1 00:00:00,040 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,360 Speaker 2: Terminal and the Bloomberg Business app. It's the latest this morning. 10 00:00:37,400 --> 00:00:40,559 Speaker 2: The Trump administration seeking to curb crude volatility, saying the 11 00:00:40,680 --> 00:00:44,400 Speaker 2: US Navy willissis and escorting tankers through the stratiformers quote 12 00:00:44,640 --> 00:00:48,240 Speaker 2: soon as a runds new Supreme Issues, Supreme Leader issues 13 00:00:48,280 --> 00:00:52,320 Speaker 2: of statements, saying the crucial waterway should remain closed. Gene Soroka, 14 00:00:52,360 --> 00:00:54,680 Speaker 2: the executive director of the Port of Los Angeles, joins 15 00:00:54,760 --> 00:00:57,280 Speaker 2: us now for more. Gene, welcome to the program. Can 16 00:00:57,280 --> 00:01:00,360 Speaker 2: we start with the operational consequences here and can you 17 00:01:00,400 --> 00:01:02,880 Speaker 2: talk us through a picture of what you see the 18 00:01:02,920 --> 00:01:06,040 Speaker 2: transit times that have had to be extended now because 19 00:01:06,040 --> 00:01:09,720 Speaker 2: of the difficulties getting through that very tight straight offor moods. 20 00:01:09,760 --> 00:01:14,199 Speaker 3: What's going on now, Well, good morning, John, not much. 21 00:01:14,720 --> 00:01:18,039 Speaker 4: There are thousands of vessels that are stuck in the 22 00:01:18,080 --> 00:01:21,679 Speaker 4: Arabian Gulf and just to the east outside of the 23 00:01:21,680 --> 00:01:25,720 Speaker 4: Strait of Horror moves about one hundred and fourteen hundred 24 00:01:25,720 --> 00:01:30,600 Speaker 4: and fifteen container ships, balance bulkers, tankers, and those energy 25 00:01:30,640 --> 00:01:34,080 Speaker 4: ships that you've talked about in the previous segment. The 26 00:01:34,200 --> 00:01:37,880 Speaker 4: companies do not have an interest right now, nor is 27 00:01:37,920 --> 00:01:42,920 Speaker 4: there enough money for insurance to transit those ships through 28 00:01:42,959 --> 00:01:46,480 Speaker 4: the strait. Risking the life and limb of crew is 29 00:01:46,640 --> 00:01:49,160 Speaker 4: just not an option for the private sector companies today. 30 00:01:49,320 --> 00:01:51,720 Speaker 2: So Gene, you're saying that for many they're just doing 31 00:01:51,720 --> 00:01:54,600 Speaker 2: a hands off approach and have canceled a lot of transits. 32 00:01:55,560 --> 00:01:57,440 Speaker 3: That's right on the container side, John. 33 00:01:58,360 --> 00:02:01,320 Speaker 4: The Middle East and especially those countries in the Gulf, 34 00:02:01,440 --> 00:02:05,800 Speaker 4: think of the United Arab Emirates, Bahrain, Kuwait, Iraq. They're 35 00:02:05,960 --> 00:02:09,079 Speaker 4: consuming public much like we are here in the United States. 36 00:02:09,480 --> 00:02:14,000 Speaker 4: So exports from Asia of furniture, footwear, clothing, electronics, and 37 00:02:14,080 --> 00:02:17,920 Speaker 4: appliances have all but halted. Those factories in Asia are 38 00:02:17,919 --> 00:02:20,760 Speaker 4: trying to segment that product, move it to the side 39 00:02:20,800 --> 00:02:24,000 Speaker 4: so they can continue servicing us here in the United States, 40 00:02:24,080 --> 00:02:28,520 Speaker 4: Latin America, European Continent, and the UK. It's a matter 41 00:02:28,560 --> 00:02:30,480 Speaker 4: of time to see if that starts coming up the 42 00:02:30,560 --> 00:02:34,080 Speaker 4: works at ports through Asia. But so far supply chains 43 00:02:34,080 --> 00:02:37,200 Speaker 4: moving here to the United States are smooth. Yet the 44 00:02:37,360 --> 00:02:41,440 Speaker 4: cost of the fuel has doubled over the last ten days. 45 00:02:41,760 --> 00:02:44,640 Speaker 5: Has that affected Gene anything about the number of ships, 46 00:02:44,639 --> 00:02:47,440 Speaker 5: the number of the scope of demand that you've seen 47 00:02:48,160 --> 00:02:50,120 Speaker 5: at the port of Los Angeles, just based on the 48 00:02:50,120 --> 00:02:53,120 Speaker 5: fuel costs alone. 49 00:02:52,400 --> 00:02:55,080 Speaker 4: Not so much right now, Lisa. But we're watching this 50 00:02:55,320 --> 00:02:59,880 Speaker 4: very closely. The cargo moving today following Lunar New Year's 51 00:03:00,000 --> 00:03:04,240 Speaker 4: in our traditional slack season, so the flow of goods 52 00:03:04,240 --> 00:03:06,120 Speaker 4: will be a little bit slow until we hit the 53 00:03:06,160 --> 00:03:09,400 Speaker 4: middle of April. Then we'll start seeing spring and summer 54 00:03:09,480 --> 00:03:10,560 Speaker 4: fashion arrive. 