WEBVTT - Pierre Andurand on What Europe Needs to Do This Winter 0:00:10.880 --> 0:00:14.080 Hello, and welcome to another episode of the Odd Thoughts podcast. 0:00:14.160 --> 0:00:17.360 I'm Tracy Alloway and I'm Joe. Wasn't so Joe. I 0:00:17.360 --> 0:00:19.640 feel like we need to do an episode on European 0:00:19.760 --> 0:00:23.440 energy once a month now. There are so many developments 0:00:23.560 --> 0:00:28.520 happening so fast. German electricity prices, price caps in the UK, 0:00:29.200 --> 0:00:32.519 the French nuclear industry, and it all relates to geopolitics 0:00:32.560 --> 0:00:34.960 and inflation. How it fits with the e c B 0:00:35.240 --> 0:00:38.120 and everything there really is like it's really like a 0:00:38.159 --> 0:00:41.600 NonStop story that we have to be covering more or 0:00:41.640 --> 0:00:44.080 less all the time. Yeah, and I feel like we 0:00:44.159 --> 0:00:47.840 had some interesting conversations on this topic earlier in the year, 0:00:48.440 --> 0:00:51.680 definitely throughout the summer and even way back into the spring. 0:00:52.120 --> 0:00:55.200 And the difference now is that we really are starting 0:00:55.240 --> 0:00:59.400 to see governments take some steps to try to limit 0:00:59.760 --> 0:01:03.240 the impact of the energy crisis. Right. But here's the 0:01:03.320 --> 0:01:06.839 thing that I don't really get, Like, sure, the government 0:01:06.920 --> 0:01:10.640 can you know, cap prices theoretically, or they could provide 0:01:10.680 --> 0:01:14.840 subsidies to homeowners theoretically, etcetera. But the one thing nothing 0:01:14.880 --> 0:01:18.600 actually provides more molecules, Like none of there's nothing that's 0:01:18.720 --> 0:01:21.199 on the government's balance sheet that it could be done 0:01:21.200 --> 0:01:24.440 to like actually, in my mind, get at the core issue, 0:01:24.560 --> 0:01:28.360 which is a shortage of natural gas, molecules or oil, etcetera. 0:01:28.600 --> 0:01:31.399 And so the question of like how Europe gets through 0:01:31.400 --> 0:01:33.959 the winter, how much of a recession will be, how 0:01:34.000 --> 0:01:37.200 it's gonna ration, energy, etcetera, is still, to my mind 0:01:37.280 --> 0:01:39.160 like a huge question mark. And I think a lot 0:01:39.240 --> 0:01:43.080 might even depend on the weather. Yeah, that's exactly right, 0:01:43.200 --> 0:01:45.800 And there's so much to discuss on this topic. But 0:01:45.920 --> 0:01:48.040 I am happy to say that we really do have 0:01:48.280 --> 0:01:51.120 the perfect guest for today. We're going to be speaking 0:01:51.240 --> 0:01:54.960 with the commodities trader Pierre onderand about this topic. We 0:01:55.000 --> 0:01:57.040 spoke to him, I think it was back in March 0:01:57.280 --> 0:01:59.400 or April of this year when a lot of these 0:01:59.480 --> 0:02:03.000 energy can sterns were just kicking off, And we're going 0:02:03.040 --> 0:02:04.640 to catch up with him and see what he's thinking 0:02:04.680 --> 0:02:07.040 about the market now. Can't wait. Pierre, Thank you so 0:02:07.120 --> 0:02:10.280 much for coming back on all blots. My pleasure. High Tracy, 0:02:10.360 --> 0:02:12.680 Hi Joe, good to speak with you again. Pierre. Maybe 0:02:12.800 --> 0:02:15.840 just to begin with you know, we've spoken to some 0:02:15.919 --> 0:02:18.520 of our colleagues, some people in the energy market recently, 0:02:18.639 --> 0:02:22.040 back in August just about how dire the situation in 0:02:22.080 --> 0:02:26.239 Europe could get this winter. At least one of them 0:02:26.320 --> 0:02:30.120 was pretty pessimistic about the outlook. But you had a 0:02:30.200 --> 0:02:34.959 Twitter thread recently where you were suggesting that maybe things 0:02:35.080 --> 0:02:39.120 aren't that bad, Maybe there are steps that society as 0:02:39.160 --> 0:02:41.480 a whole could be taking to try to offset some 0:02:41.560 --> 0:02:44.200 of these commodities pressures. What do you think Europe can 0:02:44.240 --> 0:02:49.520 do here? Yes, I think, I think, you