WEBVTT - Presenting What Next TBD: Why Everyone is Freaking out About Private Credit 0:00:02.720 --> 0:00:15.800 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.120 --> 0:00:21.840 Hello and welcome to another episode of the Odd Lots podcast. 0:00:21.880 --> 0:00:24.160 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:24.760 --> 0:00:29.680 Tracy, It's April and ninth, nine, five am. There's a 0:00:29.720 --> 0:00:34.760 ceasefire ish, it's sort of there's been something announced that's 0:00:34.840 --> 0:00:38.320 called a ceasefire. There does not seem to actually have 0:00:38.360 --> 0:00:41.680 been much of a cessation of fire per se. Maybe 0:00:41.720 --> 0:00:45.360 it's slowed down a little bit. Some of the headlines 0:00:45.440 --> 0:00:49.200 this morning are about Israel continuing to strike hard in Lebanon, 0:00:49.720 --> 0:00:52.479 Iran saying that, well, if there's no ceasefire in Lebanon, 0:00:52.479 --> 0:00:56.520 there's no ceasefire at all. But you know, overall, at 0:00:56.600 --> 0:00:59.360 least as of right now. You know, the market, et cetera. 0:00:59.480 --> 0:01:03.000 We saw that huge drop in oil Tuesday night. You know, 0:01:03.040 --> 0:01:05.920 the market's still sort of still sort of buoyant, right, 0:01:06.040 --> 0:01:06.959 still sort of resilient. 0:01:07.160 --> 0:01:09.399 Well, I think the important thing for the purposes of 0:01:09.440 --> 0:01:12.240 this particular discussion is if you take a look at 0:01:12.240 --> 0:01:14.600 what's going on in the strait of war moves, it 0:01:14.680 --> 0:01:17.720 still seems to be shut more or less and shout 0:01:17.720 --> 0:01:21.039 out to the Bloomberg function. You can hor Moves go. 0:01:21.440 --> 0:01:23.520 You can see the number of ships that are going 0:01:23.720 --> 0:01:27.520 through that particular choke point, and I have two as 0:01:27.560 --> 0:01:30.959 of today, which is basically not likely to today. 0:01:31.200 --> 0:01:33.720 There was some there were some headlines about how maybe 0:01:33.840 --> 0:01:36.679 even in the good case, they would let through ten 0:01:36.720 --> 0:01:39.880 to fifteen, which is still sort of nothing compared to 0:01:40.000 --> 0:01:43.720 normal ship traffic, so like nothing's back to normal. 0:01:43.880 --> 0:01:45.880 I was gonna say to your point, I think the 0:01:45.959 --> 0:01:48.960 thing that's confusing everyone is we keep seeing these headlines 0:01:49.000 --> 0:01:53.440 about like a billion barrels lost of world supply or 0:01:53.640 --> 0:01:57.280 twenty percent of the world's oil supply now choked out 0:01:57.360 --> 0:02:00.240 because of the Horror Moves situation. And yet if you 0:02:00.240 --> 0:02:05.040 look at the oil price, you know WTI Brent definitely up, 0:02:05.360 --> 0:02:08.840 but they're not up as much as you might think 0:02:08.880 --> 0:02:10.120 given the scale of disruption. 0:02:10.240 --> 0:02:13.320 I think many people feel intuitively the price should be higher. 0:02:13.320 --> 0:02:17.720 And then of course there's the whole refined products situation, 0:02:17.840 --> 0:02:20.640 which is more extreme, and a lot of the prices 0:02:20.680 --> 0:02:24.359 that feel really extreme in general have happened in or 0:02:24.440 --> 0:02:26.880 we see it in East Asia, whether it's like Singapore 0:02:26.960 --> 0:02:30.120 jet fuel, et cetera. Or a lot of the headlines 0:02:30.160 --> 0:02:34.079 that you see about extreme rationting come from East Asia. 0:02:34.240 --> 0:02:36.800 I forget which country was. They were, like, you know, 0:02:36.800 --> 0:02:39.160 they're doing that classic thing of only drive to work 0:02:39.200 --> 0:02:42.320 if your license plate ends in an odd number on 0:02:42.360 --> 0:02:42.840 this day. 0:02:42.720 --> 0:02:44.200 Whatever, very nineteen seventies. 