WEBVTT - Surveillance: Unresolved Issues with Musk (Podcast)

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along

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<v Speaker 1>with Jonathan Ferrell and Lisa Brawmowitz Jailey. We bring you

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<v Speaker 1>insight from the best and economics, finance, investment, and international relations.

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<v Speaker 1>Find Bloomberg Surveillance on Apple Podcast, SoundCloud, Bloomberg dot Com,

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<v Speaker 1>and of course on the Bloomberg Terminal. It's nine oh

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<v Speaker 1>four on Wall Street Life in the Bloomberg Inactive Broker Studio.

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<v Speaker 1>We're now going to bring you a special interview with

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<v Speaker 1>the Elon Musk. The Tesla CEO talked about the quote

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<v Speaker 1>unquote unresolved matters in his pursuit of Twitter Must spoke

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<v Speaker 1>with The Bloomberg's editor in chief, John Micklethwaite from the

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<v Speaker 1>Cutter Economic Form in Doha, powered by Bloomberg. They're still,

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<v Speaker 1>um a few unresolved matters you've you've probably read about

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<v Speaker 1>the questions who have the number of fake and spam

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<v Speaker 1>users on the system is less than five cent, as

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<v Speaker 1>Twitter claims, which I think is probably not most people's

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<v Speaker 1>experience on when using Twitter. Um So we're still a

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<v Speaker 1>waiting resolution on that matter. Um and that that is

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<v Speaker 1>a very significant matter. Um So we're waiting resolution on

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<v Speaker 1>that UM. And then of course there is the question

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<v Speaker 1>of will the dead portion of the round come together?

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<v Speaker 1>And then will the shareholders vote in favor? So I

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<v Speaker 1>think those are the three things that UM standard the

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<v Speaker 1>you know, if that needs to be resolved before the

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<v Speaker 1>transaction can complete. What about the general state of the economy?

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<v Speaker 1>Does that weigh on you when you think about this?

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<v Speaker 1>I mean, you just described it. You have a super

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<v Speaker 1>bad feeling about the economy. Are you still in that position?

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<v Speaker 1>I just said to you earlier Joe Biden has just

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<v Speaker 1>come out and said that a recession in America is

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<v Speaker 1>not inevitable. How do you feel about the economy? I

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<v Speaker 1>think recessionally is inevitable at some point. As to whether

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<v Speaker 1>there is a reception in the near term, I think

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<v Speaker 1>that is more likely than not. Certainly isn't. It's not

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<v Speaker 1>a certainty, but it appears more likely than not. And

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<v Speaker 1>what do you think? I'm I'm I'm with you. I

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<v Speaker 1>agree with you, and I think it's more likely. Can

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<v Speaker 1>I ask you one particular thing to do with the

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<v Speaker 1>Twitter bid, which is you know you are one of

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<v Speaker 1>the biggest and fastest growing investors in China. Tesla. You've

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<v Speaker 1>talked about it being a third of your sales going forward.

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<v Speaker 1>You're not buying Twitter the kind of public forum for

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<v Speaker 1>free speech. The Chinese historically don't tend to be very

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<v Speaker 1>enthusiastic about free speech. Are you worried about whether you

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<v Speaker 1>can keep those two particular horses running? Is buying Twitter

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<v Speaker 1>going to get you in trouble with the needs? Twitter

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<v Speaker 1>does not operate in China, so um, And I think

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<v Speaker 1>China does not attempt to interview interfere with the free

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<v Speaker 1>speech of the of the press in the US as

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<v Speaker 1>far as I know, because I assume you're not under

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<v Speaker 1>pressure to ed Bloomberg to uh from China, So I

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<v Speaker 1>think there's UM. I don't think it's gonna be an issue.

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<v Speaker 1>And in terms generally of that issue of freedom of

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<v Speaker 1>speech and Twitter, you've talked about Twitter being making even

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<v Speaker 1>freer and letting more people onto it. Is there a

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<v Speaker 1>limit at all to to who you think should be

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<v Speaker 1>allowed onto Twitter? My aspiration for Twitter, or in general,

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<v Speaker 1>for the digital town square, would be that it is

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<v Speaker 1>as inclusive in the broader sense of the word as possible.

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<v Speaker 1>Um that it is. It is appealing a system to use. UM.

