Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. Tracy, I don't
Speaker 1: think we can talk about oil enough right now. No, No,
Speaker 1: it feels like oil is the I don't want to
Speaker 1: say missing link, but the link around which everything is
Speaker 1: revolving at the moment. In particular, I mean, the Federal
Speaker 1: Reserve basically seems to have pegged it's monetary policy to
Speaker 1: gas pretices. Right, not explicitly, but it certainly seems that
Speaker 1: way implicitly, right, I I totally agree. It feels like
Speaker 1: the FED has really raised the steaks on oil because obviously, look,
Speaker 1: high oil creates all kinds of problems, it's very difficult
Speaker 1: for consumers, creates all kinds of challenges. But at the
Speaker 1: recent FED meeting, you know you heard Sherman J. Powell say, look, consumers,
Speaker 1: don't think about core vers headline plation. Just think about
Speaker 1: headline inflation. And if inflation stays high or gasoline prices
Speaker 1: stay high, then that could lead to increased expectations. The
Speaker 1: FED does not want inflation expectations to get out of hand,
Speaker 1: and so the FED will tighten in response to high
Speaker 1: oil prices, Defended implicitly said, I think it is willing
Speaker 1: to pay the price of recession to get the price
Speaker 1: of oil down. Yeah, and I've been thinking about this
Speaker 1: a lot. But it's also like gas prices just loom
Speaker 1: large in the American consciousness and I guess politically as well.
Speaker 1: And I got to say, I was at my dad's
Speaker 1: house over the weekend and all I heard was grumbling
Speaker 1: about gas prices and the Biden administration for three days.
Speaker 1: Well there, So anyway, it is, it is permeated the public.
Speaker 1: It is everything Defend has made at everything. On our
Speaker 1: recent episode, the one that we out released on Monday
Speaker 1: with Peter to Second, we talked about the challenges of
Speaker 1: eliciting a supply response and getting more oil out of
Speaker 1: the ground rapidly. But the stakes are very high. Clearly
Speaker 1: the White House is extremely stressed about that is having
Speaker 1: recently sent a letter to oil companies basically, you know,
Speaker 1: encouraging them to do more. So the question we have
Speaker 1: to ask is what if anything can be done in
Speaker 1: the short term, right, And I think this is the
Speaker 1: crux of the matter, because we've had many discussions about
Speaker 1: this at this point, but this is a problem that
Speaker 1: was many, many years in the making, so structural under
Speaker 1: investment in certain types of energy i e. Fossil fuels,
Speaker 1: and now everyone seems to be trying to figure out
Speaker 1: short term ways to alleviate that bottleneck or that choke point.
Speaker 1: Absolutely huge economic and of course political stakes. All right,
Speaker 1: let's jump right into it. We're gonna be speaking with
Speaker 1: two guests who we've had in the past who know
Speaker 1: a lot about this space, both of the terms of
Speaker 1: oil specifically, as well as various tools that the government
Speaker 1: might have to improve the supply, uh, the supply. So
Speaker 1: I had a little bit. We're going to be speaking
Speaker 1: with Rory Johnson. He is the editor of the Commodity
Speaker 1: Context newsletter of Fantastic read. He's also market economists and
Speaker 1: managing director at Price Street in Toronto. And we're also
Speaker 1: gonna be speaking with Sconda Amardath. He has the direct
Speaker 1: executive director at Employee America, a think tank which promotes
Speaker 1: tight labor markets. So Rory and Scanda, thank you so
Speaker 1: much for coming on odd lots, thanks for having us
Speaker 1: back on, thanks for having me on. Absolutely all right. Sconda,
Speaker 1: I actually just want to immediately started with you because
Speaker 1: you've been writing for several months. Now that you think
Speaker 1: the White House has tools at his disposal right now
Speaker 1: to increase oil production, they haven't been used. We'll get
Speaker 1: into the details, but why don't you just give us
Speaker 1: the very high level idea here of how the White
Speaker 1: House can use the Strategic Petroleum Way Reserve strategically to
Speaker 1: ease oil markets right now. The tools we've laid out
Speaker 1: are really about addressing what i'd call the most proximate
Speaker 1: binding constraint on u S domestic industry, and that's one
Speaker 1: of a high propensity for low investment capital discipline um
Speaker 1: for some pretty understandable and rational reasons that have to
Speaker 1: do with what i'd call uncertainty on in terms of
Speaker 1: price risk, demand uncertainty, and it's called to something and
Speaker 1: also financing uncertainty depending on where you are in the industry.
Speaker 1: And so there are tools available within the federal government
Speaker 1: that can if you work with industry, you can actually
Speaker 1: provide that kind of certainty because the government has a
Speaker 1: lot of long term storage capacity to the Strategic Controlling Reserve,
Speaker 1: which is not trivial by the way, right they have
Speaker 1: physical storage capacity in commodities is important if you're actually
Speaker 1: going to be able to fund more production but also
Speaker 1: to provide the kind of price insurance. And so the
Speaker 1: Department of Energy has the authorities to replenish their reserve
Speaker 1: they're currently releasing, which is good, but just don't be
Speaker 1: under any illusion about how much it's really helping. It
Speaker 1: helps a little bit of the margin, but it's not
Speaker 1: going to be uh, sort of the all powerful solution.
Speaker 1: But what would be valuable is actually to signal to
Speaker 1: producers who have been burnt by cycle after cycle in
Speaker 1: the last eight years or so by price crashes that
Speaker 1: have effectively led to really poor shareholder returns. And now
Speaker 1: the response has been let's invest really slowly, let's be
Speaker 1: pretty in elastic in our investment response to high prices,
Speaker 1: unlike what we saw in previous episodes of oil prices
Speaker 1: running up. And so what we're trying to get at
Speaker 1: is through what's called an insurance mechanism. It's it's a
Speaker 1: sale of physical put options and through financing mechanisms offering
Speaker 1: leverage changing that shareholder proposition. And those tools have been
Speaker 1: on the table that the administration has had notice and
Speaker 1: knowledge of these tools, they've thus far been much more
Speaker 1: reluctant to really latch onto them. They've done some marginal
Speaker 1: things that have been helpful around strategic patrolling reserve regarding
Speaker 1: the willingness to maybe explore forward contracts to replenish the reserve.
Speaker 1: But the kind of insurance plus financing pairing those two
Speaker 1: things together would be very I think helpful and powerful.