0:02:44.280 --> 0:02:46.520 Yeah, and we're seeing a lot of these types of headlines, 0:02:46.520 --> 0:02:49.760 some in Korea, some Thailand, et cetera. So it also 0:02:49.919 --> 0:02:53.560 then raises the question, you know, the straight and formosa 0:02:53.600 --> 0:02:56.280 is closed, maybe it'll be open, But does this change 0:02:56.760 --> 0:03:01.080 future energy trajectory in some way? Does this mean there's 0:03:01.160 --> 0:03:03.560 going to be more comfort with coal mining over the 0:03:03.560 --> 0:03:06.560 long term? Does this mean that economies are going to 0:03:06.600 --> 0:03:11.800 try to accelerate decarbonization efforts more intensely. Could this be 0:03:11.880 --> 0:03:15.120 a huge boon for the American leng industry, where we 0:03:15.160 --> 0:03:17.320 know we're building a lot of export terminals, et cetera. 0:03:17.560 --> 0:03:21.400 And if you know impair there's some sort of impairment 0:03:21.760 --> 0:03:26.040 to Katari llng than huge questions about even just setting 0:03:26.080 --> 0:03:28.320 aside market price it right the second or this week 0:03:29.560 --> 0:03:30.480 the future of energy. 0:03:30.600 --> 0:03:33.320 One thing about our current market moment is we are 0:03:33.360 --> 0:03:36.120 getting like a crash course in real time about the 0:03:36.160 --> 0:03:39.120 flow of energy throughout the world. And as we will 0:03:39.160 --> 0:03:42.160 see in this conversation, like it is still very much 0:03:42.360 --> 0:03:47.120 geographically constrained East versus West, and so as you say, 0:03:47.320 --> 0:03:49.400 the big question is whether or not the east kind 0:03:49.440 --> 0:03:52.480 of I don't know, scrambles even harder to adapt to this. 0:03:53.000 --> 0:03:55.240 Well, I'm very excited to say we do, in fact 0:03:55.320 --> 0:03:57.640 have the perfect guest, someone who knows about all this stuff, 0:03:57.720 --> 0:03:59.800 someone who's been on the podcast before, but we have 0:04:00.120 --> 0:04:03.120 talked to him in years, which is really sad because 0:04:03.120 --> 0:04:05.400 we really liked the guy and so very excited to 0:04:05.440 --> 0:04:08.520 welcome back onto the show. Alex Turnbull. He's an investor 0:04:08.560 --> 0:04:10.560 based in Singapore, but he's also a researcher with the 0:04:10.560 --> 0:04:16.240 Australia National University focused on energy security. Really knows the 0:04:16.400 --> 0:04:19.720 energy scene very well, spends his time thinking about the 0:04:19.720 --> 0:04:22.160 present and future of energy. So Alex, thank you so 0:04:22.240 --> 0:04:23.919 much for coming back on Outlaws. 0:04:24.279 --> 0:04:25.880 Thank you very much. It's great to be back on. 0:04:27.120 --> 0:04:32.400 Yeah, really really appreciate it. Talk about like right now, 0:04:32.680 --> 0:04:35.279 you know this phenomenon that we talk about where yeah, 0:04:35.320 --> 0:04:38.679 prices are up, but you know, by some measures, still 0:04:38.720 --> 0:04:43.000 within some sort of historical range, Whereas the headlines that 0:04:43.040 --> 0:04:45.159 you see about rationty, et cetera, like, well, this is 0:04:45.240 --> 0:04:49.000 extremely dire, et cetera. Give us your lay of the land, 0:04:49.000 --> 0:04:52.479 from the from the from the Asian perspective, from the 0:04:52.520 --> 0:04:55.120 perspective of East Asian country, it's like, how dire are 0:04:55.200 --> 0:04:58.320 things just like right now? Without that without that flow 0:04:58.839 --> 0:04:59.760 terrible Franklin. 0:05:00.200 --> 0:05:04.840 The challenge right now for Asia is that most of 0:05:04.880 --> 0:05:08.760 their crede supply does come from the Middle East, or 0:05:08.839 --> 0:05:13.320 there are some countries which do have some domestic production Malaysia, 0:05:13.680 --> 0:05:17.560 China of course, but broadly speaking, Asia is a massive 0:05:17.560 --> 0:05:20.480 crude import, and principally from the Middle East because it's 0:05:20.520 --> 0:05:24.360 the most proximate supply and generalize the chapest shipping distances 0:05:24.600 --> 0:05:28.680 and costs. So Asia is very heavily exposed right now 0:05:28.720 --> 0:05:33.320 and more acutely thinking about what the impacts might be, 0:05:33.440 --> 0:05:36.120 how they might want to preenser than the United States, 0:05:36.160 --> 0:05:38.159 of course, which produces a lot of oil but still 0:05:38.160 --> 0:05:41.640 needs Middle East in grades for blending and refining. Also Europe, 0:05:41.640 --> 0:05:44.400 which has access through its quite readily. 