know, then 0:02:49.600 --> 0:02:52.160 we think we have you know, we've been you know, 0:02:52.880 --> 0:02:55.720 used to living in in a very abundant world and 0:02:56.000 --> 0:02:58.320 we have to switch into a wolf of a dime. 0:02:58.639 --> 0:03:01.320 And once we understand that, I don't think the steps 0:03:01.320 --> 0:03:04.320 we have to make our are too difficult. But first, 0:03:05.360 --> 0:03:08.359 plan number one for no Russian gas, you know, pretty 0:03:08.440 --> 0:03:13.640 much ever for the foreseeable future. Once politicians understand that 0:03:13.680 --> 0:03:16.440 we have to plan for no Russian gas, then it 0:03:16.680 --> 0:03:19.400 is much easier than you know, assuming that it will 0:03:19.440 --> 0:03:22.360 come and then it doesn't go. So so far there 0:03:22.360 --> 0:03:24.720 has been a lot of steps have been taken. So first, 0:03:25.880 --> 0:03:29.800 you know, at the moment, Russian gas exposed to Europe 0:03:30.200 --> 0:03:33.560 have gone down by seventy and I think they will 0:03:33.600 --> 0:03:35.000 go down. I mean, for me, I think we have 0:03:35.040 --> 0:03:37.920 to assume that we will not get from now and 0:03:37.960 --> 0:03:41.160 pretty much from from next week onwards um and and 0:03:41.200 --> 0:03:44.680 think about how we can live without Russian gas altogether. 0:03:45.000 --> 0:03:47.040 So the good news is that Europe has been able 0:03:47.080 --> 0:03:50.600 to import a lot more energy so liquid natural gas 0:03:50.640 --> 0:03:56.760 than expected this year, pretty much almost double the imports 0:03:56.840 --> 0:04:01.200 of llenergy and that increasing energy so apply corresponds to 0:04:01.240 --> 0:04:06.040 about two thirds of the Russian losses so far, So 0:04:06.080 --> 0:04:07.760 that's a good news. We managed to import a lot 0:04:07.800 --> 0:04:12.040 more energy, and there's more import capacities as being built 0:04:12.560 --> 0:04:14.600 and that will come online over the next few months. 0:04:14.880 --> 0:04:17.640 So it looks like energy import capacity will not be 0:04:17.720 --> 0:04:22.600 an issue for Europe. The problem is how much you know, 0:04:23.200 --> 0:04:27.279 llergy can Europe really managed to to attract because the 0:04:27.279 --> 0:04:29.760 West of the world is competing for that supply and 0:04:29.800 --> 0:04:34.200 some other countries have no long term contracts. But I 0:04:34.240 --> 0:04:36.560 will assume that you know, Europe being you know what, 0:04:37.760 --> 0:04:40.240 you know, like one of the wealthiest continent, that they'll 0:04:40.240 --> 0:04:45.480 be able to most of the competitors for for llergy. 0:04:45.920 --> 0:04:49.599 And I think the hard part is mainly behind us. 0:04:49.640 --> 0:04:53.960 I think now the global supply of energy is still 0:04:54.000 --> 0:04:58.200 going up, we'll should have a big bump in. So 0:04:58.240 --> 0:05:02.640 if we assume that Europe could attract about of the 0:05:03.000 --> 0:05:07.520 energy additions, that will already go a long way in 0:05:07.600 --> 0:05:11.960 solving solving the crisis. But we can't replace over the 0:05:12.000 --> 0:05:14.240 next two years all of the Ossian gas. We can 0:05:14.279 --> 0:05:17.039 replace a big part of it with energy, but not 0:05:17.160 --> 0:05:19.159 all of it, So we need to have some kind 0:05:19.200 --> 0:05:23.520 of demand response. Some of it already happened. So basically, 0:05:24.080 --> 0:05:29.200 if you think of all the gas, about fifty percent 0:05:29.320 --> 0:05:33.800 is coming from residential slash commercial demand as for hitting 0:05:34.080 --> 0:05:39.719 and cooking, but many hitting, about twenty five percent is 0:05:39.760 --> 0:05:44.719 coming from industrial demand or so from power. So so 0:05:44.800 --> 0:05:49.560 far we've seen a switch of about thirty five oil 0:05:49.960 --> 0:05:54.599 in the industrial demand. So already today we have lost 0:05:54.680 --> 0:05:57.920 a lot of gas demand from the industry because natural 0:05:57.960 --> 0:06:01.080 gas