Speaker 1: It doesn't solve every issue in the industry, but capital
Speaker 1: discipline is a big reason why we're not seeing the
Speaker 1: big capex ramp up in US industry. And look, US
Speaker 1: is the biggest producer, so it's not as if US
Speaker 1: is some small fi producer relative to the global economy.
Speaker 1: It is the biggest country. So Rory, maybe I could
Speaker 1: bring you in here. You know, when Sconda talks about
Speaker 1: the need for price insurance for the oil industry, what
Speaker 1: exactly is the problem that we're trying to solve here,
Speaker 1: Because I'm sure a lot of people will look at
Speaker 1: oil above a hundred dollars a barrel. A lot of
Speaker 1: the big oil majors or energy majors are posting record
Speaker 1: profits and they're going to see that and think, well,
Speaker 1: why in the world would you need to underpin it further? Yeah,
Speaker 1: And I think one thing that's really interesting is to
Speaker 1: think about the way in which the SPR can be
Speaker 1: used to to really kind of ameliorate this challenge we're facing.
Speaker 1: And one of the things we've often heard as a
Speaker 1: reason for lackluster interest in investment is, sure, the price
Speaker 1: of oil is very high, but backwardation is extreme, right,
Speaker 1: So the you know, full word price of oil you know,
Speaker 1: twelve eighteen months out is considerably lower. Uh, And that's
Speaker 1: where they would effectively be hedging in their production. So
Speaker 1: that's really, in some ways the price that matters more
Speaker 1: than the spot price. So it's interesting here, particularly when
Speaker 1: relating it to you know, discussions of you know, Chairman
Speaker 1: Powell's worries about an unmooring of inflation expectations. Consumers care
Speaker 1: about the spot price, whereas producers probably care about a
Speaker 1: price you know, twelve to eighteen months down the line.
Speaker 1: So the question is how can the SPR be used
Speaker 1: to kind of you know, achieve some of that goal. Um.
Speaker 1: A lot of the criticisms of the SPR I think
Speaker 1: are warranted in that, you know, for instance, the release
Speaker 1: at the end of one by the by administration was
Speaker 1: very much just a oil prices are high, so let's
Speaker 1: open the taps. Let the oil out and you know,
Speaker 1: hopefully bring down the price of oil. That's a bad
Speaker 1: use of the s PR because it's you know, using
Speaker 1: a finite resource. It's you know, it's it's a stock
Speaker 1: of oil. To bring down the prompt price without really
Speaker 1: anything else and all was equal, that should you know,
Speaker 1: reduce the investment incentive or investment signal to the patch.
Speaker 1: But what if you you know, for every barrel you
Speaker 1: sold today, you bought another barrel like Sconda was saying
Speaker 1: in the in the in the futures market, you know,
Speaker 1: twelve to eighteen months down the line. So then what
Speaker 1: you're doing is you're both bringing down the spot price
Speaker 1: and you're lifting up the back of the curves. You're
Speaker 1: flattening the curve, which both reduces that kind of inflationary
Speaker 1: pressure on consumers well also increasing the signal to producers
Speaker 1: to produce more. So I think that is that is
Speaker 1: the way the SPR should be used, and it hasn't
Speaker 1: been used historically cause it's a bit more you know,
Speaker 1: you know, technical, a bit more kind of uh, you know,
Speaker 1: seems very Wall Street, and I know that Washington doesn't
Speaker 1: always like to go down that road, but I think
Speaker 1: it's a much more effective way of using that capacity
Speaker 1: resource effectively as a buffer battery, rather than just as
Speaker 1: viewing it as like an emergency stock. So oil might
Speaker 1: be at a hundred and fifteen dollars per barrel or
Speaker 1: whatever right now, but if you look at the futures
Speaker 1: curve or the curve of all the various oil prices
Speaker 1: out in time, you'll see that it's in backwardation, which
Speaker 1: means that people expect prices to come down over the
Speaker 1: long term, which is exactly the kind of thing that
Speaker 1: doesn't incentivize people to ramp up production because they're thinking
Speaker 1: they can't forward sell future barrels at a higher price.
Speaker 1: Is that right, Yeah, exactly. And I would just quibble
Speaker 1: a little bit about the expectation comment, and I think
Speaker 1: it's not necessarily the market's expecting the price to fall.
Speaker 1: It's that right now the market is willing to pay
Speaker 1: X amount for a for a barrel of w T
Speaker 1: I in eighteen months um, which is slightly different than
Speaker 1: like let's say a market forecast. But just as an example,
Speaker 1: so w T I right now is trading you know,
Speaker 1: above a hundred and ten, around a hundred and twenty
Speaker 1: or whatever, whereas eighteen months out it's it's it's decently
Speaker 1: below a hundred. So I think that's the price signal
Speaker 1: that I think producers are really looking at. And so
Speaker 1: the question is how can you kind of achieve both
Speaker 1: those goals? And I think the spr and again Employe
Speaker 1: America has a tremendous amount of I think, really creative
Speaker 1: policy work around this space to kind of change up
Speaker 1: the playbook a little bit, because it's not you know,
Speaker 1: this is a new kind of crisis we're facing, uh,
Speaker 1: and I think it's going to take new ways of
Speaker 1: trying to solve it. So the idea here, the core idea,
Speaker 1: is to really bring markets into balance and elicit an
Speaker 1: increase supplayer response, so they're just more gallant. So far,
Speaker 1: the idea we know this is creating a tremendous amount
Speaker 1: of political pressure and stress for the White House, and
Speaker 1: I assume in Canada for Trudeau's administration as well, although
Speaker 1: I haven't followed the politics as closely. So far, most
Speaker 1: of the ideas they get bandied about don't actually seem
Speaker 1: to address this. So let's talk about some of the
Speaker 1: other ideas and their drawbacks. So what's wrong Scanda with
Speaker 1: cutting the gas tax? So again, cutting the gas tax. Right,
Speaker 1: when we think about gasoline, it is scarce in the
Speaker 1: sense that, um, you can look the inventory at it
Speaker 1: to say it's scarce. You can say that the supply
Speaker 1: picture for crude oil and the terms of global refining capacity,
Speaker 1: there's a clear crunch that is tied to the Russian
Speaker 1: invasion of Ukraine. So we're dealing with real scarcity here.
Speaker 1: And if we think about what the gas X as
Speaker 1: a prop for making it easier to consume gasoline, and
Speaker 1: when it's scarce, when it's a subsidy for demand at
Speaker 1: a time when it's scarce, that typically doesn't check out.