0:05:46.040 --> 0:05:49.599 How much do the spot prices actually matter at this 0:05:49.720 --> 0:05:51.400 moment in time, because you know, you can look up 0:05:51.440 --> 0:05:54.599 something like Dubaioman or some type of oil that you 0:05:54.600 --> 0:05:57.599 would assume would be maybe flowing into East Asia, and 0:05:57.640 --> 0:05:59.560 you can look at the spot price, but like if 0:05:59.560 --> 0:06:03.520 it's not actually moving, does that like moving out of 0:06:03.560 --> 0:06:06.479 the Strait of War, moves into Asia? Does that mean anything? 0:06:07.200 --> 0:06:09.960 It does certainly for some ride So for Amani Crode 0:06:10.000 --> 0:06:12.400 can still be loaded and is being loaded those a 0:06:12.480 --> 0:06:17.320 real price is prompt Brent, there's a and those sorts 0:06:17.360 --> 0:06:21.200 of trades are real. So you're often saying even for 0:06:21.279 --> 0:06:25.520 loadings from Yandu and Saudi Arabia OSPs, which cause you know, 0:06:26.040 --> 0:06:29.719 indications of price are anywhere from twenty to twenty five 0:06:29.760 --> 0:06:32.880 dollars above whatever the prevailing bread contract is. 0:06:33.720 --> 0:06:37.479 So in terms of like the knock on effects on 0:06:37.520 --> 0:06:40.400 the economy mentioned some of the rational thing. Okay, yes, 0:06:40.480 --> 0:06:44.480 this is very they're highly exposed to it. What is 0:06:44.920 --> 0:06:49.680 it hitting now? Is the economic destruction already taking place? 0:06:49.839 --> 0:06:52.120 Like talk to us about like just sort of like 0:06:52.560 --> 0:06:55.760 I guess on the ground figuratively and literally, what are 0:06:55.760 --> 0:06:57.279 some of the ripple effects that we're seeing. 0:06:58.279 --> 0:07:03.160 You're certainly saying aious constraints on consumption where they don't 0:07:03.160 --> 0:07:07.400 really have a lot of refining capacity, and where there is, 0:07:07.839 --> 0:07:10.720 they just don't have large amounts of crude story. So 0:07:11.200 --> 0:07:14.720 places like the Philippines and Vietnam are already under some 0:07:14.880 --> 0:07:18.200 significant stress. A lot of it is also driven by 0:07:18.200 --> 0:07:19.840 the factors. It's kind of a question of whether you 0:07:19.840 --> 0:07:22.800 can get credit lines to be able to pay these prices. 0:07:23.360 --> 0:07:27.400 And ultimately the decision of the refineries is if they 0:07:27.600 --> 0:07:30.760 don't have inputs, they have to shut the refinery down, 0:07:30.800 --> 0:07:34.840 which incurs a large amount of fixed costs and downtime 0:07:34.920 --> 0:07:38.040 and so forth. So a lot of these players are 0:07:38.080 --> 0:07:40.200 kind of living hand in mouth and trying to get 0:07:40.200 --> 0:07:42.320 whatever they can to stay open as long as they can. 0:07:42.800 --> 0:07:45.920 So that's how you have this extreme willingness to pay 0:07:46.000 --> 0:07:49.440 for prompt cargoes in order to keep these assets operating 0:07:49.480 --> 0:07:51.800 and running. But then you know the future's cove is 0:07:51.840 --> 0:07:55.000 about thirty sixty days, and that's a long time in 0:07:55.440 --> 0:08:00.400 the current febrile context where you could get resolution or not. 0:08:01.120 --> 0:08:04.480 And so that that disconnector is going to remain. I think, 0:08:04.520 --> 0:08:06.679 so long as there is no sense of a clear 0:08:06.720 --> 0:08:07.560 path here. 0:08:08.400 --> 0:08:11.840 Who's not getting energy? Because all right, if there are 0:08:11.880 --> 0:08:16.200 some entities that are almost going to be completely priced 0:08:16.200 --> 0:08:18.760 and sensitive, they have to keep the lights on, they 0:08:19.000 --> 0:08:20.760 they're going to just pay whatever. So you get these 0:08:20.840 --> 0:08:25.280 huge short term spot prises. But volume is volume, and 0:08:25.320 --> 0:08:27.760 so who is actually being forced to turn off the 0:08:27.840 --> 0:08:31.320 lights or not run a refinery or whatever because they're 0:08:31.320 --> 0:08:33.480 getting out bid If there are fewer molecules, there are 0:08:33.480 --> 0:08:34.920 fewer molecules. 