Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot
Speaker 1: Com and of course on the Bloomberg terminal of our prayer.
Speaker 1: Joins us now acting chief Economist at the O E
Speaker 1: c D intercourse with his Portuguese economics and i'd also
Speaker 1: point out of our your British Columbia cred which tells
Speaker 1: me that it's all econom metrics. How good are you
Speaker 1: now at O E c D of guessing the statistic?
Speaker 1: Is it? Do you have a lot of confidence and
Speaker 1: degrees of freedom and trying to guest estimate out to
Speaker 1: two thousands. It's a very very challenging environment, but we
Speaker 1: have very confident of out our forecasts. We we we've
Speaker 1: been as you said, we we warned about to slow down,
Speaker 1: and right now we're saying that listen, we are. We
Speaker 1: are facing the largest energy crisis since the nineteen seventies,
Speaker 1: and we have a dramatic picture that shows exactly that
Speaker 1: governments around the U cd are spending around of GDP
Speaker 1: just in energy, and this is as as much as
Speaker 1: we did in the seventies and eighties and so very
Speaker 1: challenging environment. So feel very comfortable about our forecast with
Speaker 1: your GDP growth slow down from whatever it wasn't two
Speaker 1: thousand twenty one down to three point whatever down to
Speaker 1: two point two how does China play into that vector? Well,
Speaker 1: for China, we are for remember this year was the
Speaker 1: lowest growth for China since the nineteen seventies, with the
Speaker 1: exception of the height of the pandemic. And we are
Speaker 1: forecasting China next year to rebound to about four point
Speaker 1: six percent, but going down to four to twenty four.
Speaker 1: But there's two risks that we think that can plague
Speaker 1: this central scenario. First of all, um it's fairly possible
Speaker 1: that if the street COVID lockdowns continue and they become
Speaker 1: more pervasive, then certainly growth is going to be a
Speaker 1: lot less than we are forecasting. And the second one
Speaker 1: has to do with real estate market. If the adjustment
Speaker 1: on the real estate market is less smooth than we
Speaker 1: would like it to be, it's very possible that also
Speaker 1: growth will be negatively affected in China. So we are
Speaker 1: seeing a bit of a rebounding in in China, but
Speaker 1: risks are certainly fairly high over there too. Although you
Speaker 1: pointed out that this is really an energy crisis, which
Speaker 1: isn't necessarily the way that everybody else would frame it.
Speaker 1: They would view it as a pandemic crisis. They would
Speaker 1: view it as a free money for decades kind of crisis,
Speaker 1: that's kind that have come to a head. They would
Speaker 1: view it as an inflation crisis. More broadly, why do
Speaker 1: you view it through the lens of energy primarily? Well,
Speaker 1: first of all, the energy crisis is a direct consequence
Speaker 1: of Russia's aggression on Ukraine, right and so, which has
Speaker 1: led to lower growth and more prices rising everywhere. We
Speaker 1: see that even before the war, prices was starting to
Speaker 1: go up, so you're absolutely right about that. But clearly
Speaker 1: inflation became a lot more pervasive, more entrenched, and also
Speaker 1: the pressures have intensified after the war. We have I
Speaker 1: think a very interesting estimation our forecast which is trying
Speaker 1: to see whether this is mostly because of a supply
Speaker 1: shock or it's mostly a demand shock. Well, if it
Speaker 1: started as a supply shock, right now in many countries
Speaker 1: of the U City you can see that it really
Speaker 1: right now, it doesn't matter, it's it's demand and supply.
Speaker 1: In fact, in centric some some countries, like the UK,
Speaker 1: demand factors are now having more an impact than the
Speaker 1: supply factors. So right now, what we're talking about very
Speaker 1: large inflation. Uh in many parts of the world. Montery
Speaker 1: policy has to continue to be the size has to
Speaker 1: do what montary policy has to do in order to
Speaker 1: get out of this situation. I think we're starting to
Speaker 1: see some positive signs in some parts of the world.