55 00:03:11,080 --> 00:03:13,359 Speaker 3: But the fuel component right now is. 56 00:03:13,280 --> 00:03:17,240 Speaker 4: About twenty five percent of the overall freight cost, almost 57 00:03:17,280 --> 00:03:20,160 Speaker 4: double or much higher than it normally is. Yet it's 58 00:03:20,200 --> 00:03:22,280 Speaker 4: not impeding purchase orders. From what I hear out of 59 00:03:22,320 --> 00:03:27,000 Speaker 4: retailers and manufacturers alike. Those pos in Asia are remaining solid. 60 00:03:27,200 --> 00:03:29,960 Speaker 4: We're not seeing a drove of cancelations how much. 61 00:03:30,040 --> 00:03:33,160 Speaker 5: You also seeing supply chains start to regionalize in a 62 00:03:33,200 --> 00:03:35,480 Speaker 5: more concrete way. I mean, we've been talking about this 63 00:03:35,520 --> 00:03:38,920 Speaker 5: for a significant period of time. People trying to localize 64 00:03:38,960 --> 00:03:41,720 Speaker 5: where they get things to avoid some of these disruptions. 65 00:03:42,200 --> 00:03:47,840 Speaker 4: Is that accelerating, Yeah, it's interesting depending on hubs of production. 66 00:03:47,960 --> 00:03:50,640 Speaker 4: Think of the automotive industry here in the United States 67 00:03:50,640 --> 00:03:54,320 Speaker 4: with their tiered suppliers, as they're all within one hundred 68 00:03:54,400 --> 00:03:58,320 Speaker 4: or two hundred mile radius of those oem plants. Folks 69 00:03:58,400 --> 00:04:02,840 Speaker 4: are looking at scenario building around supply chains, whether it's tariffs, 70 00:04:02,880 --> 00:04:06,119 Speaker 4: cost Now this war in the Middle East that's impacting 71 00:04:06,160 --> 00:04:09,320 Speaker 4: the fuel costs across the board in a variety of areas. 72 00:04:09,640 --> 00:04:11,520 Speaker 4: Not only do we see it at the pump here 73 00:04:11,600 --> 00:04:14,920 Speaker 4: up sixty cents over the last two weeks, but that 74 00:04:15,000 --> 00:04:18,760 Speaker 4: bunker fuel for the big container ships, cruise ships, and 75 00:04:18,880 --> 00:04:23,040 Speaker 4: airline tickets have risen substantially over this period of time, 76 00:04:23,320 --> 00:04:27,040 Speaker 4: adding to that fuel adjustment factor. On the manufacturing side, 77 00:04:27,040 --> 00:04:30,160 Speaker 4: these supply chains can't move that quickly, and they've been 78 00:04:30,200 --> 00:04:33,880 Speaker 4: designed in ways to allow for some adaptation, and that's 79 00:04:33,920 --> 00:04:38,080 Speaker 4: why we typically see closed loop services in the Middle East. 80 00:04:38,320 --> 00:04:41,480 Speaker 4: Those ships that are coming from Asia will offload the cargo, 81 00:04:41,600 --> 00:04:43,800 Speaker 4: pick up a small amount of exports and a lot 82 00:04:43,800 --> 00:04:47,120 Speaker 4: of empty containers, and head straight back to Asia. Here 83 00:04:47,160 --> 00:04:49,159 Speaker 4: in the Transpacific trade, we don't see a lot of 84 00:04:49,200 --> 00:04:54,120 Speaker 4: interdependence of crews, assets, or those vessels themselves. So the 85 00:04:54,160 --> 00:04:57,040 Speaker 4: supply chain folks across the board are continuing to look 86 00:04:57,080 --> 00:05:00,600 Speaker 4: for ways to refine. Yet it the inertia is not 87 00:05:00,640 --> 00:05:01,960 Speaker 4: going to happen that quickly. 88 00:05:02,160 --> 00:05:04,080 Speaker 6: Jane, you lived through a lot of crisises. You also 89 00:05:04,160 --> 00:05:06,560 Speaker 6: worked in the Middle East. There was the pandemic, there 90 00:05:06,640 --> 00:05:08,799 Speaker 6: was the Red Sea at one point shut for about 91 00:05:08,839 --> 00:05:12,279 Speaker 6: six months essentially. On top of that, we recently had 92 00:05:12,480 --> 00:05:15,719 Speaker 6: a lot of issues regarding tariffs. What does this remind 93 00:05:15,760 --> 00:05:16,280 Speaker 6: you of the. 94 00:05:16,200 --> 00:05:20,560 Speaker 4: Most, probably, Anne Marie accommodation of all of those. When 95 00:05:20,640 --> 00:05:22,720 Speaker 4: I lived and worked in the Middle East, we were 96 00:05:22,720 --> 00:05:25,279 Speaker 4: going through the Second Iraqi War, and while there was 97 00:05:25,320 --> 00:05:29,000 Speaker 4: a lot of cargo flowing in to support the troops 98 00:05:29,000 --> 00:05:32,200 Speaker 4: that were on the ground and help rebuild Iraq, there 99 00:05:32,279 --> 00:05:36,159 Speaker 4: was always this fear of the Strait of Horror Moves 100 00:05:36,240 --> 00:05:42,160 Speaker 4: being closed and that twenty one mile gateway that allows 101 00:05:42,440 --> 00:05:47,839 Speaker 4: cargo product ag doll aluminum and of course the energy 102 00:05:47,880 --> 00:05:50,640 Speaker 4: products going through there. That was a fear for many, 103 00:05:50,640 --> 00:05:52,839 Speaker 4: many decades, and now we're seeing what it really looks 104 00:05:52,880 --> 00:05:56,880 Speaker 4: like the price of these energy products is on an 105 00:05:56,920 --> 00:06:00,720 Speaker 4: international