0:08:34.679 --> 0:08:39.960 Yeah, I mean certainly less high income countries in Asia. 0:08:40.400 --> 0:08:42.920 You'll start to see quite an acute crunch in the Philippines. 0:08:42.960 --> 0:08:46.439 So they've recently secured some cargoes from China on one 0:08:46.440 --> 0:08:50.600 off basis, some Vietnam the same. You know, places like 0:08:50.600 --> 0:08:53.880 the Pacific Islands, like they're in a not very good place. 0:08:54.440 --> 0:08:58.640 So it's already starting to begin the demand destruction starting 0:08:59.480 --> 0:09:02.080 mostly of course, mostly buy income. 0:09:03.600 --> 0:09:06.240 So you mentioned refineries there, and one of the headlines 0:09:06.280 --> 0:09:10.000 that's come up recently is Asian refining margins slip into 0:09:10.280 --> 0:09:13.200 negative territory, which would seem like a bad thing if 0:09:13.200 --> 0:09:15.280 you're a refiner. And I take the point that you 0:09:15.360 --> 0:09:18.360 need to keep these assets going because it's hard to 0:09:18.520 --> 0:09:21.400 shut them down and then restart them again. But if 0:09:21.440 --> 0:09:25.520 you're not making any money, how long are these refiners 0:09:25.559 --> 0:09:26.720 actually going to keep going for? 0:09:28.000 --> 0:09:32.959 Well, for some Chinese tape hod refiners, just smaller private ones. 0:09:34.920 --> 0:09:38.880 They live in a different political slash economic context and 0:09:39.480 --> 0:09:42.120 as that's told to stay on, they will. You know, 0:09:42.120 --> 0:09:44.360 it depends on which In many of these countries you 0:09:44.400 --> 0:09:48.640 don't have purely market priced fuels, So whether that's Vietnam 0:09:48.840 --> 0:09:52.360 or China. In places where you have market pricing pass 0:09:52.320 --> 0:09:55.959 through like Australia, the price of fuel is getting very 0:09:55.960 --> 0:09:56.719 expensive in date. 0:09:57.200 --> 0:10:01.280 So in those situations basically where Tracy mentioned, a refiner 0:10:01.360 --> 0:10:05.040 might be actually operating at negative Mergin. That's in an 0:10:05.160 --> 0:10:09.760 environment in which the retail price of fuel is not liberalized. 0:10:09.800 --> 0:10:12.199 There's a set the government sets the price of fuel 0:10:12.240 --> 0:10:15.480 or sets the band or something like that, and the 0:10:15.520 --> 0:10:18.160 refiners just have to keep operating until the next time 0:10:18.240 --> 0:10:21.680 that band has changed. Yes, okay, got it. So what 0:10:21.720 --> 0:10:25.240 are you seeing Let's talk about you know right now, 0:10:25.520 --> 0:10:28.720 is this is there? What's happening with US energy? Is 0:10:28.760 --> 0:10:32.000 it all being taken up by Europe as you'r is 0:10:32.080 --> 0:10:35.040 Asia trying to get in on the action or bidding 0:10:35.280 --> 0:10:38.600 for cargoes like what's happening with American flows. 0:10:38.920 --> 0:10:42.840 American plays ago in Asia quite sharply right now. So 0:10:43.280 --> 0:10:49.680 Asian prices spot in the JackAM futures about European TTF 0:10:49.720 --> 0:10:54.000 or title transfer facility futures for the next period. That 0:10:54.040 --> 0:10:56.920 could change quickly, but at the moment, Asia has a 0:10:57.080 --> 0:11:00.640 much higher urgency and willingness to pay as like into summer, 0:11:01.240 --> 0:11:04.640 higher powered amount from cooling, air conditioning, and also just 0:11:04.679 --> 0:11:08.880 a much more acute dependence upon energy in certain countries. 