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<v Speaker 1>So I mean, ideally i'd like to get like of uh,

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<v Speaker 1>that's in North America and perhaps I don't know half

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<v Speaker 1>the world or something ultimately on on Twitter in one

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<v Speaker 1>form or another. And that needs what that means. It

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<v Speaker 1>must be something that is appealing to people. It obviously

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<v Speaker 1>cannot be a place where they feel uncomfortable or harassed,

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<v Speaker 1>um or they'll simply not use it all right. That

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<v Speaker 1>was Tesla Ceo Elon Musk sitting down with Bloomberg's editor

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<v Speaker 1>in chief John michelth Waite from the Cutter Economic Form

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<v Speaker 1>in Doha, powered by Bloomberg. We're gonna rip up the

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<v Speaker 1>script here with Prusia shrim she's US economist at Barclays,

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<v Speaker 1>but obviously with department from LS is always dollar in

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<v Speaker 1>foreign exchange based is a litmus paper of the system.

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<v Speaker 1>Let's go from weekend out to strong dollar. How does

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<v Speaker 1>a resilient dollar or strong dollar change the degrees of

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<v Speaker 1>freedom that Jerome Powell has well, thanks for having me, Tom.

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<v Speaker 1>A strong dollar is definitely something that is favorable for

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<v Speaker 1>import prices. Um. It's it should help in the long

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<v Speaker 1>term to try and relieve some pressure at least from

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<v Speaker 1>important inflation. So the President Trump would say, we need

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<v Speaker 1>to bring the dollar down to spur exports. We haven't

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<v Speaker 1>heard that from President By at least so far. I mean,

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<v Speaker 1>give me the exports side of that discussion. Well, um,

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<v Speaker 1>it's it's true that a stronger dollar would be um

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<v Speaker 1>slightly unfavorable for net exports, But I think the focus

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<v Speaker 1>right now is on taming inflation pressure. So from that

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<v Speaker 1>point of view, we think a stronger dollar absolutely absolutely.

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<v Speaker 1>But put going to yet your Danny's point, there is

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<v Speaker 1>no vulcer. They're not going to raise rates into a recession.

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<v Speaker 1>They don't want to trigger a recession. Is that an

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<v Speaker 1>accurate characterization and of what you expect from the central bank? Well, absolutely,

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<v Speaker 1>I think no central bank wants to engineer the recession.

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<v Speaker 1>But from what we saw in their summary of economic projections,

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<v Speaker 1>from what we heard from Chair Powell, I think they

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<v Speaker 1>are acutely aware that there is likely to be some

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<v Speaker 1>pain to the economy if they wish to bring price

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<v Speaker 1>pressures under control. And I think what they showed us

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<v Speaker 1>through the seventy five basis point rate hike in the

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<v Speaker 1>June f O m C and what their hawkish dot

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<v Speaker 1>plot shows us is they're willing to sort of push

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<v Speaker 1>the limit a little over here to try and and

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<v Speaker 1>get expeditiously to neutral. Uh. And even if that comes

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<v Speaker 1>at the cost of slightly lower growth and slightly more unemployment,

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<v Speaker 1>I think that's a chance that they're willing to take

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<v Speaker 1>at this point in all right, So if you go

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<v Speaker 1>there to the dark plot and the projections, we have

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<v Speaker 1>to also go to what some people have called fantasy land,

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<v Speaker 1>this idea of unemployment remaining fairly muted into the future,

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<v Speaker 1>even though we do have this hark ish shelt What

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<v Speaker 1>is the breaking point for the reserve for policymakers more

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<v Speaker 1>broadly in terms of the unemployment rate at a time

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<v Speaker 1>when you've got the likes of Larry Summers projecting five

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<v Speaker 1>percent unemployment for five years needed to bring inflation down. Yeah,

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<v Speaker 1>it's it's I think they are in a tough spot.

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<v Speaker 1>Um that the trade off between you know, achieving price

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<v Speaker 1>stability as well as full employment that's becoming increasingly challenging. Um.

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<v Speaker 1>And I think we are in a tough inflation environment. UM.

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<v Speaker 1>I do agree to your point that, you know, the

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<v Speaker 1>projections that they've laid out in in their summary over

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<v Speaker 1>there do seem a little optimistic. You know, some might

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<v Speaker 1>call it a Rosie picture. UM, aspirational even UM. But

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<v Speaker 1>I think what the FED is likely to look at

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<v Speaker 1>going forward is how the data evolves. And you know,

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<v Speaker 1>that's the message that check Powell has given us multiple times.

