WEBVTT - Data Dependency and the Global Energy Pivot 0:00:03.880 --> 0:00:07.320 Welcome to Bloomberg Opinion. I'm Vonnie Quinn this week. If 0:00:07.360 --> 0:00:10.360 you threaten other nations and try to use energy as 0:00:10.360 --> 0:00:14.640 a geopolitical weapon, energy importing nations will find alternatives. All 0:00:14.680 --> 0:00:16.400 they want is energy, and if you tell them that 0:00:16.440 --> 0:00:19.720 the energy you provided insecure, they will alternatives. And at 0:00:19.720 --> 0:00:22.239 the moment, obviously there's an energy transition was already in 0:00:22.280 --> 0:00:24.960 a degree of swing, and it's really being fueled by 0:00:25.000 --> 0:00:28.160 what's happened. David Fickling on the year that hastened the 0:00:28.200 --> 0:00:32.640 greatest global energy transformation since the nineteen seventies. Later in 0:00:32.800 --> 0:00:36.600 the path, President Duping didn't quite have all the political power, 0:00:36.800 --> 0:00:39.199 but the next premiere will probably be his men, and 0:00:39.320 --> 0:00:42.120 the heat will probably be change. And that means that 0:00:42.159 --> 0:00:45.400 the economic hurrican is likely to be met, and that 0:00:45.479 --> 0:00:49.800 will have global financial implications going into commodities at the 0:00:49.840 --> 0:00:54.080 asset prices. Shulie Wren on expectations for China's annual parliamentary 0:00:54.120 --> 0:00:57.480 meeting the National People's Congress starting Sunday. First though of 0:00:57.520 --> 0:01:00.600 Bloomberg Opinions, John Authors, as we kick off new months 0:01:00.680 --> 0:01:03.760 in markets, John, is this a market in the process 0:01:03.800 --> 0:01:06.479 of repricing coming to a conclusion, or do we still 0:01:06.560 --> 0:01:09.080 have completely disparate opinions on what's going on out there. 0:01:09.920 --> 0:01:13.120 It certainly looks at the moment as though we are 0:01:13.120 --> 0:01:16.800 repricing that we are at least in the process of 0:01:16.880 --> 0:01:20.760 another wave towards accepting that rates will be higher for 0:01:20.840 --> 0:01:26.120 longer and that bond yields will have therefore to be higher. Briefly, 0:01:26.160 --> 0:01:28.840 you had ten year yields here in the States hit 0:01:28.959 --> 0:01:33.360 four percent on Wednesday. You now have German two year 0:01:33.400 --> 0:01:38.160 bunt yields at a post crisis high. They haven't been 0:01:38.200 --> 0:01:40.600 as high as they currently now, which is above three percent, 0:01:40.959 --> 0:01:45.520 since the actual eve of the Lehman bankruptcy way back 0:01:45.520 --> 0:01:50.360 in two thousand and eight. So the move towards some 0:01:50.480 --> 0:01:55.080 kind of an acceptance that rates will have to stay higher, 0:01:56.360 --> 0:01:59.200 but also it's not all negative, and some kind of 0:01:59.200 --> 0:02:02.520 an acceptance that we're back to an economy that looks 0:02:02.560 --> 0:02:06.200 a bit more like what it was for many decades before. 0:02:06.840 --> 0:02:09.160 I noticed we're not using the word normal because we 0:02:09.240 --> 0:02:12.079 still don't know what normally. I'm not sure how much 0:02:12.120 --> 0:02:17.400 that helps to use that, but where in obviously we're 0:02:17.440 --> 0:02:21.040 back in the world where inflation is relevant and affect 0:02:21.120 --> 0:02:23.720 of life to be concerned about really for the first 0:02:23.760 --> 0:02:27.480 time in three decades, I'd say, and that obviously matters 0:02:27.520 --> 0:02:30.720 a lot. And we're also in the world therefore where 0:02:31.639 --> 0:02:36.160 permanent minimal interest rates can no longer I think we've 0:02:36.240 --> 0:02:40.040 now reached the point where everywhere outside of Japan accepts 0:02:40.080 --> 0:02:42.720 that that's no longer going to be the case, that 0:02:42.800 --> 0:02:46.560 we have got out of that regime into a different way. 0:02:46.639 --> 0:02:49.560 You have to imagine that because four percent caused such 0:02:49.560 --> 0:02:51.280 a I don't want to say shudder, but it definitely 0:02:51.280 --> 0:02:54.280 caused a reaction that we're not done yet. That's not 0:02:54.320 --> 0:02:59.160 the peak now, and again it depends which