0:11:10.080 --> 0:11:13.000 In Europe, you've so you're going into summer, you have 0:11:13.120 --> 0:11:17.520 this solar wind, and it's not quite panic stations just yet. 0:11:18.080 --> 0:11:21.199 So I think Europe will be a little bit more 0:11:21.880 --> 0:11:25.480 slow to fill its storage, but then by just goes 0:11:25.520 --> 0:11:28.760 on till say June or July. Then that that's when 0:11:28.800 --> 0:11:30.520 the real panic was set up. 0:11:46.360 --> 0:11:46.880 For Asia. 0:11:47.000 --> 0:11:49.760 How much of a role does Russian oil play right 0:11:49.760 --> 0:11:52.680 now in terms of replacing last Middle Eastern supply. 0:11:53.600 --> 0:11:55.320 I mean, most of the Russian crew has already been 0:11:55.360 --> 0:11:57.840 sold anyway, and it has been sold very heavily into 0:11:57.920 --> 0:12:03.560 Chinese refineries and Tipa, so it's not like it some 0:12:03.640 --> 0:12:06.240 of them was sitting offshore when it was going through 0:12:06.280 --> 0:12:10.040 a period of more robust US sanctions. The offshore barrels 0:12:10.040 --> 0:12:12.840 of oil and water has been dropping very sharply as 0:12:12.880 --> 0:12:17.240 all that crude has been absorbed into various places India, China, 0:12:17.360 --> 0:12:20.839 like I said, so, yeah, so I think I think 0:12:20.840 --> 0:12:23.120 that's sort of that that has provided something of a 0:12:23.160 --> 0:12:27.240 buffer to this shock because there was this backup of 0:12:27.320 --> 0:12:30.080 Russian crew that couldn't know. I'm was quite sure whether 0:12:30.080 --> 0:12:31.679 they could pay for it without a did sanction by 0:12:31.679 --> 0:12:34.640 the US. But of course that's melted a way in 0:12:34.760 --> 0:12:35.640 the current context. 0:12:36.840 --> 0:12:41.960 You mentioned that the Philippines has imported some gas from China, 0:12:42.480 --> 0:12:46.200 and I'm curious, like, what has has China. We know 0:12:46.240 --> 0:12:49.240 they've been a big accumulator over the years, generally of 0:12:49.400 --> 0:12:52.800 natural resources, and they have strategic stockpiles and so forth. 0:12:53.120 --> 0:12:55.640 But right now, what are they doing and are they 0:12:56.000 --> 0:12:59.480 trying to play some role in stabilizing or easing to 0:12:59.520 --> 0:13:00.840 crunch for a region overall? 0:13:01.760 --> 0:13:05.480 I think they've been very strategic. Then they're not. Certainly 0:13:05.520 --> 0:13:09.000 there's more or less control on exports of oil products 0:13:09.040 --> 0:13:11.600 right now, which is not very helpful for the region 0:13:12.000 --> 0:13:15.760 because they have a time been large exports. They are 0:13:15.760 --> 0:13:20.040 clearly doing this in a very targeted fashion, and I 0:13:20.040 --> 0:13:23.200 would assume there's other considerations behind that. 0:13:24.800 --> 0:13:27.559 Oh wait, say more, Well. 0:13:28.400 --> 0:13:31.280 For example, China has territorial distributes with the Philippines and 0:13:31.360 --> 0:13:34.240 Vietnam and the South China Sea, and they've now got 0:13:34.240 --> 0:13:36.520 something oh so interesting. 0:13:36.720 --> 0:13:37.800 Okay, that makes sense. 0:13:38.040 --> 0:13:41.800 Yeah, oil is geopolitical tool. Is a tail as old as. 0:13:42.080 --> 0:13:42.600 Is all as time. 0:13:42.679 --> 0:13:44.680 I was gonna say time, but I guess as old 0:13:44.720 --> 0:13:47.240 as what two hundred years or something like that. Okay. 0:13:47.960 --> 0:13:51.120 So we were talking about the potential for an energy 0:13:51.160 --> 0:13:55.480 crisis to actually hasten decarbonization efforts in Asia, and this 0:13:55.559 --> 0:13:58.080 is something that came up before on an episode we 0:13:58.120 --> 0:14:03.520 did on China's teapot refineries. Are you seeing rumblings of 0:14:03.559 --> 0:14:06.200 that at the moment or are people still in sort 0:14:06.240 --> 0:14:07.640 of weight and see mode. 0:14:08.280 --> 0:14:11.320 Ah No, there's definitely been a notable pickup in certain 0:14:11.360 --> 0:14:14.360 areas where there was already a bit of momentum. So in Japan, 0:14:14.960 --> 0:14:19.200 they have been undertaking a number of nuclear restarts. They 0:14:19.680 --> 0:14:24.360 