Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: The first name on the list was Edward Morse. Absolutely
Speaker 2: definitive within the global zeitgeys if you will, the Washington
Speaker 2: Consensus on Petroleum, all sorts of efforts here, including his
Speaker 2: work with the Council unfeign At Relations, and we're honored
Speaker 2: that doctor Morris would join us in our studio today.
Speaker 2: Welcome to Bloomberg, doctor Morris. When I look at this,
Speaker 2: I think the arch question is a cup of coffee
Speaker 2: this morning with the President of the United States, how
Speaker 2: would you brief him on the timeline to get Venezuela
Speaker 2: to a new Caracas, a new Venezuela.
Speaker 1: The timeline is very, very long. The timeline includes not
Speaker 1: just what must be done on the oils patch, but
Speaker 1: also includes how do you get this government to cooperate
Speaker 1: with the United States. And yes, they're starting out on
Speaker 1: a good foot, but this can't be done without a
Speaker 1: change in the entire view of the government of how
Speaker 1: they do what they do. They're there to make money,
Speaker 1: they're there to control things, and they can't do that
Speaker 1: and have the oil patch resume what it was like
Speaker 1: five years ago.
Speaker 2: This is a transactional president. You have lived with your
Speaker 2: iconic work at City Group, a transactional big American banks
Speaker 2: enjoying losing big money in Latin America and other places.
Speaker 2: What do you perceive as a relationship of President Trump
Speaker 2: with mister Diamond, with mister moynihan and with other financiers
Speaker 2: of America.
Speaker 1: Well, he's got a good relationship with the financial sector
Speaker 1: for all kinds of good reasons that we can get into.
Speaker 1: That's a separate subject. But here the capital has to
Speaker 1: come from oil companies. And oil companies look at risk.
Speaker 1: They look at the risk in the marketplace, what is
Speaker 1: a supply demand balance, They look at the risks of
Speaker 1: an investment, And in the case of Venezuela, they need
Speaker 1: a lot of capital going into infrastructure, and that infrastructure
Speaker 1: has to be in place before the oil comes out
Speaker 1: of the ground. So we're talking here about billions of
Speaker 1: dollars to start to restore the infrastructure that will get
Speaker 1: things going, to allow oil on a sustainable basis to
Speaker 1: rise by a mere four or five hundred thousand barrels
Speaker 1: a day. That's twenty billion dollars. Twenty billion dollars is
Speaker 1: not nothing. When oil companies have opportunities in Guyana, opportunities
Speaker 1: in Argentina, opportunities in Brazil, and opportunities in Africa. So
Speaker 1: the question is what will attract companies to spend the
Speaker 1: capital that Trump needs for the transaction toward.
Speaker 2: Paul Chevron debt eleven point seven percent. That's where they
Speaker 2: are right now.
Speaker 3: Just as an example, what do you think the US
Speaker 3: government or what do you think those energy companies would
Speaker 3: need from the US government in terms of assurances or
Speaker 3: whatever to commit that capital.
Speaker 1: Do you think, well, they need the re insurance from
Speaker 1: the Venezuelan side as well as from the US government,
Speaker 1: because the US government said that it's not taking over
Speaker 1: Venezuela a good point. So it needs to have the confidence,
Speaker 1: which will be step by step, and I suspect the
Speaker 1: first step will be with Chevron to see whether they
Speaker 1: can make good in short term of capital with short
Speaker 1: term return. So I think it's going to be a
Speaker 1: slow process, but it will be trust building on trust,
Speaker 1: and we'll see how smooth that transition goes.
Speaker 3: Talkos to just describe the energy when we talk about Venezuela,
Speaker 3: What do they have, what do they need? How big
Speaker 3: are they is? How important is this? Because I understand
Speaker 3: there's a lot underground.
Speaker 1: It's quite important. So the world is known for a
Speaker 1: long time that Venezuela has the largest known oil reserves
Speaker 1: in the world. The problem is it's not the kind
Speaker 1: of oil that the rest of the world needs or wants.
Speaker 1: And the problem is it's in Venezuela, and it's complicated
Speaker 1: oil to get out of the ground. But they've done
Speaker 1: it before, and they've managed to go from under two
Speaker 1: million barrels a day to three and a half million
Speaker 1: barls a day in a relatively short period of time
Speaker 1: a couple of decades ago. So if the will is
Speaker 1: there and the government is there to provide the guarantees,
Speaker 1: but to do that you need the government institutions to
Speaker 1: be rewarned. Those government institutions have themselves deteriorated dramatically. They
Speaker 1: don't have the human resources, they don't have the personnel
Speaker 1: to be able to guide it. So part of the
Speaker 1: process will be a return of that human resource base.