countries you're 0:02:59.160 --> 0:03:02.280 looking at. Again, bear in mind, all of this is 0:03:02.360 --> 0:03:06.480 balanced against the fact that the economic uses broadly good. 0:03:06.840 --> 0:03:10.560 It's spectacularly that's part of the problem, yes, exactly, particularly 0:03:10.600 --> 0:03:14.000 in China, it's spectacularly good because it looks as though 0:03:14.320 --> 0:03:17.560 what many people must admit, include myself, were worried about 0:03:17.639 --> 0:03:20.080 is that when they released the COVID restrictions, you would 0:03:20.080 --> 0:03:23.160 have a really serious dose of the pandemic which would 0:03:23.160 --> 0:03:25.760 slow them down for a while before they began then 0:03:25.800 --> 0:03:29.320 to enjoy economic benefits. It looks as though it hasn't 0:03:29.320 --> 0:03:33.800 been that severe, judging by how strongly their PMI data 0:03:33.800 --> 0:03:36.880 has improved. We're only just starting to get post reopening 0:03:36.960 --> 0:03:39.440 data now, though, so we don't really know yet right 0:03:40.480 --> 0:03:43.200 so it's possible we were in the course of an overreaction, 0:03:43.240 --> 0:03:48.200 but the first data that takes into account all of 0:03:48.240 --> 0:03:53.560 February does look very positive, and that makes that makes 0:03:53.560 --> 0:03:56.360 a difference. That brings up the question of being data dependent, 0:03:56.480 --> 0:03:58.560 which is obviously what the FEND says it is all 0:03:58.560 --> 0:04:00.800 the time. What does that even mean anymore? Do we 0:04:00.840 --> 0:04:04.320 want strong data or do we want weak data? I 0:04:04.560 --> 0:04:09.440 think I think data dependency really is more meaningful myself 0:04:09.480 --> 0:04:11.240 than it has been for a while, in the sense 0:04:11.280 --> 0:04:15.680 that trying to work out what the fed's reaction function 0:04:15.800 --> 0:04:20.000 would be, how hawkish it feels it needs to be 0:04:21.160 --> 0:04:25.160 is beside the point for the time being. If inflation 0:04:25.600 --> 0:04:29.640 doesn't come down pretty swiftly, they will have to keep 0:04:30.000 --> 0:04:33.880 tightening the screws. The data we got last month, it 0:04:34.040 --> 0:04:37.960 wasn't that people change their minds about how the FED 0:04:37.960 --> 0:04:41.200 would react that really there was really no Fed speak 0:04:41.279 --> 0:04:44.000 that really shifted the market. It was just a series 0:04:44.040 --> 0:04:46.360 of data points that made it clear that higher rates 0:04:46.360 --> 0:04:48.839 are going to be needed, or at least rates are 0:04:48.880 --> 0:04:53.960 high for longer. Yes, And I think that's probably where 0:04:54.000 --> 0:04:58.400 we are for now. Like there is enough uncertainty that 0:04:58.520 --> 0:05:01.520 we are all probably better trying to work out where 0:05:01.520 --> 0:05:05.120 the economy is going. Then we are trying to work 0:05:05.160 --> 0:05:08.080 out how the FED would react to it. As it 0:05:08.160 --> 0:05:11.600 stands at the moment. It's obviously reasonable to think that 0:05:11.600 --> 0:05:14.000 that rates will be rising faster than people thought a 0:05:14.000 --> 0:05:17.440 month ago. John, is it possible in any scenario that 0:05:17.480 --> 0:05:20.279 the major economies, and I suppose i'm talking, you're the 0:05:20.360 --> 0:05:26.520 US and China avoid recession completely? It's a bit like 0:05:26.560 --> 0:05:29.480 that line in Dumb and Dumber and Carrie says, so 0:05:29.600 --> 0:05:31.520 you're telling me there's a chance. I mean, yeah, yeah, 0:05:31.600 --> 0:05:38.320 there's a chance. I still find it very hard. I 0:05:38.360 --> 0:05:41.160 still find it very hard to see that happening. You. 0:05:41.880 --> 0:05:46.200 I mean in the case of the US. Obviously, there 0:05:46.320 --> 0:05:51.160 is this this issue that the FED is almost certainly 0:05:51.240 --> 0:05:56.800 not going to under hike. It might over I believe 0:05:56.880 --> 0:05:58.920 them when they say that they are convinced that the 0:05:59.279 --> 0:06:02.920 greater risk is of letting inflation get under control than 0:06:03.000 --> 0:06:07.880 of overdoing it. Therefore, the more the economy does rally, 0:06:08.040 --> 0:06:12.000 the more there will be no choice but to squelch it. 0:06:12.040 --> 0:06:16.320 Is it conceivable that it's such a mild recession we 0:06:16.360 --> 0:06:19.280 eventually yet that we don't really think if it is 0:06:19.320 --> 0:06:21.760 a recession. I guess that's possible. You had the one, 0:06:21.839 --> 0:06:24.839 the recession of the early nineties, the recession after the 0:06:24.839 --> 0:06:29.680 dot com bubble were not the apologies to anybody who 0:06:29.680 --> 0:06:31.720 did happen to lose their job during those episodes, but 0:06:32.360 --> 0:06:36.919 in general, they were not major moments that really affected 0:06:36.920 --> 0:06:39.760 the quality of life. And we didn't hear any complete 0:06:39.880 --> 0:06:43.599 horror stories out of earning season. We didn't hear any well. Again, 0:06:43.680 --> 0:06:47.160 that's another intriguing one, is just how long that ball 0:06:47.240 --> 0:06:50.240 can stay here? But yes, I think with earnings, the 0:06:50.839 --> 0:06:54.279 issue is that it's very difficult to raise rates, to 0:06:54.360 --> 0:06:58.039 have a slowdown in activity without there being a very 0:06:58.080 --> 0:07:02.239 significant effect on profits. No, you're quite right, we haven't 0:07:02.279 --> 0:07:06.880 seen that big an impact thus far. When companies are 0:07:06.880 --> 0:07:10.000 still making profits, they still have money to reinvest or 0:07:10.080 --> 0:07:13.440 to inject into the rest of the markets via dividends 0:07:13.560 --> 0:07:18.800 or buy backs. It would probably suit the FED to better, 0:07:18.880 --> 0:07:21.720 or those fighting inflation better if companies weren't doing so 0:07:21.760 --> 0:07:26.120 well Yeah, so I think that's another instance where the 0:07:26.280 --> 0:07:31.360 fact that the lag in terms of really crimping economic 0:07:31.400 --> 0:07:35.040 activity after rates start to go up, that lag is 0:07:35.080 --> 0:07:39.800 proving longer than some had hoped, and that probably means 0:07:39.880 --> 0:07:42.840 ultimately that the chances of an overcorrection at the end 0:07:42.840 --> 0:07:45.120 of the cycle rise. Well, it's fascinating because even in 0:07:45.160 --> 0:07:48.040 places like Australia and New Zealand where the lag isn't 0:07:48.080 --> 0:07:50.880 as long, usually because it goes straight to housing, we're 0:07:50.920 --> 0:07:53.680 still seeing those central banks continue to have to raise rates. 0:07:53.680 --> 0:07:57.160 So it really as a phenomenally strange time. Will there 0:07:57.200 --> 0:07:59.640 have to be books written about this? Monetary policy wise, 0:07:59.640 --> 0:08:03.560 have we learned a lot? I'm not sure we've learned 0:08:03.840 --> 0:08:07.160 very much yet. I mean, we were still learning about 0:08:07.200 --> 0:08:09.240 the financial crisis of two thousand and eight. I can 0:08:09.320 --> 0:08:11.000 remember thinking at the time, I'm probably going to have 0:08:11.000 --> 0:08:13.800 to spend the rest of my career trying to understand 0:08:14.120 --> 0:08:18.200 what just happened. There are some very important senses in 0:08:18.240 --> 0:08:20.800 which the world is only now coming out of the 0:08:20.880 --> 0:08:25.800 post crisis environment. And yeah, there's a very good argument 0:08:25.840 --> 0:08:29.800 that particularly COVID, possibly also the reaction to the invasion 0:08:29.840 --> 0:08:33.240 of Ukraine were the shocks that were needed to knock 0:08:33.360 --> 0:08:36.440 us out of it. Whether in years to come there'll 0:08:36.440 --> 0:08:39.599 be an analogy with World War two ending the depression 0:08:39.679 --> 0:08:43.200 after a similar amount of time, it's conceivable that, you know, 0:08:43.600 --> 0:08:48.439 a really bad, truly shocking event knocks the economy out 0:08:48.440 --> 0:08:52.760 of this sort of post financial crash condition. Is it 0:08:52.760 --> 0:08:55.560 fair to say that when this is all over, if 0:08:55.600 --> 0:08:59.360 there is this to be over problems that plagued economy 0:08:59.440 --> 0:09:03.160 is like, for example, stagnation in Japan, no inflation in Japan, 0:09:03.200 --> 0:09:05.280 that those won't be the problems that those economies are 0:09:05.280 --> 0:09:08.360 dealing with anymore. A lot of that comes down to demographics, 0:09:08.400 --> 0:09:10.400 I think. In these particularly in the case of Japan, 0:09:10.440 --> 0:09:13.319 which is obviously of the leading country is the one 0:09:13.360 --> 0:09:18.079 that dealt with a declining population first. It is quite 0:09:18.120 --> 0:09:23.800 intriguing Japan does actually seem to have inflation. It's also 0:09:23.960 --> 0:09:26.360 quite intriguing for the first time in a generation. It's 0:09:26.360 --> 0:09:30.520 also quite intriguing that even the new guy coming in 0:09:30.559 --> 0:09:32.800 at the Bank of Japan doesn't seem to be convinced 0:09:32.840 --> 0:09:36.760 that you can actually start tightening yet, that he still 0:09:36.760 --> 0:09:41.319 sees the return of inflation as something fragile. We are 0:09:41.400 --> 0:09:45.880 I suppose you could say Europe really does seem to have. 0:09:46.920 --> 0:09:51.960 Europe had suffered Japanification for over a decade, and Europe 0:09:52.040 --> 0:09:55.280 does seem to have lifted out of it through a 0:09:55.320 --> 0:09:59.760 combination of COVID nineteen and Vladimir Putin. It looks to 0:09:59.800 --> 0:10:02.559 me as though Japan probably has as well, but it's 0:10:02.600 --> 0:10:06.200 not that clear, and it certainly does. Europe has similar 0:10:06.280 --> 0:10:09.400 kinds of issue, gemographic issues coming to those that are 0:10:09.480 --> 0:10:12.520 arrived a while ago in Japan. But there is the 0:10:12.559 --> 0:10:17.560 issue that that shrinking population is less likely to makes 0:10:17.559 --> 0:10:20.640 it more problematic. Not to mention China, well, there is 0:10:20.679 --> 0:10:25.640 that too, Bloomberg Opinions, John Authors. Next, the big consumers 0:10:25.640 --> 0:10:28.400 and the big exporters of oil agreed not to use 0:10:28.440 --> 0:10:31.160 this as a geopolitical weapon, and that's worked very well 0:10:31.320 --> 0:10:34.480 for our exporting nations ever since. And so I think 0:10:34.480 --> 0:10:37.319 what's really striking about what happened over the past year 0:10:37.559 --> 0:10:41.480 is that Putin's actions around energy broke that five decade 0:10:41.480 --> 0:10:45.320 packed between our producers and consumers. David Fickling on some 0:10:45.400 --> 0:10:49.280 of the unintended consequences of Russia's war on Ukraine. This 0:10:49.440 --> 0:10:53.600 is Bloomberg opinion. You're listening to Bloomberg opinion. I'm Vanni Quinn. 0:10:54.000 --> 0:10:59.079 Just more than a year ago Russia invaded Ukraine. That 0:10:59.240 --> 0:11:02.679 said in motion a series of catastrophic events, including a 0:11:02.800 --> 0:11:07.320 shifting of decades long energy relationships. Moscow didn't perhaps bang 0:11:07.360 --> 0:11:10.760 on that accelerating the energy transition, but that's what it 0:11:10.800 --> 0:11:13.520 did at least one silver lining, perhaps in a very 0:11:13.600 --> 0:11:17.959 dark cloud. Numberg Opinions. David Fickling joins, so, David, Russia's 0:11:17.960 --> 0:11:21.640 invasion of Ukraine hastened a global energy transformation. As you 0:11:21.679 --> 0:11:24.400 put it in a recent article, that's really a phenomenon 0:11:24.520 --> 0:11:28.000 of graphics and just information. There was an energy transformation 0:11:28.040 --> 0:11:30.920 in the works. By how much has the war actually 0:11:31.000 --> 0:11:35.040 hastened that transition? I think certainly early on after the invasion, 0:11:35.240 --> 0:11:37.960 there was an expectation that this was going to renew 0:11:38.240 --> 0:11:41.720 an underline the world's addiction to the fields that Russia exports, 0:11:41.720 --> 0:11:44.480 apollowing gaps and to a lesser extent coal. I think 0:11:44.520 --> 0:11:47.720 what we can see now is how much those predictions 0:11:47.720 --> 0:11:49.760 have not been the case. I mean, you know, there 0:11:49.800 --> 0:11:51.079 was a report out just a couple of weeks ago 0:11:51.280 --> 0:11:54.760 via a Rice Stadded Norwegian oil and Gas consultancy. They 0:11:54.800 --> 0:11:58.600 reckon fossil fuel emissions globally will peak by twenty twenty five. 0:11:58.679 --> 0:12:01.040 This is something you no one was predicting