Speaker 1: It may sort of cross subsidize in some through a
Speaker 1: bunch of intermediating mechanisms the supply side, but it's pretty
Speaker 1: inefficient if it's going to do that, and it actually
Speaker 1: it creates a disincentive for actually adjusting your consumption for
Speaker 1: those people who can adjust their consumption. I think obviously
Speaker 1: in the United States especially, there are a lot of
Speaker 1: people who just can't adjust their consumption very easily because
Speaker 1: there are dependent on an internal combustion vehicle for their livelihood. Um,
Speaker 1: there are people probably in Westchester County. He could probably
Speaker 1: take the train a little more. Um So there are
Speaker 1: Western County in New York. So there's clearly um ability
Speaker 1: to adjust consumption that you're taking off the table when
Speaker 1: you sort of take these sort of blunt measures too.
Speaker 1: All the all alse equal, it's a subsidy for consumption
Speaker 1: and subsidy for demand when the root cause that we
Speaker 1: really want to attack is on the supply side. If
Speaker 1: you want to raise um to the said, you want
Speaker 1: to bring supply and demand into balance. You don't want
Speaker 1: some adjustment on the demand side and some increase in
Speaker 1: terms of on the supply side. So all right, here's
Speaker 1: another one that people talk about. What about and Rory
Speaker 1: or Scanderble what happened? What about banning exports of energy?
Speaker 1: You hear that too. It's like, Okay, the world demands
Speaker 1: a lot, but we have plenty here, and we have
Speaker 1: plenty of capacity. Why not just keep it all here
Speaker 1: so that US consumers aren't fighting with global consumers. I
Speaker 1: think there's two ways you could think about it. One,
Speaker 1: the US had a crude oil export band for a
Speaker 1: very very long time and and repealed that about a
Speaker 1: half decade ago. Um that actually in some ways has
Speaker 1: actually been pointed to that repeal, ironically is actually appointed
Speaker 1: to as one of the reasons that the US refining
Speaker 1: sector has had its kind of waned a little bit
Speaker 1: over the past you know, five to seven years, because
Speaker 1: the band had actually artificially kept the price of western
Speaker 1: you know, West Texas intermediate or domestic US feedstock at
Speaker 1: a lower price than global So it's actually effectively a
Speaker 1: subsidies to two refiners. Now, now, what they're discussing and
Speaker 1: what's been kind of floated around from some of the
Speaker 1: you know leaks out of the out of the White
Speaker 1: House and elsewhere, is a potential ban or at least
Speaker 1: um limiting and cap on the export of refined products.
Speaker 1: Because while the US you know, does you know, have
Speaker 1: all of these kind of you know, imports and exports,
Speaker 1: it is actually a net exporter of gasoline, diesel, etcetera. Uh,
Speaker 1: and that is you know, and a lot of that
Speaker 1: goes to Latin America in particular and elsewhere, and banning
Speaker 1: that in particular would be you know, rescipe for a
Speaker 1: diplomatic crisis. Um, A lot of allies depend on that,
Speaker 1: and it would just kind of, you know, it would
Speaker 1: further punish US refiners because right now, sure now they
Speaker 1: don't have a dis kind of feast stock, but now
Speaker 1: they actually have really you know, high value export markets
Speaker 1: that they're exporting to. If you take that away, then
Speaker 1: it's really going to be you know, you know, a
Speaker 1: one to punch for for domestic US refining. So could
Speaker 1: you talk a little bit more about the mechanism for
Speaker 1: making this happen. So if someone says e s F
Speaker 1: for the Exchange Stabilization Fund, I mean I have a
Speaker 1: very very vague memory of it during the financial crisis,
Speaker 1: But what exactly is it and what has it been
Speaker 1: used for before? So the Exchange Stabilization Fund exists within
Speaker 1: the Treasury Department. It has been used for a variety
Speaker 1: of crises. But the statutory purposes around UM sort of
Speaker 1: the commitments of the U S S of the I
Speaker 1: m F that promote UM stable exchange rates. So it
Speaker 1: could be in some cases very direct UM and even
Speaker 1: still with some controversy, say the Mexican Paso crisis, of
Speaker 1: the Treasury got involved made some short term loans through
Speaker 1: the Exchange to Abalization Fund. It kind of got the
Speaker 1: moniker of being some uh a high discretion um instrument,
Speaker 1: but to support stable exchange rates In two thousand and eight,
Speaker 1: Hank Paulson, than Treasury secretary, used it to guarantee money
Speaker 1: market funds under the guys that stable money market funds
Speaker 1: would be better for exchange rates stability. I think that's
Speaker 1: a pretty legitimate argument, but it is attenuated, right. You
Speaker 1: have to acknowledge that, like you're trying to like keep
Speaker 1: money markets and keep what was a brewing and actually
Speaker 1: spiraling financial crisis at the time um in place. Keep
Speaker 1: that in check. Yes, that did create exchange rate volatility.
Speaker 1: Something between the two is what we're calling for in
Speaker 1: terms of it's well, it may not be uh directly
Speaker 1: in exchange rate intervention, the exchange rate and balance of
Speaker 1: payments struggles that are again right now brewing and growing.
Speaker 1: In terms of developing and underdeveloped countries, and in terms
Speaker 1: of sources for exchange rate volatility, commodities played a pretty
Speaker 1: big role, specifically oil and food. That's what really matters
Speaker 1: for import bills for a number of countries, and it's
Speaker 1: where oil price spikes especially. We haven't really seen the
Speaker 1: big declines yet, but in terms of the supply risk
Speaker 1: from Russia and what the implications are like if you
Speaker 1: want to attack those root causes. There's a pretty strong case.
Speaker 1: It's a stronger case than the money Market Fund usage.
Speaker 1: And I should also mention Steve Minuchen did pretty much
Speaker 1: the same thing, probably through slightly through sort of FED
Speaker 1: facilities using the Exchange Tabilization Fund before the CARES Act
Speaker 1: passed two to effectively backstop money markets through FED facilities
Speaker 1: using the Exchange Stabilization Fund. So we've used it for
Speaker 1: those three purposes. This is a little yeah, I said,
Speaker 1: less attenuated than that. It's within the discretion of the statute.
