:44,560 --> 00:07:47,440 Speaker 5: and planes were grounded. That was the type of demand 158 00:07:47,440 --> 00:07:51,880 Speaker 5: destruction that twenty percent looked like. And now, if the 159 00:07:51,920 --> 00:07:54,760 Speaker 5: strait remains closed, and I think this is the critical 160 00:07:54,800 --> 00:07:56,480 Speaker 5: part here, whether it's the war or whatever, when we 161 00:07:56,480 --> 00:07:58,360 Speaker 5: could talk about all the ways that this could you know, 162 00:07:58,400 --> 00:07:59,800 Speaker 5: the nuance is in the way you could have. 163 00:08:00,040 --> 00:08:01,280 Speaker 4: You know, slippage and leakage. 164 00:08:01,320 --> 00:08:03,840 Speaker 5: But if the strait remains as it is today, we 165 00:08:03,880 --> 00:08:07,480 Speaker 5: will need to forcibly kind of adjust the market to 166 00:08:07,600 --> 00:08:10,280 Speaker 5: that level of demand, but without a pandemic, just via 167 00:08:10,320 --> 00:08:14,559 Speaker 5: price signals. That's why two hundred plus is at least 168 00:08:14,720 --> 00:08:16,480 Speaker 5: and the longer this goes on, the higher we go. 169 00:08:16,600 --> 00:08:17,400 Speaker 4: And it's not just oil. 170 00:08:17,400 --> 00:08:19,680 Speaker 5: We had already seen jet fuel in Asia hit over 171 00:08:19,680 --> 00:08:22,840 Speaker 5: two hundred dollars a barrel. Briefly, because the product markets 172 00:08:22,880 --> 00:08:24,400 Speaker 5: are the things that are actually going to drive that 173 00:08:24,440 --> 00:08:26,440 Speaker 5: demand destruction, not crude itself. 174 00:08:27,000 --> 00:08:31,360 Speaker 2: Yeah, explain that a little bit further. The product markets 175 00:08:31,520 --> 00:08:33,640 Speaker 2: talk to us a little bit when you say that, 176 00:08:34,200 --> 00:08:35,079 Speaker 2: what do you mean by that? 177 00:08:35,559 --> 00:08:38,400 Speaker 5: Yeah, So you and I as global consumers don't actually 178 00:08:38,400 --> 00:08:39,840 Speaker 5: typically consume crude oil. 179 00:08:40,000 --> 00:08:45,440 Speaker 2: Only Tracy Tracy, Tracy does exactly unsuccessfully. 180 00:08:45,480 --> 00:08:47,800 Speaker 5: But yeah, I think I think all of us would 181 00:08:47,800 --> 00:08:51,640 Speaker 5: be pretty unsuccessful kind of consuming very very toxic liquid. 182 00:08:51,880 --> 00:08:56,520 Speaker 5: But I think you know what we actually consume jet fuel, diesel, gasoling. 183 00:08:56,720 --> 00:09:00,680 Speaker 5: These are things that are created, distilled, and refine in 184 00:09:00,720 --> 00:09:04,440 Speaker 5: an oil refinery. So oil refineries consume crude. So what 185 00:09:04,480 --> 00:09:06,520 Speaker 5: we talk about when we talk about, you know, the 186 00:09:06,520 --> 00:09:08,880 Speaker 5: bloat in the product market is we're talking about so 187 00:09:08,920 --> 00:09:11,000 Speaker 5: crude oil has a supply and demand curve as you'd 188 00:09:11,040 --> 00:09:12,880 Speaker 5: you know, see an econ one on one, and then 189 00:09:12,960 --> 00:09:17,280 Speaker 5: each individual product gasoline, jet fuel, diesel, naffa, petrochemical, feed, 190 00:09:17,360 --> 00:09:19,959 Speaker 5: everything else, you know, shipping fuel, they all have their 191 00:09:20,000 --> 00:09:23,240 Speaker 5: own specific supply and demand curves, which this market becomes 192 00:09:23,280 --> 00:09:26,800 Speaker 5: like fractally complicated very quickly. But to simplify really what 193 00:09:26,800 --> 00:09:28,760 Speaker 5: we're talking about, as a refinery taking a let's say, 194 00:09:28,760 --> 00:09:31,000 Speaker 5: a barrel of oil for one hundred dollars, which is 195 00:09:31,200 --> 00:09:33,040 Speaker 5: roughly where we're trading right now on Brent, we're kind 196 00:09:33,080 --> 00:09:34,920 Speaker 5: of jumping another side of one hundred. They take a 197 00:09:34,960 --> 00:09:36,360 Speaker 5: barrel of oil for one hundred, and they were fined 198 00:09:36,360 --> 00:09:38,840 Speaker 5: into a bunch of different products. The premiums they get 199 00:09:38,880 --> 00:09:41,760 Speaker 5: for those products are what we typically call the crack spread, 200 00:09:41,840 --> 00:09:44,679 Speaker 5: or the difference between crude and a refined product that 201 00:09:45,080 --> 00:09:47,959 Speaker 5: is yielded from a refinery, and the refinery margin is 202 00:09:48,040 --> 00:09:51,280 Speaker 5: essentially the weighted average blend of all those crack spreads 203 00:09:51,320 --> 00:09:54,600 Speaker 5: plus other costs and everything else. But what's happening right now, 204 00:09:54,600 --> 00:09:57,439 Speaker 5: and the reason that we're actually seeing the refined product 205 00:09:57,440 --> 00:10:01,160 Speaker 5: market jump ahead of the consequences in the crude oil market, 206 00:10:01,520 --> 00:10:04,600 Speaker 5: is that the worst thing for a refinery is literally 207 00:10:04,679 --> 00:10:07,400 Speaker 5: running out of crude feedstock. And actually, full credit to 208 00:10:07,600 --> 00:10:11,000 Speaker 5: June Go of Sparta Commodities for educating me more on this, 209 00:10:11,040 --> 00:10:13,720 Speaker 5: because I would have thought, Wow, product markets are going insane. 210 00:10:13,760 --> 00:10:16,400 Speaker 5: Refiners were chasing as hard as they can, running as 211 00:10:16,440 --> 00:10:19,640 Speaker 5: fast as they can to capture those exceptionally high margins. 212 00:10:20,120 --> 00:10:22,960 Speaker 5: But the issue is that for them, shutting down a 213 00:10:23,000 --> 00:10:25,240 Speaker 5: facility is the worst case scenario. This is basically a 214 00:10:25,280 --> 00:10:28,400 Speaker 5: giant flowing chemistry set that if you turn it off, 215 00:10:28,840 --> 00:10:31,120 Speaker 5: it's really really hard to kind of turn back on properly, 216 00:10:31,120 --> 00:10:33,280 Speaker 5: and it takes a lot of time and money and downtime, 217 00:10:33,320 --> 00:10:35,200 Speaker 5: and then you're not capturing any of those margins. 218 00:10:35,520 --> 00:10:37,920 Speaker 4: So what the refiners are doing. These are the fineries in. 219 00:10:37,920 --> 00:10:41,400 Speaker 5: Asia that basically have a massive twenty million barrel a 220 00:10:41,480 --> 00:10:43,559 Speaker 5: day gap coming towards them in the market in terms 221 00:10:43,600 --> 00:10:47,880 Speaker 5: of feedstock. They're preemptively reducing activity, reducing the rate of 222 00:10:47,960 --> 00:10:51,400 Speaker 5: runs so they can extend their runway basically for how 223 00:10:51,440 --> 00:10:53,600 Speaker 5: long they can remain in the market at all. So 224 00:10:53,640 --> 00:10:56,480 Speaker 5: this means that you know, with crude oil, two weeks ago, 225 00:10:56,480 --> 00:10:58,720 Speaker 5: we still had crude flowing out of the Gulf. It 226 00:10:58,800 --> 00:11:01,000 Speaker 5: takes a month or two for those cargoes to get 227 00:11:01,080 --> 00:11:03,360 Speaker 5: where they're going. It's only then that will really start 228 00:11:03,400 --> 00:11:06,160 Speaker 5: to feel the consequence and the supply loss and the 229 00:11:06,160 --> 00:11:09,480 Speaker 5: inventory drained down. But with the refiners in Asian in 230 00:11:09,520 --> 00:11:13,640 Speaker 5: particular preemptively and kind of you know, adjusting down their 231 00:11:13,720 --> 00:11:17,079 Speaker 5: run rates, we're seeing the impacts in Asian product markets immediately. 