were moving very tentatively as the public got behind nuclear 0:14:24.360 --> 0:14:28.080 and the politics became less challenging. That that is all 0:14:28.240 --> 0:14:33.600 apparently accelerating now, so Japan will push very hard on 0:14:33.680 --> 0:14:37.000 nuclear restarts, and more importantly, the public polling is really 0:14:37.000 --> 0:14:39.080 strong for it, so there's not a lot of political risk. 0:14:39.600 --> 0:14:43.240 And of course Takehi had a massive election win, so 0:14:43.280 --> 0:14:45.840 she's in favor of the publics behind it, and there's 0:14:45.880 --> 0:14:48.960 a matter of necessity now, so I think that's something 0:14:49.000 --> 0:14:52.000 one could assume is only going to move faster. And 0:14:52.040 --> 0:14:54.440 then in Korea there's also more of a push for 0:14:54.520 --> 0:14:59.280 nuclear restarts, so that's that's moving quickly. China is doing 0:14:59.280 --> 0:15:01.960 some very pointed stuff to try to reduce sell and 0:15:02.040 --> 0:15:07.440 G burns and use in chemicals. It's tricky and tricky 0:15:07.480 --> 0:15:10.040 to if you've got a plastics plant, that's kind of 0:15:10.040 --> 0:15:12.480 hard to do, but they're having a red hot go 0:15:12.560 --> 0:15:15.360 at it. And similarly, you're also starting to see a 0:15:15.440 --> 0:15:19.480 staggering acceleration in IV adoption. If you do calls to 0:15:19.760 --> 0:15:23.440 auto dealers around Asia and ask them how much time 0:15:23.720 --> 0:15:26.640 electric vehicles stay on the lots down to single days, 0:15:27.000 --> 0:15:30.400 and many of them are back or now, So if 0:15:30.480 --> 0:15:31.720 there probably wasn't, maybe. 0:15:31.760 --> 0:15:34.040 What you're doing are you calling up the car lots 0:15:34.040 --> 0:15:34.680 and asking them this? 0:15:35.200 --> 0:15:38.320 Yeah, of course, wait, say more about this and what 0:15:38.360 --> 0:15:41.320 would they have said? This is actually this is this 0:15:41.360 --> 0:15:44.080 is not this is new. Uh, this is new is 0:15:44.200 --> 0:15:47.160 underground information. But talk about this, like, what would they 0:15:47.160 --> 0:15:49.560 have said a month ago? What are the type of 0:15:50.000 --> 0:15:52.200 dealers you're talking to? What would they have said? A 0:15:52.200 --> 0:15:52.600 month ago. 0:15:52.640 --> 0:15:56.880 And now, I mean, you know in January when there 0:15:56.960 --> 0:16:01.400 was yeah, you would say b white cause, for example, 0:16:01.600 --> 0:16:04.840 a couple of deals in Australia, Singapore or the pots 0:16:04.880 --> 0:16:07.600 of Asia that would be on the lot for twenty 0:16:07.600 --> 0:16:10.680 five plus days. You know, the inventory turns were kind 0:16:10.680 --> 0:16:13.360 of a bit slow and the market didn't look kind 0:16:13.360 --> 0:16:16.680 of glotted. We're down to single digit days in most 0:16:16.680 --> 0:16:20.480 places now. So anything China can't produce out of the 0:16:20.520 --> 0:16:23.400 review sector, I think we'll get solved this year. That's 0:16:23.440 --> 0:16:25.680 just really the constraint is on the supply side, not 0:16:25.760 --> 0:16:26.440 of the demand side. 0:16:26.480 --> 0:16:30.160 Now, I don't know the degree of granularity that you 0:16:30.160 --> 0:16:33.120 pay attention to American politics. Are you familiar with you 0:16:33.200 --> 0:16:37.320 know who Thomas Massey is? Is this name Ringlebell? Oh yeah, yeah, 0:16:38.200 --> 0:16:41.520 he's a Kentucky from congressman from Kentucky who drives a 0:16:41.600 --> 0:16:45.080 tesla with a bumper sticker that said this this this 0:16:45.160 --> 0:16:48.680 tesla is powered by Kentucky cole. So he's like, you know, 0:16:48.760 --> 0:16:51.240 he's a politician from Kentucky or public Aga is very 0:16:51.280 --> 0:16:53.680 pro called, but he's also a pro testla. So is 0:16:53.680 --> 0:16:57.120 his coll powered tesla? Is that basically the sort of 0:16:57.600 --> 0:17:02.120 near or medium term future of Asia, which is like okay, 0:17:02.200 --> 0:17:06.440 ellenng