Speaker 1: And I would say you can make a very strong
Speaker 1: case that supporting stability and supply demand balances and reduced
Speaker 1: likelihood of price bikes in key commodities can be very
Speaker 1: justified and legitimate. And at this point the Treasury has
Speaker 1: two or twenty one billion in that account with the
Speaker 1: ability to actually use it pretty flexibly. I think there
Speaker 1: are a lot of people who will shutter at the
Speaker 1: notion of using it for this purpose, but I think
Speaker 1: it's also time when we really need to think seriously
Speaker 1: about what the supply implications of supply risks are on
Speaker 1: exchange rates and financial stability. Let me ask you another
Speaker 1: technical question about your plans so the implicit is you
Speaker 1: how do you de risk production now, because as Rory
Speaker 1: pointed out, the shape of the futures curve can tell
Speaker 1: investors where they can hedge in or what what the
Speaker 1: market is paying for eighteen months out, and it's not
Speaker 1: as attractive as spots. So the price that we see
Speaker 1: on the screen hundred and ten West Texas isn't necessarily
Speaker 1: the price that investors could get. And so, okay, you
Speaker 1: want to raise that. You want to lower the short end,
Speaker 1: which is what retail pays the pump, and you want
Speaker 1: to put some put a floor under the long end
Speaker 1: so that investors so that companies will produce more. And
Speaker 1: that creates that sort of like you get that supply response,
Speaker 1: Where do you price that long end? So you're talking
Speaker 1: about the idea of like you're the government can give
Speaker 1: a put and so de risk production. How do you
Speaker 1: price that? And what kind of like what is guaranteed
Speaker 1: If I'm an oil company and I'm looking at this plan,
Speaker 1: what is like the sort of like exact economics that
Speaker 1: the government is potentially offering me here in order to
Speaker 1: drill more and produce more. There are advantages to sort
Speaker 1: of doing a forward contract that are made in terms
Speaker 1: of simplicity, right, it's just look at the forward curve
Speaker 1: and try to use that to price. And I think
Speaker 1: that's that's a pretty helpful and legitimate way, as Rory
Speaker 1: laid out, and we laid that under an original proposal
Speaker 1: that this is something that it comes with at a
Speaker 1: you take a smaller profit margin effectively right when you
Speaker 1: lock in as a producer forward prices, but it's certainty
Speaker 1: and if you can leverage that up, that's still pretty valuable.
Speaker 1: But as you've see, if you've seen the oil and
Speaker 1: the number of EMPs that have talked about lifting their
Speaker 1: hedges specifically they don't want the burden of locking in
Speaker 1: lower forward prices when they could ride high right now
Speaker 1: on current spot prices. And so for those that are
Speaker 1: have free cash flow and um are not capital constrained,
Speaker 1: so they don't really have a need for financing and
Speaker 1: they have enough for pain earnings to accelerate investment as
Speaker 1: they so wish, they may not be as interested in that.
Speaker 1: I think they would still be interested in sort of
Speaker 1: downside price protections that they have the option, Like, optionality
Speaker 1: is valuable even if you are so let's say we
Speaker 1: actually don't know how long oil crude oil markets are
Speaker 1: gonna stay tight, if they're gonna get tighter for how
Speaker 1: long they're gonna get tighter like it maybe a year
Speaker 1: and maybe a few months, Maybe it's um it's multiple years.
Speaker 1: And in that environment, if spot prices are high, you
Speaker 1: can still sell at high prices. But if prices crash,
Speaker 1: and that could happen because of recession, that could happened
Speaker 1: because of OPEC, that could happen because of maybe an
Speaker 1: electric vehicle adoption. Right, there's all those certainties that are
Speaker 1: very real, and I think all the major CEOs are
Speaker 1: getting those questions from their shareholders and internal management of
Speaker 1: what do we do in those environments. Well, if you
Speaker 1: have if you have actual um downside price protection and
Speaker 1: price risk is my farther the biggest risk to really
Speaker 1: think about in this industry, then I think it's it's
Speaker 1: a pretty valuable thing to have and say, Okay, we
Speaker 1: can actually accelerate some investment in exchange for having the
Speaker 1: side assurance that you need so to me to actually
Speaker 1: make that financially viable. So the optionality is kind of critical,
Speaker 1: and I think I've talked at least a few people
Speaker 1: who work at MPs and kind of understand called the
Speaker 1: financial map here to a degree that's suggest Yeah, the
Speaker 1: optionality is valuable, even if I'm not someone who hedges
Speaker 1: in terms of forward contracts. Um it doesn't solve every
Speaker 1: problem in the industry. There's obviously other things that matter,
Speaker 1: but I think this is getting out a pretty key
Speaker 1: source of uncertainty and risk. I have a non technical question.
Speaker 1: I guess it's a question about optics, which I've increasingly
Speaker 1: come to realize are very, very important for the way
Speaker 1: policy is actually made. But when we talk about the
Speaker 1: Biden administration essentially providing a backstop or a way of
Speaker 1: incentivizing further oil production, that just seems to be such
Speaker 1: a massively different position to the way Biden came in,
Speaker 1: where he was basically saying we're going to really crack
Speaker 1: down on the fossil fuel industry, We're going to encourage
Speaker 1: renewable energy, UH, turned down emissions and all of that.
Speaker 1: How do you how how do you manage the optics
Speaker 1: of moving from a clean energy policy to a policy
Speaker 1: where you're essentially incentivizing or trying to incentivize more production
Speaker 1: of fossil fuels, like the principle of resilience is an
Speaker 1: important one to keep in mind that actually we need
Speaker 1: to walk into gum here because we did have a
Speaker 1: huge geopolitical shock. Um. I think there are certain stances
Speaker 1: that were likely taken because it was politically convenient during
Speaker 1: sort of primary election season. But the world has changed,
Speaker 1: and their stances should be willing to adapt to the
Speaker 1: current moment. Especially Uh, it probably was too far to
Speaker 1: begin with to say that, Okay, we're going to sort
Speaker 1: of block leasing and block sort of need certain try
Speaker 1: to keep investment down in the oil industry in the US.
Speaker 1: And at the same time, it's also what it's saying,
Speaker 1: like you can just say the world has changed. I
Speaker 1: think that's that's okay, and that's like, why is it okay? Well, one,
Speaker 1: this kind of oil price futility is not actually very
Speaker 1: helpful for a lot of reasons. But it's social stability,
Speaker 1: whether it's even stability for the energy transition, because in
Speaker 1: the end, metrochemical products are also relevant for that purpose.
Speaker 1: And so if oil prices spike because Russian supply rapidly
Speaker 1: comes offline, that's gonna have a lot more economical locations
Speaker 1: and just about the price at the pump. So stability
Speaker 1: is good, and in stability in a way that's actually
Speaker 1: preventing price crashes is actually i'd say more in the
Speaker 1: spirit of trying to adjust consumption patterns for the better.