232 00:11:32,800 --> 00:11:34,400 Speaker 3: So the other thing I want to ask you about, 233 00:11:34,440 --> 00:11:38,680 Speaker 3: Rory is so we have strategic stockpiles that are supposed 234 00:11:38,720 --> 00:11:41,360 Speaker 3: to help us get through these types of near term 235 00:11:41,400 --> 00:11:43,679 Speaker 3: supply shocks, and you know, the release of which is 236 00:11:43,679 --> 00:11:46,240 Speaker 3: supposed to not only push down the price of stuff 237 00:11:46,280 --> 00:11:49,199 Speaker 3: like gasoline, but also maybe help the refiners keep going 238 00:11:49,240 --> 00:11:52,640 Speaker 3: so that they don't have to start preemptively shutting down capacity. 239 00:11:53,440 --> 00:11:56,880 Speaker 3: At the same time, we now have g seven countries 240 00:11:57,040 --> 00:12:00,480 Speaker 3: that seem to be very reluctant to release from the stocks. 241 00:12:00,520 --> 00:12:03,120 Speaker 3: And I should just mention that we're recording this on 242 00:12:03,559 --> 00:12:05,960 Speaker 3: March ninth, and you know, there are all these headlines 243 00:12:06,000 --> 00:12:07,840 Speaker 3: flying around, so who knows what will happen by the 244 00:12:07,840 --> 00:12:10,440 Speaker 3: time this episode gets out. And then at the same time, 245 00:12:10,520 --> 00:12:13,480 Speaker 3: we also have the US where there's a lot of 246 00:12:13,559 --> 00:12:17,480 Speaker 3: chatter about releasing from the SPR. Talk to us about 247 00:12:17,520 --> 00:12:21,280 Speaker 3: the pros and cons of actually dipping into those strategic 248 00:12:21,320 --> 00:12:22,280 Speaker 3: stockpiles right now. 249 00:12:22,600 --> 00:12:25,120 Speaker 5: Yeah, So I think it's important to note that like 250 00:12:25,240 --> 00:12:27,280 Speaker 5: this is the mother of all suppliers. This is the 251 00:12:27,280 --> 00:12:29,880 Speaker 5: boogeyman for every oil analyst when they're kind of learning 252 00:12:29,960 --> 00:12:34,239 Speaker 5: the ropes. This is the purpose built reason the scenario, 253 00:12:34,679 --> 00:12:37,400 Speaker 5: precisely that the SPR was kind of created to mitigate 254 00:12:37,440 --> 00:12:40,400 Speaker 5: the risk of To me, it's insane that they haven't 255 00:12:40,480 --> 00:12:42,839 Speaker 5: yet tapped the reserve already, and I think speaks to 256 00:12:42,840 --> 00:12:45,800 Speaker 5: the fact that particularly Trump administration has tied itself in 257 00:12:45,880 --> 00:12:51,120 Speaker 5: knots criticizing the Biden administration for releasing SPR stocks in 258 00:12:51,120 --> 00:12:54,040 Speaker 5: twenty twenty two to offset the Russian supply shock. Now, 259 00:12:54,120 --> 00:12:56,240 Speaker 5: just on that very briefly, I was a big supporter 260 00:12:56,360 --> 00:12:59,360 Speaker 5: of that release. I thought that was a clear national 261 00:12:59,360 --> 00:13:02,800 Speaker 5: security threat and global economic threat that Russia posed would 262 00:13:02,800 --> 00:13:05,640 Speaker 5: invade Ukraine, and we thought we were going to lose so 263 00:13:05,760 --> 00:13:09,520 Speaker 5: much oil from Russia. But it wasn't executed perfectly in fairness, 264 00:13:09,520 --> 00:13:12,160 Speaker 5: but still I think that was a good purpose of it. 265 00:13:12,440 --> 00:13:15,160 Speaker 5: And now this is also a very good purpose of it. 266 00:13:15,200 --> 00:13:17,120 Speaker 5: We could have refilled more in the intern and we 267 00:13:17,160 --> 00:13:20,520 Speaker 5: should have. Congress needs to allocate more money to the SPR, 268 00:13:20,559 --> 00:13:23,000 Speaker 5: to the Department of Energy. Most of the money that 269 00:13:23,080 --> 00:13:26,280 Speaker 5: was earned from the Biden era sale of the SPR 270 00:13:26,320 --> 00:13:28,240 Speaker 5: has essentially been remitted to Congress, so you actually need 271 00:13:28,280 --> 00:13:30,600 Speaker 5: to get that money back again. But I think what 272 00:13:30,640 --> 00:13:33,360 Speaker 5: we've seen so this morning, the the IA and G 273 00:13:33,440 --> 00:13:35,920 Speaker 5: seven countries we're talking about, this coordinate release of three 274 00:13:36,000 --> 00:13:38,120 Speaker 5: hundred to four hundred million barrels was with the Financial 275 00:13:38,160 --> 00:13:40,800 Speaker 5: Times reported as I saw. But yeah, they come out 276 00:13:40,800 --> 00:13:43,440 Speaker 5: and said no. Now there's a couple of reasons that 277 00:13:43,480 --> 00:13:47,280 Speaker 5: you could explain why they could say no. One they 278 00:13:47,280 --> 00:13:50,240 Speaker 5: could be hoping and fearing that things could be even 279 00:13:50,320 --> 00:13:53,040 Speaker 5: worse so holding it closer to the chest. On that, 280 00:13:53,120 --> 00:13:54,760 Speaker 5: I would say one of the big problems is that 281 00:13:54,840 --> 00:13:57,839 Speaker 5: the collective release rate of the sprs around the world 282 00:13:58,080 --> 00:14:01,720 Speaker 5: is not twenty million barrels. So the crisis is already really, 283 00:14:01,720 --> 00:14:04,280 Speaker 5: really bad, and you can't actually fill the gap entirely 284 00:14:04,559 --> 00:14:07,160 Speaker 5: with sprs, even if it was unlimited, which it isn't. 285 00:14:07,240 --> 00:14:10,560 Speaker 5: Just the flow it itself can't keep up. So if anything, 286 00:14:10,760 --> 00:14:14,320 Speaker 5: you kind of need to almost start easing earlier rather 287 00:14:14,360 --> 00:14:16,720 Speaker 5: than later. On the other hand, I think there's this 288 00:14:16,800 --> 00:14:19,520 Speaker 5: question of like maybe you know, repeatedly we hear that 289 00:14:19,600 --> 00:14:21,520 Speaker 5: like Trump thinks this is going to be a short 290 00:14:21,560 --> 00:14:23,960 Speaker 5: lived shock. Last night when I was driving in Ottawa, 291 00:14:24,240 --> 00:14:26,080 Speaker 5: you know, they were talking about, you know, this is 292 00:14:26,080 --> 00:14:27,640 Speaker 5: going to be short, sharp, and then we're gonna get 293 00:14:27,680 --> 00:14:29,840 Speaker 5: rid of the Islamic Republican Iran and we're all going 294 00:14:29,880 --> 00:14:32,520 Speaker 5: to be better off. But this is nothing, Nothing that 295 00:14:32,520 --> 00:14:34,240 Speaker 5: we see so far indicates it's going to be short 296 00:14:34,320 --> 00:14:34,840 Speaker 5: and sharp. 297 00:14:35,200 --> 00:14:37,240 Speaker 4: Again, I'm shocked we are this far down the road. 298 00:14:37,280 --> 00:14:39,720 Speaker 5: I didn't think the president had the appetite for this 299 00:14:39,800 --> 00:14:41,800 Speaker 5: kind of true and utter chaos. 