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<v Speaker 1>So I think that's going to be their focus as

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<v Speaker 1>of now. Well, what data will they be looking at

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<v Speaker 1>between now in July when they're deciding between fifty and

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<v Speaker 1>seventy five? Yeah, so we get a whole host of

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<v Speaker 1>data points in fact, but we now and July. But

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<v Speaker 1>I would say top of the list would definitely be

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<v Speaker 1>in the June um CPI inflation print. UM. They will

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<v Speaker 1>you know, see signs of whether inflation pressures continue to

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<v Speaker 1>accelerate UM, you know, across core categories, particularly UM, the

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<v Speaker 1>University of Michigan's Inflation Expectations print is going to be

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<v Speaker 1>another important indicator that they will look at. And then

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<v Speaker 1>of course we have the employment report that comes in

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<v Speaker 1>at the beginning of the month, and you know, outside

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<v Speaker 1>of that, I think they will also continue to look

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<v Speaker 1>at some of how, you know, some of the other

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<v Speaker 1>data points in terms of how retail sales evolve, what's

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<v Speaker 1>happening to housing. For example, we get a bunch of

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<v Speaker 1>home sales data UM, and you know, we're getting the

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<v Speaker 1>sense that housing is beginning to feel the pinch of

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<v Speaker 1>title financial conditions. So I think it's going to be

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<v Speaker 1>a whole set of these data points that they will

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<v Speaker 1>keep an eye on UM and you know that's what

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<v Speaker 1>they like you deliberate on before making their policy decisions.

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<v Speaker 1>So focusing on the inflation expectations data point in particular,

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<v Speaker 1>because Power sided that directly in the REST conference last week,

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<v Speaker 1>saying we saw that University of Michigan number, and that

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<v Speaker 1>is partly why we decided to move seventy five basis points,

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<v Speaker 1>not wait six weeks to do so. And we heard

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<v Speaker 1>Jim Bullard of the St. Louis Bed over the weekend

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<v Speaker 1>talking about the risk of inflation expectations running away, getting

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<v Speaker 1>out of control. How large of a credibility problem does

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<v Speaker 1>this Federal Reserve have right now? And what is the

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<v Speaker 1>likelihood you place around something like that happening. Well, I

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<v Speaker 1>think credibility was um, you know, probably an issue that

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<v Speaker 1>they were concerned about going into the June f O

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<v Speaker 1>m C meeting, and I think that's the reason why

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<v Speaker 1>they did such a statement hike, and you know, they

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<v Speaker 1>did that hawkish shift to their dot plot. But you know.

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<v Speaker 1>Having done that, I think to some extent they have

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<v Speaker 1>been successful in sort of reinstate incredibility around UM, their

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<v Speaker 1>price stability mandate UM as if now, um, you know,

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<v Speaker 1>inflation expectations still look reasonably well anchored. Yes, the move

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<v Speaker 1>up in the University of Michigan print was a cause

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<v Speaker 1>for concern UM, but right now that doesn't seem to

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<v Speaker 1>be running away. This is critical. I mean, July Barklay

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<v Speaker 1>says there's a reluctance to do seventy five weeks back

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<v Speaker 1>to back that put you in a you know, a

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<v Speaker 1>less hawkish camp. I guess that's how I put it,

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<v Speaker 1>not so much dervish camp. How close are they to

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<v Speaker 1>their comfortable neutrality? Not some fancy tailor rule or statistical ballet,

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<v Speaker 1>but how I mean, if it's nonlinear, how close are

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<v Speaker 1>they to the point where they're aware it's nonlinear and

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<v Speaker 1>there's a huge impact. Is it now? Is it the fall?

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<v Speaker 1>Is it next year? UM? I think they they're getting there.

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<v Speaker 1>They're getting there, They're getting they're getting there close to

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<v Speaker 1>their estimate of the neutral rate. And like you said,

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<v Speaker 1>we are slightly below consensus, and that we are calling,

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<v Speaker 1>you know, for a fifty basis point hike in in July,

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<v Speaker 1>and we think right now we are seeing signs that

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<v Speaker 1>type of financial conditions are lightly weighing on economic activity already. Um,

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<v Speaker 1>we think that these signs are, like you, to intensify

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<v Speaker 1>as we get into the July meeting, and um, you know,

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<v Speaker 1>the Fed is likely to conclude that policy is possibly

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<v Speaker 1>inching into restrictive territory already at least Simon remiss on this.