Speaker 1: So if you're providing the kind of price insurance I'm
Speaker 1: talking about that prevents the sort of price crash scenario
Speaker 1: in which we see gratuitous oil consumption and also one
Speaker 1: in which industry kind of gets financially cleaned out, So
Speaker 1: we should those are the kinds of things that I
Speaker 1: think admission should see clearer eyes and try to be
Speaker 1: able to bridge that gap. But it does like we
Speaker 1: have to walk into gun here, and I think that's
Speaker 1: something that if we don't, we're gonna have these really
Speaker 1: messy handoffs between oil and gas to whatever the future
Speaker 1: of sort of clean energy ends up being. And you
Speaker 1: can make those investments just but those latter investments in
Speaker 1: clean energy do take time. The technology is still in
Speaker 1: certain and certain dimensions, and so those things we should
Speaker 1: not expect those things to come online and somehow displace
Speaker 1: oil and gas instantaneously. The technology and the production structure
Speaker 1: is just not there yet compared to the timeline it
Speaker 1: takes to be able to ramp up and ramp down
Speaker 1: US oil production, which is like uniquely, it's such a
Speaker 1: unique phenomenon in terms of geology and technology coming together
Speaker 1: to turn what was once long dated investments that had
Speaker 1: to happen. Are now on a much shorter cycle in
Speaker 1: terms of it takes about i'd say nine to twelve
Speaker 1: months before when you see the rig counts going up
Speaker 1: to when you see production going up um up, And
Speaker 1: if you think about the decline rates itself also are lower,
Speaker 1: higher in shale as opposed to the past. So these
Speaker 1: are sort of unique opportunities to really thread that needle.
Speaker 1: I unfortunately don't think that there's really been a lot
Speaker 1: of serious movement administration towards making threading me needle. Let's
Speaker 1: bring in another dimension, rory of some of the condistrants
Speaker 1: that's getting a lot of attention. And you already hinted
Speaker 1: at this refining capacity. What's the problem? What where did
Speaker 1: it go? And can you just sort of give us
Speaker 1: the sketch stress of like why the refining aspect is
Speaker 1: difficult right now? Yeah, So I've been in the industry
Speaker 1: over a decade now, and the entire time prior to
Speaker 1: this year, refining has more or less been a boring
Speaker 1: kind of backwater of the overall oil industry in that
Speaker 1: it has been chronically oversupplied, over capacity and margins have
Speaker 1: been kind of generally bad. Um. Mix that with the
Speaker 1: fact that you know, having a refinery is it's a
Speaker 1: very highly polluting, emitting facility. A lot of communities don't
Speaker 1: want them around there, you know, typically very old. You know,
Speaker 1: the classic refrain is that is that there hasn't been
Speaker 1: a new, major green field refinery built in the United
Speaker 1: States since nineteen seven, which is a very very long
Speaker 1: time to go without kind of new facilities. All all
Speaker 1: of the capacity growth we've seen has basically been bolted
Speaker 1: onto existing facilities. So and just to put in perspective
Speaker 1: the extent of the crisis we're currently facing. Normally, crack
Speaker 1: spreads or what we'd or refining margins the difference between
Speaker 1: the price of crude oil and the value of the
Speaker 1: refined products themselves. Normally that's you know, gy rates between
Speaker 1: you know, ten and twenty dollars a barrel, So on
Speaker 1: top of the price of oil, consumers are paying that
Speaker 1: ten to twenty dollars a barrel of refining cost essentially
Speaker 1: at the pump that is currently at you know, in
Speaker 1: the United States between five dan seventy dollars a barrel,
Speaker 1: so you know, three three and a half times normal. Uh.
Speaker 1: And that's why while oil prices are are very high,
Speaker 1: consumer pump prices are exceptionally high. Uh, you know, highest
Speaker 1: by a long shot through history. And that's a big
Speaker 1: part of the reason why. So there was this It
Speaker 1: was it was generally undesirable to invest in new refining
Speaker 1: capacity for a whole bunch of reasons, particularly in the West, uh,
Speaker 1: North America, Western Europe, et cetera. At the same time,
Speaker 1: you you had this capacity pressure from a lot of
Speaker 1: particularly emerging markets. Um. You know, areas in Africa. There's
Speaker 1: a major refinery that's been coming online for a while
Speaker 1: now in Nigeria. And the other areas that you have
Speaker 1: a lot of capacity coming online are China and India,
Speaker 1: where you know, a lot of the incremental demand growth
Speaker 1: is expected and they're gonna be very new, highly sophisticated refineries.
Speaker 1: So they have been putting this pressure, and you saw
Speaker 1: this kind of tidal wave of capacity coming online. So
Speaker 1: everyone was slowly winding down or at least you know,
Speaker 1: disinvesting from the refining assets in the West. Um, and
Speaker 1: then that you know, uh, that trend was pushed into
Speaker 1: overdrive during the initial bout of COVID, when obviously demand
Speaker 1: completely collapsed and everyone was like, Okay, well maybe we're
Speaker 1: planning on, you know, retiring this facility in a year
Speaker 1: or two, let's just do it now, because this seems
Speaker 1: like a terrible time to kind of try and hold
Speaker 1: on when we're so close to the end. So I
Speaker 1: think what's really happened, unfortunately, is we have this capacity
Speaker 1: coming down the line globally, and then we had this
Speaker 1: bridge of these kind of old facilities that we're going
Speaker 1: to kind of get us across the finish line, and
Speaker 1: that bridge is more or less been collapsed by COVID,
Speaker 1: And now we're in this period of exceptionally high and
Speaker 1: exceptionally volatile refining capacity constraints that have been pushed into
Speaker 1: further overdrive by things like the Russia shock, because in
Speaker 1: addition to being a major export of crude oil, Russia
Speaker 1: is also a major exporter of refined products, mostly kind
Speaker 1: of um, you know, partially refined feedstock, but also diesel.
Speaker 1: And finally, the other thing that's kind of come all
Speaker 1: together at the same time here is that China is
Speaker 1: also normally a fairly large export or refined products, but
Speaker 1: for a variety of domestic reasons, one of the most
Speaker 1: notable ones being a stated intention to reduce the emissions
Speaker 1: in China, they've actually been running their refineries less hot
Speaker 1: and basically banning exports, not not fully banning, but drastically
Speaker 1: restricting exports. So I think we're looking at what can
Speaker 1: be done. One of the easiest things is to try
Speaker 1: or one of the simplest things, theoretically would be to
Speaker 1: try and press Beijing to loosen those refined product export restrictions. Alternatively,
Speaker 1: the other thing, and we've been talking about policy options here.