prices are much higher than than oil prices. Some 0:06:01.160 --> 0:06:04.120 of that switching from gas to oil has happened, and 0:06:04.160 --> 0:06:09.080 I switching happening just because some of it needs a 0:06:09.080 --> 0:06:12.040 bit of lead time, so that in Europe and Asia. 0:06:12.120 --> 0:06:13.960 So I think we will lose some natural guest demand 0:06:14.000 --> 0:06:18.440 worldwide due to very high natural gas prices, and then 0:06:18.640 --> 0:06:24.239 what's what's left to do is really bring residential demand 0:06:24.279 --> 0:06:27.279 and power demand down to Willie balance the market and 0:06:27.320 --> 0:06:29.880 the steps that have to be taken are not so dramatic. 0:06:30.279 --> 0:06:32.760 Basically a thing that I mean, it looks like in 0:06:32.800 --> 0:06:36.039 my supplant demand model that we need to bring the 0:06:36.279 --> 0:06:41.520 residential and commercial demand down by fifteen percent. Of responds 0:06:41.600 --> 0:06:45.440 to lowering the term stat by three degrees from twenty 0:06:45.480 --> 0:06:49.040 two degrees celsius to nineteen degrees celsius. So it might 0:06:49.040 --> 0:06:51.760 sound a bit you know, chili relative to what we 0:06:52.120 --> 0:06:54.400 are being we are used to, but it's not very cold. 0:06:54.440 --> 0:07:00.560 It's basically had in nine six in in Europe and 0:07:00.839 --> 0:07:04.279 the UK, and we were living with fifteen to sixteen 0:07:04.279 --> 0:07:07.520 degrees in the seventies, you know, during the the energy 0:07:07.560 --> 0:07:12.080 crisis of the seventies. Um so alreadys that will go along, 0:07:13.120 --> 0:07:15.560 and then we'll need to bring power demand down by 0:07:15.560 --> 0:07:19.520 five percent, which is you know, BIGI just switching some 0:07:19.800 --> 0:07:23.120 you know, switching off the lights in a room that 0:07:23.160 --> 0:07:26.760 are not used, switching off buildings at night when they're 0:07:26.800 --> 0:07:30.480 not used, and stuff like that bring power demand down 0:07:30.560 --> 0:07:33.040 by five percent. So there are steps to be taken. 0:07:33.280 --> 0:07:35.920 Um in that situation, we don't need any Russian gas 0:07:35.920 --> 0:07:39.360 at all. And actually Russia would not get one dred 0:07:39.400 --> 0:07:43.080 billion dollars of European money as a result. So I 0:07:43.080 --> 0:07:47.000 think if I were bring that you know, to be 0:07:47.720 --> 0:07:52.240 three degrees cooler in in the winter, but still very comfortable, 0:07:52.680 --> 0:07:58.000 very comfortable temperatures, and you know, switching off some lights 0:07:58.000 --> 0:08:01.960 here and there and that enough to not gas at all. 0:08:02.200 --> 0:08:03.960 So I think we have more language than we think. 0:08:04.000 --> 0:08:08.360 I think the Shermong girls and the version protagonists, you know, 0:08:08.360 --> 0:08:10.880 when they say that we're all gonna freeze to days 0:08:10.920 --> 0:08:13.200 in the in the winter, it's actually not true. But 0:08:13.280 --> 0:08:15.200 we need to plan, you know, I mean, it could 0:08:15.200 --> 0:08:18.880 be true at the end. If we don't make steps 0:08:18.920 --> 0:08:21.760 today to lower demand, then we will have some issue, 0:08:22.600 --> 0:08:25.320 some shortage before the end of the winter. I keep 0:08:25.320 --> 0:08:27.640 having to remind myself three degrees does it sound like 0:08:27.760 --> 0:08:30.400 that much? But you know, for listeners, bear in mind, 0:08:30.680 --> 0:08:33.320 you know that celsius in fahrenheit and something. But it 0:08:33.440 --> 0:08:35.240 is interesting too that, as you point out, and you 0:08:35.280 --> 0:08:38.000 said on Twitter, that actually was more the average in 0:08:38.040 --> 0:08:41.880 the nineties. So it's not a huge backstab. Just on 0:08:41.960 --> 0:08:46.320 the question of getting adequate llergy imports. How much of 0:08:46.320 --> 0:08:49.480 it is it about essentially outbidding the rest of the 0:08:49.520 --> 0:08:55.280 world versus expanding the physical infrastructure to take in that llenergy. 