is impaired BYD's are flying off the lot, and 0:17:06.520 --> 0:17:08.959 so essentially we have a lot of like de facto 0:17:09.040 --> 0:17:12.280 col powered tesla's driving around or sorry, col powered BYD's 0:17:12.320 --> 0:17:13.400 flying around to. 0:17:13.320 --> 0:17:15.920 A certain extent, yeah, I mean it's also there's also 0:17:16.160 --> 0:17:20.480 very hard analytic math behind this, in the sense that 0:17:20.520 --> 0:17:24.040 there are the streets of holl moves do not aside 0:17:24.040 --> 0:17:26.200 from the East West pipeline which looks like it got 0:17:26.200 --> 0:17:28.560 pretty badly hit today over the last twenty four to 0:17:28.560 --> 0:17:31.800 forty eight hours, there is no way for that oil 0:17:31.880 --> 0:17:34.520 to make its way out otherwise. So this is very 0:17:34.520 --> 0:17:37.520 different to twenty twenty two, where you have sanctions, you 0:17:37.520 --> 0:17:39.919 have this and that, but the spice will flow if 0:17:39.920 --> 0:17:43.719 it can physically move or be moved by pipelines, by 0:17:43.800 --> 0:17:45.679 rail and what have you. And so in twenty twenty 0:17:45.680 --> 0:17:48.280 two I was pretty sanguine about the impacts on the 0:17:48.280 --> 0:17:51.000 oil market because russ has got a lot of pipeline 0:17:51.000 --> 0:17:57.439 capacity to China through Kazakhstan and there was clearly not 0:17:57.640 --> 0:18:01.760 really the appetite to do full on shadow fleet sanctions 0:18:02.440 --> 0:18:04.400 that will be requited to slow down in this case 0:18:04.440 --> 0:18:06.720 you actually just can't get it out. That's all there 0:18:06.840 --> 0:18:08.919 is to it. And so if you look at that 0:18:09.000 --> 0:18:13.080 vulnerability with oil where twenty plus percent of the market 0:18:13.119 --> 0:18:15.639 comes to the Middle East an LNG, which is about 0:18:15.640 --> 0:18:18.040 the same numbers. And then if you look at say 0:18:18.040 --> 0:18:21.080 a big network flow graph model of global coal market 0:18:21.119 --> 0:18:26.520 which I've done, the coal is not really dependent upon checkpoints. 0:18:27.400 --> 0:18:31.320 The biggest producers are places like you know, first of all, 0:18:31.320 --> 0:18:33.360 trying to produce the enormous amount domestically it's the world, 0:18:33.359 --> 0:18:37.639 it's the largest producer. India does too, Australia, South Africa. 0:18:37.760 --> 0:18:39.840 These are all places with access to open ocean, no 0:18:40.280 --> 0:18:43.520 quirky straits, and so you don't really have to worry 0:18:43.600 --> 0:18:47.000 too much about whether some geopolitical event takes out coal. 0:18:47.480 --> 0:18:50.040 That the most reliable option, of course is just producing 0:18:50.040 --> 0:18:55.320 stuff in country, whether that's solo when batteries nuclear, but 0:18:55.560 --> 0:18:58.399 in a pinch, and currently I think coal is going 0:18:58.440 --> 0:18:59.880 to have a bit of a comeback for that reason. 0:19:00.080 --> 0:19:04.679 Line, yeah, sending coal aside for a second, when you 0:19:04.680 --> 0:19:08.040 look at alternate sources of energy, do you have like 0:19:09.119 --> 0:19:11.120 I don't want to say a personal favorite, but which 0:19:11.119 --> 0:19:13.280 one which one of them? Do you think comes out 0:19:13.320 --> 0:19:16.160 on top in the sort of medium to longer term. 0:19:16.280 --> 0:19:18.880 From this particular situation, it's like. 0:19:18.880 --> 0:19:23.200 Asking someone, well, you know what one should I grow? What? 0:19:23.400 --> 0:19:25.800 What what should I plant? I'm like, well, okay, where 0:19:25.840 --> 0:19:29.240 are you? So if you're anywhere close to the equator, 0:19:29.760 --> 0:19:32.320 we'll have a good solibaries or a solaries crisy shape. 0:19:32.760 --> 0:19:35.400 And if you've got to year round batteries are also 0:19:35.440 --> 0:19:38.320 pretty cheap, because that's that's how to be. If you're 0:19:38.560 --> 0:19:41.760 somewhere in the Baltic or something, then it's wind right. 