Speaker 1: One of the policy options that has been generally been
Speaker 1: kind of derided, I think by the industry, but I
Speaker 1: think is actually pretty interesting is this idea floated normally
Speaker 1: associated with with Secretary Yellen um of a buyer's cartel
Speaker 1: or a price cap on Russian exports. And this would
Speaker 1: be effective a way of saying, okay, instead of having
Speaker 1: full blown kind of Iran style secondary sanctions on anyone
Speaker 1: purchasing Russian exports, you will only sanction barrels that are
Speaker 1: purchased above a certain price threshold so that you can
Speaker 1: still reduce pressure, or you can kind of reduce pressure
Speaker 1: on the overall global price system, will also still depriving
Speaker 1: mos Cow of you know, war revenue. So I think
Speaker 1: this is this, you know, we're trying to find all
Speaker 1: these different ways to address this situation. I think the
Speaker 1: same general philosophy could be applied to refined exports from
Speaker 1: Russia as well. So one of the criticisms of government
Speaker 1: intervention in the market has always been that it might
Speaker 1: inadvertently end up exacerbating booms and bus versus actually smoothing them.
Speaker 1: And we've seen this dynamic a number of times um
Speaker 1: in places where there is a lot of government intervention,
Speaker 1: and I'm thinking mostly of China, and one of my
Speaker 1: favorite examples there is the government trying to smooth out
Speaker 1: the pig price cycle post African swine fee verse. So,
Speaker 1: you know, prices went up because there was a shortage
Speaker 1: of pigs, and then the government tried to ramp up
Speaker 1: pig production and prices collapsed, and everyone who had decided
Speaker 1: they were going to become a pig farmer and expand
Speaker 1: their pig production facilities suddenly was losing money. So I
Speaker 1: guess my question is, how do you actually how do
Speaker 1: you ensure that these types of support measures smooth the
Speaker 1: cycle rather than exacerbate them on the way up as
Speaker 1: well as on the way down. I think there's a
Speaker 1: way that you can. I mean, the issue here is
Speaker 1: that we're in an acute crisis today, So I think
Speaker 1: there's this question, Like there's an example, for instance, of
Speaker 1: a over a hundred year old refinery in Texas that
Speaker 1: is slated for retirement next year, and the kind of
Speaker 1: estimates I've seen or that it would cost three billion
Speaker 1: dollars to get it up to kind of get it
Speaker 1: back to some kind of you know, reasonable state for operation.
Speaker 1: And while three billion dollars is obviously a tremendous amount
Speaker 1: of money, when the overall kind of consumption base globally
Speaker 1: and particularly the United States is paying like I was saying,
Speaker 1: kind of three to five, you know, three to four
Speaker 1: times the refining margins, it's very easy to cover, you know,
Speaker 1: the economic impact of of three billion dollars on that
Speaker 1: scale very quickly. So I think I think the hope
Speaker 1: is that you can you can kind of get a
Speaker 1: short term stop gap solution that then you can kind
Speaker 1: of let the market take back over, because again we're
Speaker 1: mostly trying to uh combat the effects of this you know,
Speaker 1: exholginous shock of COVID that pushed all of and this
Speaker 1: is a classic theme on your podcast, especially of accelerating
Speaker 1: these pre existing trends and that had happened for you know,
Speaker 1: in the bad ways of kind of a wind down
Speaker 1: in the industry. So I think the hope would be
Speaker 1: to kind of do something temporary as a stop gap.
Speaker 1: And then also I think when we can start to
Speaker 1: think about things like a Sconda's proposal around the SPR,
Speaker 1: I think that is a way that you can kind
Speaker 1: of change the kind of operational concept of an asset
Speaker 1: like the SPR to be more flexible and more useful
Speaker 1: in all of these instances, because you're not if you're
Speaker 1: just shifting the shape of the curve, that's by definition
Speaker 1: not going to exacerbate booms and bus you are flattening
Speaker 1: that booming bus. Just to be clear, Scanda, or is
Speaker 1: there anything the government could do right now to expand
Speaker 1: domestic refining capacity? Is other facilities that were recently closed
Speaker 1: that could be reopened? Uh? Is there are other facilities
Speaker 1: that could be expanded? Like is that what? What can
Speaker 1: be done there. So I think that because of the
Speaker 1: or finding as an industry, is very hard to sort
Speaker 1: of make a buck over time, even though and you
Speaker 1: typically have one or two years in which the bulk
Speaker 1: of the payout really materializes. And so when you think
Speaker 1: about like the amount of duration in your capital structure,
Speaker 1: you need to be able to actually manage that. It's
Speaker 1: sort of you do need to I don't know, it's
Speaker 1: not gonna be something that's solved through uh sort of
Speaker 1: any kind of short term financing or anything like that.
Speaker 1: It's something that you do need to sort of directly
Speaker 1: fund that. Some people may not like that, but that
Speaker 1: is something that if it costs three billion dollars, like,
Speaker 1: that's something that's, uh, that's got to be considered if
Speaker 1: you really want to kind of keep existing capacity online.
Speaker 1: There's there were a number of refineries that were closed
Speaker 1: in the last five years. So this has been a
Speaker 1: sort of secular phenomenon and not nothing really related to
Speaker 1: the political cycle to the extent you can. It's it's
Speaker 1: not easy to be able to turn on an existing refinery.
Speaker 1: You should really have an engineer on to talk about
Speaker 1: what it would take. I've talked to a couple of
Speaker 1: them who have talked about effectively restarting a refinery in
Speaker 1: certain countries, and it does take time, it's not impossible.
Speaker 1: It could be on a timeline that's stills relevant for
Speaker 1: sort of bridging the gap between where refining capacity is
Speaker 1: now and where it likely will be in a few
Speaker 1: years when, especially in emerging markets, we see refining capacity emerge,
Speaker 1: and so in that time there's probably something useful to
Speaker 1: be done. It's just important to be a little bit
Speaker 1: humble about it, and that there is a refining bottleneck,
Speaker 1: there's only so much you can do. There is uh
Speaker 1: you can try to fund um some of the existing
Speaker 1: capacity and make sure it doesn't get shelved too quickly.