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<v Speaker 1>I'm sorry, folks. The Bloomberg Financial Conditions Index, which is

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<v Speaker 1>really really a good series, thank you Michael Rosenberg and team,

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<v Speaker 1>is one standard deviation down today. It's a negative one

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<v Speaker 1>point zero six at Lisa, which is Germain. To the

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<v Speaker 1>Barclays point, things are tightening, and you see that mortgage

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<v Speaker 1>rates exemplified. They're probably more than anywhere else at six percent. Putcha,

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<v Speaker 1>how much buying power does the consumers still have? One

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<v Speaker 1>of the biggest questions has really been the power of

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<v Speaker 1>the consumer. And we've heard about how they are so

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<v Speaker 1>strong and their balance sheets are terrific. Are they really

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<v Speaker 1>that good right now? Um? Well, to the to your point, yes,

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<v Speaker 1>houshold balance sheets still look reasonably you know, healthy. We

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<v Speaker 1>still estimate that excess savings that they accumulated over the

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<v Speaker 1>course of the pandemic are still about two and a

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<v Speaker 1>half trillion dollars um. But we are seeing signs that

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<v Speaker 1>consumers are likely pulling back on spending. We think the

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<v Speaker 1>momentum and consumption spending is slowing. We see that in

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<v Speaker 1>the retail sales data. For example, we track some high

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<v Speaker 1>frequency credit card data, and we we've seen signs that

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<v Speaker 1>you know, slow spending has slowed across goods and services.

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<v Speaker 1>And then you know, to your point, the savings rate

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<v Speaker 1>has also dropped well below um pre pandemic levels. So

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<v Speaker 1>you know, even despite the fact that they do have

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<v Speaker 1>you know, decent balance sheets to rely on, it looks

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<v Speaker 1>like they are becoming a little hesitant about spending. And

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<v Speaker 1>I think eroding purchasing power is a key concern among

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<v Speaker 1>consumers right now. Thank you so much for joining us

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<v Speaker 1>today Pussia, Assam. Where this with Barclays and now our

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<v Speaker 1>conversation of the day on your fear of recession Edward

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<v Speaker 1>year Danny joins us his president, Your Danny research for

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<v Speaker 1>far more than that, decades of experience and the ebbs

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<v Speaker 1>and flows of the American economic experiment, and we just

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<v Speaker 1>saw Carlos Good of the areas. Kellogg's say, enough, we're

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<v Speaker 1>thrown in a towel. We're breaking up underperformer in Battle Creek, Michigan.

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<v Speaker 1>In recession, in the gloom of recession? Ad isn't the

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<v Speaker 1>rule always corporations adjust? Well? I think everybody adjusts in

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<v Speaker 1>a recession. And uh, what what's interesting is if we

0:13:23.040 --> 0:13:25.520
<v Speaker 1>are in a recession or we're going to have an

0:13:25.559 --> 0:13:28.880
<v Speaker 1>imminent recession. As you know, Tom, this is probably the

0:13:28.960 --> 0:13:32.960
<v Speaker 1>most anticipated recession of all times, which in my mind

0:13:33.120 --> 0:13:35.520
<v Speaker 1>makes it either less likely or if it does occur,

0:13:36.280 --> 0:13:40.559
<v Speaker 1>it's going to be a fairly short and uh and

0:13:40.640 --> 0:13:44.840
<v Speaker 1>shallow recession, which is kind of where I'm leaning towards

0:13:44.920 --> 0:13:47.840
<v Speaker 1>at this point. I don't think a recession is yet inevitable.