a few 0:12:01.120 --> 0:12:04.120 years back. Wind and solar generates a fit of the 0:12:04.240 --> 0:12:07.520 U electricity last year, and the IA. The wreck in 0:12:07.600 --> 0:12:11.520 generation globally from gas and coal will stagnate through twenty 0:12:11.559 --> 0:12:14.440 twenty five, while renewal output goes about nine percent a year. 0:12:14.679 --> 0:12:16.760 All these things are pointing in the same direction. And 0:12:16.760 --> 0:12:19.920 it's actually quite an old lesson of energy geo politics, 0:12:20.120 --> 0:12:22.880 which is that if you threaten other nations and try 0:12:22.920 --> 0:12:26.400 to use energy as a geopolitical weapon, energy consuming nations, 0:12:26.480 --> 0:12:30.240 energy importing nations will find alternatives. All they want is energy, 0:12:30.280 --> 0:12:32.560 and if you tell them that the energy you provided insecure, 0:12:32.840 --> 0:12:35.080 they will look for alternatives. And at the moment, obviously 0:12:35.080 --> 0:12:37.439 there is an energy transition was already in a degree 0:12:37.440 --> 0:12:40.000 of swing, and it's really being sort of fueled by 0:12:40.040 --> 0:12:43.120 what's happened. But David, twenty twenty five is literally two 0:12:43.240 --> 0:12:47.160 years away. Are we saying peak fossil fuel in two years? Yeah? 0:12:47.200 --> 0:12:49.000 I mean that's the foecut from Writer, which is a 0:12:49.040 --> 0:12:51.719 Norwegian consultancy. Their roots are in oil and gas. These 0:12:51.760 --> 0:12:54.440 are not sort of energy transition advocates, But this is 0:12:54.480 --> 0:12:56.960 just looking at the numbers. The driver of that is 0:12:56.960 --> 0:12:59.480 what's happening in the power sector. And of course in 0:12:59.520 --> 0:13:01.360 the power sector, one thing that we saw over the 0:13:01.400 --> 0:13:04.400 past ten years was a sort of frena move situation 0:13:04.480 --> 0:13:07.880 between renewables and gas, where sometimes gas would just support renewables, 0:13:07.960 --> 0:13:09.920 but sometimes gas was sort of especially in Europe, the 0:13:09.960 --> 0:13:13.920 competition for renewables, gas in particular, and especially pipeline gas 0:13:13.920 --> 0:13:16.160 has been the fuel that has suffered from this. Russia's 0:13:16.200 --> 0:13:18.840 vast exports of pipeline gas to Europe have gone away, 0:13:19.160 --> 0:13:21.440 and Europe's looking alternative now a lot of fat. Some 0:13:21.520 --> 0:13:23.800 of that is coal, some of that is ELMG, the 0:13:23.840 --> 0:13:25.520 same gas, but a huge amount of it if you 0:13:25.559 --> 0:13:28.240 look at the Repower EU program that they put through, 0:13:28.640 --> 0:13:31.680 is just advancing that end transition. So David, what happens 0:13:31.720 --> 0:13:35.280 to the OPEC hegemony then, well, I mean, I think 0:13:35.280 --> 0:13:37.760 it's very interesting if you look at the history of 0:13:37.800 --> 0:13:41.160 the OPEC hegemony and how they have maintained their position 0:13:41.240 --> 0:13:44.520 over the past five decades, it's really been by not 0:13:44.640 --> 0:13:47.720 doing what Russia has done over the past year. Obviously, 0:13:48.080 --> 0:13:51.600 famously in nineteen seventy three, OPEC, or rather OAPEC, the 0:13:51.600 --> 0:13:54.360 Arab nations in OPEC threatened to use oil as a 0:13:54.400 --> 0:13:57.880 geopolitical weapon over the October War, and you had the 0:13:57.920 --> 0:14:00.080 crisis that resolved to come out over the seventies, and 0:14:00.120 --> 0:14:01.960 as a result of that, you did see a lot 0:14:02.000 --> 0:14:05.160 of demand destruction. You saw oil consumers switching to more 0:14:05.160 --> 0:14:08.280 efficient cars. Fuel oil generated a quarter of the world's 0:14:08.280 --> 0:14:11.880 electricity in nineteen seventy two. Now it's about two and 0:14:11.920 --> 0:14:14.040 a half percent. That was given up because it was 0:14:14.040 --> 0:14:16.520 seen as too risky. You saw the building of nuclear 0:14:16.520 --> 0:14:19.800 power stations, cold power stations. You saw the first start 0:14:19.840 --> 0:14:22.640 of serious sort of renewable work with Jimmy Carter putting 0:14:22.640 --> 0:14:24.520 solar panels on the white hats and that sort of thing. 