level. So even though the United States now is 106 00:06:00,760 --> 00:06:04,120 Speaker 4: a net exporter of energy, we're still feeling it right 107 00:06:04,160 --> 00:06:07,560 Speaker 4: here at home. This is how important that geography is. 108 00:06:07,920 --> 00:06:10,520 Speaker 4: And while it's only about eight to twelve percent of 109 00:06:10,600 --> 00:06:15,320 Speaker 4: container shipping volume and assets worldwide, it's going to have 110 00:06:15,440 --> 00:06:19,440 Speaker 4: knock on effects if this lasts longer than some experts 111 00:06:19,760 --> 00:06:23,960 Speaker 4: had originally predicted. So it's adding all these pieces together 112 00:06:24,320 --> 00:06:28,160 Speaker 4: and it's that continued unknown. What CEOs and executives are 113 00:06:28,160 --> 00:06:31,479 Speaker 4: telling me and Marie is their planning horizons have shrunk 114 00:06:31,920 --> 00:06:36,359 Speaker 4: two months, if not less than that right now, trying 115 00:06:36,360 --> 00:06:40,200 Speaker 4: to understand how best they can move tactically because longer 116 00:06:40,320 --> 00:06:43,760 Speaker 4: range strategy is very difficult at this point in time. 117 00:06:43,920 --> 00:06:46,039 Speaker 6: Given your contacts around the world, have you heard of 118 00:06:46,120 --> 00:06:50,400 Speaker 6: any companies asking the US directly for that naval escort? 119 00:06:51,760 --> 00:06:52,360 Speaker 3: No, I have it. 120 00:06:52,480 --> 00:06:57,000 Speaker 4: We just had last week the large Transpacific Maritime conference 121 00:06:57,520 --> 00:07:00,680 Speaker 4: here in southern California that was by the S and 122 00:07:00,760 --> 00:07:03,560 Speaker 4: P Global and Journal e Commerce groups over forty four 123 00:07:03,640 --> 00:07:06,760 Speaker 4: hundred delegates, many of the shipping line executives, and as 124 00:07:06,760 --> 00:07:09,400 Speaker 4: we started trying to plan or scenario build just a 125 00:07:09,440 --> 00:07:13,680 Speaker 4: little bit follow on conversations this week, no one has 126 00:07:13,760 --> 00:07:15,640 Speaker 4: raised their hands saying they want to start. 127 00:07:15,400 --> 00:07:16,360 Speaker 3: Pushing through again. 128 00:07:16,760 --> 00:07:20,040 Speaker 4: The safety of those crews is omnipresent in their thoughts, 129 00:07:20,360 --> 00:07:22,960 Speaker 4: and then the risk of those assets containers. You're not 130 00:07:22,960 --> 00:07:26,800 Speaker 4: going to be able to recoup that if anything disastrous happened, ever, 131 00:07:27,160 --> 00:07:29,080 Speaker 4: and you're going to have to live with it. There's 132 00:07:29,200 --> 00:07:32,960 Speaker 4: also this risk, a war risk insurance premium that's been 133 00:07:33,040 --> 00:07:35,600 Speaker 4: levied by a number of carriers about three thousand dollars 134 00:07:35,680 --> 00:07:38,960 Speaker 4: per container for any cargo that would be transiting in 135 00:07:39,040 --> 00:07:42,560 Speaker 4: that region. And it's simply an outcome of the fact 136 00:07:42,600 --> 00:07:45,160 Speaker 4: that they can't get insurance for the vessels or cargo 137 00:07:45,360 --> 00:07:47,800 Speaker 4: or the protection of the crew. So to be at 138 00:07:47,800 --> 00:07:51,400 Speaker 4: a standstill now, we'll continue for some time until we 139 00:07:51,440 --> 00:07:53,800 Speaker 4: have some level of surety that that region will be 140 00:07:53,800 --> 00:07:54,320 Speaker 4: safe again. 141 00:07:54,920 --> 00:07:56,520 Speaker 3: Stay with us Multilemberg. 142 00:07:56,560 --> 00:08:08,880 Speaker 2: Savannah's coming up off to this, the retired Lieutenant General 143 00:08:08,960 --> 00:08:12,200 Speaker 2: Robert Walsh of Academy Securities, writing restoring normal shipping could 144 00:08:12,200 --> 00:08:15,600 Speaker 2: take weeks if a significant number of naval minds are deployed. 145 00:08:15,880 --> 00:08:18,520 Speaker 2: Lieutenant General Welsh joins us. Now for more, Lieutenant General, 146 00:08:18,560 --> 00:08:20,760 Speaker 2: welcome back to the program, Sir. I want to give 147 00:08:20,800 --> 00:08:22,160 Speaker 2: to you just the quote that we heard from the 148 00:08:22,200 --> 00:08:25,320 Speaker 2: Supreme Leader, supposedly a quote from the Supreme Leader yesterday. 149 00:08:25,560 --> 00:08:27,760 Speaker 2: The leader of the straight ofform mers must certainly continue 150 00:08:27,760 --> 00:08:30,360 Speaker 2: to be used. Studies have been conducted on opening other 151 00:08:30,440 --> 00:08:33,040 Speaker 2: fronts where the enemy has little experience and would be 152 00:08:33,120 --> 00:08:35,640 Speaker 2: highly vulnerable. Now we're going to get to the ram 153 00:08:35,640 --> 00:08:38,200 Speaker 2: of speculation, Lieutenant General, But what do you suppose the 154 00:08:38,240 --> 00:08:39,600 Speaker 2: Supreme Leader is addressing there? 