0:13:47.880 --> 0:13:52.800
<v Speaker 1>I've got subjective probability of a recession happening over the

0:13:52.880 --> 0:13:56.959
<v Speaker 1>next eighteen months. But I've been raising that assessment as

0:13:57.280 --> 0:13:59.880
<v Speaker 1>as everybody else hasn't been. And let's go through some

0:14:00.000 --> 0:14:02.800
<v Speaker 1>of the components, starting with gas, and with five dollars

0:14:02.880 --> 0:14:04.880
<v Speaker 1>a gallon gas, Let's say it goes down a little

0:14:04.880 --> 0:14:07.599
<v Speaker 1>bit but stays around here. At what point is that

0:14:07.760 --> 0:14:09.680
<v Speaker 1>the trigger in and of itself in terms of how

0:14:09.840 --> 0:14:13.160
<v Speaker 1>much it really crimps consumer spending. Well, you know, it's

0:14:13.320 --> 0:14:17.680
<v Speaker 1>it's a tricky situation. When you look at UH spending

0:14:17.760 --> 0:14:21.160
<v Speaker 1>by all households, it's about four or five percent of

0:14:21.240 --> 0:14:26.640
<v Speaker 1>all households budgets relative to personal income. However, when you

0:14:26.720 --> 0:14:29.720
<v Speaker 1>look at it on a per household basis, we were

0:14:29.760 --> 0:14:33.560
<v Speaker 1>spending about hundred dollars a month on average per household

0:14:33.920 --> 0:14:35.800
<v Speaker 1>about a year ago, and now we're up to about

0:14:35.880 --> 0:14:39.000
<v Speaker 1>five thousand dollars per month. And I should say that's

0:14:39.000 --> 0:14:41.000
<v Speaker 1>at an annual rate. It's not per month. It's at

0:14:41.000 --> 0:14:44.000
<v Speaker 1>an annual rate. In other words, at the price of

0:14:44.080 --> 0:14:46.960
<v Speaker 1>five dollars UH. If it just stays here, we'll be

0:14:47.000 --> 0:14:50.040
<v Speaker 1>spending five thousand dollars on average per household, and that

0:14:50.160 --> 0:14:54.080
<v Speaker 1>hurts especially lower income households. Now, some of them have

0:14:54.240 --> 0:14:58.840
<v Speaker 1>had some pretty substantial wage increases, but unfortunately they've seen

0:14:59.000 --> 0:15:00.760
<v Speaker 1>that they've had to give the mold back at the

0:15:00.800 --> 0:15:06.680
<v Speaker 1>grocery store and filling up with gasoline. So the gasoline

0:15:06.760 --> 0:15:09.920
<v Speaker 1>situation is definitely an issue, and it's as you mentioned before,

0:15:10.000 --> 0:15:12.080
<v Speaker 1>it's really one of the main reasons that the consumer

0:15:12.120 --> 0:15:14.960
<v Speaker 1>sentiment index has taken a dive to an all time

0:15:15.040 --> 0:15:19.560
<v Speaker 1>record low, especially the expectations component. So consumers are depressed,

0:15:19.560 --> 0:15:23.920
<v Speaker 1>and they're depressed about inflation generally and gasoline prices and

0:15:24.000 --> 0:15:27.680
<v Speaker 1>grocery prices specifically. And I'm wondering how that is going

0:15:27.760 --> 0:15:30.160
<v Speaker 1>to translate into corporate earnings because as we talk about

0:15:30.160 --> 0:15:32.320
<v Speaker 1>a consumer faced with higher prices at the gas pump,

0:15:32.360 --> 0:15:35.720
<v Speaker 1>at the grocery store, they're spending less on certain discretionary items.

0:15:35.760 --> 0:15:37.520
<v Speaker 1>We've seen that with the warnings out of the likes

0:15:37.560 --> 0:15:40.720
<v Speaker 1>of Target. How much broader will that extend at as

0:15:40.760 --> 0:15:43.760
<v Speaker 1>we approach the second quarter earning season. Well, that's a

0:15:43.800 --> 0:15:47.240
<v Speaker 1>good news and bad news situation. The bad news is

0:15:47.400 --> 0:15:50.720
<v Speaker 1>that some of these retailers are getting stuck with lots

0:15:50.760 --> 0:15:56.200
<v Speaker 1>of inventories of consumer discretionary categories. And the good news

0:15:56.320 --> 0:15:59.080
<v Speaker 1>is that they're going to have to clear those inventories

0:15:59.200 --> 0:16:02.000
<v Speaker 1>by cutting price is And as you know, one of

0:16:02.080 --> 0:16:06.400
<v Speaker 1>the most significant components of inflation over the past year

0:16:06.440 --> 0:16:10.000
<v Speaker 1>has been consumer durable goods inflation, and that's gonna come down,

0:16:10.120 --> 0:16:15.440
<v Speaker 1>especially all the housing related items. So um, it's contributing

0:16:15.440 --> 0:16:17.560
<v Speaker 1>to a slower economy. On the other hand, it's going

0:16:17.640 --> 0:16:19.960
<v Speaker 1>to probably mean that the inflation news is going to

0:16:20.040 --> 0:16:22.640
<v Speaker 1>be somewhat better than expected over the rest of the year.