300 00:14:41,840 --> 00:14:43,360 Speaker 4: And then we're going to see how long he remains 301 00:14:43,400 --> 00:14:44,240 Speaker 4: to have the appetite for that. 302 00:14:44,600 --> 00:14:46,560 Speaker 5: But that's essentially the best read I could have is 303 00:14:46,880 --> 00:14:50,760 Speaker 5: they think this is short a short lived geopolitical sentiment disruption, 304 00:14:51,040 --> 00:14:53,600 Speaker 5: when this is really just the largest physical supply discreption 305 00:14:53,720 --> 00:14:56,680 Speaker 5: we've ever seen. The other thing they're reportedly musing, which 306 00:14:56,680 --> 00:15:01,080 Speaker 5: is even more insane and terrifying, is renewing the export 307 00:15:01,160 --> 00:15:04,920 Speaker 5: ban on both crude oil and fine products. So something 308 00:15:04,960 --> 00:15:08,120 Speaker 5: that the Biden administration kind of amused about in late 309 00:15:08,160 --> 00:15:10,680 Speaker 5: twenty twenty two, and I wrote a piece then on 310 00:15:10,760 --> 00:15:13,920 Speaker 5: Commarditi context that was all about the reasons that that 311 00:15:13,960 --> 00:15:16,720 Speaker 5: was a really, really bad idea that I appreciate the 312 00:15:16,760 --> 00:15:19,760 Speaker 5: impulse towards autarchy, particularly given the fact that the United 313 00:15:19,760 --> 00:15:22,120 Speaker 5: States is the largest oil producer in the world now. 314 00:15:22,560 --> 00:15:23,440 Speaker 4: But not only are. 315 00:15:23,520 --> 00:15:26,240 Speaker 5: Crude quality issues at play, you know, the US producers 316 00:15:26,280 --> 00:15:28,760 Speaker 5: to wish light and doesn't instill's the import heavy, but 317 00:15:28,800 --> 00:15:31,720 Speaker 5: also there's regional issues that the US Gulf Coast is 318 00:15:31,720 --> 00:15:34,760 Speaker 5: a net exporter of diesel, the US East Coast is 319 00:15:34,760 --> 00:15:38,160 Speaker 5: a net importer of gasoline from Europe. So basically, if 320 00:15:38,160 --> 00:15:41,160 Speaker 5: you start closing these borders off, all of these individual 321 00:15:41,200 --> 00:15:43,880 Speaker 5: regions start to basically shut down and kind of ossify 322 00:15:44,280 --> 00:15:46,640 Speaker 5: in a way that is not at all what I 323 00:15:46,640 --> 00:15:49,400 Speaker 5: think President Trump would want. But I no longer have 324 00:15:49,520 --> 00:15:52,720 Speaker 5: much faith that they are fully thought in this through 325 00:15:52,760 --> 00:15:55,240 Speaker 5: because if you had, you would have thought about THEESPR, 326 00:15:55,240 --> 00:15:56,720 Speaker 5: you would have thought about insurance, you would have thought 327 00:15:56,720 --> 00:15:58,920 Speaker 5: about all of this already, and they just clearly haven't. 328 00:15:59,240 --> 00:16:02,360 Speaker 2: Yeah, this is the striking things to me, at least 329 00:16:02,800 --> 00:16:06,400 Speaker 2: from everything I've read, it sort of seems to have 330 00:16:06,440 --> 00:16:08,760 Speaker 2: taken them a little bit by surprise. Some of the 331 00:16:08,880 --> 00:16:10,840 Speaker 2: market rear. I mean, it's almost hard to believe that 332 00:16:10,880 --> 00:16:14,240 Speaker 2: there wasn't more anticipating of this when you're going into 333 00:16:14,360 --> 00:16:18,000 Speaker 2: war like this, But it does not seem I certainly 334 00:16:18,000 --> 00:16:20,400 Speaker 2: get the same impression as you. By the way, everyone 335 00:16:20,440 --> 00:16:24,040 Speaker 2: should pull up that chart of Singapore jet fuel prices. 336 00:16:24,160 --> 00:16:26,720 Speaker 2: It almost looks fake. It's just like, you know, we're 337 00:16:27,320 --> 00:16:31,000 Speaker 2: ninety dollars a barrel at the end of February, broke 338 00:16:31,040 --> 00:16:34,960 Speaker 2: two hundred and twenty. Recently it's come in a little bit, 339 00:16:35,200 --> 00:16:37,920 Speaker 2: So talk to us a little bit more about this 340 00:16:38,000 --> 00:16:42,160 Speaker 2: sort of relationship between the duration of the war and 341 00:16:42,200 --> 00:16:45,280 Speaker 2: the ability to flip the switch back, because it does 342 00:16:45,600 --> 00:16:48,520 Speaker 2: the president's communication does seem to be like, yeah, we're 343 00:16:48,520 --> 00:16:51,080 Speaker 2: paying a price right now, but it's gonna be worth it, 344 00:16:51,120 --> 00:16:54,240 Speaker 2: and then prices are going to come down. How you know, 345 00:16:54,360 --> 00:16:57,840 Speaker 2: as this goes on longer and longer, to what degree 346 00:16:57,920 --> 00:17:01,840 Speaker 2: does everything compound and make it more difficult to go 347 00:17:01,920 --> 00:17:02,560 Speaker 2: back to normal? 348 00:17:03,240 --> 00:17:04,600 Speaker 4: And I think this is a topic. 349 00:17:04,720 --> 00:17:07,040 Speaker 5: I was listening to axt year podcast on the Straight 350 00:17:07,080 --> 00:17:10,200 Speaker 5: offour Moods Flow with the shipping experts exactly on this topic, 351 00:17:10,240 --> 00:17:12,080 Speaker 5: and I think you guys nailed it there that this 352 00:17:12,119 --> 00:17:13,679 Speaker 5: gets worse every single day goes on. 353 00:17:13,720 --> 00:17:15,120 Speaker 4: But let's talk through the ways it gets worse. 354 00:17:15,200 --> 00:17:17,600 Speaker 5: Yeah, So when we talk with the straight up hoorror 355 00:17:17,600 --> 00:17:19,320 Speaker 5: moves like you could think of it very simply as 356 00:17:19,320 --> 00:17:22,119 Speaker 5: like the world's largest pipeline or like a big giant 357 00:17:22,160 --> 00:17:25,000 Speaker 5: garden hose, you know, through which twenty million barrels of 358 00:17:25,040 --> 00:17:28,320 Speaker 5: petroleum flows when the stray was closed initially, you know, 359 00:17:28,359 --> 00:17:31,080 Speaker 5: for the first day to three days, it's kind of 360 00:17:31,080 --> 00:17:31,760 Speaker 5: like a kink in. 361 00:17:31,760 --> 00:17:32,440 Speaker 4: The garden hose. 362 00:17:32,880 --> 00:17:35,399 Speaker 5: If the conflict at it then, which is honestly when 363 00:17:35,440 --> 00:17:38,200 Speaker 5: I expected it to end, you would unkink the garden 364 00:17:38,200 --> 00:17:39,960 Speaker 5: hose and things would get back to normal pretty quickly. 365 00:17:40,040 --> 00:17:42,359 Speaker 5: Kind of no harm, no foul, some issues, but like 366 00:17:42,400 --> 00:17:44,800 Speaker 5: you can make that up pretty quickly. But now you know, 367 00:17:44,960 --> 00:17:47,280 Speaker 5: ten plus days into this, we now have the equivalent 368 00:17:47,280 --> 00:17:50,439 Speaker 5: of a two hundred million barrel air gap in the 369 00:17:50,480 --> 00:17:53,320 Speaker 5: global flow of petroleum. First of all, not to mention 370 00:17:53,480 --> 00:17:55,480 Speaker 5: that in addition to this kind of kink in the 371 00:17:55,520 --> 00:17:59,639 Speaker 5: garden hose, that pressure has built up because these countries 372 00:17:59,680 --> 00:18:02,680 Speaker 5: can't export out of this region anymore, countries like a 373 00:18:02,760 --> 00:18:06,119 Speaker 5: Rock and Kuwait in particular, both of which lack sufficient 374 00:18:06,240 --> 00:18:08,919 Speaker 5: domestic storage capacity because they just export the stuff all 375 00:18:08,960 --> 00:18:11,680 Speaker 5: the time, and for decades and decades they have been 376 00:18:11,720 --> 00:18:15,200 Speaker 5: forced to shut in production. Now Iraq as of yesterday, 377 00:18:15,480 --> 00:18:18,000 Speaker 5: shut in over three million barrels a day of production 378 00:18:18,080 --> 00:18:20,240 Speaker 5: from a southern basher fields that is. 379 00:18:20,280 --> 00:18:21,800 Speaker 4: Alone, just a Rock alone. 