0:08:55.400 --> 0:08:59.200 Is there an acceleration of LLERGY import terminal construction that 0:08:59.240 --> 0:09:01.280 will start to move of the dial in the medium 0:09:01.320 --> 0:09:04.200 or short term, Yeah, there are some. So I'm not 0:09:04.240 --> 0:09:07.240 worried about the import capacity of Europe because we already 0:09:07.240 --> 0:09:12.240 have some floating platform that can import energy that are 0:09:12.320 --> 0:09:16.080 coming online in the next few months, and already today 0:09:16.120 --> 0:09:19.720 like the energy imports, we present seventy one of the 0:09:19.760 --> 0:09:22.439 import capacity of Europe. But we need a bit more 0:09:22.480 --> 0:09:24.680 important in the north of Europe, and that will happen 0:09:24.720 --> 0:09:27.439 over the next few months. So it doesn't look like, 0:09:28.520 --> 0:09:31.280 you know, the import capacity is a constraint in Europe. 0:09:32.640 --> 0:09:34.520 So what we need is that we need the global 0:09:34.520 --> 0:09:37.400 supplier of energy to grow up. Um So, in terms 0:09:37.400 --> 0:09:42.120 to give you some numbers, global supply of energy is 0:09:42.160 --> 0:09:45.880 about five hundred and fifty busy m, so that's billion 0:09:45.960 --> 0:09:49.760 cubic meters, and it's growing for the next few years 0:09:50.320 --> 0:09:54.520 um at a one fifteen b c m yes of 0:09:54.600 --> 0:09:57.520 the next two years, and then it goes to sixty 0:09:57.640 --> 0:10:01.439 or so sixty bc mp year. And so if we 0:10:01.520 --> 0:10:06.160 assume so basically with the current volume that Europe is important. 0:10:06.440 --> 0:10:09.960 It will just need to import about of the additions 0:10:10.040 --> 0:10:13.520 on top of the import today to balance the markets. 0:10:13.600 --> 0:10:16.480 Fas for the next two years we accept slightly cooler 0:10:16.520 --> 0:10:39.000 temperatures in the winter. So you mentioned this idea of Europe, 0:10:39.120 --> 0:10:42.080 you know, giving a hundred billion dollars of money to 0:10:42.240 --> 0:10:45.960 Russia for its commodities exports. And one thing that you 0:10:46.000 --> 0:10:49.080 wrote after we last spoke in March was about how 0:10:49.320 --> 0:10:52.920 price caps on Russian oil could work and add pressure 0:10:52.960 --> 0:10:55.960 to the Russian economy, and you kind of focused on 0:10:56.000 --> 0:10:59.280 a problem in the current situation, which is that Russia 0:10:59.760 --> 0:11:04.360 is exporting less oil and gas, but it's selling that 0:11:04.440 --> 0:11:07.160 oil and gas at higher prices, so it's still getting 0:11:07.160 --> 0:11:10.640 a substantial amount of money from those exports. Uh. And 0:11:10.720 --> 0:11:12.920 fast forward to this month, we have the G seven 0:11:13.200 --> 0:11:16.240 endorsing that price cap on Russian oil. I should say 0:11:16.240 --> 0:11:20.200 we're recording this UM on September twenty one, which is 0:11:20.360 --> 0:11:23.160 the week of the UN General Assembly, so there might 0:11:23.200 --> 0:11:26.680 be some news on this. But talk to us about 0:11:27.000 --> 0:11:29.640 what you would like to see from the G seven 0:11:29.720 --> 0:11:33.160 in order to make these price caps work, because it 0:11:33.200 --> 0:11:35.600 does seem like it's kind of a delicate balancing act, 0:11:36.040 --> 0:11:39.520 and presumably the West wants to pressure the Russian economy 0:11:39.559 --> 0:11:44.560 without sending commodities prices way higher. Yes, so I think 0:11:44.600 --> 0:11:48.800 it's possible to enforce, but you need and I think 0:11:48.840 --> 0:11:51.560 a lot you know, all the consumers have an incentive 0:11:51.800 --> 0:11:55.640 in playing game and you know, buying buying really cheaper 0:11:55.679 --> 0:11:58.120 than what they've done, you know, in the past. So 0:11:58.520 --> 0:12:01.160 I think the keys to find cap prize that is 0:12:03.160 --> 0:12:07.000 lower than current prices obviously, and and lower than where 0:12:07.120 --> 0:12:09.600 China and India are buying it. And