0:19:42.119 --> 0:19:44.960 So I think the appeal with sola, which is that 0:19:45.040 --> 0:19:47.959 you can roll it up very quickly, particularly with households. 0:19:48.400 --> 0:19:50.680 And it's interesting you're already starting to say the impacts 0:19:50.680 --> 0:19:56.320 of Australia's government pushing residential batteries, and that is that 0:19:56.920 --> 0:20:00.240 the interday spreads in power in Australia are very subject 0:20:00.359 --> 0:20:04.639 and the gas five generators, I'm not really pricing the 0:20:04.680 --> 0:20:07.040 market anywhere near as often as they used to, and 0:20:07.080 --> 0:20:09.639 gas burns have actually collapsed, as they have in California. 0:20:10.560 --> 0:20:15.160 So if you want to kind of decouple from gas prices, 0:20:15.760 --> 0:20:19.560 batteries plus storage, solar plus storage is a very quick 0:20:19.600 --> 0:20:22.040 fix and can be rolled out very quickly, and it 0:20:22.040 --> 0:20:24.920 seems to be working very well in Australia that the 0:20:25.000 --> 0:20:28.200 price impact of this shock is fastly less than twenty 0:20:28.240 --> 0:20:29.080 twenty two already. 0:20:30.280 --> 0:20:33.840 This is really interesting talk about that spread. So to 0:20:33.880 --> 0:20:38.119 some extent, would it be fair to say that a 0:20:38.240 --> 0:20:42.800 proxy or a gauge of how well solar plus batteries 0:20:43.000 --> 0:20:47.399 is working or affecting a market is not in lower 0:20:47.440 --> 0:20:52.399 prices per se, but in a diminishing spread between the 0:20:52.480 --> 0:20:55.119 highest and the lowest price of the day, and that 0:20:55.280 --> 0:20:57.840 you have this like growing You know that it's a 0:20:57.880 --> 0:21:01.119 sign of a sort of like pure power stability. 0:21:01.280 --> 0:21:03.440 Yeah, I mean one thing in power Marx is the 0:21:03.520 --> 0:21:06.400 spark spread. So what is the what is the cost 0:21:06.440 --> 0:21:09.000 to get out of bed for a gas fired power plant? 0:21:09.040 --> 0:21:11.360 So you take the heat rate times whatever the gas 0:21:11.440 --> 0:21:14.320 price is and you work out how many hours a 0:21:14.400 --> 0:21:17.639 day over a week are effectively priced by gas and 0:21:17.720 --> 0:21:20.159 what happens. What happened in Australia was we had a 0:21:20.200 --> 0:21:23.560 lot of solo and not much storage, and still the 0:21:23.600 --> 0:21:26.640 peaks were still very expensive because that was the gas 0:21:26.680 --> 0:21:29.040 plants knew they could set the price. What's happened with 0:21:29.040 --> 0:21:32.760 this proliferation of storage is that gas no longer reliably 0:21:32.800 --> 0:21:37.040 sets the price in those hours and sickly in Australia, 0:21:37.080 --> 0:21:41.440 where it's often somewhat oligobalistic market structure, having a lot 0:21:41.440 --> 0:21:45.760 of residential batteries tied together in a mesh network which 0:21:45.760 --> 0:21:50.560 then bids into the market is really crushing those peaky 0:21:50.640 --> 0:21:54.000 times of the day and that has a disproportionate impact 0:21:54.000 --> 0:21:57.040 on average daily prices. The problem in places like the 0:21:57.119 --> 0:22:01.200 UK is there's a lot of renewables, really nice storage, 0:22:01.240 --> 0:22:02.959 so they're not getting much benefit out it's because they 0:22:02.960 --> 0:22:04.600 still get priced on the margin by gas. 0:22:05.080 --> 0:22:07.679 Is it just because they haven't made they have to 0:22:07.720 --> 0:22:10.639 bite the bullet and buy a lot of batteries from China? 0:22:10.720 --> 0:22:13.840 Or like, what is why is there the lack of 0:22:14.280 --> 0:22:16.400 storage to complement the renewables in the. 0:22:16.359 --> 0:22:19.719 UK marketstruction design that they're fixing this right now. I'm 0:22:19.760 --> 0:22:21.960 sure they'll be in a very different place in two years, 0:22:22.400 --> 0:22:27.000 but it was something of another side, I would say. So. 0:22:27.240 --> 0:22:29.880 One of the things that stood out from a previous 0:22:29.880 --> 0:22:32.760