Speaker 1: So over all you say that you think that probably
Speaker 1: try to economy will recover next year, which might actually
Speaker 1: increase demand for certain goods, including energy. How will this
Speaker 1: factor into how much developed markets have to be hiking
Speaker 1: rates have to be countering that increase in demand, the
Speaker 1: increase momentum that we see heading over from the east. Well,
Speaker 1: what we highlight as well is that this inflation is
Speaker 1: having a tremendous impact on people's incomes. Right if you
Speaker 1: all across the world, we have a dramatic picture on
Speaker 1: real wages and all across the world, real ways that
Speaker 1: are going down. And that's why we focus so much
Speaker 1: that right now, if you want to ease the pain.
Speaker 1: If you want to pain to be as short as possible,
Speaker 1: it is absolutely essential that we continue to be determined
Speaker 1: in this fight against inflation. If the economy starts recovering
Speaker 1: as we expect in the second half of next year,
Speaker 1: then certainly this will will give a bit more pressures
Speaker 1: on prices. But I think as long as Monterrey policy
Speaker 1: is doing what it's doing and remain steady fast on
Speaker 1: on fighting inflation, we'll be able to have lower inflation
Speaker 1: going forward. Over when Bloomberg Surveillance visits you at Central
Speaker 1: Portugal for the ECB confab here next year, you're modeling
Speaker 1: out six percent global inflation. Every single central banker is
Speaker 1: going to say that's unacceptable. Do you perceive that as
Speaker 1: a stopping point or do you have a different statistic
Speaker 1: where we get to a vaunted tent tailor perfection? What
Speaker 1: do we do when we get inflation down to six
Speaker 1: point eight or dare I say five percent? I think
Speaker 1: what matters right now is when when we're going to
Speaker 1: have inflation picking and uh and coming down steadily, and
Speaker 1: so the trend is going to be very important. I'll
Speaker 1: give a good example Brazil. When they started there was
Speaker 1: one of The first kind is to face significant inflationary pressures,
Speaker 1: and there's central bank decided to hike interest rates very
Speaker 1: decisively for a few months, and now it's starting to
Speaker 1: pay off. I think the last reading we had also
Speaker 1: from the United States is positive, and so what we
Speaker 1: need to do around the world is exactly to assess
Speaker 1: the situation. Some countries have acted a lot more than others.
Speaker 1: But what matters right now is to get to a
Speaker 1: situation which inflation picks and starts to come down durably.
Speaker 1: It has to be durably, cannot be only one data point,
Speaker 1: and this is what we need to monitor. In our forecast,
Speaker 1: we forecast that basically inflation will start to pivot around
Speaker 1: a mid next year and we will continue to come down,
Speaker 1: even though it will remain fairly high in some countries
Speaker 1: at the end of twenty three. I don't want to
Speaker 1: get you in trouble, but I'm gonna get you in
Speaker 1: trouble with your academics and potically teaching at the University
Speaker 1: of British Columbia. How do you respond to a central
Speaker 1: banker gaining out a two year recession, as we got
Speaker 1: from the Governor of the Bank of England you have
Speaker 1: a confidence and establishing a real g d P view
Speaker 1: our twenty four months or dare I say thirty six months. Well,
Speaker 1: listen in all these forecasts, you know, and I know
Speaker 1: that all these forecasts, our best scenario, are our what
Speaker 1: we expect. Things will evolve, Things change. You know, nobody
Speaker 1: expected a pandemic three years ago. Nobody expected award, you know,
Speaker 1: just just just a few months ago. So things change.
Speaker 1: What I can tell is that our forecasts, given what
Speaker 1: we know today, what we see in the data, we
Speaker 1: fair we We are fairly confident about our central forecast
Speaker 1: right now. But risks, as as I said before, arising
Speaker 1: and so risks that think can go wrong are there.
Speaker 1: But right now our central scenario is not a recession.
Speaker 1: Sluggish growth, but not a recession. This has been wonderful.