I think somehow 0:12:09.679 --> 0:12:14.719 there will be game, at least unofficially to to do that. 0:12:14.760 --> 0:12:16.839 But then it's a question of how they will want 0:12:16.840 --> 0:12:19.679 to enforce it, right, it's um there will always be 0:12:19.720 --> 0:12:22.040 some cheating, But I think on on on a large part, 0:12:22.080 --> 0:12:25.960 it's possible to enforce as far as um you know, 0:12:26.000 --> 0:12:29.080 because there's like it's a large flow bicky. If you 0:12:29.120 --> 0:12:32.800 have to replace all the oil exports to Europe and 0:12:32.880 --> 0:12:35.400 move them to India and China, you need a lot 0:12:35.520 --> 0:12:38.079 more ships. So backy, you have some constraints in terms 0:12:38.120 --> 0:12:41.520 of shipping, and a lot of those ships are Greek, 0:12:41.720 --> 0:12:44.400 so I think there will be some you know, the 0:12:44.480 --> 0:12:46.440 devil will be in the detail. I think it's possible, 0:12:46.480 --> 0:12:50.400 but the but hopefully they're speaking with enough people to 0:12:50.559 --> 0:12:54.079 understand what has to be done to really minimize the 0:12:54.200 --> 0:12:58.559 cheating so that we can really put a damp on 0:12:58.559 --> 0:13:02.640 on Russiana revenue. Can we just go back a little 0:13:02.679 --> 0:13:06.600 bit to the rationing, and some of the rationing seems 0:13:06.640 --> 0:13:09.959 straightforward in Europe, It's like, okay, turned down the thermostats 0:13:09.960 --> 0:13:13.719 in the winter, turn off lights in rooms when you're 0:13:13.720 --> 0:13:17.240 not in them. But in terms of like industrial demand, 0:13:17.440 --> 0:13:20.160 that seems like, you know, it almost seems like a 0:13:20.160 --> 0:13:23.160 guarantee that there is a deep recession coming to Europe. 0:13:23.200 --> 0:13:28.160 If factories just can't afford to operate profitably at current prices, 0:13:28.200 --> 0:13:30.680 how much demand destruction, Like what's that going to do 0:13:30.840 --> 0:13:33.760 to Europe's industrial sector? And how much of a bite 0:13:33.760 --> 0:13:35.559 will that take out? How much will it just sort 0:13:35.600 --> 0:13:39.640 of like factory shutdowns essentially contribute to getting demand to 0:13:39.679 --> 0:13:45.600 the necessary levels. So there's some industries that um use 0:13:45.720 --> 0:13:48.679 natural gas as if eat stuck, so not only to 0:13:49.200 --> 0:13:53.360 know not only geration, but that defeats stuck. So some 0:13:53.440 --> 0:13:59.120 examples would be chemical manufacturing would be you know, glassmaking 0:14:00.160 --> 0:14:05.440 would be petro chemical, the petro chemical industry. So for 0:14:05.520 --> 0:14:07.800 some processes you need natural gas as the feedstock and 0:14:07.840 --> 0:14:10.720 you cannot change it right, but some of them you can. 0:14:10.840 --> 0:14:14.199 For example, for the petcam industry, you can use NAPSA 0:14:14.440 --> 0:14:18.440 instead of instead of natural gas, so you can have 0:14:18.480 --> 0:14:21.480 some switching from natural gas to oil. Also in in 0:14:21.680 --> 0:14:26.240 the in terms of natural gas demand for the industry, 0:14:26.280 --> 0:14:29.840 a lot of it is also to generate their own 0:14:29.880 --> 0:14:33.760 power and and for that they can actually use oil 0:14:33.840 --> 0:14:36.320 instead of natural gas. So you can have quite a 0:14:36.320 --> 0:14:39.760 lot of switching in the industry. And already today we're 0:14:39.760 --> 0:14:43.200 seeing switching of thirty pc from natural gas to oil. 0:14:43.880 --> 0:14:46.400 So that's the good news. In in in the industry 0:14:46.480 --> 0:14:49.640 that does have to take natural gas, well, I guess 0:14:49.640 --> 0:14:52.840 we'll have to think of which ones are strategic and 0:14:52.880 --> 0:14:56.360 which ones are not. And the strategic industries will have 0:14:56.440 --> 0:14:59.120 to be helped by the government to be able to 0:14:59.240 --> 0:15:04.480 afford gas and power places until the matter resolve and 0:15:04.480 --> 0:15:06.880 and