155 00:08:40,080 --> 00:08:42,440 Speaker 7: Well, I think what the'se trying to say, And first off, 156 00:08:42,480 --> 00:08:44,959 Speaker 7: thanks Jonathan for having me this morning. But I think 157 00:08:44,960 --> 00:08:46,720 Speaker 7: what he's trying to say is, you know, they're trying 158 00:08:46,720 --> 00:08:50,439 Speaker 7: to work against our strength. They're using asymmetric warfare. You know, 159 00:08:50,480 --> 00:08:55,520 Speaker 7: it's one of the things the Chinese philosopher Son Sou said, 160 00:08:55,520 --> 00:08:59,000 Speaker 7: don't work against an enemy strength, work against their weaknesses. 161 00:08:59,080 --> 00:09:00,720 Speaker 7: And this is one of the those areas where they 162 00:09:00,760 --> 00:09:03,480 Speaker 7: can work asymmetrically. And Iran feels like they want to 163 00:09:03,480 --> 00:09:06,599 Speaker 7: get leverage whenever they go into whatever negotiations may be. 164 00:09:06,760 --> 00:09:09,040 Speaker 7: This could go long term, and he wants to have 165 00:09:09,080 --> 00:09:11,560 Speaker 7: that leverage, and he's going to get against our One 166 00:09:11,600 --> 00:09:13,680 Speaker 7: of our key problems is trying to keep the straits 167 00:09:13,679 --> 00:09:14,440 Speaker 7: over Moose open. 168 00:09:14,800 --> 00:09:17,520 Speaker 6: Well, yesterday the Treasury Secretary said that his belief is 169 00:09:17,520 --> 00:09:20,520 Speaker 6: that as soon as it is militarily possible, the US Navy, 170 00:09:20,559 --> 00:09:24,880 Speaker 6: perhaps with an international coalition, will be escorting vessels through. 171 00:09:25,240 --> 00:09:27,320 Speaker 6: Can you walk us through what this even looks like. 172 00:09:27,800 --> 00:09:29,280 Speaker 3: Yeah, sure, am Marie. That's great. 173 00:09:29,360 --> 00:09:31,600 Speaker 7: I think the one point you hit on was an 174 00:09:31,640 --> 00:09:36,439 Speaker 7: international coalition trying to bring partners together to open the 175 00:09:36,480 --> 00:09:38,600 Speaker 7: straights up, because this is an international problem. So the 176 00:09:38,600 --> 00:09:42,800 Speaker 7: more the US can always leverage international problems, problems like this, 177 00:09:42,880 --> 00:09:45,800 Speaker 7: the better off it's going to be. And we've got 178 00:09:45,800 --> 00:09:48,080 Speaker 7: a lot of international partners that have a lot of 179 00:09:48,080 --> 00:09:50,760 Speaker 7: capabilities in this. I think you can see right now 180 00:09:51,000 --> 00:09:54,600 Speaker 7: that the US has a great ability right now to 181 00:09:54,760 --> 00:10:01,600 Speaker 7: suppress Aroan's missile drone capabilities to kind of maintain air 182 00:10:01,679 --> 00:10:05,360 Speaker 7: superiority over that. And now the real question would be 183 00:10:05,400 --> 00:10:08,240 Speaker 7: would around start delay minds in there, because that's another 184 00:10:08,320 --> 00:10:10,960 Speaker 7: opportunity they've got to choke off the straits of Hormuse. 185 00:10:11,200 --> 00:10:14,679 Speaker 7: That's another asymmetric capability that if you look at the 186 00:10:14,720 --> 00:10:17,520 Speaker 7: way the US Navy operates, they would rather just like 187 00:10:17,600 --> 00:10:20,960 Speaker 7: we've seen the first parts of the air campaign, it's 188 00:10:21,000 --> 00:10:23,240 Speaker 7: like they would rather stand off than stand in. When 189 00:10:23,240 --> 00:10:27,000 Speaker 7: you start putting, you know, warships into contested areas like 190 00:10:27,360 --> 00:10:30,160 Speaker 7: contested lottorals like we have in the Gulf in the 191 00:10:31,080 --> 00:10:34,920 Speaker 7: Straits there, they would like to set the conditions first. 192 00:10:34,960 --> 00:10:37,240 Speaker 7: And that's why I think you're seeing time before the 193 00:10:37,400 --> 00:10:40,800 Speaker 7: escorts start to happen, setting those conditions right before we 194 00:10:40,840 --> 00:10:42,520 Speaker 7: start conducting the operations. 195 00:10:42,679 --> 00:10:45,200 Speaker 6: Well besides the UK Navy, who's signing up for this 196 00:10:45,320 --> 00:10:47,240 Speaker 6: international coalition, I. 197 00:10:47,160 --> 00:10:48,800 Speaker 7: Think that would be something that have to be worked 198 00:10:48,800 --> 00:10:52,320 Speaker 7: with the international partners like Saudi Arabia. I think the UAE, 199 00:10:52,640 --> 00:10:55,240 Speaker 7: we've had the French in there in Australia have mind 200 00:10:56,320 --> 00:10:58,880 Speaker 7: color measures capabilities. They would be the ones and I 201 00:10:58,880 --> 00:11:01,200 Speaker 7: think you'd have a better chance at performing that once 202 00:11:01,240 --> 00:11:03,280 Speaker 7: the conditions are set where it's safe to go in 203 00:11:03,559 --> 00:11:06,920 Speaker 7: to conduct escort and mind clearing operations, because these would 204 00:11:06,920 --> 00:11:09,520 Speaker 7: really be more looked at by the International Committee as 205 00:11:09,880 --> 00:11:13,120 Speaker 7: defensive operations and not offensive operations, and why you'd have 206 00:11:13,160 --> 00:11:15,320 Speaker 7: a better chance of getting a coalition with those partners. 