0:14:24.960 --> 0:14:26.760 But the pack that came at the end of that 0:14:26.880 --> 0:14:29.920 was really that the big consumers and the big exporters 0:14:29.920 --> 0:14:33.160 of oil agreed not to use this as a geopolitical weapon. 0:14:33.240 --> 0:14:36.760 And that's worked very well for our exporting nations ever since. 0:14:37.240 --> 0:14:39.960 And so I think what's really striking about what happened 0:14:39.960 --> 0:14:43.520 over the past year is that Putin's actions around energy, 0:14:43.560 --> 0:14:46.280 around the invasion of Ukraine sort of broke that five 0:14:46.360 --> 0:14:50.240 decade packed between oil producers and consumers, and that's a 0:14:50.280 --> 0:14:52.920 problem for all oil exporters. Most of the others will 0:14:52.960 --> 0:14:55.640 probably do better, but it's potentially a very severe own 0:14:55.680 --> 0:14:58.680 goal for Russia. Yeah, for sure. Now we do know 0:14:58.760 --> 0:15:02.000 that Russia is still managed two salads oil at a 0:15:02.040 --> 0:15:04.360 discount to shadow markets and so on. We know that 0:15:04.400 --> 0:15:07.000 things like smaller, older vessels are being used to ship 0:15:07.040 --> 0:15:10.040 this oil. They're literally being repainted and sort of vessel 0:15:10.200 --> 0:15:13.080 chop shops, I guess somewhere. And then also the possibility 0:15:13.080 --> 0:15:15.280 of oil spills has grown because of this. So what 0:15:15.520 --> 0:15:19.480 has changed beyond the fact that poorer countries are getting 0:15:19.560 --> 0:15:23.480 cheaper oil and Russia still gets some revenue from oil. Well, 0:15:23.720 --> 0:15:26.000 that's right, And I think you know, one thing that 0:15:26.040 --> 0:15:28.280 we see with this is that no one has a 0:15:28.360 --> 0:15:30.480 vest interest in rocking the boat too much. You know, 0:15:30.560 --> 0:15:32.960 Europe did not want to cut off its imports of 0:15:33.080 --> 0:15:35.600 Russian petroleum, and it was sort of really dragged, kicking 0:15:35.600 --> 0:15:37.080 and screaming into it a lot of the time by 0:15:37.120 --> 0:15:39.520 Russia's own actions. And at this point, you know, we 0:15:39.560 --> 0:15:41.520 see you mentioned developing countries. I mean, I think one 0:15:41.560 --> 0:15:44.080 of the most interesting dynamics we see right now is 0:15:44.120 --> 0:15:46.400 that a lot of this Russian CREWD is getting exported 0:15:46.440 --> 0:15:49.200 to India. India has some of the world's biggest oil 0:15:49.240 --> 0:15:51.480 refineries and a lot of it is being refined in 0:15:51.480 --> 0:15:54.400 India and then exported back to Europe. And Europe's fairly 0:15:54.400 --> 0:15:56.040 happy to turn a blind eye to that because it 0:15:56.080 --> 0:15:59.920 wants cheeko refined products. It wants che gasoline and diesel. 0:16:00.360 --> 0:16:02.840 So there's a gray market that's flourishing there. This has 0:16:02.880 --> 0:16:05.160 always happened. I mean, if you look at Glencore across 0:16:05.200 --> 0:16:08.000 the world's biggest country trader, the real roots of grain 0:16:08.040 --> 0:16:10.320 Core at the time when that business really starts to 0:16:10.320 --> 0:16:12.400 take off was very much in the aftermath of the 0:16:12.480 --> 0:16:15.600 seventies oil crisis, when Mark Rich Glencore was formerly Mark 0:16:15.680 --> 0:16:18.880 Rich and Co. Celebrated commodities trader. I mean, he made 0:16:18.880 --> 0:16:21.040 a lot of money from selling Iranian oil to Israel 0:16:21.320 --> 0:16:24.440 after the Iranian Revolution, which obviously neither Iran nor Israel 0:16:24.480 --> 0:16:26.560 wanted to admit that that was going on. By acting 0:16:26.560 --> 0:16:28.600 as a middleman, Mark Rich is able to do very 0:16:28.640 --> 0:16:30.480 well out of that, and that's the sort of dynamic 0:16:30.520 --> 0:16:33.520 that we will see increasingly now. How much is a 0:16:33.600 --> 0:16:37.160 mild winter in northern countries contributed to this energy transition 0:16:37.240 --> 0:16:39.640 or to this ability to get past this difficult phase. 