and it will you know, over the next two 0:15:06.960 --> 0:15:09.720 to three years. It would be resolved to more lergy 0:15:09.880 --> 0:15:14.560 and as far as we there's enough incentive for consumers 0:15:14.600 --> 0:15:19.240 to red the unnecessary consumption of energy. I know this 0:15:19.320 --> 0:15:23.560 is a slight turn or detour, but can you give 0:15:23.640 --> 0:15:25.600 us a lot of perspective just from where your perspective 0:15:25.640 --> 0:15:28.760 what's going on with French nuclear well brickally, you know, 0:15:28.960 --> 0:15:32.640 it's a nuclear park. You know was at first at 0:15:32.680 --> 0:15:36.840 the life expectancy of forty years and we're getting towards 0:15:36.840 --> 0:15:39.560 the end of the forty years. So there's some issues 0:15:39.600 --> 0:15:42.200 that the maintenance have to be done. Uh you know 0:15:42.240 --> 0:15:44.800 they can they see some cousion, some you know, some 0:15:44.880 --> 0:15:47.520 issue here and there that they have to fix. But 0:15:47.600 --> 0:15:51.680 it looks like you know, the work mainly at those 0:15:51.720 --> 0:15:54.360 power places. The work will be done for some of 0:15:54.400 --> 0:15:57.800 that capacity to come back online. But I think there 0:15:57.800 --> 0:16:01.640 should be a switch to to really invest massively into 0:16:01.760 --> 0:16:04.320 nuclear like around Europe, and I hope that will come 0:16:04.360 --> 0:16:09.360 because we need that baseload no no low calbum capacity. 0:16:09.920 --> 0:16:12.880 That takes a while to build plants, right nuclear plants, 0:16:12.880 --> 0:16:15.680 but they have to today decided to go for it. 0:16:16.440 --> 0:16:18.720 If I can add also, you know, like the warmer 0:16:18.800 --> 0:16:23.560 temperatures in the summer make it more difficult to cool 0:16:24.640 --> 0:16:27.600 U nuclear reactors, so that's why some of them have 0:16:27.640 --> 0:16:29.840 to shut down as well. And that happens not only 0:16:29.840 --> 0:16:32.880 in Europe, but around the world, right, So there most 0:16:32.920 --> 0:16:35.800 of them are built around weathers or around the sea, 0:16:35.920 --> 0:16:38.320 and when the water becomes too warm, they have to 0:16:38.320 --> 0:16:41.840 shut down until the water gets cooler. That you have 0:16:41.840 --> 0:16:46.240 that tissue as well. So you mentioned perhaps some support 0:16:46.360 --> 0:16:51.160 for certain industries who cannot easily substitute fuels, but you've 0:16:51.200 --> 0:16:55.440 also been publicly critical of some government support schemes for 0:16:55.560 --> 0:17:00.120 energy usage. Specifically, the UK is capping of electricity and 0:17:00.240 --> 0:17:02.480 net gas prices. I think it's something like two thousand 0:17:02.520 --> 0:17:07.639 five pounds for UK households. What's the issue there? And 0:17:07.720 --> 0:17:12.280 I'm curious if that criticism also extends to the US 0:17:12.320 --> 0:17:16.280 where the big you know, effort that's been underway here 0:17:16.320 --> 0:17:19.680 when it comes to lowering energy prices is the release 0:17:19.760 --> 0:17:23.880 from the U S is strategic petroleum reserve natural gas 0:17:23.920 --> 0:17:26.760 in all Like, I think I understand that government you 0:17:26.960 --> 0:17:29.840 want to help households and businesses, and of course they should, 0:17:29.880 --> 0:17:32.280 you know, but we have to make sure that the 0:17:32.320 --> 0:17:36.439 demand meat supply as well, because if demand is above supply, 0:17:36.480 --> 0:17:40.439 eventually you have shortages and we all are in trouble, right, 0:17:40.480 --> 0:17:42.720 we have blackouts, you know, we can't eat at all, 0:17:43.160 --> 0:17:45.600 and then you know in the winter gets much much 0:17:45.600 --> 0:17:49.679 called the rights three degree impact. So the key is 0:17:49.720 --> 0:17:52.560 to do I think too if you look at the UK, 0:17:53.440 --> 0:17:57.000 UK places have a lot more expensive than most European 0:17:57.280 --> 0:18:01.280 places of emample in France, uh electricity