Speaker 1: Don't prayer. Thank you so much for joining us of
Speaker 1: our prayer. At the O E c D. We migrate
Speaker 1: to something more stable, and that would be economics. Dana
Speaker 1: Peterson joins US of Wesleyan and University of Wisconsin Economics
Speaker 1: at Madison and thrilled that she could join us. This morning,
Speaker 1: O E c D came out with a big fancy
Speaker 1: report Dana, yours is more important. How have you tweaked
Speaker 1: your view for next year on real g d P. Well,
Speaker 1: we think that the economy is probably going to be
Speaker 1: flat next year, and that incorporates a couple of quarters
Speaker 1: of recession. Maybe the fourth quarter of this year is
Speaker 1: a little bit negative, but really most of the brunt
Speaker 1: we think will be in the first quarter of next
Speaker 1: year minus one and a half percent, and then second
Speaker 1: quarter and minus four tents and then kind of a
Speaker 1: moderate increase in the back half of next year, so
Speaker 1: all folding up into pretty much again flat growth for
Speaker 1: the economy. Well, how do you respond to what the
Speaker 1: conference board is seeing over the many decades of what
Speaker 1: inflation spikes up as a general rule, it's stochastic and
Speaker 1: comes down with quite a plunge with great a pidity.
Speaker 1: Do you buy that that we could see that? Well,
Speaker 1: when I look at the components of what's driving inflation
Speaker 1: right now, a lot of its rents, right and then
Speaker 1: the other aspects are services, um, non housing services. But
Speaker 1: when you look at rents, they're really sticky and they
Speaker 1: tend to reflect what has already happened in the housing market.
Speaker 1: And we know that rents are are difficult to come
Speaker 1: off because certainly, people being pushed out of the new
Speaker 1: and existing home sales market, they're going to go into
Speaker 1: the rental market. So that means that we're probably going
Speaker 1: to have a period of time where rents are still
Speaker 1: going to continue to push up inflation data. How much
Speaker 1: do you buy this idea of a shallow recession, Well,
Speaker 1: our own forecast suggests that, yes, the recession will be shallow,
Speaker 1: and indeed, along with that you might not have a
Speaker 1: really big hit to the labor market. And a lot
Speaker 1: of that's a function of labor shortages. So if you
Speaker 1: have companies hoarding workers and still also hiring people, especially
Speaker 1: in those in person services and other types of jobs
Speaker 1: where you physically have to be at work, that's going
Speaker 1: to support con omption. And so we may not have
Speaker 1: a really deep procession. But that sort of is a
Speaker 1: bit of a bed on the fact that things will
Speaker 1: deteriorate quickly enough for the FED to pause, for the
Speaker 1: lag effects to actually kick in and show us that
Speaker 1: there is some sort of active deceleration and inflation that
Speaker 1: gives the FED confidence, right, I mean, without that if
Speaker 1: there is momentum, how much does that really cast this
Speaker 1: idea of a shallow recession aside, Well, I think the
Speaker 1: FED is looking at the data right. So already the
Speaker 1: housing market tends to react very quickly to interest rate hikes,
Speaker 1: and we're also started to see consumers dial back their
Speaker 1: expectations for how many like durable goods they're going to purchase,
Speaker 1: especially things that need to be financed. So the FED
Speaker 1: is already seeing some of that evidence. But certainly there
Speaker 1: are lags, and it's not clear how long those lags are.
Speaker 1: But I would suggest that the Fed, you know, still
Speaker 1: has some way to go in terms of raising interest rates,
Speaker 1: but that those interest rate hikes are probably going to
Speaker 1: be smaller than what we've seen. Dana, I'm fascinating did
Speaker 1: And again this is the heritage of the Conference Board,
Speaker 1: which going back to seven has always aggregated our economics.