Speaker 2: Edward Morris with this for a lengthy conversation this morning
Speaker 2: with Hartree and of course definitive at City Group, among
Speaker 2: other services to the United States over his long decades
Speaker 2: on petroleum, on hydrocarbons, I believe I've shared this stage
Speaker 2: with you and Shannon O'Neil at the Council on Foreign Relations.
Speaker 2: Doctor O'Neil was on with us recently exceptionally gloomy about
Speaker 2: Venezuela's ability to reorganize given an event like what we've seen.
Speaker 2: I assume you've been to us more than forty times.
Speaker 2: You remember a Caracus from another time in place. Do
Speaker 2: you have any optimism that they can move from a
Speaker 2: Cuba like society to something that can get capitalism done.
Speaker 1: Well, you have to be a little bit optimistic given
Speaker 1: the change that has already taken place. So changing getting
Speaker 1: Maduro out of that position is a major step. And
Speaker 1: now the government is in a crisis of survival. That
Speaker 1: survival will require them to cooperate with the US. So
Speaker 1: the options that they have are quite limited. Who is
Speaker 1: going to replace the US at this moment in time,
Speaker 1: Given the US military position, the naval position surrounding Venezuela,
Speaker 1: the control that the US has over Venezuela and exports,
Speaker 1: it's not easy to imagine a replacement for that. So
Speaker 1: the good news really is that they are cooperating to start,
Speaker 1: and we'll see how that goes. But it will be
Speaker 1: a long road with difficulty.
Speaker 3: Is it your understanding, just based upon the limited reporting
Speaker 3: that we have in the last twelve forty eight hours,
Speaker 3: that the government of Venzezezuela was in contact with the
Speaker 3: Trump administration if to facilitate that mister Maduro being taken.
Speaker 1: Look, it could not have been done without there being
Speaker 1: some contact within the government. We know from reporting that
Speaker 1: the intelligence operations preceded this. They were on the ground,
Speaker 1: they had to have help to be on the ground,
Speaker 1: and undoubtedly they were not taken by surprise because of
Speaker 1: the smooth way events went on over the weekend.
Speaker 3: I do think China is viewing what's going on these days.
Speaker 1: China's in a big difficult position they have. They are
Speaker 1: a massive creditor to Venezuela. Venezuela has been part of
Speaker 1: central to the Belton Road initiative enlarging China's influence in
Speaker 1: Latin America. Excuse me, and it's been frankly a failure.
Speaker 1: They have between fifty and one hundred billion of debt.
Speaker 1: Their operations right now are to export oil to pay
Speaker 1: for that debt controls their exports out of Venezuela. So
Speaker 1: they they had, yes, they came down and condemned the
Speaker 1: US government. They had to do that, but they have
Speaker 1: to take a quiet approach because there's so much at
Speaker 1: stake between them and the US on a global basis,
Speaker 1: so much at stake on a bilateral basis, including their tariffs,
Speaker 1: that they want to see some resolution on. So I
Speaker 1: think we'll see quiet diplomacy with China and the US
Speaker 1: rather than stamping on the foot or saying anything about
Speaker 1: military force.
Speaker 2: In my reading, i've heard that. But what does Edward Morris,
Speaker 2: I'm going to butcher the pronunciation, Doctor Morris. Do we
Speaker 2: need to show the flag this morning and cow Shingport
Speaker 2: in Taiwan? Does the US Navy need to get over there,
Speaker 2: and you know, like Perry centuries ago, show the flag time.
Speaker 1: I think the US showed the flag before Madua was
Speaker 1: taken out. They showed the flag with a massive military
Speaker 1: sale to Taiwan. And the military has been there, the
Speaker 1: Navy has been there. China is not in a position
Speaker 1: to fool around with the US, even with much of
Speaker 1: the US naval fleet now around Venezuela. So I think
Speaker 1: it's going to be stepping very lightly on what could happen.
Speaker 2: Van Morris with his folks a special edition of Bloomberg Surveillance.
Speaker 2: We've really held back the commercial interruptions to give you
Speaker 2: this conversation for America. Around the world, you have such
Speaker 2: a relationship with Faisal and on in Saudi Arabia. How
Speaker 2: does the Middle East in general, and particularly read and Jedda,
Speaker 2: how do they respond to these actions?
Speaker 1: They're responding quite quietly. Riad Is looking at the global setting.
Speaker 1: They know that Venezuela could be a threat to the
Speaker 1: production agreement within OPEK plus, but not in the short run.
Speaker 1: And the short run they're looking at the year ahead.