Speaker 1: And probably there's stuff on the trades side where if
Speaker 1: China is sort of I don't know, I don't want
Speaker 1: to go too much into the motivations, but the fact
Speaker 1: that we're finding in a global refining capacity crunch and
Speaker 1: they've kind of intentionally decided to not run their refineries
Speaker 1: at quite the same pace that we're seeing in the US,
Speaker 1: it may be something to do there in terms of
Speaker 1: diplomatic and trade channels. So Joe and I were talking
Speaker 1: about this a little bit in the intro. But the
Speaker 1: FED is raising rates until inflation comes down. Energy and
Speaker 1: gas prices seem to be a big part of rising inflation.
Speaker 1: What exactly is the impact of raising interest rates on
Speaker 1: oil and gas prices? Because on the one hand, you
Speaker 1: would expect raising interest rates to bring down consumption and
Speaker 1: reduce prices that way, and at the same time you
Speaker 1: would expect lower prices via demand destruction not to be
Speaker 1: necessarily a good thing for encouraging future production increases. So
Speaker 1: how do you square the sort of the overall impact
Speaker 1: active rate increases on on prices here? Well, what's it
Speaker 1: really interesting here in particular is you know, even in
Speaker 1: years where we've had very serious recessions, like back in
Speaker 1: the you know, two eight nine financial crisis, you didn't
Speaker 1: actually see that much of an outright contraction in global
Speaker 1: oil demand. It's it's really more of a flattening typically.
Speaker 1: Obviously in the beginning of COVID you did, but that
Speaker 1: was a very particular kind of recession and crisis. So
Speaker 1: I think theoretically what you would do is you would
Speaker 1: more or less buy time for supply to catch up,
Speaker 1: rather than bringing outright demand back down to the supply level.
Speaker 1: So it would help, but it would help in a
Speaker 1: very disruptive and kind of economic and socially deliterious way.
Speaker 1: The other irony here, like you were saying, not only
Speaker 1: are it would you theoretically, by bringing prices down, reduce
Speaker 1: the incentive to invest more in new supply. But I
Speaker 1: think one of the things I was saying last time
Speaker 1: I was on the podcast was one of one of
Speaker 1: the things I think will drive eventual E n P
Speaker 1: reinvestment will be the performance of their of their equities.
Speaker 1: Um And what we've seen by this aggressive move by
Speaker 1: the FED has obviously taken a tremendous amount of air
Speaker 1: out of the overall market, but that includes oil and
Speaker 1: gas equities, which, while still performing very well, have actually
Speaker 1: fallen back considerably over the past week or so. Um
Speaker 1: So that again, I think, pulls back in the wrong way.
Speaker 1: UM So, yeah, you could. It's one of the things
Speaker 1: that you could theoretically get to that goal, but in
Speaker 1: a in the kind of a roundabout and kind of
Speaker 1: deeply ineffective or inefficient manner. Yeah. I'll just talk on
Speaker 1: two key mechanisms to I think about here. One is,
Speaker 1: even though the price of oil in the US has
Speaker 1: obviously gone up quite considerably. It's actually much higher for
Speaker 1: countries they're not going to back to the dollar, right
Speaker 1: so that they actually the dollar effect, so we dollar
Speaker 1: appreciation that is effective. The oil is much more expensive,
Speaker 1: has actually increased even more in a number of developed
Speaker 1: and developing countries. And so that's one part of demand
Speaker 1: destruction where it's actually the burden for other countries and
Speaker 1: not the US through some of the fed's actions and
Speaker 1: the FEDS forcefulness right now. And so that's that's one
Speaker 1: part of it. The other part that I would just
Speaker 1: highlight is, yes, maybe the FED tightening at the margin
Speaker 1: leads to lower inflation and lower prices through some sort
Speaker 1: of demand channels, but it is going to cram the
Speaker 1: supply side to in the process. Because every single E
Speaker 1: n P is probably getting the question, now, are you
Speaker 1: sure that your capital plans can withstand recession, especially since
Speaker 1: like the return performance has been so poor. And I
Speaker 1: think that's a very rational question, and it's one that
Speaker 1: I always say. The Fed's pretty much encouraging them to
Speaker 1: ask this question, which it's I guess maybe it's solved
Speaker 1: some sort of big macroeconomic inflation challenge if you push
Speaker 1: it hard enough, like Vulker, but it's actually not good
Speaker 1: for the supply side responses that they claim to be
Speaker 1: hoping for because at least to greater reluctance to invest.
Speaker 1: So this is where I was gonna go, Scander, I mean,
Speaker 1: big picture, You've been really sounding the alarm pretty intensely
Speaker 1: on this topic for a while. Why the urgency? And
Speaker 1: I just wanted like, like, how big of a deal
Speaker 1: is it? What are the stakes that we're talking about
Speaker 1: if this sort of if there isn't a way either
Speaker 1: through industry or public private relations to get the oil
Speaker 1: price down, like just sort of lay it out. Why
Speaker 1: this is so urgent in your view? I think it's
Speaker 1: so urgent. And obviously we are a think tank focus
Speaker 1: on full employment and yet we're start of talking about
Speaker 1: oil and policy. It's that oil price shocks are macro
Speaker 1: economically relevant. Commodity price shocks are macroeconomically relevant, and they
Speaker 1: can actually lead to greater business cycle in stability and
Speaker 1: over time, if that instability is not managed, leads to recession,
Speaker 1: higher unemployment, slack labor markets that are bad for everyone. Look,
Speaker 1: there's a lot of there's there's two channels I think
Speaker 1: are really important to think about. They're both very highly
Speaker 1: salient to this current moment. One is even like, let's
Speaker 1: leave aside the FED for a second, oil prices going
Speaker 1: up if oil prices spike further from here, which I
Speaker 1: think there's clearly a scenario with second materialized. That is
Speaker 1: one in which you will see more consumer spending be
Speaker 1: dedicated towards price at the pump food. These are the
Speaker 1: areas where we've seen like if you say commodity price
Speaker 1: pikes in general, but I'd say the elastic sectors and
Speaker 1: so nondiscretionary that takes away demand from discretionary sectors. All
Speaker 1: else equal, consumer discretionary sectors is where there's actually a
Speaker 1: lot of labor that's also tied to it, so we'll
Speaker 1: see employment demand at risk of attorney the other way
Speaker 1: where we actually see that um there are layoffs potentially
Speaker 1: in those sectors, and that itself is important and it's
Speaker 1: something that I think a lot of people say, well,
Speaker 1: the U S is a net oil exporter now or
Speaker 1: a net were energy independent, and yet it kind of
Speaker 1: misses the fact that the elasticity of investment in the
Speaker 1: energy sector has really changed. Again. I remember in sixteen
Speaker 1: everyone was very bullish on There are a lot of
Speaker 1: people who are in the economic space who are very
Speaker 1: bullish about the economies, like low oil prices is good
Speaker 1: for the consumer, while missing the fact that actually it
Speaker 1: was fixed investment that was um rapidly declining because of
Speaker 1: oil prices declining, and there's a high elasticity at that time,
Speaker 1: so the elasticity of capit capital spendatures to the price
Speaker 1: of oil was exceptionally high sixteen and those macro implications
Speaker 1: almost led to a recession. The FED ultimately backed off
Speaker 1: their sort of hiking plans, and I think that was
Speaker 1: actually pretty critical to keeping the expansion alive, but it
Speaker 1: was largely missed by the FED by most I would
Speaker 1: call it. I'd say the Bomb administration and most of
Speaker 1: sort of the main economists at the time who are
Speaker 1: focused on this. I thought it was going to be
Speaker 1: actually a big consumer benefit and a big win, but
Speaker 1: it really acquired the FED to back off their hiking
Speaker 1: plans for business cycle stability to materialize. Now you're seeing
Speaker 1: the opposite where actually the elastic city has gone down.