0:16:22.800 --> 0:16:25.840
<v Speaker 1>And you're Denny, given twenty eight flavors of recession, is

0:16:25.920 --> 0:16:29.040
<v Speaker 1>your study of history that all central banks remained data

0:16:29.120 --> 0:16:31.760
<v Speaker 1>dependent or do they throw in the tunnel and blink

0:16:31.920 --> 0:16:35.240
<v Speaker 1>at some point? Well, I don't see if Paul Bulker

0:16:35.320 --> 0:16:37.480
<v Speaker 1>out there, let me let me start out with the extreme.

0:16:37.600 --> 0:16:40.640
<v Speaker 1>I mean, you know, back in the late seventies early eighties,

0:16:41.320 --> 0:16:44.680
<v Speaker 1>Paul Workers said, you know, thank it, I gotta I

0:16:44.720 --> 0:16:47.040
<v Speaker 1>gotta bring inflation down. The only way that's going to happen.

0:16:47.560 --> 0:16:49.440
<v Speaker 1>So if I let interest rates go up to whatever

0:16:49.600 --> 0:16:52.120
<v Speaker 1>level it takes to cause a recession and bring inflation down,

0:16:52.680 --> 0:16:55.400
<v Speaker 1>and history does show it's certainly a u s. History

0:16:55.440 --> 0:16:58.480
<v Speaker 1>shows that the most effective way to bring inflation down

0:16:58.640 --> 0:17:00.640
<v Speaker 1>is to have a recession. A really hard procession will

0:17:00.640 --> 0:17:03.040
<v Speaker 1>do it, for sure. I don't think the central banks

0:17:03.080 --> 0:17:05.159
<v Speaker 1>want to go there. They've spent the past couple of

0:17:05.280 --> 0:17:09.000
<v Speaker 1>years trying to get their labor markets protected from the pandemic.

0:17:09.040 --> 0:17:12.240
<v Speaker 1>They don't want to suddenly completely reverse that around. So

0:17:12.520 --> 0:17:15.479
<v Speaker 1>I don't think we're gonna see these central banks uh

0:17:16.119 --> 0:17:18.359
<v Speaker 1>uh tighten in a way that causes the kind of

0:17:20.000 --> 0:17:23.600
<v Speaker 1>procession in the seventies. But they are tightening, There's no

0:17:23.680 --> 0:17:25.680
<v Speaker 1>doubt about that. And the fact of the matter is

0:17:25.760 --> 0:17:30.560
<v Speaker 1>the financial markets have tightened even more so. Critic conditions

0:17:30.640 --> 0:17:33.400
<v Speaker 1>are slowing the global economy down. And I think we're

0:17:33.400 --> 0:17:35.879
<v Speaker 1>gonna see a peak in commodity prices here pretty shortly.

0:17:36.280 --> 0:17:38.800
<v Speaker 1>And your Jenny, thank you so much, greatly appreciate it.

0:17:38.840 --> 0:17:42.119
<v Speaker 1>With some real tangible optimism there you're journey at research.

0:17:42.200 --> 0:17:49.119
<v Speaker 1>This warning to Kevin booked with this managing director Clearview

0:17:49.240 --> 0:17:52.160
<v Speaker 1>Energy Partners, and Kevin, I want to link in here

0:17:52.800 --> 0:17:56.800
<v Speaker 1>weaker yen in the import ramifications of Japan and others,

0:17:57.280 --> 0:17:59.800
<v Speaker 1>which is the researcher over the weekend on what Russia

0:18:00.080 --> 0:18:04.080
<v Speaker 1>is doing with their hydrocarbons. They're moving it to India,

0:18:04.520 --> 0:18:07.280
<v Speaker 1>they are moving it through the Straits of Malacca, up

0:18:07.359 --> 0:18:10.920
<v Speaker 1>the Pacific rim to other places, maybe to Japan. I'm