0:16:39.960 --> 0:16:42.400 And is it significant that this winter was mild or 0:16:42.400 --> 0:16:44.560 would every winter need to be mild in order for 0:16:44.640 --> 0:16:48.000 this to continue? Yeah? I think that has certainly been 0:16:48.040 --> 0:16:50.920 a very lucky adventure arity for Europe that it didn't 0:16:51.040 --> 0:16:53.440 face those big draws on gas. I mean, if you look, 0:16:53.560 --> 0:16:56.440 it's remarkable really that the prices of oil and gas 0:16:56.480 --> 0:16:59.200 are lower now than they were before the war. Now, 0:16:59.360 --> 0:17:01.680 this winter is a crucial one. Next winter will also 0:17:01.720 --> 0:17:04.080 be a crucial one. They're not out of the woods yet, 0:17:04.119 --> 0:17:06.800 but I think beyond that the threat of the weather 0:17:06.800 --> 0:17:09.159 starts to change. Because you know, the great advantage of 0:17:09.200 --> 0:17:12.240 fuel and fossil fields in particular is that they're very flexible. 0:17:12.359 --> 0:17:14.360 There is a global market for it. You can move 0:17:14.359 --> 0:17:16.199 it from one corner of the world to another. You 0:17:16.240 --> 0:17:19.639 can fairly easily increase production from the fields. And obviously, 0:17:19.720 --> 0:17:21.800 you know, people at the IA and an OPEC track 0:17:22.040 --> 0:17:25.080 demand month by month or indeed week by week and 0:17:25.160 --> 0:17:27.840 produces a sort of adjusting their plans according to that. 0:17:28.240 --> 0:17:31.200 So there's that flexibility there. Of course, we just transition 0:17:31.200 --> 0:17:34.280 to renewables. Renewables don't have that. You cannot produce more 0:17:34.280 --> 0:17:36.960 power from a wind farms than its sort of rated capacity, 0:17:37.240 --> 0:17:40.000 so that becomes a problem. And also it takes a 0:17:40.080 --> 0:17:42.000 while to develop those new wind farms. It takes several 0:17:42.080 --> 0:17:45.080 years to plug them in to build transmission lines. However, 0:17:45.160 --> 0:17:47.520 beyond this winter, we really start to see the picture 0:17:47.600 --> 0:17:50.359 changing a lot. You know, Europe is locking down supplies 0:17:50.359 --> 0:17:53.960 of alternative energy that doesn't need Russia. So if we 0:17:54.160 --> 0:17:56.280 have another mild winter that Europe is able to make 0:17:56.320 --> 0:17:58.800 it through this year, then the sort of threat of 0:17:58.800 --> 0:18:01.600 that weapon really goes down substantially. So when you talk 0:18:01.640 --> 0:18:05.360 about renewables, we know that there are certain environmental problems 0:18:05.359 --> 0:18:08.199 with some of them still, right, so things like battery 0:18:08.200 --> 0:18:11.680 power and nuclear power, are they uncategorically better for the environment. 0:18:12.760 --> 0:18:14.880 The big problem we're facing at the moment is that 0:18:14.960 --> 0:18:17.000 there is a fixed amount of the common duck side 0:18:17.000 --> 0:18:19.440 that we're able to pump into the atmosphere, and each 0:18:19.520 --> 0:18:21.760 year we pump about thirty six thirty seven billion tons 0:18:21.800 --> 0:18:24.720 of conduck side into the atmosphere, and we're heading for 0:18:25.119 --> 0:18:27.600 geological limits about how much of that we can take 0:18:27.680 --> 0:18:30.560 before the atmosphere itself starts warming, and that's a battle 0:18:30.560 --> 0:18:32.280 that we have to sort of fight over the next 0:18:32.280 --> 0:18:35.400 thirty years. So certainly you can certainly point to things. 0:18:35.400 --> 0:18:37.440 You can point to gus, there's a lot, there'll be 0:18:37.440 --> 0:18:39.640 a lot of end of life waste from solar panels, 0:18:39.640 --> 0:18:41.800 you know, thirty years from now when we have to 0:18:41.920 --> 0:18:44.440 reconfigure them. But none of those really compared to the 0:18:44.720 --> 0:18:46.879 global scale of the challenge that we face with climate 0:18:46.960 --> 0:18:49.560 change at the moment, so I think they're clearly superior. Yeah, 0:18:49.600 --> 0:18:51.960 I'm also thinking about things like cobalt mining and so on. 0:18:52.720 --> 0:18:54.560 I mean, I think that's an interesting thing. But I 0:18:54.600 --> 0:18:56.960 think if you look at the scale of different commodities, 0:18:57.119 --> 0:18:59.160 one thing to bear in mind is that an unusual 0:18:59.160 --> 0:19:01.760 thing about fuel