207 00:11:15,480 --> 00:11:17,840 Speaker 5: Lieten in general, do you think that still there is 208 00:11:17,880 --> 00:11:21,320 Speaker 5: the possibility of ground troops going into Iran, particularly to 209 00:11:21,360 --> 00:11:24,040 Speaker 5: get the industry radium still there at least? 210 00:11:24,080 --> 00:11:25,520 Speaker 3: That's a really hard question to say. 211 00:11:25,760 --> 00:11:29,840 Speaker 7: I certainly don't see large ground forces going in there. 212 00:11:30,000 --> 00:11:33,360 Speaker 7: There could be significant operations that would go into key 213 00:11:33,440 --> 00:11:37,840 Speaker 7: sites like you just mentioned for nuclear capabilities, very dangerous operations. 214 00:11:37,840 --> 00:11:40,360 Speaker 7: We have the capabilities to do it. Again, those conditions 215 00:11:40,400 --> 00:11:42,240 Speaker 7: would have to be set for those forces to go in. 216 00:11:42,320 --> 00:11:43,920 Speaker 7: But at the end of the day, I don't see 217 00:11:43,960 --> 00:11:47,320 Speaker 7: any risk that the US wants to take by putting large 218 00:11:47,320 --> 00:11:50,160 Speaker 7: ground forces in and putting them at risk into some 219 00:11:50,200 --> 00:11:51,800 Speaker 7: type of long extended campaign. 220 00:11:51,960 --> 00:11:53,840 Speaker 2: Lieutenant General, do you think you can end up in 221 00:11:53,840 --> 00:11:56,520 Speaker 2: a long extended campaign even if you don't want to. 222 00:11:57,920 --> 00:12:01,880 Speaker 7: I think this warfare change as it goes on, and 223 00:12:01,920 --> 00:12:03,960 Speaker 7: what we're starting to see from the Iranians is even 224 00:12:04,000 --> 00:12:06,760 Speaker 7: with the massive power the US has along with the 225 00:12:06,840 --> 00:12:10,360 Speaker 7: Israelis bringing all this power to bear and taking down, 226 00:12:10,679 --> 00:12:14,760 Speaker 7: you know, the missile capabilities somewhat the drone capabilities, we're 227 00:12:14,760 --> 00:12:17,960 Speaker 7: seeing those numbers drop way down. We've seen them destroyed 228 00:12:17,960 --> 00:12:21,000 Speaker 7: pretty much the entire navy of Iran. But at the 229 00:12:21,000 --> 00:12:24,200 Speaker 7: same time, like I said, the Ranians have looked at 230 00:12:24,200 --> 00:12:26,240 Speaker 7: this problem just as the US has looked at it 231 00:12:26,240 --> 00:12:29,120 Speaker 7: for a very long time. They understand the strengths of 232 00:12:29,120 --> 00:12:31,280 Speaker 7: what the US does, how the US comes to war, 233 00:12:31,720 --> 00:12:33,920 Speaker 7: and what they have worked against is those weaknesses, and 234 00:12:33,920 --> 00:12:36,880 Speaker 7: a weakness they see here is that regime is willing 235 00:12:36,920 --> 00:12:40,199 Speaker 7: to hang on for a long long time. And then 236 00:12:40,240 --> 00:12:42,840 Speaker 7: that's what we see as regimes like this are not 237 00:12:42,880 --> 00:12:45,319 Speaker 7: willing to give up power. They're willing to entrench themselves 238 00:12:45,400 --> 00:12:47,800 Speaker 7: for a long time. And what they're seeing is by 239 00:12:47,880 --> 00:12:52,160 Speaker 7: using this asymmetric threats by firing the drones in particular 240 00:12:52,320 --> 00:12:55,480 Speaker 7: the missiles also you know, at our allies and partners, 241 00:12:55,520 --> 00:12:59,040 Speaker 7: and threatening the straits to keep them closed. That's an 242 00:12:59,080 --> 00:13:01,640 Speaker 7: asymmetric way where they've got leverage, and they're going to 243 00:13:01,720 --> 00:13:04,199 Speaker 7: use that as best they can to get in negotiations 244 00:13:04,440 --> 00:13:06,560 Speaker 7: where they've got leverage to try to get the things 245 00:13:06,600 --> 00:13:08,440 Speaker 7: they want coming out of it as the war comes 246 00:13:08,520 --> 00:13:08,920 Speaker 7: to an end. 247 00:13:09,000 --> 00:13:11,199 Speaker 3: When that comes to an end, stay with us. 248 00:13:11,520 --> 00:13:24,240 Speaker 2: More Bloomberg surveillance coming up after this. Rachel's of the 249 00:13:24,320 --> 00:13:26,840 Speaker 2: sense for a new American security right In the following 250 00:13:26,840 --> 00:13:30,000 Speaker 2: traders will assume the US will continue such measures as 251 00:13:30,040 --> 00:13:32,320 Speaker 2: long as