0:18:10.920 --> 0:18:13.720
<v Speaker 1>not going to speak for that, to China whatever. What

0:18:14.040 --> 0:18:18.399
<v Speaker 1>part of the Russian oil movement has year attention with

0:18:18.600 --> 0:18:23.520
<v Speaker 1>clear View Energy's global perspective Morning Tom First and foremost

0:18:23.640 --> 0:18:26.280
<v Speaker 1>the amount that China is buying. It's that strong alliance

0:18:26.280 --> 0:18:29.440
<v Speaker 1>between China and Russia that really shelters the Russian barrel

0:18:29.600 --> 0:18:32.320
<v Speaker 1>right now. India notable for its growth, but China for

0:18:32.359 --> 0:18:36.159
<v Speaker 1>its volume. Second is that the products don't necessarily have

0:18:36.240 --> 0:18:39.600
<v Speaker 1>the same home. Those are big refining destinations, China and India.

0:18:40.000 --> 0:18:43.160
<v Speaker 1>So take crude. They're fine, but they've got products they've

0:18:43.359 --> 0:18:45.600
<v Speaker 1>made of their own, and so they don't need as

0:18:45.680 --> 0:18:48.560
<v Speaker 1>much of the refined product that just just disappears if

0:18:48.600 --> 0:18:51.720
<v Speaker 1>it can't find a market. Kevin, I want to ask

0:18:51.800 --> 0:18:54.240
<v Speaker 1>you all these sophisticated questions, but really I just want

0:18:54.280 --> 0:18:56.480
<v Speaker 1>to know how high gas prices can potentially go in

0:18:56.520 --> 0:18:58.720
<v Speaker 1>the United States given some of the calls at a

0:18:58.800 --> 0:19:03.200
<v Speaker 1>JP Morgan and the like for six dollars a gallon gasoline? Look,

0:19:03.240 --> 0:19:04.640
<v Speaker 1>did you think we were going to be at five

0:19:04.760 --> 0:19:07.440
<v Speaker 1>right now? I think a lot of people are revising

0:19:07.480 --> 0:19:11.439
<v Speaker 1>their expectations. Were one hurricane or one major refinery outage

0:19:11.440 --> 0:19:14.760
<v Speaker 1>away from a significant uptick on its own. With that,

0:19:14.920 --> 0:19:18.240
<v Speaker 1>we have crude structurally aiming higher. If you see real

0:19:18.280 --> 0:19:21.040
<v Speaker 1>insurance sanctions going to force, I don't know how price

0:19:21.119 --> 0:19:24.159
<v Speaker 1>caps are gonna work just yet, A little skeptical that

0:19:24.400 --> 0:19:27.320
<v Speaker 1>even works in the end. Uh And so the sanctions

0:19:27.359 --> 0:19:30.240
<v Speaker 1>that you have put in place threatened to squeeze crude

0:19:30.280 --> 0:19:32.440
<v Speaker 1>even a bit more before the year ends. And so

0:19:32.520 --> 0:19:34.760
<v Speaker 1>now you've got crude going up, you've got risks to

0:19:34.800 --> 0:19:38.600
<v Speaker 1>the refining side. Six dollars is not unreasonable. So what's

0:19:38.640 --> 0:19:41.560
<v Speaker 1>the what's the pressure reliever here? Given that we've heard

0:19:41.560 --> 0:19:44.719
<v Speaker 1>about taxes and removing certain gas taxes that that probably

0:19:44.720 --> 0:19:47.119
<v Speaker 1>won't do anything. If anything, it will actually cause prices

0:19:47.160 --> 0:19:50.480
<v Speaker 1>to go higher because it will increase demand or allow

0:19:50.680 --> 0:19:53.320
<v Speaker 1>demand to keep climbing. What do you see as a

0:19:53.400 --> 0:19:58.080
<v Speaker 1>policy prescription to cap prices where they are send them lower. Well,

0:19:58.160 --> 0:20:00.320
<v Speaker 1>you just had a guest who prescribed for action. I

0:20:00.400 --> 0:20:03.840
<v Speaker 1>suppose nothing solve side prices like high prices, except also

0:20:03.920 --> 0:20:06.960
<v Speaker 1>slow growth. But the administration is looking at options that

0:20:07.040 --> 0:20:09.520
<v Speaker 1>are really at the sort of the dwindling end of