is that we use it every single year. 0:19:02.200 --> 0:19:04.280 You know, every time you feel a car, you need 0:19:04.359 --> 0:19:06.600 more oil to fuel that car. Every ton of coal, 0:19:06.640 --> 0:19:08.960 you need to burn more coal. Whereas something like cobalt 0:19:09.480 --> 0:19:12.239 is used once. The volumes of global cobalt production are 0:19:12.240 --> 0:19:14.200 in the hundreds of thousands of times, whereas the volumes 0:19:14.200 --> 0:19:16.080 of cross and fuel productions are in the tens of 0:19:16.080 --> 0:19:19.040 billions of tons. So in terms of the effect on 0:19:19.080 --> 0:19:21.840 the planet. There's some pretty awful labor conditions and things 0:19:21.840 --> 0:19:24.680 like cobalt mining. But you know, I don't think any 0:19:24.680 --> 0:19:26.440 of us surreiling for a sort of world of perfection 0:19:26.480 --> 0:19:29.679 where the resources that we're using produce no problems anywhere 0:19:29.680 --> 0:19:31.399 in the world. I think we know we have a 0:19:31.400 --> 0:19:33.359 sort of global challenge that we have to face about 0:19:33.560 --> 0:19:35.639 keeping this vanish the planet where we can live in 0:19:35.640 --> 0:19:37.359 the sort of conditions that we've been used to living. 0:19:37.520 --> 0:19:40.800 Bloomberg Opinions. David Fickling Next. A lot of things will 0:19:40.840 --> 0:19:42.880 get decided at this time, and it will be one 0:19:42.880 --> 0:19:46.479 of the most interesting National People's Congress in recent years. 0:19:46.480 --> 0:19:50.000 Surely ran on the China Communist Party's National People's Congress 0:19:50.080 --> 0:19:53.920 kicking off Sunday. This is Bloomberg Opinion. You're listening to 0:19:53.960 --> 0:19:58.000 Bloomberg Opinion. I'm Vannie Quinn. Markets are eagerly awaiting what 0:19:58.080 --> 0:20:02.240 emerges from the China Communist Parties National People's Congress starting someday. 0:20:02.440 --> 0:20:05.919 Blueberg Opinions. Shuley Ran joins now for a discussion around 0:20:06.000 --> 0:20:09.640 what in particular markets will be watching. Shuley, first of all, 0:20:09.640 --> 0:20:11.920 give us an idea of how many people are involved, 0:20:12.040 --> 0:20:14.520 who are the key characters to watch and what we'll 0:20:14.560 --> 0:20:17.440 get decided at this event. A lot of things will 0:20:17.480 --> 0:20:19.480 get decided at this time, and it will be one 0:20:19.520 --> 0:20:23.000 of the most interesting National People's Congress in recent years 0:20:23.080 --> 0:20:25.840 because at this point we're going to find out who 0:20:25.880 --> 0:20:28.840 the new premiere will be and all the key economic 0:20:29.080 --> 0:20:32.000 posts will be announced, such as the next Central Bank governor, 0:20:32.200 --> 0:20:35.680 the next head of Bank Regulati et c. And also 0:20:35.800 --> 0:20:39.000 very interesting is how China will say its world target, 0:20:39.240 --> 0:20:42.359 because that's going to affect a lot of global asset prices, 0:20:42.440 --> 0:20:45.439 such as commodities. The reason is that you know, in 0:20:45.440 --> 0:20:49.080 the past, President Shifting didn't quite have all the political 0:20:49.119 --> 0:20:53.680 power within him, right like oftentimes China's GDP targets were 0:20:53.720 --> 0:20:55.879 not met, and then he can toss the ball to 0:20:56.080 --> 0:20:58.800 current Premier League Chin and say, okay, they could chandn't 0:20:58.840 --> 0:21:01.159 do the job. But the next premier will probably be 0:21:01.280 --> 0:21:03.760 his men and the heat will probably be the change. 0:21:03.960 --> 0:21:06.960 And that means that whatever the economic target that they're 0:21:07.040 --> 0:21:10.439 study is likely to be met, and that will have 0:21:10.560 --> 0:21:16.720 global financial implications going into commodities and asserprises. Now, officials 0:21:16.760 --> 0:21:19.600 have been debating apparently whether to put that target at 0:21:19.680 --> 0:21:22.639 five percent, which would be faster than last year's three percent. 0:21:23.280 --> 0:21:26.119 Would that suggest though, that Beijing would have to engage 0:21:26.119 --> 0:21:27.760 in more stimulus if it were to be a five 0:21:27.800 --> 0:21:32.560