380 00:18:21,880 --> 00:18:25,520 Speaker 5: So far, that is the same size as the feared 381 00:18:25,640 --> 00:18:28,760 Speaker 5: loss of Russian supply in April of twenty twenty, twenty 382 00:18:28,760 --> 00:18:31,560 Speaker 5: twenty two. That sent the market, you know, ripping higher 383 00:18:31,560 --> 00:18:34,280 Speaker 5: above one hundred and twenty brent, just from perspective, and 384 00:18:34,280 --> 00:18:36,960 Speaker 5: we didn't end up losing that supply. In the Russia case, 385 00:18:37,000 --> 00:18:39,480 Speaker 5: we only lost one briefly and it came back. But 386 00:18:39,560 --> 00:18:42,240 Speaker 5: in Iraq, we've already lost Kuwait. We've already lost it. 387 00:18:42,560 --> 00:18:45,520 Speaker 5: In the Emirates and Saudi Arabia, they have more storage 388 00:18:45,520 --> 00:18:47,600 Speaker 5: capacity and a bit more optionality they can get. You know, 389 00:18:47,600 --> 00:18:49,960 Speaker 5: there's a pipeline to the west coast in the Red 390 00:18:50,000 --> 00:18:52,760 Speaker 5: Sea in Saudi Arabia that can diff some of the flow. Similarly, 391 00:18:52,800 --> 00:18:55,080 Speaker 5: with the Unity of Arab Emirates, you can divert some 392 00:18:55,240 --> 00:18:58,320 Speaker 5: flow out the port of Fujia. The pipeline to the 393 00:18:58,320 --> 00:19:00,320 Speaker 5: west coast of Saudi Arabia can get bombed if we 394 00:19:00,359 --> 00:19:02,679 Speaker 5: get to an existential battle. You know, this keeps grinding, 395 00:19:02,720 --> 00:19:05,399 Speaker 5: same with the ports of Fujera, I think. But again, 396 00:19:05,440 --> 00:19:08,800 Speaker 5: these systems can all be broken. So you've lost that. 397 00:19:08,880 --> 00:19:12,320 Speaker 5: So you've lost supply structurally at least for weeks pontentially 398 00:19:12,359 --> 00:19:14,960 Speaker 5: a month, even if the thing resumed, even if flower 399 00:19:15,000 --> 00:19:18,400 Speaker 5: zoom tomorrow. And then on the refine, that's on the exporter, 400 00:19:18,560 --> 00:19:20,560 Speaker 5: the supply side, on the demand side, and the and 401 00:19:20,600 --> 00:19:23,200 Speaker 5: the importers in Asia. Like I said, you've already begun 402 00:19:23,280 --> 00:19:27,000 Speaker 5: to lose refining runs. And because the jet feels very particular, 403 00:19:27,240 --> 00:19:30,080 Speaker 5: I think rightfully so, so you don't store as much 404 00:19:30,119 --> 00:19:32,800 Speaker 5: of it typically, So I think part of that giant 405 00:19:32,960 --> 00:19:35,800 Speaker 5: spike in fuel prices and jet fuel and particularly was 406 00:19:35,960 --> 00:19:38,720 Speaker 5: this sudden kind of loss of supply, not a lot 407 00:19:38,760 --> 00:19:40,239 Speaker 5: of inventory cover and all of a sudden you had 408 00:19:40,240 --> 00:19:43,000 Speaker 5: all of these airlines all across stations, like, Wow, I'm 409 00:19:43,040 --> 00:19:45,040 Speaker 5: not headed for this. I need to get every barrel 410 00:19:45,080 --> 00:19:47,639 Speaker 5: I can right now. So I think even if this 411 00:19:47,760 --> 00:19:50,320 Speaker 5: resolved right now, which it doesn't look like it's going to, 412 00:19:50,359 --> 00:19:52,120 Speaker 5: but even if it did, now we have a big 413 00:19:52,160 --> 00:19:53,680 Speaker 5: air gap in the system that's going to need to 414 00:19:53,720 --> 00:19:55,640 Speaker 5: work itself out, and all of these different supply chains 415 00:19:55,640 --> 00:19:59,359 Speaker 5: will probably end up taking two three months minimum to 416 00:19:59,400 --> 00:20:02,040 Speaker 5: get back to some thing resembling normal. And it doesn't 417 00:20:02,080 --> 00:20:04,879 Speaker 5: look like we're about to kind of resume flow through 418 00:20:04,880 --> 00:20:06,399 Speaker 5: the stated of from moves right now, despite with what 419 00:20:06,480 --> 00:20:07,120 Speaker 5: has says. 420 00:20:07,720 --> 00:20:11,080 Speaker 3: I have what is perhaps a silly question, but does 421 00:20:11,160 --> 00:20:15,600 Speaker 3: demand destruction actually exist when it comes to higher oil prices? 422 00:20:15,840 --> 00:20:18,480 Speaker 3: I mean, you know, seriously, I know that airlines will 423 00:20:18,560 --> 00:20:21,639 Speaker 3: go bankrupt eventually because of high oil prices, but it 424 00:20:21,680 --> 00:20:23,760 Speaker 3: feels like it is one of those things that you 425 00:20:23,840 --> 00:20:26,960 Speaker 3: want to keep using for as long as you are 426 00:20:27,320 --> 00:20:30,600 Speaker 3: physically or financially capable of doing so. 427 00:20:31,440 --> 00:20:33,680 Speaker 5: I'll talk about three different angles here. So the first 428 00:20:33,720 --> 00:20:37,359 Speaker 5: is the difference between the elasticity of price versus the 429 00:20:37,680 --> 00:20:39,680 Speaker 5: elasticity of income. So I think there's the one question 430 00:20:39,720 --> 00:20:42,159 Speaker 5: of I think when we typically think about demand destruction, 431 00:20:42,240 --> 00:20:45,000 Speaker 5: we think that primarily through the lens of like, prices 432 00:20:45,000 --> 00:20:46,600 Speaker 5: got too high, so I'm not going to drive to 433 00:20:46,640 --> 00:20:47,080 Speaker 5: work today. 434 00:20:47,359 --> 00:20:48,360 Speaker 4: There's also the angle of. 435 00:20:48,320 --> 00:20:50,199 Speaker 5: Prices got so high they crash the economy and you 436 00:20:50,280 --> 00:20:52,120 Speaker 5: lost your job, so you no longer have to drive 437 00:20:52,119 --> 00:20:52,520 Speaker 5: to work. 438 00:20:52,760 --> 00:20:53,680 Speaker 4: So that is one angle. 439 00:20:53,720 --> 00:20:55,520 Speaker 5: If this goes on for much longer, we're not talking 440 00:20:55,680 --> 00:20:58,919 Speaker 5: like we're talking serious recession, if not like outright global 441 00:20:58,960 --> 00:21:02,600 Speaker 5: depressionary condition. If the straight remains closed for a month 442 00:21:02,680 --> 00:21:05,480 Speaker 5: plus you know, two months, So there's that's the one angle. 443 00:21:05,800 --> 00:21:08,160 Speaker 5: But when we talk about you know, I agree, I'm 444 00:21:08,200 --> 00:21:10,439 Speaker 5: not going to stop driving my kid to school. I 445 00:21:10,480 --> 00:21:14,399 Speaker 5: have a fairly high tolerance for high prices. But we 446 00:21:14,440 --> 00:21:17,600 Speaker 5: live in wealthy, advanced societies. I think what you saw, 447 00:21:17,680 --> 00:21:19,680 Speaker 5: for instance, in twenty twenty two, I think is illustrated 448 00:21:19,680 --> 00:21:22,159 Speaker 5: to this in the LNG market, when there was a 449 00:21:22,280 --> 00:21:26,720 Speaker 5: very very high profile event when a contracted energy tanker 450 00:21:26,720 --> 00:21:30,240 Speaker 5: that was supposed to land in Pakistan got diverted and 451 00:21:30,320 --> 00:21:31,960 Speaker 5: ended up in Europe because the Europeans were willing to 452 00:21:31,960 --> 00:21:34,240 Speaker 5: pay way way more, and basically the energy supplier broke 453 00:21:34,280 --> 00:21:37,760 Speaker 5: the contract to service that which economics dictated. But I 454 00:21:37,760 --> 00:21:40,520 Speaker 5: think the human cost was very real. Pakistan just couldn't 455 00:21:40,560 --> 00:21:42,800 Speaker 5: afford it. So what you're going to see here, let's 456 00:21:42,800 --> 00:21:46,480 Speaker 5: say again, in this horrible scenario where the strip ver 457 00:21:46,520 --> 00:21:50,199 Speaker 5: moves remains closed until twenty twenty seven, this is what 458 00:21:50,240 --> 00:21:51,159 Speaker 5: the world would look like. 459 00:21:51,560 --> 00:21:52,360 Speaker 4: What you would end up. 460 00:21:52,280 --> 00:21:56,200 Speaker 5: Seeing is massive demand destruction from lower income countries that 461 00:21:56,240 --> 00:21:59,040 Speaker 5: can no longer afford to get those barrels and attract 462 00:21:59,040 --> 00:22:01,000 Speaker 5: them to their shores in the first place. So you 463 00:22:01,080 --> 00:22:04,159 Speaker 5: and I would see this as massively surging price at 464 00:22:04,160 --> 00:22:05,760 Speaker 5: the pump, and we would grumble, and it would it 465 00:22:05,760 --> 00:22:08,359 Speaker 5: would sap our consumer spending energy, et cetera, et cetera, 466 00:22:08,480 --> 00:22:10,160 Speaker 5: but the barrels would likely be there. 