0:20:09.560 --> 0:20:12.560
<v Speaker 1>the options set. They've already drawn the spr they've already

0:20:12.600 --> 0:20:15.440
<v Speaker 1>considered products reserves, which aren't very big. Now they're looking

0:20:15.480 --> 0:20:19.960
<v Speaker 1>at things like product export limitations, not necessarily outright bands,

0:20:20.040 --> 0:20:24.120
<v Speaker 1>but caps keeping products home that could have deliterious consequences. Yes,

0:20:24.200 --> 0:20:27.840
<v Speaker 1>a gasoline price ghastly tax holiday, but as you suggested,

0:20:27.880 --> 0:20:31.360
<v Speaker 1>that could induced demand or at least preserve it and Ultimately,

0:20:31.480 --> 0:20:34.280
<v Speaker 1>the things that could put an immediate relief in price

0:20:34.640 --> 0:20:37.680
<v Speaker 1>or sort of outside of the administration's environmental comfort zone.

0:20:37.840 --> 0:20:41.640
<v Speaker 1>So things like waving air quality standards for for vapor pressure.

0:20:42.000 --> 0:20:44.360
<v Speaker 1>That doesn't look like something they're going to do well.

0:20:44.440 --> 0:20:46.760
<v Speaker 1>To that point, this is an administration that came into

0:20:46.800 --> 0:20:49.200
<v Speaker 1>office with a climate agenda that has been trying to

0:20:49.320 --> 0:20:52.800
<v Speaker 1>lead a global charge toward de carbonization and cleaner energy.

0:20:52.880 --> 0:20:55.240
<v Speaker 1>If you're leading an oil company, why would you invest

0:20:55.320 --> 0:20:58.400
<v Speaker 1>in more refineries or ramping up your production capacity knowing

0:20:58.520 --> 0:21:00.639
<v Speaker 1>that at the end of the day people want to

0:21:00.640 --> 0:21:04.920
<v Speaker 1>phase out fossil fuels. Yeah, drill today, disappear tomorrow is

0:21:04.960 --> 0:21:09.440
<v Speaker 1>not an investment thesis. One last fossil bender before America

0:21:09.520 --> 0:21:12.240
<v Speaker 1>goes green and sober is not going to convince capital

0:21:12.280 --> 0:21:15.720
<v Speaker 1>discipline to loosen. It is really a difficult proposition to

0:21:15.760 --> 0:21:19.680
<v Speaker 1>talk about transition and also ramping at the same time. Well, Kevin,

0:21:19.720 --> 0:21:22.560
<v Speaker 1>are you predicting six dollars a gallon gas? I mean,

0:21:22.640 --> 0:21:25.200
<v Speaker 1>can I narrow it down to that? Lisa, I'm asking

0:21:25.280 --> 0:21:28.280
<v Speaker 1>for a friend. Lisa wants to know we don't predict

0:21:28.359 --> 0:21:30.760
<v Speaker 1>prices that clearly we predict directions. Then we've got room

0:21:30.840 --> 0:21:36.040
<v Speaker 1>to the upside. That's his way of saying, probably I

0:21:36.119 --> 0:21:41.680
<v Speaker 1>think you said. Okay, Kevin, thank you so much, greatly

0:21:41.720 --> 0:21:43.760
<v Speaker 1>appreciate it. As he predicts were all going to be

0:21:43.840 --> 0:21:48.040
<v Speaker 1>driving VW diesels here within weeks. He's with clear View

0:21:48.560 --> 0:21:52.879
<v Speaker 1>Energy Partners. This is the Bloomberg Surveillance Podcast. Thanks for listening.

0:21:53.280 --> 0:21:56.040
<v Speaker 1>Join us live weekdays from seven to ten a m.

0:21:56.160 --> 0:22:00.520
<v Speaker 1>Eastern on Bloomberg Radio and on Bloomberg Television each day

0:22:00.680 --> 0:22:04.280
<v Speaker 1>from six to nine am for insight from the best

0:22:04.359 --> 0:22:09.359
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0:22:09.520 --> 0:22:14.200
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0:22:14.320 --> 0:22:17.560
<v Speaker 1>and of course on the terminal. I'm Tom Keene, and

0:22:17.720 --> 0:22:19.520
<v Speaker 1>this is Bloomberg