Speaker 1: So expecting a big capex boom in the energy sector
Speaker 1: to offset whatever is happening in the consumer discussionary sector
Speaker 1: may not happen, especially because yeah, we've seen that rig
Speaker 1: counts have not increased at the same pace as you
Speaker 1: would expect an oil prices, You're not going to see
Speaker 1: the same fixed investment boom that you might have otherwise
Speaker 1: expected or seen in prior oil price increases, and so
Speaker 1: that is a self resource of instability. The second part
Speaker 1: is what the Jaypal effectively admitted, which was that oil
Speaker 1: prices do wait on their thinking now that they are
Speaker 1: thinking about energy inflation and whether that actually takes them
Speaker 1: away from their target for longer. And that kind of
Speaker 1: plays out through just oil prices going up and then
Speaker 1: the FED just responds, but also like there are going
Speaker 1: to be growing pass through issues that we need to
Speaker 1: take seriously. Passed through from the price of diesel to
Speaker 1: the price of retailed goods is a tricky thing to model.
Speaker 1: It's sort of sometimes it shows up and sometimes it doesn't.
Speaker 1: But typically the bigger the price pike, the more non
Speaker 1: linear the response um, and the more likely you see
Speaker 1: passed through materialized. So we're kind of flirting with a
Speaker 1: lot of risks in this direction, and the FED re
Speaker 1: responding to those risks with tighter policy is more likely
Speaker 1: to translate into sort of recessionary financial conditions. Rory and Sconda,
Speaker 1: so great to have you both, huge topic, great conversation.
Speaker 1: Thank you for coming on odline. Thanks so much. Thanks
Speaker 1: for traving that great Tracy. I thought Scanda's answer there,
Speaker 1: you know, setting aside how you elicit the price, the
Speaker 1: supply response, the steaks are really hot, totally. You know what.
Speaker 1: I had an epiphany over the weekend which was basically
Speaker 1: that everything everything comes down to cycles, right, and booms
Speaker 1: and bus and we always overshoot going down and then
Speaker 1: undershoot going up. And it just feels like people especially
Speaker 1: have a tendency of internalizing whatever their last experiences, which
Speaker 1: means that everyone reacts very slowly to a changing environment,
Speaker 1: which is why I think it's hard to incentivize more
Speaker 1: production than things like oil and gas or lumber, which
Speaker 1: we've spoken about before, infrastructure everything like that. Well, I
Speaker 1: was thinking about this after our last episode with Peter
Speaker 1: church Second, which is like, okay, like we had this
Speaker 1: sort of like if you think about like a game
Speaker 1: theory matrix in we had this like really like good
Speaker 1: one for consumers where there was a lot of incentive,
Speaker 1: especially after to pump more even though it wasn't that profitable.
Speaker 1: And you know, I was thinking also like that was
Speaker 1: like you could say that was the state of housing
Speaker 1: pre Great Financial Crisis, Like that's what we had like
Speaker 1: two thousand three to two thousand seven hre just like
Speaker 1: this massive increase in like home building, etcetera. And we've
Speaker 1: never been able to get that back. We've never had
Speaker 1: like a big home building boom outside of those years.
Speaker 1: And so you know, we had this like huge costly
Speaker 1: oil and gas boom from through It's gonna be really
Speaker 1: hard to get that back with respect to oil and gasoline.
Speaker 1: But in the meantime, the costs are very high, the
Speaker 1: risks are very high owing to the effect on monetary
Speaker 1: policy or you know, just consumer buying power. Right, So
Speaker 1: you could see why you might want the government to
Speaker 1: come in and try to smooth these boom bus cycles
Speaker 1: a little bit. But on the other her hand, you know,
Speaker 1: I asked that question about optics. You know, it comes
Speaker 1: down to that, and I think it's going to be
Speaker 1: very very hard for the administration to sell something that's
Speaker 1: basically you know, we're going to subsidize or incentivize oil
Speaker 1: and gas versus something like a tax holiday on gas,
Speaker 1: which is much more i think politically pleasing because you're
Speaker 1: aiming that at consumers, right, I mean, it's that's still
Speaker 1: unclear to me whether there is a significant force within
Speaker 1: the administration that actually like wants increased production. It's I
Speaker 1: think at this point there is, but it's tricky. I
Speaker 1: think there are other things that maybe don't move the
Speaker 1: needle as much that are more politically popular, like the
Speaker 1: idea of a gas holiday, but in terms of like
Speaker 1: will we use public money to subsidize in backstop energy producers,
Speaker 1: still seems like politically a tough sell. But again, steaks
Speaker 1: seem pretty high. Yeah, alright, shall we leave it there.
Speaker 1: Let's leave it there. This has been another episode of
Speaker 1: the All Thoughts Podcast. I'm Tracy Alloway. You can follow
Speaker 1: me on Twitter at Tracy Hallaway and I'm Joe wi
Speaker 1: Isn't All. You could follow me on Twitter at the Stalwart.
Speaker 1: Follow our guests on Twitter. Rory Johnston, He's at Rory
Speaker 1: Underscore Johnston, Sconda, Amerdath at Irving Swisher, follow our producer
Speaker 1: Carmen Rodriguez at Carmen armand followed the Bloomberg head of
Speaker 1: podcast Francesca Levy at Francesco Today and check out all
Speaker 1: of our podcasts at Bloomberg under the handle at podcast
Speaker 1: Thanks for listening.