467 00:22:10,400 --> 00:22:10,960 Speaker 4: We are in the. 468 00:22:10,880 --> 00:22:13,920 Speaker 5: Countries that will attract the most supplies because we're willing 469 00:22:13,920 --> 00:22:16,480 Speaker 5: to pay the highest prices. But other lower income countries 470 00:22:16,480 --> 00:22:17,600 Speaker 5: in the world, it's not going to be a price 471 00:22:17,640 --> 00:22:19,800 Speaker 5: issue for them. It's going to be an outright shortage, 472 00:22:20,119 --> 00:22:22,600 Speaker 5: and that I think is how demand destruction in this 473 00:22:22,680 --> 00:22:35,960 Speaker 5: particular instance, would work. 474 00:22:40,560 --> 00:22:42,679 Speaker 2: Talk to us about two hundred dollars barrel? How do 475 00:22:42,720 --> 00:22:45,399 Speaker 2: you you say, so this is in the cards, potentially, 476 00:22:45,680 --> 00:22:47,600 Speaker 2: could you walk us through the math of how we 477 00:22:47,640 --> 00:22:50,399 Speaker 2: get there or like why that seems like where it 478 00:22:50,440 --> 00:22:52,600 Speaker 2: could go and not just say one to fifty and 479 00:22:52,640 --> 00:22:55,440 Speaker 2: to talk about how you why that number seems realistic? 480 00:22:55,880 --> 00:22:57,680 Speaker 5: Yeah, and I should say, I mean like two hundred 481 00:22:57,800 --> 00:22:59,280 Speaker 5: is you guys kind of said in the intro like 482 00:22:59,320 --> 00:23:01,760 Speaker 5: these are just kind of placeholder numbers to the stage, 483 00:23:01,800 --> 00:23:04,159 Speaker 5: like the numbers stopped meaning something when they reach that high, 484 00:23:04,359 --> 00:23:06,480 Speaker 5: but just to this point that you're gonna need to 485 00:23:06,560 --> 00:23:09,040 Speaker 5: keep ratcheting the price or higher and higher and higher 486 00:23:09,359 --> 00:23:10,399 Speaker 5: until a couple things happened. 487 00:23:10,480 --> 00:23:13,400 Speaker 4: So one, even if this continues, even the walk and use. 488 00:23:13,440 --> 00:23:15,040 Speaker 5: A lot of this was predicated in this assumption that 489 00:23:15,080 --> 00:23:18,840 Speaker 5: the strait remains completely shut. Important historical context is that 490 00:23:18,880 --> 00:23:21,760 Speaker 5: even during the tanker wars of the nineteen eighties, at 491 00:23:21,800 --> 00:23:23,960 Speaker 5: the peak of the kind of iron Irok war, when 492 00:23:23,960 --> 00:23:25,480 Speaker 5: you had I think it was over four hundred and 493 00:23:25,480 --> 00:23:27,879 Speaker 5: fifty ships attacked two hundred and fifty tankers, and like 494 00:23:27,920 --> 00:23:31,000 Speaker 5: fifty of those tankers were either sunk or scuttled entirely, 495 00:23:31,040 --> 00:23:34,320 Speaker 5: like a much bigger, more explosive situation than we're currently 496 00:23:34,359 --> 00:23:37,080 Speaker 5: even seeing in the Gulf today. During that period, you 497 00:23:37,240 --> 00:23:39,359 Speaker 5: never actually had estoblished to the straighter from Moose, you 498 00:23:39,359 --> 00:23:42,560 Speaker 5: had military escorts, and you had other things, but the 499 00:23:42,640 --> 00:23:46,760 Speaker 5: oil continued to flow. In this instance, it's effectively shut. 500 00:23:46,800 --> 00:23:48,720 Speaker 5: You're seeing minor, like let's say five to ten percent 501 00:23:48,760 --> 00:23:50,880 Speaker 5: of the prior flow go through, but it's effectively shut. 502 00:23:50,920 --> 00:23:52,320 Speaker 4: We've never really seen this before. 503 00:23:52,600 --> 00:23:56,160 Speaker 5: So if this continues, you're you're going to keep bidding 504 00:23:56,240 --> 00:23:58,000 Speaker 5: up prices to do one of either two things we 505 00:23:58,040 --> 00:23:59,040 Speaker 5: talked about, demand destruction. 506 00:23:59,080 --> 00:24:00,760 Speaker 4: So I think that's one way the market solve itself. 507 00:24:01,400 --> 00:24:04,760 Speaker 5: Or prices get so crazy high on the other side 508 00:24:04,760 --> 00:24:05,879 Speaker 5: of the straight and they think I should know here 509 00:24:05,960 --> 00:24:09,520 Speaker 5: is crude prices are probably effectively negative prices right now 510 00:24:09,640 --> 00:24:11,280 Speaker 5: on the wrong side of the straight, because those are 511 00:24:11,280 --> 00:24:13,199 Speaker 5: stranded barrels and on we can get to them. But 512 00:24:13,359 --> 00:24:16,600 Speaker 5: if you can basically arb that between effectively negative prices 513 00:24:16,960 --> 00:24:19,320 Speaker 5: and potentially the highest prices we've ever seen in the market, 514 00:24:19,520 --> 00:24:22,359 Speaker 5: that's a really compelling economic incentive to take the risk 515 00:24:22,480 --> 00:24:25,320 Speaker 5: to cross the Strait, or to pay your cruise, you know, 516 00:24:25,440 --> 00:24:27,800 Speaker 5: the sufficient amount of money to cross straight, or to 517 00:24:27,840 --> 00:24:29,880 Speaker 5: afford the exceptionally extensive war insurance. 518 00:24:30,119 --> 00:24:32,720 Speaker 4: So it's like that mad money meme. It's like, that's 519 00:24:32,720 --> 00:24:33,560 Speaker 4: what the money's for. 520 00:24:33,880 --> 00:24:37,159 Speaker 5: It really is that we're trying to basically incentivize between 521 00:24:37,200 --> 00:24:41,640 Speaker 5: two awful scenarios, either seafarers and tanker owners risking their 522 00:24:41,760 --> 00:24:44,600 Speaker 5: lives and their ships going through the Strait to deliver 523 00:24:44,680 --> 00:24:48,639 Speaker 5: this fuel, or you're asking people to basically stop moving, 524 00:24:48,800 --> 00:24:50,680 Speaker 5: stop moving or on the planet, and neither of those 525 00:24:50,760 --> 00:24:53,720 Speaker 5: is a very attractive solution, which is why again, I 526 00:24:54,119 --> 00:24:57,320 Speaker 5: just fundamentally can't see this continuing. I think I keep 527 00:24:57,320 --> 00:24:59,600 Speaker 5: saying like Trump's gonna taco because he has to taco, 528 00:25:00,040 --> 00:25:02,040 Speaker 5: and people keep criticizing me. They're like, no, no, no, it's 529 00:25:02,080 --> 00:25:05,520 Speaker 5: no longer just Trump's calls. It's Net and Yahoo, it's 530 00:25:05,520 --> 00:25:07,760 Speaker 5: the Iranians or whatever. And I think that's probably true. 531 00:25:07,840 --> 00:25:11,280 Speaker 5: It's not just Trump's call anymore, but he's still one 532 00:25:11,560 --> 00:25:14,280 Speaker 5: the person that's probably movable on this by market reaction, 533 00:25:14,760 --> 00:25:17,120 Speaker 5: and too, he's still probably the most important incremental voice 534 00:25:17,119 --> 00:25:19,360 Speaker 5: in that conversation. So if he pulled out, I think 535 00:25:19,400 --> 00:25:21,400 Speaker 5: that does a lot to deesk the situation. I think 536 00:25:21,400 --> 00:25:22,800 Speaker 5: that's probably where we need to go here. 537 00:25:23,240 --> 00:25:26,160 Speaker 3: I realize we have I don't think we've mentioned OPEK 538 00:25:26,560 --> 00:25:30,400 Speaker 3: once in this conversation, which probably says something about OPEX 539 00:25:30,640 --> 00:25:33,879 Speaker 3: relevance today. But you know, to what extent can OPEK 540 00:25:34,080 --> 00:25:38,439 Speaker 3: respond with a big supply increase and maybe shift some 541 00:25:38,560 --> 00:25:43,040 Speaker 3: production away from the golf and start firing up output elsewhere. 