and gas prices 0:18:01.280 --> 0:18:04.399 are only a four percent relative to last year, and 0:18:04.480 --> 0:18:06.520 next year there will be a fifteen percent, which is 0:18:06.800 --> 0:18:11.600 way way below commercial like wholesale levels. In the UK 0:18:11.720 --> 0:18:14.560 they followed at least the doubles you know over the years, 0:18:14.560 --> 0:18:17.040 so that you should have some kind of price response 0:18:17.080 --> 0:18:19.880 already because it's a lot more expensive than last year 0:18:19.920 --> 0:18:23.040 and more expective than in Europe. But I think that 0:18:23.080 --> 0:18:25.240 the government should do more. You know, you can't. Just 0:18:26.920 --> 0:18:29.080 when I hear a listress saying, well, we don't want 0:18:29.119 --> 0:18:31.680 to tell you to use the less energy, well actually 0:18:31.840 --> 0:18:34.679 you do. You know energy doesn't You can't print energy, 0:18:34.760 --> 0:18:37.159 right you? You can import some of it, but you 0:18:37.160 --> 0:18:39.359 have limits to how much you want to you can import. 0:18:39.359 --> 0:18:42.800 You can only import what's available on the world. Um 0:18:43.119 --> 0:18:46.000 and if you overbid I want, like if you try 0:18:46.040 --> 0:18:49.439 to buy you know, the one extra cargo that another 0:18:49.480 --> 0:18:52.439 country needs desperitely, then you you bring prices up a 0:18:52.440 --> 0:18:54.959 lot and then the government will have to to to 0:18:55.000 --> 0:18:57.200 pay the bill which is eventually which is at the 0:18:57.280 --> 0:18:59.920 end of the day taxpayer, right. And so I think 0:19:00.200 --> 0:19:04.760 government should do more um to motivate, to encourage I mean, 0:19:04.800 --> 0:19:07.920 first to explain why to go on the public awareness campaign, 0:19:08.520 --> 0:19:11.399 to explain to the consumer what you know, how to 0:19:11.840 --> 0:19:16.919 reduce their energy demand while still you know, living comfortably um. 0:19:16.960 --> 0:19:20.480 And that's something that they've been they have started doing 0:19:20.480 --> 0:19:23.360 in the in in the EU, and I hope the 0:19:23.480 --> 0:19:27.000 UK will will will do that as well, because you 0:19:27.040 --> 0:19:29.359 need to bring demand down. The market will not be 0:19:29.440 --> 0:19:33.640 able to two to be in balanced if you don't, 0:19:33.720 --> 0:19:37.439 let you know, consumer prices go up and your supply 0:19:37.600 --> 0:19:40.240 is going down, then you know, how can you meet 0:19:40.960 --> 0:19:44.000 You can't import enough energy to to really you can't 0:19:44.040 --> 0:19:48.879 replace natural gas with all the energy um. You need 0:19:48.920 --> 0:19:51.679 to bring demand down to And what about the spr release? 0:19:51.880 --> 0:19:54.680 How significant has that been in terms of bringing down 0:19:54.760 --> 0:19:58.119 oil and gas prices? And then secondly is that a 0:19:58.160 --> 0:20:01.639 sustainable strategy because one of the criticisms as well, you 0:20:01.760 --> 0:20:04.919 really saw this inventory and then it becomes harder and 0:20:05.000 --> 0:20:09.560 perhaps more expensive to buy it back. Yes, I mean, 0:20:11.240 --> 0:20:15.480 so for this year, right, we have We still have 0:20:15.640 --> 0:20:18.760 the Russian invasion of Ukraine, but so far we have 0:20:18.880 --> 0:20:22.639 not lost any Russian oil or very little bitlically maybe 0:20:23.119 --> 0:20:26.040 maximum half a million bar of the day, which is 0:20:26.040 --> 0:20:29.840 a lot less than what we expected earlier in the year. 0:20:30.640 --> 0:20:33.560 So so far Russia has been able to to you know, 0:20:33.600 --> 0:20:37.359 to export pretty much as much as they wanted around 0:20:37.400 --> 0:20:40.520 the world. But the EU embargo has not started yet, right, 0:20:40.560 --> 0:20:44.520 so we're starting in in could in early December and 0:20:44.560 --> 0:20:49.520 then products in early February. Um so so far, but 0:20:50.840 --> 0:20:57.600 the better administration used that as the user potential