Speaker 1: The year ahead is quite uncertain and quite messy, and
Speaker 1: it was that way before the taking of Maduro. We
Speaker 1: have Russia, Ukraine, We have uncertainty on the distortion and
Speaker 1: disruption side around the world. And the Saudis have also
Speaker 1: a military tide of the US that they don't want
Speaker 1: to lose, right, so they have to and they look
Speaker 1: at their budget. The budget requires a lot of borrowing.
Speaker 1: That borrowing may include in their own minds, how low
Speaker 1: can prices go for US six.
Speaker 2: Where's the folks? I failed, Paul, I've failed. Ed Morris
Speaker 2: nailed the decline in oil. Do you have a lower
Speaker 2: oil target from her for heart Tree.
Speaker 1: So we don't know how low the price will go.
Speaker 1: It's lifted a little bit by the geopolitical risk. I'd
Speaker 1: say the supply demand balance, which is higher supply than
Speaker 1: the race demand now and going forward, is for oil
Speaker 1: testing branded forty OK and I think testing branded forty
Speaker 1: is something the Saudis can swallow. How much lower than
Speaker 1: that they can swallow? It is not known.
Speaker 2: I want to get this thing because Paul's got any questions.
Speaker 2: So you're going to go visit Trump. President Trump is
Speaker 2: going to mean Edward Morris coffee with the President. You're
Speaker 2: going to talk about a transactional American president. And I
Speaker 2: know you're going to get a phone call from Ottawa
Speaker 2: where Mark Kearney is going to go Edmonton's playing Ottawa,
Speaker 2: ed Morre's come join me at an Ottawa senator's hockey game.
Speaker 2: I mean, this is the way it's going to work.
Speaker 2: What do you say to Mark Kearney of Canada?
Speaker 1: Well, start with Trump, because I haven't answered your question
Speaker 1: by said that Trump. And what I said of Trump
Speaker 1: is your policy on energy dominance is a wonderful strategy.
Speaker 1: But mister President, I think you're ignoring some things about
Speaker 1: energy dominance, and there are two things about it. One
Speaker 1: is that you can't get to where you want without
Speaker 1: having a significant growth, because this is a world transitioning
Speaker 1: to electricity intensity, and you can't do the electricity intensity
Speaker 1: you need for AI and cloud computing and energy dominance
Speaker 1: without renewables. You can't do it even without hydrogen. So
Speaker 1: you've got to enlarge what you think about energy dominance.
Speaker 1: And then, mister President, you've got to think about the US.
Speaker 1: The US is not one country when it comes to energy.
Speaker 1: At six. We have two exporting segments in the US.
Speaker 1: They are the Gulf Coast of the US. And I'm
Speaker 1: not talking about the Gulf of America or the Gulf
Speaker 1: of Mexico, but the Gulf Coast, and we have Alaska,
Speaker 1: both exporters of fossil fuels. And then we have two
Speaker 1: massive importers of fossil fuel with no tie. And mister President,
Speaker 1: here is a lesson. The reason that we have two
Speaker 1: importers on the West Coast and the East Coast that
Speaker 1: are massive in scale, global in scale is because another
Speaker 1: period of dominance around World War One, we thought we
Speaker 1: were the best shipbuilding company country in the world, and
Speaker 1: we wanted to retain that dominance. So the Jones Act
Speaker 1: was enacted. And the Jones Act has meant that when
Speaker 1: it comes to energy, we are importers because we can't
Speaker 1: afford American chips to take oil from the Gulf Coast
Speaker 1: to the West Coast or the East coast. We need
Speaker 1: investors and they carry far.
Speaker 2: So this is the moment to do away with a
Speaker 2: Jones Act.
Speaker 1: This is the moment to do it, I mean, and
Speaker 1: also to tell the president energy dominance a good idea
Speaker 1: needs a little bit of massaging at the edge.
Speaker 2: I mean, the photograph of Theodore Roosevelt with the map
Speaker 2: of Venezuela behind him from I believe Paul nineteen oh
Speaker 2: nine was just stunning. I mean, this history going back here,
Speaker 2: Paul Sweeney with Edward Morris.
Speaker 3: So when you go down to Houston, you talk to
Speaker 3: these big energy companies today. Are they happy with what's
Speaker 3: going on in the last twenty four or forty eight
Speaker 3: hours or are they apprehensive? Did they see a big
Speaker 3: opportunity here?
Speaker 1: They see a better opportunity that they've seen than they've
Speaker 1: seen in years, but they are apprehensive. The risk of
Speaker 1: putting capital, their capital, their shareholders. Capital at risk looms
Speaker 1: extremely large in their minds, so there's not going to
Speaker 1: be a rush to put money into Venezuela until we
Speaker 1: see what the structure of the investment might look like.