Homer's is shut, and will be skeptical of 252 00:13:32,320 --> 00:13:34,840 Speaker 2: post war pressure on Russia due to a widening gap 253 00:13:35,080 --> 00:13:37,719 Speaker 2: between the US and the EU. Rachel joins us now 254 00:13:37,760 --> 00:13:39,760 Speaker 2: for more. Rachel, welcome to the program. Thanks for having 255 00:13:39,800 --> 00:13:41,280 Speaker 2: How much for mess are we in right now? 256 00:13:41,440 --> 00:13:44,920 Speaker 8: I think we're in quite a mess and the issue 257 00:13:45,240 --> 00:13:48,640 Speaker 8: now is I mean, the most charitable read on the 258 00:13:48,720 --> 00:13:52,240 Speaker 8: decision last night was that Russian oil prices were already 259 00:13:52,320 --> 00:13:56,840 Speaker 8: high and that if this lifting, if the sanctions easing 260 00:13:56,840 --> 00:13:59,480 Speaker 8: didn't happen, that China would be getting all of all 261 00:13:59,559 --> 00:14:04,160 Speaker 8: of the game. The challenges here that it's not enough barrels, 262 00:14:04,440 --> 00:14:07,960 Speaker 8: and that at the end of the day, it's not 263 00:14:08,120 --> 00:14:10,960 Speaker 8: clear that we're getting closer to the end of the 264 00:14:11,000 --> 00:14:13,520 Speaker 8: war and reopening hormones, and at the end of the day, 265 00:14:13,640 --> 00:14:16,560 Speaker 8: for the energy markets, that's what needs to happen, and 266 00:14:16,600 --> 00:14:20,360 Speaker 8: it means but this uncertainty means that even US producers 267 00:14:20,440 --> 00:14:24,440 Speaker 8: here can't really benefit because they don't want to start 268 00:14:24,440 --> 00:14:28,800 Speaker 8: investing more in the risk that there's demand destruction ahead 269 00:14:29,240 --> 00:14:33,240 Speaker 8: or that suddenly the war is over. And this fifty 270 00:14:33,320 --> 00:14:36,560 Speaker 8: million barrels is back on the market. So you know, 271 00:14:36,760 --> 00:14:39,360 Speaker 8: here in the US, we don't have lots of surplus 272 00:14:39,400 --> 00:14:41,680 Speaker 8: capacity that we can flood the market with. 273 00:14:42,240 --> 00:14:44,680 Speaker 1: So I think it's it's a very difficult situation. 274 00:14:44,840 --> 00:14:46,760 Speaker 2: I'm sure you've seen the research coming out of the banks. 275 00:14:46,760 --> 00:14:49,240 Speaker 2: This was Goldman deadly. Oil price is likely to exceed 276 00:14:49,240 --> 00:14:51,040 Speaker 2: the two thousand and eight peak. It flows through the strain, 277 00:14:51,120 --> 00:14:53,520 Speaker 2: remain to press through March. What's the day on the 278 00:14:53,520 --> 00:14:55,320 Speaker 2: calendar that you're focused on. 279 00:14:56,040 --> 00:14:59,440 Speaker 1: Yeah, I mean, I think right now it's hard. Everybody 280 00:14:59,480 --> 00:14:59,960 Speaker 1: has their model. 281 00:15:00,240 --> 00:15:02,360 Speaker 8: It's hard to think about where the prices go because 282 00:15:02,360 --> 00:15:06,000 Speaker 8: at a certain point it's more symbolic than actually based 283 00:15:06,040 --> 00:15:10,120 Speaker 8: on market models. But I am really watching, you know 284 00:15:10,160 --> 00:15:13,200 Speaker 8: where we are in early April, right, that's when the 285 00:15:13,200 --> 00:15:17,160 Speaker 8: physical supply risks of you know, sort of really mount, 286 00:15:17,360 --> 00:15:20,680 Speaker 8: right because a number of energy producers, especially Ron but 287 00:15:20,840 --> 00:15:23,880 Speaker 8: also Saudi Arabia they front loaded, they sent more vessels 288 00:15:23,920 --> 00:15:28,560 Speaker 8: out and and that's so that's when I think, you know, 289 00:15:28,640 --> 00:15:31,440 Speaker 8: things would start to bite. That's also when we'll be watching, 290 00:15:31,920 --> 00:15:36,160 Speaker 8: are have these additional barrels from the G seven from 291 00:15:36,240 --> 00:15:40,360 Speaker 8: the IA, you know, stockpile release are they coming to market. 292 00:15:40,720 --> 00:15:44,120 Speaker 8: And I'm watching as much not just crude oil, but 293 00:15:44,360 --> 00:15:50,160 Speaker 8: product markets, diesel, jet fuel, and also the cascading effects 294 00:15:50,400 --> 00:15:54,320 Speaker 8: that we're seeing in Asia of chemical plants shutting down 295 00:15:54,840 --> 00:15:58,360 Speaker 8: and the like. So I think if we're not at 296 00:15:58,400 --> 00:16:02,240 Speaker 8: a point where they're ceilings are reopened towards the end 297 00:16:02,280 --> 00:16:05,920 Speaker 8: of the month, we'll be in a well even more 298 00:16:05,960 --> 00:16:06,880 Speaker 8: difficult situation. 299 00:16:07,040 --> 00:16:08,520 Speaker 1: When does demand destruction kick in. 300 00:16:08,960 --> 00:16:12,240 Speaker 8: I think we're starting to see it already, maybe more 301 00:16:12,360 --> 00:16:16,960 Speaker 8: so in Asia. We're seeing mandated moves across Southeast Asia 302 00:16:17,680 --> 00:16:21,240 Speaker 8: to reduce demand, when we're seeing it even in Europe. 