Speaker 1: Are we so polarized as a society of the halves
Speaker 1: and have nots that you can't aggregate your macro analysis
Speaker 1: as the Conference Board is done for decades. Well, I
Speaker 1: mean the good news is that even though we do
Speaker 1: have arrogance, we also look at individual income groups, especially
Speaker 1: with our consumer confidence. What do you see them? Well,
Speaker 1: the youngest and the oldest groups are you know, a
Speaker 1: little bit more disgruntled than the folks in the middle,
Speaker 1: and certainly um people who are at the lower end
Speaker 1: of the income spectrum are being hit harder by inflation,
Speaker 1: So we can look at those details there. I'm well,
Speaker 1: I'm actually wondering just how much this has to do
Speaker 1: with home ownership, right If the younger people are not
Speaker 1: able to get into homes and they're seeing their rents increase,
Speaker 1: and it's absolutely prohibitive to go and buy a home
Speaker 1: for the first time because interest rates, because mortgage rates
Speaker 1: are seven percent, how much is that the distinguishing feature
Speaker 1: right now between the halves and I have not Well,
Speaker 1: certainly is a distinguishing feature. But let's not forget during
Speaker 1: the pandemic, the biggest increase in homeownership was among the
Speaker 1: younger groups, right, Jen, Jen, Well, the millennials, right, because
Speaker 1: many of them, you know, have children. Now, they have
Speaker 1: been able to get jobs, and they've accumulated some savings,
Speaker 1: and certainly there were injections of cash for the fiscal stimulus,
Speaker 1: so that did help them at least during the pandemic.
Speaker 1: Those who were going got in there early to buy homes.
Speaker 1: The millennials have their kids playing investing in Doge off
Speaker 1: their couch. I mean, that's how bad it is. Dan,
Speaker 1: I want to go back to what we're gonna see
Speaker 1: here on the inflation guestimate for December before the FED meeting.
Speaker 1: Is that a mystery to you? Already have some confidence
Speaker 1: in the conference board pick for what inflation will be
Speaker 1: before December four. Well, we think that inflation is going
Speaker 1: to continue to ease. We probably reached a peak earlier
Speaker 1: this year. Um. We're seeing food and energy prices come
Speaker 1: off certainly in the last few months in terms of
Speaker 1: their contributions, and that's really important in terms of bringing
Speaker 1: down the aggregate level of inflation, and also things like
Speaker 1: utilities for for hope for people who know all the
Speaker 1: people who live in homes. Um. But certainly we're concerned
Speaker 1: about again the rents and services prices continuing to rise
Speaker 1: and place pressure on upward pressure on inflation. Dania Peterson,
Speaker 1: thank you so much with the conference board on Denmark,
Speaker 1: I believe playing it against nord Vic joins this, founder
Speaker 1: and CEO of Accenting Data. Come on, Yen's World stops Denwark, Denmark,
Speaker 1: Tunisia as well. What do you think Denmark is really
Speaker 1: percolating with a chance here to make some noise. Yeah,
Speaker 1: we'll hope they can do a little bit like England
Speaker 1: and yesterday. Okay, sours Furst comment there. Yeah, let's get
Speaker 1: to it with a dollar. What is the two thousand
Speaker 1: twenty three view here on the dollar? There's been big
Speaker 1: figures moves, uh this year? Can there be big figure
Speaker 1: moves next year? So this year has been essentially one
Speaker 1: of the strongest in the history of the dollar, right,
Speaker 1: massive run up against some of the biggest currencies in
Speaker 1: the world, Like I've seen the yen move and so forth,
Speaker 1: and then in the last couple of weeks we've seen, uh,
Speaker 1: a big reversal within that ball move. And like our
Speaker 1: opposition in indicators that we track at Exante Data have
Speaker 1: have had some of the most extreme signals. Right, real
Speaker 1: money investors were very very overweight dollars, all the trend
Speaker 1: following investors were really max long dollars, and we had
Speaker 1: this very violent washout. So now everybody kind of has
Speaker 1: to decide, Okay, is this really a big change in
Speaker 1: trend or is it just some kind of repositioning in
Speaker 1: the market. And the reposition was Steph only a big
Speaker 1: piece of what was going on, and we could already
Speaker 1: see as soon as the news from China, which was
Speaker 1: actually quite important to the turn in the dollar overall,
Speaker 1: as soon as that is less positive, the dollar kind
Speaker 1: of looks like it wants to go back to the
Speaker 1: appreciating trend. Right, So I think for me, the key
Speaker 1: is global growth. We can talk about the fete on
Speaker 1: the fet is important, but the most important verbal for
Speaker 1: the dollar is what's going on with global growth. And
Speaker 1: if we still have a problematic growth situation in China,
Speaker 1: if e doesn't recover, then it's hard for me to
Speaker 1: see that there's going to be a strategic turn in
Speaker 1: the dollar. We can have like wiggles, and we had
Speaker 1: a big wiggle now over the last couple of weeks,
Speaker 1: but a strategic turn requires that global growth is going
Speaker 1: to get better, and for me, that's too early to
Speaker 1: make that call. We can go into detail with that. Yes,
Speaker 1: you're talking about China, and that was sort of giving
Speaker 1: some fuel to this risk capitite, the idea that perhaps
Speaker 1: they were tiptoeing away from COVID zero. It seems like
Speaker 1: it's the opposite today, and yet the narrative and the
Speaker 1: market is not cooperating. You're not seeing the off move
Speaker 1: in equities, You're not seeing a strengthening dollar. What do
Speaker 1: you make of this the idea that a lot of
Speaker 1: the reasons behind the rally are turning on their head,
Speaker 1: but the market is not so. So the first thing
Speaker 1: I would say is that there's been optimism around China, right,
Speaker 1: and the optimism was based on the notion that there
Speaker 1: was going to be a move away from cyri COVID policy.