Speaker 2: I'm surprised.
Speaker 1: I don't see a move in WTI and Brent Crew today.
Speaker 3: Now I couldn't have told you is it gonna be
Speaker 3: up five percent or down five percent? But I kind
Speaker 3: of got nothing going on here today.
Speaker 1: Well, in my prepared remarks, I thought that was the
Speaker 1: first question. I didn't know. You know that we're going
Speaker 1: to have prices go down a.
Speaker 2: Little bits and surveillance, you know, we make it up as.
Speaker 1: We're winging it. No, I'm not surprised. Okay, there is
Speaker 1: no change in the energy market period.
Speaker 3: There you go, all right, so, but I think at
Speaker 3: some point it just feels like almost Opeck and Opeck
Speaker 3: plus become less and less relevant every day.
Speaker 1: Opek and Outpeck plus have become less relevant every day
Speaker 1: since the beginning of this decade. And when we look
Speaker 1: at the positions that have put this in place, it's
Speaker 1: not just the rise of Guyana and Brazil and Argentina again,
Speaker 1: but it really is the US. The US h you know,
Speaker 1: I have this battle with my colleagues at work almost
Speaker 1: every day. The US is not just a crude oil producer.
Speaker 1: It is a massive liquids producer. We are a producer
Speaker 1: of twenty three twenty four million barrels a day, and
Speaker 1: our growth has been in natural gas liquids. Natural gas
Speaker 1: liquids compete with oil out of a refinery. They compete
Speaker 1: with gasoline, they compete with dissolate, they compete with fuel oil.
Speaker 1: They're there for transportation, they're there for home heating and
Speaker 1: power generation and industrial use. So we are the disruptor
Speaker 1: of the global market, and we're the ones who put
Speaker 1: OPEC plus in a position of defense.
Speaker 2: I would be out. We're going to have to wrap
Speaker 2: it up here with Mark Champion coming up, folks from Europe,
Speaker 2: with all of his decades of experience, Doctor Morris. Some
Speaker 2: of the highlights of my career here than with you
Speaker 2: in with Daniel Jurgen. If I was to get Urgen
Speaker 2: in Morse together and look at his theprize, just the
Speaker 2: romance that I as a kid in college, red cover
Speaker 2: to cover. We got to find the romance for Venezuela,
Speaker 2: to save a society, to say a region maybe to
Speaker 2: support the don Road doctrine. I don't know how do
Speaker 2: we get the romance back that you knew working there,
Speaker 2: that I knew as a student.
Speaker 1: I don't know how we do that. I know that
Speaker 1: I'm not going to bring the romance back, and Dan
Speaker 1: Jurgen certainly has the ability to do it. By the way,
Speaker 1: I was an early reader of the Prize. He and
Speaker 1: I knew each other in graduate school. We were in
Speaker 1: different graduate schools, And when he wrote The Price, the
Speaker 1: original version that I read was actually twice as long
Speaker 1: as a version in print, So he had to cut
Speaker 1: out a lot of wonderful text in order to put
Speaker 1: out that brilliant book.
Speaker 2: The book was it, Paul? It was You had to
Speaker 2: walk around even if you didn't read it, you walked
Speaker 2: walk it. Yeah, to be cool, You're gonna talked about
Speaker 2: this unique American relationship with various and sundry Banana republics,
Speaker 2: Reagan and Granada and the rest. Can we develop a
Speaker 2: new process with Central and Latin America or will this
Speaker 2: be the same old, same way through the rest of
Speaker 2: the Trump term.
Speaker 1: No, I think there is a process going on. If
Speaker 1: we look at elections that have taken place in Latin America.
Speaker 1: There's a rebellion in those countries against corruption. There's a
Speaker 1: move from the corrupt left to the right. We've had
Speaker 1: a corrupt right in the past, but it's been a
Speaker 1: very constructive set of moves from reelections. So I think
Speaker 1: I think Latin America is in a very good position now,
Speaker 1: better position than it's been in a long time. And
Speaker 1: part of it is the lessons learned from China, overspending
Speaker 1: and having a view that all credit has to be repaid.
Speaker 2: Wow, Paul, we got to get to mark Champion. But
Speaker 2: doctor Morris, I got to bring this up, Paul said,
Speaker 2: you got to ask the question time. What's it mean
Speaker 2: for Landman?
Speaker 1: Thank you very much for inviting me. It has been
Speaker 1: a pleasure to.
Speaker 2: Be Thank you so much. With har Tree and of
Speaker 2: course doctor Morris was City Group for many years, Edward
Speaker 2: Morrice there