303 00:16:21,280 --> 00:16:25,360 Speaker 8: I think on the power side, the gas natural gas 304 00:16:25,400 --> 00:16:28,920 Speaker 8: spiked even more quickly than oil just once the kateries 305 00:16:28,960 --> 00:16:33,360 Speaker 8: started to shut in production and we saw TTF spike up. 306 00:16:33,680 --> 00:16:37,520 Speaker 8: Was that last week and now we're sort of seeing 307 00:16:37,560 --> 00:16:40,200 Speaker 8: it flat in part because at those prices, people. 308 00:16:39,960 --> 00:16:43,200 Speaker 1: Don't want to buy, and that's going to kick in. 309 00:16:43,320 --> 00:16:50,200 Speaker 8: Especially later this year, when normally producers would be injecting 310 00:16:50,240 --> 00:16:50,760 Speaker 8: more fuel. 311 00:16:50,880 --> 00:16:52,240 Speaker 1: It's at storage time. 312 00:16:52,600 --> 00:16:55,960 Speaker 8: So I think we'll start seeing some switches to coal 313 00:16:56,200 --> 00:16:59,880 Speaker 8: where that can happen. We'll start seeing some rationing, and 314 00:17:00,320 --> 00:17:02,640 Speaker 8: you know here in the United States. We're a bit 315 00:17:02,680 --> 00:17:06,920 Speaker 8: more sheltered on on especially the natural gas side, because 316 00:17:06,920 --> 00:17:10,919 Speaker 8: we can't export a lot more capacity than we're already doing. 317 00:17:11,320 --> 00:17:15,360 Speaker 8: But still we're already at a point where electricity prices 318 00:17:15,520 --> 00:17:18,200 Speaker 8: we're a salient political issue in the midterms. 319 00:17:18,400 --> 00:17:19,560 Speaker 1: There were a big issue in the. 320 00:17:19,480 --> 00:17:22,560 Speaker 8: Off year elections last year, and so now we're looking 321 00:17:22,600 --> 00:17:25,240 Speaker 8: at prices of the pump being more expensive as well 322 00:17:25,280 --> 00:17:26,639 Speaker 8: as electricity bills. 323 00:17:26,680 --> 00:17:28,679 Speaker 5: Well, I guess the key question for economists has been 324 00:17:28,720 --> 00:17:31,280 Speaker 5: when does this end up suppressing growth in a material way? 325 00:17:31,440 --> 00:17:33,120 Speaker 5: And most people seem to say not until it goes 326 00:17:33,160 --> 00:17:34,000 Speaker 5: on for months. 327 00:17:34,040 --> 00:17:35,040 Speaker 1: Or a longer period of time. 328 00:17:35,080 --> 00:17:36,679 Speaker 5: And then I think of that spring break and how 329 00:17:36,680 --> 00:17:38,080 Speaker 5: a number of people are saying, I'm not going to 330 00:17:38,119 --> 00:17:40,160 Speaker 5: fly anywhere because the prices have gone up forty percent, 331 00:17:40,320 --> 00:17:42,560 Speaker 5: thirty percent and it's not worth it. I mean, are 332 00:17:42,560 --> 00:17:44,760 Speaker 5: we already seeing that start to trickle in on the 333 00:17:44,800 --> 00:17:46,919 Speaker 5: margins in the US or is that mostly an Asia 334 00:17:47,000 --> 00:17:48,680 Speaker 5: story a Europe story for now? 335 00:17:48,840 --> 00:17:50,679 Speaker 1: I think it's mostly an Asia Europe story. 336 00:17:51,400 --> 00:17:54,000 Speaker 8: I guess it depends how quickly how short term people 337 00:17:54,000 --> 00:17:57,240 Speaker 8: buy their spring break tickets. I often sometimes I travel 338 00:17:57,320 --> 00:17:59,159 Speaker 8: short term, but a lot of times. You know, I 339 00:17:59,280 --> 00:18:01,439 Speaker 8: have I have some trips booked out through the spring. 340 00:18:01,800 --> 00:18:04,159 Speaker 8: I'd be more worried about how people are going to 341 00:18:04,240 --> 00:18:05,680 Speaker 8: travel and drive this summer. 342 00:18:05,880 --> 00:18:07,359 Speaker 1: People are making those decisions. 343 00:18:07,359 --> 00:18:10,560 Speaker 8: We're seeing airlines in Asia and elsewhere start to put 344 00:18:10,560 --> 00:18:11,800 Speaker 8: on fuel surcharges. 345 00:18:12,960 --> 00:18:16,080 Speaker 1: So those dynamics now here in the US. I think. 346 00:18:16,200 --> 00:18:19,280 Speaker 8: You know, we've seen the drivers of growth be largely 347 00:18:19,320 --> 00:18:22,760 Speaker 8: around AI and AI roll out imports have been driven 348 00:18:22,800 --> 00:18:23,240 Speaker 8: by AI. 349 00:18:23,720 --> 00:18:25,400 Speaker 1: Some of that will continue, but. 350 00:18:25,359 --> 00:18:28,040 Speaker 8: That's where I start to worry about. You know, memory 351 00:18:28,119 --> 00:18:31,840 Speaker 8: ship prices we're already going up, and now they're helium shortages. 352 00:18:32,119 --> 00:18:33,840 Speaker 1: Helium's used in semiconductors. 