Speaker 1: And what we're seeing in China is that there might
Speaker 1: be a desire to somehow relax those policies that have
Speaker 1: had a disastrous impact on the economy. But is it
Speaker 1: really feasible? Right, We now have cases that are skyrocketing.
Speaker 1: We have a population that has been told that COVID
Speaker 1: was very scary and something that should be avoided at
Speaker 1: all costs. And this could go on for a long
Speaker 1: time in the sense that they only have around called
Speaker 1: the cases today, right, Like go back to when we
Speaker 1: had a peak in United States, which is a smaller
Speaker 1: coun tree population wise, where we had a million a day. Right,
Speaker 1: So this were in the early phase of an acceleration,
Speaker 1: and this could go on for a long time. And
Speaker 1: they are they're just gonna let it run. That's that's
Speaker 1: would be a pretty pretty strange way for them to
Speaker 1: go from one extreme to the other. So it's gonna
Speaker 1: be a gradual, messy process here. I think it's going
Speaker 1: to be hard for the market to cope with that,
Speaker 1: although that seems like they're coping with it right now.
Speaker 1: Heading into three, it seems like the consensus is you
Speaker 1: might see some more dollar strength and then it will
Speaker 1: turn into dollar weakness. You will see Europe start to outperform,
Speaker 1: you will see Asia start to outperform, you will see
Speaker 1: the US underperform. Where do you push back against the
Speaker 1: consensus right now? Yeah? Um it all it all comes
Speaker 1: down to the inflation and inflation expectations. Right. We saw
Speaker 1: after the CPI print, one CPI print that was better
Speaker 1: than the trend we have had, market rallied enormously. There
Speaker 1: was also after that that the dollar had one of
Speaker 1: the one of its biggest moves ever in a few days. Um,
Speaker 1: So it really comes down to inflation. Have we turned
Speaker 1: the corner? Well, we're gonna have stick services prices. We
Speaker 1: I think it's it's pretty clear that goods prices are
Speaker 1: sounds are normalize. But the market is also hoping that
Speaker 1: that services prices will also normalize. If that's not the case,
Speaker 1: it's going to be a big problem of risk ances,
Speaker 1: right because that's been priced now that the worst is
Speaker 1: over inflation. If that's not the case, we're gonna be
Speaker 1: back to having risk asses under pressure. Yes, thank you,
Speaker 1: go down. Markins Norg with us is a sounding day.
Speaker 1: I want him to point out again he want the
Speaker 1: beauty contest institutional investor three years in a row in
Speaker 1: foreign exchange. I can think I can say no one's
Speaker 1: ever done there. I may stand corrected on that. Here's
Speaker 1: what you need to know. Zeteco Pipeline was a phenomenal
Speaker 1: song by Aaron Novel years ago. Daniel Leno produced it
Speaker 1: down to New Orleans and it is a key, key
Speaker 1: oil pipeline along the Gulf of Mexico. It is the
Speaker 1: focus now of our next Stephen. Short is principle of
Speaker 1: narrowness and acuity on the hydrocarbon market. It's short, group Stephen,
Speaker 1: let me summarize for our audience. We're up to our
Speaker 1: eyeballs and petroleum and the price is gonna go down.