542 00:25:43,359 --> 00:25:46,280 Speaker 5: Yeah, So I think it's a great question, and unfortunately 543 00:25:46,440 --> 00:25:48,720 Speaker 5: the straight up from muz is a risk concept kind 544 00:25:48,720 --> 00:25:52,560 Speaker 5: of short circuits the OPEX normal reaction that we're talking 545 00:25:52,600 --> 00:25:55,280 Speaker 5: about spare capacity. Virtually all the spare capacity and OPEK 546 00:25:55,720 --> 00:25:57,600 Speaker 5: is on the wrong side of the straight of Hormus. 547 00:25:57,600 --> 00:26:01,480 Speaker 5: It's in Iraq, Kuwait, Saudi Arabia and the UAE. All 548 00:26:01,520 --> 00:26:03,520 Speaker 5: of that is currently caught up in this. So I 549 00:26:03,560 --> 00:26:06,040 Speaker 5: think that's part of the challenge and why the trade 550 00:26:06,040 --> 00:26:08,560 Speaker 5: of Ruis was always the boogeyman scenario was there's no 551 00:26:08,720 --> 00:26:11,080 Speaker 5: real normal way at the marking gain around it. The 552 00:26:11,119 --> 00:26:14,160 Speaker 5: one major producer that's within OPEC plus that is likely 553 00:26:14,200 --> 00:26:18,000 Speaker 5: the single greatest beneficiary of this is actually Moscow. So 554 00:26:18,080 --> 00:26:22,280 Speaker 5: the Russians had been under increasing pressure during you know, 555 00:26:22,359 --> 00:26:25,040 Speaker 5: the trum administration have put a lot of pressure on 556 00:26:25,119 --> 00:26:26,399 Speaker 5: all of the kind of what I call it the 557 00:26:26,400 --> 00:26:29,840 Speaker 5: big sanction three. You've got Iran Venezuela and Russia Venezuela. 558 00:26:29,840 --> 00:26:32,320 Speaker 5: We have a regime change. I Ran, we're the process 559 00:26:32,320 --> 00:26:35,720 Speaker 5: of doing so or trying to. And then in Russia 560 00:26:35,880 --> 00:26:38,159 Speaker 5: they said that they were prioritizing the war in Ukraine, 561 00:26:38,160 --> 00:26:40,439 Speaker 5: and they were at various points. But now they had 562 00:26:40,440 --> 00:26:42,399 Speaker 5: actually been putting a lot of pressure on the Russian 563 00:26:42,440 --> 00:26:45,360 Speaker 5: oil trade. India, which was one of the largest importers 564 00:26:45,440 --> 00:26:48,800 Speaker 5: of Russian crewed, the largest seaborn importer of Russian crude. 565 00:26:48,800 --> 00:26:51,400 Speaker 5: After the invasion, with the price cap and everything else, 566 00:26:52,040 --> 00:26:55,600 Speaker 5: they got under increasing pressure on two fronts. One, the 567 00:26:55,600 --> 00:26:58,920 Speaker 5: Trump administration issued blocking sanctions or like the hefty off 568 00:26:59,000 --> 00:27:00,960 Speaker 5: you know, really really tough set actions that were on Iran, 569 00:27:01,280 --> 00:27:03,679 Speaker 5: issued those on ros Neft and Luke Oil, which are 570 00:27:03,880 --> 00:27:07,840 Speaker 5: Russia's two largest crudel exporting companies. In addition to that, 571 00:27:08,040 --> 00:27:10,400 Speaker 5: so Vidians didn't like that and they started pulling back 572 00:27:10,440 --> 00:27:12,879 Speaker 5: purchases there because they're afraid of the sanctions risk. But 573 00:27:12,880 --> 00:27:17,120 Speaker 5: in addition, Trump actually imposed a specific punitive twenty five 574 00:27:17,119 --> 00:27:21,879 Speaker 5: percent tariff on India for being such large importers of 575 00:27:21,920 --> 00:27:22,639 Speaker 5: Russian oil. 576 00:27:23,040 --> 00:27:24,520 Speaker 4: So over that kind. 577 00:27:24,400 --> 00:27:28,560 Speaker 5: Of between October and say January, we saw Indian imports 578 00:27:28,600 --> 00:27:30,520 Speaker 5: of Russian crew drop from over two million barrels a 579 00:27:30,560 --> 00:27:32,240 Speaker 5: day to about one million barrels today, So they have 580 00:27:33,119 --> 00:27:35,280 Speaker 5: that Russian oil wasn't really it was a little bit 581 00:27:35,280 --> 00:27:37,479 Speaker 5: going more to China, but it wasn't finding many other buyers. 582 00:27:37,480 --> 00:27:39,520 Speaker 5: So Tracy mentioned that, you know, we were building up 583 00:27:39,600 --> 00:27:41,639 Speaker 5: lost and lots of oil and water. That's where a 584 00:27:41,680 --> 00:27:43,399 Speaker 5: lot of this was ending up. So the prices for 585 00:27:43,480 --> 00:27:46,800 Speaker 5: these the discounts that were kind of suffered by Russian. 586 00:27:46,520 --> 00:27:49,080 Speaker 4: Barrels were exploding. They are building up on water. 587 00:27:49,640 --> 00:27:51,880 Speaker 5: Russia was kind of the oil indusue was on its 588 00:27:51,880 --> 00:27:54,200 Speaker 5: back foot and probably going to start contracting pretty. 589 00:27:53,960 --> 00:27:55,200 Speaker 4: Meaningfully if that continued. 590 00:27:55,720 --> 00:27:58,119 Speaker 5: Now what are you seeing, Well, all of a sudden, 591 00:27:58,240 --> 00:28:01,280 Speaker 5: one of the major places that has incremental supply at 592 00:28:01,320 --> 00:28:03,960 Speaker 5: all to share on the world is Russia. So India's 593 00:28:04,000 --> 00:28:05,760 Speaker 5: back in the market for Russian crewed and the White 594 00:28:05,760 --> 00:28:09,640 Speaker 5: Hose actually explicitly gave them a waiver for those sanctions 595 00:28:09,640 --> 00:28:11,640 Speaker 5: that I mentioned previously. So they're going to start imporing 596 00:28:11,680 --> 00:28:13,840 Speaker 5: a lot more Russian crud because they need to, and 597 00:28:13,880 --> 00:28:18,720 Speaker 5: even the Europeans have started clamoring about easing sanctions or 598 00:28:18,840 --> 00:28:22,080 Speaker 5: reopening flow on the Druze, but pipeline to Eastern Europe 599 00:28:22,400 --> 00:28:26,400 Speaker 5: into Germany, it's a mess. And again it's a mess 600 00:28:26,440 --> 00:28:31,120 Speaker 5: that overwhelmingly serves the interests of the Kremlin above any 601 00:28:31,200 --> 00:28:34,639 Speaker 5: kind of other single national actor in this oil market. 