353 00:18:34,160 --> 00:18:37,520 Speaker 8: Taiwan is one of the countries that is quite high 354 00:18:37,520 --> 00:18:41,280 Speaker 8: on a pain point schedule level, however you measure it 355 00:18:42,600 --> 00:18:47,240 Speaker 8: not having a lot of reserves and the like, and 356 00:18:47,280 --> 00:18:49,200 Speaker 8: then other countries like India. 357 00:18:49,359 --> 00:18:50,960 Speaker 1: My senses in the US. 358 00:18:50,760 --> 00:18:52,840 Speaker 8: The worry is more, are we going to be in 359 00:18:52,880 --> 00:18:54,920 Speaker 8: some version of a growth slow down? 360 00:18:55,119 --> 00:18:56,240 Speaker 1: And you know, the dread it. 361 00:18:56,320 --> 00:18:58,960 Speaker 8: I'm not ready to call at stake inflation yet, but 362 00:18:59,480 --> 00:19:02,040 Speaker 8: you know, we were seeing prices of other goods start 363 00:19:02,080 --> 00:19:05,879 Speaker 8: to go up, especially you know, healthcare and the like 364 00:19:06,200 --> 00:19:08,119 Speaker 8: and so I do think this puts the FED in 365 00:19:08,200 --> 00:19:10,960 Speaker 8: a tricky you know, in a tricky position. That being said, 366 00:19:11,000 --> 00:19:13,920 Speaker 8: the right thing to do from just a commodity shock 367 00:19:14,040 --> 00:19:17,000 Speaker 8: like this is probably to look through it. But this 368 00:19:17,040 --> 00:19:20,680 Speaker 8: is an economy where we're not adding jobs really right, 369 00:19:21,200 --> 00:19:24,920 Speaker 8: and where prices are going up, and so I think 370 00:19:25,000 --> 00:19:30,440 Speaker 8: globally this is more of a risk to growth rather 371 00:19:30,520 --> 00:19:34,480 Speaker 8: than sign of some sort of recession. But you know, 372 00:19:34,880 --> 00:19:38,000 Speaker 8: there's also a risk that investments slowed down as well, 373 00:19:38,359 --> 00:19:42,679 Speaker 8: a long term investments infrastructure projects, both in the Golf region, 374 00:19:43,440 --> 00:19:45,720 Speaker 8: but also questions internationally. 375 00:19:46,000 --> 00:19:48,800 Speaker 6: Two months ago and ten days the United States captured 376 00:19:48,880 --> 00:19:52,680 Speaker 6: Nicholas Maduro, we have seen companies like Chevron say they're 377 00:19:52,680 --> 00:19:55,399 Speaker 6: going to expand production. Could that be a lever this 378 00:19:55,440 --> 00:19:59,399 Speaker 6: administration leans more into given what's going on in the region. 379 00:20:00,080 --> 00:20:02,960 Speaker 8: Yeah, I think it will reinforce their priority on that. 380 00:20:03,760 --> 00:20:10,000 Speaker 8: We've seen a brow of different administration officials in Caracas, 381 00:20:10,080 --> 00:20:13,879 Speaker 8: their investor trips I think going on this month, you know, 382 00:20:13,960 --> 00:20:16,919 Speaker 8: and we've seen Venezuela and production go basically back up 383 00:20:16,920 --> 00:20:18,920 Speaker 8: to where it was in the fall of last year, 384 00:20:19,119 --> 00:20:21,920 Speaker 8: maybe getting close to where we were at the beginning 385 00:20:21,960 --> 00:20:25,959 Speaker 8: of the second Trump administration one and change million barrels 386 00:20:25,960 --> 00:20:29,280 Speaker 8: a day. The challenge is it's not easy to bring 387 00:20:29,359 --> 00:20:33,120 Speaker 8: a lot of more supply online quickly, so it's more Again, 388 00:20:33,200 --> 00:20:36,080 Speaker 8: we're back to this medium term question of is the 389 00:20:36,119 --> 00:20:39,120 Speaker 8: demand going to be there a year from now, five 390 00:20:39,200 --> 00:20:43,800 Speaker 8: years from now. So I think we'll see producers already 391 00:20:44,000 --> 00:20:47,640 Speaker 8: present adding, you know, in the neighborhood of a few 392 00:20:47,720 --> 00:20:51,119 Speaker 8: hundred thousand barrels a day. Every barrel helps to be clear, 393 00:20:51,600 --> 00:20:53,680 Speaker 8: But I don't think we're going to see the kind 394 00:20:53,800 --> 00:20:57,040 Speaker 8: of investment that takes. 395 00:20:56,800 --> 00:20:59,200 Speaker 1: Us to, you know, that helps us fill this gap. 396 00:20:59,240 --> 00:21:00,679 Speaker 1: This is ten millisian barrels a. 397 00:21:00,720 --> 00:21:03,760 Speaker 8: Day gap of things that either are not going through 398 00:21:03,800 --> 00:21:08,439 Speaker 8: the strait of hormones or can't be diverted through other pipelines. 399 00:21:09,240 --> 00:21:12,800 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 400 00:21:12,800 --> 00:21:16,360 Speaker 2: in markets, economics, angiopolitics. You can watch the show live 401 00:21:16,480 --> 00:21:19,480 Speaker 2: on Bloomberg TV weekday mornings from six am to nine 402 00:21:19,520 --> 00:21:23,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 403 00:21:23,280 --> 00:21:25,880 Speaker 2: anywhere else you listen, and as always on the Bloomberg 404 00:21:25,960 --> 00:21:27,840 Speaker 2: Terminal and the Bloomberg Business app.