Speaker 1: Do I have that right? Well? In the near term,
Speaker 1: we certainly our risk to the downside. So we had
Speaker 1: the market that switched into contango. This is the no
Speaker 1: mix w t I crude oil market contango, meaning that
Speaker 1: the price this month is cheaper than the price next
Speaker 1: month that occurred on yesterday's expiration in the December contract.
Speaker 1: Why are we in contango, Well, simply because to your point,
Speaker 1: the Ydeico pipeline, which is a significant pipeline that takes
Speaker 1: oil from the shell patch in West Texas that's being
Speaker 1: produced and takes it to the export market in Houston. Well,
Speaker 1: there's maintenance now that's gonna last well into December on
Speaker 1: that pipeline. So your oil flows are lower, but you're
Speaker 1: still producing oil in West Texas. So if you can't
Speaker 1: move it into Houston, you have to put it somewhere.
Speaker 1: And it's very important as far as the NAMIX is concerned,
Speaker 1: because where that something is going to be is up
Speaker 1: at the NAMIX Terminal complex up in Christian, Oklahoma. So
Speaker 1: we're looking at a situation where we're gonna be building
Speaker 1: supplies at the NAMIX Terminal Complex in the next Week's
Speaker 1: a surprise to me. Stephen is an amateur. Is West
Speaker 1: Texas Intermediate breaches seventy dollars, we get a sixty nine
Speaker 1: print on American oil? Is that in your realm of possibility?
Speaker 1: Excuming yes, with regard to now, this was one of
Speaker 1: our more bearish cases, and this is really at the
Speaker 1: tail end of our modeling of where we could go.
Speaker 1: But certainly I do expect to see um oil find
Speaker 1: a base here, assuming we do not go into a
Speaker 1: significant recession. And we have to keep in mind, this
Speaker 1: is the Biden put right, This is the level seventy
Speaker 1: dollar oil and low seventies that the White has a said,
Speaker 1: this is the level we're going to start buying oil
Speaker 1: to refill the spr So if you're sitting there, why
Speaker 1: would you sell seventy dollar oil when the United States
Speaker 1: government's gonna come in and start buying two hundred million
Speaker 1: barrels at that price, so they're in effect without recession?
Speaker 1: Is your floor in the market, tome? So what about
Speaker 1: the ceiling? Right? Because we were talking about the type
Speaker 1: market about you know, two minutes ago, and we were
Speaker 1: talking about how oil prices are going to rise beyond
Speaker 1: a hundred and twenty barrel on certainly Brent and close
Speaker 1: to that on w T I what's changed so materially
Speaker 1: in the physical market to make that completely an obsolete argument. Yeah,
Speaker 1: well absolutely so the one hundred thirty, which is where
Speaker 1: we were in the first quarter of second quarter of
Speaker 1: last year, that's unattainable. That to say that we can
Speaker 1: get back up there, but we can't stay there because
Speaker 1: that's where we sell. The demand destruction so that is
Speaker 1: short of something catastrophic happing and supply in the market,
Speaker 1: that market cannot go up and beyond that. So what
Speaker 1: has changed now, of course, is the weekending economies around
Speaker 1: the globe. So it is a near term barished picture
Speaker 1: at this point. As we said, the Russians are front
Speaker 1: running the price caps, so they've dumped a lot of
Speaker 1: oil on in the market. There are fineries in Europe
Speaker 1: fearful of that price cap, have bought all that oil.
Speaker 1: So you're having a hard time now selling physical oil.
Speaker 1: So a lot of the physical oils getting rolled forward
Speaker 1: into the first quarter, which is going to keep the
Speaker 1: market supplied. And the fear now, of course is COVID
Speaker 1: with China. When is that economy finally going to reopen?
Speaker 1: There is some optimism that it can reopen fully by
Speaker 1: next summer, but there's still a lot of skepticism in that.