602 00:28:34,960 --> 00:28:38,280 Speaker 2: It is pretty striking turn of events with it, isn't it. 603 00:28:38,560 --> 00:28:41,000 Speaker 2: You brought this up earlier, but I feel like this 604 00:28:41,040 --> 00:28:42,760 Speaker 2: is going to come up, so we should talk about 605 00:28:42,760 --> 00:28:46,480 Speaker 2: it more. There actually was a headline already this idea 606 00:28:46,680 --> 00:28:49,840 Speaker 2: of curbing exports, and you know, I think in a 607 00:28:49,840 --> 00:28:51,760 Speaker 2: lot of people's head is like, oh, we produce more 608 00:28:51,760 --> 00:28:54,360 Speaker 2: oil than we need, we export them. Let's just keep 609 00:28:54,400 --> 00:28:57,080 Speaker 2: it all at home and then prices will come down, 610 00:28:57,240 --> 00:28:59,920 Speaker 2: et cetera. Like I feel like, if you're not thinking 611 00:29:00,080 --> 00:29:03,320 Speaker 2: second order, it sounds like a totally fine thing, walk 612 00:29:03,400 --> 00:29:06,560 Speaker 2: us through, Like why you think that's like a disaster scenario. 613 00:29:07,000 --> 00:29:09,280 Speaker 5: Yeah, So I think what would be compelling to Trump 614 00:29:09,640 --> 00:29:12,800 Speaker 5: is that in the first two or three weeks it 615 00:29:12,840 --> 00:29:16,040 Speaker 5: would result in very meaningfully lower pump prices. 616 00:29:16,080 --> 00:29:18,200 Speaker 4: For US consumers. I think, let's just get that by the. 617 00:29:18,200 --> 00:29:20,760 Speaker 5: Way, But in a way that's kind of too much 618 00:29:20,760 --> 00:29:23,680 Speaker 5: of a good thing in that what you see is like, 619 00:29:23,720 --> 00:29:25,360 Speaker 5: as an example of the US Golf Coast, which is 620 00:29:25,400 --> 00:29:27,560 Speaker 5: the major refining hub of the United States, where you 621 00:29:27,600 --> 00:29:29,880 Speaker 5: have all of the outlet from the Permian and all 622 00:29:29,920 --> 00:29:31,800 Speaker 5: the rest of the oil fields and directly into that 623 00:29:31,840 --> 00:29:34,960 Speaker 5: refining hub, much of which is exported. You see a 624 00:29:35,000 --> 00:29:36,800 Speaker 5: lot of diesel exports, about a million, million and a 625 00:29:36,800 --> 00:29:39,200 Speaker 5: half barrels a day of diesel exports out of the region, 626 00:29:39,560 --> 00:29:43,200 Speaker 5: largely going to Mexico, Latin America and other areas. If 627 00:29:43,200 --> 00:29:45,960 Speaker 5: you band exports, let's say across the board, what you'd 628 00:29:45,960 --> 00:29:48,239 Speaker 5: do is you would start building those inventories at that 629 00:29:48,320 --> 00:29:51,840 Speaker 5: pace in the US Golf Coast, so you'd start overflowing 630 00:29:51,840 --> 00:29:52,760 Speaker 5: your tanks of diesel. 631 00:29:52,920 --> 00:29:54,360 Speaker 4: Diesel prices would crash. 632 00:29:54,480 --> 00:29:56,360 Speaker 5: That would be great very briefly for your kind of 633 00:29:56,480 --> 00:29:58,880 Speaker 5: you know, drivers of big your your big diesel trucks 634 00:29:58,880 --> 00:30:02,800 Speaker 5: and shipping, et cetera. Right, But eventually you reached a 635 00:30:02,840 --> 00:30:04,840 Speaker 5: stage where it's the same kind of thing as you're 636 00:30:04,840 --> 00:30:06,600 Speaker 5: seeing from the Golf export as you run in a 637 00:30:06,600 --> 00:30:08,520 Speaker 5: storage space, and all of a sudden, you can't produce 638 00:30:08,560 --> 00:30:11,280 Speaker 5: any more diesel, you can't put it anywhere. That begins 639 00:30:11,280 --> 00:30:14,120 Speaker 5: to overflow, your tanks need to cut runs. That's when 640 00:30:14,200 --> 00:30:17,480 Speaker 5: things get bad because then you're starting to lose gasoline supply, 641 00:30:17,520 --> 00:30:19,120 Speaker 5: You're starting to lose everything else as well, and all 642 00:30:19,160 --> 00:30:21,240 Speaker 5: of a sudden you're gonna get turned into an importer 643 00:30:21,800 --> 00:30:25,320 Speaker 5: of various fuels. Now there's also the issue that you 644 00:30:25,360 --> 00:30:29,240 Speaker 5: have a lot of trade between regions that like, maybe 645 00:30:29,280 --> 00:30:31,760 Speaker 5: you could put excess fuel out of the Gulf Coast 646 00:30:31,920 --> 00:30:33,400 Speaker 5: into the East Coast. 647 00:30:33,800 --> 00:30:35,960 Speaker 4: Ah. Well, then we get back to your favorite topic, 648 00:30:36,080 --> 00:30:36,880 Speaker 4: the Jones Act. 649 00:30:38,200 --> 00:30:40,600 Speaker 5: So I think there's a way that you could design 650 00:30:40,640 --> 00:30:45,520 Speaker 5: a very specific policy that was selective with certain fuels. 651 00:30:45,080 --> 00:30:45,800 Speaker 4: And everything else. 652 00:30:45,840 --> 00:30:47,760 Speaker 5: If this was a true, like if Trump wanted to 653 00:30:47,800 --> 00:30:50,560 Speaker 5: do this for months, then yeah, I expect them to 654 00:30:50,560 --> 00:30:52,040 Speaker 5: do something along these lines, and it's going to get 655 00:30:52,040 --> 00:30:52,720 Speaker 5: extremely messy. 656 00:30:52,760 --> 00:30:54,320 Speaker 4: I also don't know if they can kind of. 657 00:30:54,400 --> 00:30:58,360 Speaker 5: Stick handle the specifics of this industry and the way 658 00:30:58,360 --> 00:31:01,040 Speaker 5: that they would need to. But you could create a 659 00:31:01,040 --> 00:31:03,960 Speaker 5: scenario that the US basically cuts itself off from the 660 00:31:03,960 --> 00:31:06,120 Speaker 5: world and does so in a way that doesn't completely 661 00:31:06,160 --> 00:31:08,160 Speaker 5: just ory the interesty, let's say you still allow US 662 00:31:08,200 --> 00:31:10,760 Speaker 5: golf Coast deesel exports. But I think the other thing 663 00:31:10,800 --> 00:31:14,400 Speaker 5: here is that over time the system just continues to 664 00:31:14,440 --> 00:31:18,520 Speaker 5: break an erode, that all of those imports into pat 665 00:31:18,560 --> 00:31:21,640 Speaker 5: into the US East Coast, while those barrels will get 666 00:31:21,640 --> 00:31:24,640 Speaker 5: inside devised elsewhere. If you can't incentive like let's say 667 00:31:24,800 --> 00:31:27,440 Speaker 5: he goes full mix in Allah the nineteen seventies oil 668 00:31:27,440 --> 00:31:28,640 Speaker 5: shocks and all I do you have an export ban. 669 00:31:28,760 --> 00:31:31,000 Speaker 5: Let's see you have price caps or price fixing at 670 00:31:31,000 --> 00:31:33,280 Speaker 5: the pump, not outside the royal of possibility. With the 671 00:31:33,280 --> 00:31:36,680 Speaker 5: current administration, I think that is where again you short 672 00:31:36,720 --> 00:31:39,360 Speaker 5: circuit that mechanisms. I mentioned earlier that in the current 673 00:31:39,400 --> 00:31:43,000 Speaker 5: situation we likely in the United States, Canada where I'm 674 00:31:43,080 --> 00:31:45,680 Speaker 5: up right now, these countries likely will not run out 675 00:31:45,720 --> 00:31:46,200 Speaker 5: of fuel. 676 00:31:46,360 --> 00:31:47,880 Speaker 4: They will just get very, very expensive. 677 00:31:48,280 --> 00:31:51,920 Speaker 5: These policies that the White House could impose could create 678 00:31:51,920 --> 00:31:56,240 Speaker 5: a situation of outright scarcity and shortages in North America 679 00:31:56,560 --> 00:31:58,040 Speaker 5: in a way that we wouldn't be able to pay 680 00:31:58,040 --> 00:31:58,360 Speaker 5: to get. 681 00:31:58,280 --> 00:31:59,600 Speaker 4: Around them, because it's whole prooined. 682 00:31:59,720 --> 00:32:02,840 Speaker 5: So purpose is to avoid that pump price spike, But 683 00:32:03,000 --> 00:32:06,040 Speaker 5: in doing so, you would end up creating outright shortages instead. 684 00:32:07,040 --> 00:32:10,120 Speaker 2: Rory Johnston, it's been too long. I was gonna say 685 00:32:10,160 --> 00:32:12,400 Speaker 2: we should chat more often, but you know, I don't 686 00:32:12,400 --> 00:32:14,600 Speaker 2: want to chat again too soon because that would be 687 00:32:14,600 --> 00:32:17,160 Speaker 2: a very bad sign. But it's very possible that we 688 00:32:17,280 --> 00:32:19,240 Speaker 2: might be calling on you again. But thank you so 689 00:32:19,360 --> 00:32:21,080 Speaker 2: much for coming on novels. 690 00:32:21,160 --> 00:32:36,560 Speaker 4: That was great. Thanks for having me guys. Always a player, Tracy. 691 00:32:36,600 --> 00:32:39,640 Speaker 2: I really like talking to Rory. I thought that was great. 692 00:32:39,920 --> 00:32:42,160 Speaker 2: I think one of the interesting dynamics which I hadn't 693 00:32:42,160 --> 00:32:47,560 Speaker 2: fully appreciated is that spread between the products and the 694 00:32:47,600 --> 00:32:49,920 Speaker 2: price of crude. I mean that jet feud. I didn't 695 00:32:49,920 --> 00:32:53,200 Speaker 2: totally understand why the jet fuel market or you know, 696 00:32:53,360 --> 00:32:56,440 Speaker 2: had blown out quite so crazy, but it makes intuitive 697 00:32:56,520 --> 00:33:00,000 Speaker 2: sense that when there is such concern about the capacity 698 00:33:00,080 --> 00:33:02,600 Speaker 2: at all to get the input that they have to 699 00:33:02,680 --> 00:33:05,320 Speaker 2: already just sort of start slowing down their pace. 700 00:33:05,560 --> 00:33:07,480 Speaker 3: Let me just say I don't like it. I don't 701 00:33:07,560 --> 00:33:11,880 Speaker 3: like talking to Rory about how the hypothetical doom scenarios 702 00:33:11,920 --> 00:33:14,920 Speaker 3: that every oil analyst has been thinking about for decades 703 00:33:14,920 --> 00:33:18,160 Speaker 3: and decades are now coming to pass and turning into 704 00:33:18,240 --> 00:33:22,120 Speaker 3: actual reality. That's not very fun. But if we're going 705 00:33:22,160 --> 00:33:24,600 Speaker 3: to talk to one person about what's happening right now. 706 00:33:24,640 --> 00:33:27,640 Speaker 3: I think Rory is a very good person to talk to, 707 00:33:27,800 --> 00:33:32,200 Speaker 3: someone who is not naturally doomor ish in his thinking, 708 00:33:32,360 --> 00:33:37,040 Speaker 3: but is nevertheless quite concerned about the current state of affairs. 709 00:33:37,520 --> 00:33:41,200 Speaker 2: I think the risks from a sort of global stability 710 00:33:41,320 --> 00:33:45,520 Speaker 2: perspective are very bad when you start thinking about, Okay, 711 00:33:45,600 --> 00:33:50,200 Speaker 2: here is this war that the US and Israel launched, 712 00:33:50,720 --> 00:33:54,000 Speaker 2: and then the ramifications could be that a lot of 713 00:33:54,040 --> 00:33:57,920 Speaker 2: the world's poorer countries just get completely shut off or 714 00:33:57,960 --> 00:34:01,440 Speaker 2: have to deal with like crippling oil, lost sterity, the 715 00:34:01,920 --> 00:34:04,760 Speaker 2: fallout from that, again setting us out of the specific 716 00:34:04,840 --> 00:34:07,160 Speaker 2: market fallout, and how long it would take to get 717 00:34:07,160 --> 00:34:09,960 Speaker 2: the oil market back to normal. The sort of broader 718 00:34:10,080 --> 00:34:14,680 Speaker 2: fallout from that dynamic, specifically that everyone's oil prices go 719 00:34:14,800 --> 00:34:18,080 Speaker 2: up massively or get cut off, strike me as a 720 00:34:18,200 --> 00:34:19,440 Speaker 2: very disturbing potential. 721 00:34:19,719 --> 00:34:22,280 Speaker 3: Well, the other thing that's rather disturbing is this idea 722 00:34:22,320 --> 00:34:26,520 Speaker 3: of Russia as the new swing producer, right, and you 723 00:34:26,560 --> 00:34:30,319 Speaker 3: know Russia we all know has strategic goals. You can 724 00:34:30,400 --> 00:34:34,160 Speaker 3: imagine a scenario where it becomes very strategic and political 725 00:34:34,560 --> 00:34:38,360 Speaker 3: in its decisions of who gets oil where, so lots 726 00:34:38,360 --> 00:34:39,319 Speaker 3: to think about. 727 00:34:39,200 --> 00:34:42,160 Speaker 2: Lots of thing about yeah, because you especially if Europe 728 00:34:42,160 --> 00:34:46,160 Speaker 2: starts to soften a little bit on Russian energy. I 729 00:34:46,200 --> 00:34:49,440 Speaker 2: don't know all kinds of weird dominoes that I think 730 00:34:49,600 --> 00:34:52,760 Speaker 2: are going to be knocked over because of this, beyond 731 00:34:52,800 --> 00:34:54,320 Speaker 2: just the extraordinary price surge. 732 00:34:54,680 --> 00:34:57,399 Speaker 3: And meanwhile, lots and lots of episodes that we need 733 00:34:57,440 --> 00:35:01,040 Speaker 3: to record, so not just oil, we also want to 734 00:35:01,080 --> 00:35:04,239 Speaker 3: talk about fertilizer. And given the news from today, it 735 00:35:04,239 --> 00:35:06,239 Speaker 3: looks like we're going to have to do with jonzact 736 00:35:06,239 --> 00:35:06,920 Speaker 3: episode as well. 737 00:35:06,960 --> 00:35:09,600 Speaker 2: Jones, Zach spr We have a lot to come. 738 00:35:09,800 --> 00:35:11,440 Speaker 3: It's all coming, all right. Shall we leave it there 739 00:35:11,480 --> 00:35:11,759 Speaker 3: for now? 740 00:35:11,840 --> 00:35:12,520 Speaker 4: Let's leave it there. 741 00:35:12,680 --> 00:35:15,080 Speaker 3: This has been another episode of the Oud Lots podcast. 742 00:35:15,160 --> 00:35:18,040 Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Allaway. 743 00:35:18,160 --> 00:35:21,160 Speaker 2: And I'm Joe Wisenthal. You could follow me at the Stalwart. 744 00:35:21,280 --> 00:35:24,600 Speaker 2: Follow our guest Rory Johnston. He's at Rory Underscore Johnston. 745 00:35:24,880 --> 00:35:28,000 Speaker 2: Follow our producers Carmen Rodriguez at Kerman armand dash Ol 746 00:35:28,000 --> 00:35:31,120 Speaker 2: Bennett at Dashbot and Cale Brooks at Cale Brooks. And 747 00:35:31,200 --> 00:35:33,520 Speaker 2: for more Odd Lots content, go to Bloomberg dot com 748 00:35:33,520 --> 00:35:35,840 Speaker 2: slash odd Lots for the daily newsletter and all of 749 00:35:35,840 --> 00:35:38,160 Speaker 2: our episodes, and you can chat about all these topics 750 00:35:38,200 --> 00:35:41,920 Speaker 2: twenty four seven in our discord discord dot gg slash 751 00:35:41,960 --> 00:35:42,799 Speaker 2: od lots. 752 00:35:43,640 --> 00:35:46,120 Speaker 3: And if you enjoy odd Lots, if you like it 753 00:35:46,160 --> 00:35:49,200 Speaker 3: when we churn out these emergency episodes, then please leave 754 00:35:49,280 --> 00:35:52,720 Speaker 3: us a positive review on your favorite podcast platform. And remember, 755 00:35:52,719 --> 00:35:55,040 Speaker 3: if you are a Bloomberg subscriber, you can listen to 756 00:35:55,200 --> 00:35:58,080 Speaker 3: all of our episodes absolutely add free. All you need 757 00:35:58,120 --> 00:36:00,840 Speaker 3: to do is find the Bloomberg channel on Apple Podcasts 758 00:36:00,880 --> 00:36:03,600 Speaker 3: and follow the instructions there. Thanks for listening