Speaker 1: So without that demand in the market, you've got this
Speaker 1: low scenario of oil prices. I think in that low
Speaker 1: seventy low eighty, I think this is the bottom of
Speaker 1: the market, and therefore we're waiting for the demand. Because
Speaker 1: we think about this cap x is challenge. Interest rates
Speaker 1: are are moving higher, your hurdle rates for apacs are
Speaker 1: that much higher. So you're still looking at a market
Speaker 1: that's going to be a dearth of capital, which is
Speaker 1: not going to go, of course, obviously to bringing more
Speaker 1: oil to the market. So your long term picture is
Speaker 1: still bullish. That still gets you back to that one
Speaker 1: hundred dollar range, but we just have to get over
Speaker 1: these short term hurdles. Could you foresee a time where
Speaker 1: you see the price of gasoline go down and the
Speaker 1: price of diesel stay high and even go higher. Well,
Speaker 1: that that's the new dynamic that we're in, Lisa, because
Speaker 1: right here in my hometown, Philadelphia, the once great epicenter
Speaker 1: of the East Coast refinery um, we've lost our refinery capacity.
Speaker 1: So three years ago we had a refinery in South
Speaker 1: Philly that produced our process three thirty thousand barrels of
Speaker 1: crude oil day. That was a lot of gasoline, a
Speaker 1: lot of distant fuel that went right into our whole
Speaker 1: market here in Philly, and then of course ninety miles
Speaker 1: up the Jersey Turnpike into Lynden, New Jersey, in the
Speaker 1: New York Harbor market, we no longer have that, so
Speaker 1: that diesel fuel has to come from somewhere. And keeping
Speaker 1: in mind that gasolene is your best margin for a refiners,
Speaker 1: so this is where they maximize. So this is where
Speaker 1: you bring more gasolene to the market at the expense
Speaker 1: of distillate fuel diesel fuel. So now we have to yes,
Speaker 1: I'm sorry, I just this is so important socially, Stephen
Speaker 1: Short and you've been so dead on this. If we
Speaker 1: affect a shortage of heating whatever fuel in New England,
Speaker 1: in the Greater Northeast, how do you perceive a government
Speaker 1: response of this? I mean, what is the linkage of
Speaker 1: not in my backyard to government regulation, investment incentives to
Speaker 1: fix this problem. Well, the short term fix is for
Speaker 1: for this winter is the Northeast Northeast Heating Oil Reserve,
Speaker 1: which you have two million barrels of heating oil sitting
Speaker 1: in tanks up in Connecticut and Massachusetts, and you also
Speaker 1: have that for gas line too, so that isn't in fact,
Speaker 1: and I'm surprised we haven't seen that yet because here
Speaker 1: in Philadelphia, forty five minutes up the Northeast Extension, Allentown
Speaker 1: was aut of diesel that they had closed down one
Speaker 1: of their gas stations up there because they were out
Speaker 1: of diesel fuel. So we are running shortages into this market.
Speaker 1: Seven Again, I don't mean to interrupt. I was in
Speaker 1: parison on the way out to c d G. There
Speaker 1: were lines, lines, lines I've never seen waiting for a
Speaker 1: girl and a gas Are you predicting that for Allentown
Speaker 1: or for Albany, New York? Well, certainly that that is
Speaker 1: the risk. I think, guess Lean, we're going to be uh,
Speaker 1: you know, we'll we'll get through this because that's where
Speaker 1: the price incentive is. Both distal fuel with diesel fuel.
Speaker 1: We're already running shortages and that was shortagees time before
Speaker 1: we even had any sort of heating demand in the market.
Speaker 1: So we're looking at the Northeast, the mid Atlantic New
Speaker 1: England markets that are seventy percent of the homes or
Speaker 1: market he heats with heating oils, so that that is
Speaker 1: an absolute risk that will continue all through the cold months.
Speaker 1: Absolutely brilliant. Here the Short report, folks, I can't say
Speaker 1: enough about it. Yeah, I've got the emails. No, we
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Speaker 1: Shark of the Short Group for five pages every day
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