you know, 0:20:57.960 --> 0:21:00.959 version supply loss that the next use to release THEESPR, 0:21:01.520 --> 0:21:04.800 and we had the largest SPR whillis ever m you know, 0:21:04.880 --> 0:21:08.960 briefly by hundred and sixty million barars I today over 0:21:09.000 --> 0:21:12.800 the last six months, which is weughly a million barrels 0:21:12.840 --> 0:21:14.840 a day from the US and also half a million 0:21:14.840 --> 0:21:17.639 barrels a day from the west of the world. Publicly, 0:21:17.680 --> 0:21:19.720 if we lost half a million barllars a day from 0:21:19.880 --> 0:21:22.840 from Russia, but we got one point five million barllars 0:21:22.840 --> 0:21:25.200 a day extra from the ESPR, I think it means 0:21:25.200 --> 0:21:27.960 that the Russian invasion of Kin bought a million barllars 0:21:27.960 --> 0:21:31.199 a day, more production, more supply on the market. And 0:21:31.240 --> 0:21:34.119 I think that one of the reasons why the market 0:21:34.200 --> 0:21:37.360 has gone down since the summer is the fact that 0:21:38.359 --> 0:21:43.160 market participants were expecting Russian supply to go down by 0:21:43.400 --> 0:21:45.480 buffy two million bars a day and we have not 0:21:45.880 --> 0:21:48.440 seen that yet. But on the other hand, we saw 0:21:48.440 --> 0:21:53.000 the SPR release, and there are like large worries about 0:21:53.200 --> 0:21:56.760 you know, uh, like important worries about a large recession 0:21:56.800 --> 0:21:59.760 coming with interest rates going up and with the impact 0:21:59.800 --> 0:22:04.960 of the Russian war on the globody economy. Um. So 0:22:05.000 --> 0:22:07.000 I think it's a mix of that, right, Like, Russian 0:22:07.000 --> 0:22:10.640 supply hasn't gone down, we had a large SPR supply, 0:22:11.080 --> 0:22:14.440 demand is probably weaker than what we expected. And then 0:22:14.480 --> 0:22:17.879 you have all the macro worries about you know, fighting 0:22:17.920 --> 0:22:21.000 inflation for getting you know, higher and higher interest rates 0:22:21.119 --> 0:22:26.000 while the consortable is being hit with higher community places. 0:22:26.040 --> 0:22:28.480 So when we talked to you in the spring, I 0:22:28.480 --> 0:22:30.800 mean there were a number of factors and you said, 0:22:30.840 --> 0:22:32.560 you know, there was a possibility that we could see 0:22:32.600 --> 0:22:35.159 two hundred dollar oils. I think the number that you 0:22:35.200 --> 0:22:38.040 put out and obviously now uh, you know, w T 0:22:38.200 --> 0:22:41.400 I think is somewhere maybe at the high eighties. Right now, 0:22:41.840 --> 0:22:45.080 where what do you see here? I mean the SPR release, 0:22:46.000 --> 0:22:48.560 They're not they can't keep releasing it forever, right, it's 0:22:48.600 --> 0:22:52.680 a finite amount that they release. It's still seems plausible 0:22:52.720 --> 0:22:55.959 that we could have risks to Russian supply, and of 0:22:56.000 --> 0:22:58.680 course we haven't talked about. You know, China has had 0:22:58.920 --> 0:23:02.400 hard lockdowns over the last several months in major cities 0:23:02.640 --> 0:23:07.919 and that is significantly curtailed the country's petroleum consumption previous reasons. 0:23:08.080 --> 0:23:10.200 So I'm curious, like, which way you see the risk 0:23:10.520 --> 0:23:15.640 skewed and where could oil go now? Yes, I think 0:23:15.840 --> 0:23:18.800 res as cute to the upsite clearly as you say, 0:23:19.240 --> 0:23:22.200 I believe we're gonna lose some Russian supply. I don't 0:23:22.200 --> 0:23:25.280 know how much, but I would say between one and 0:23:25.320 --> 0:23:28.800 two million pars a day. The SPR release will have 0:23:28.880 --> 0:23:30.760 to stop, I mean always. I think the pace of 0:23:30.760 --> 0:23:34.520 the release is going to slow down now, um quite 0:23:34.520 --> 0:23:36.000 a lot, and I don't think they can carry on 0:23:36.040 --> 0:23:39.560 for very long, so that will stop. Then China at 0:23:39.600 --> 0:23:42.320 some point will we open. We don't know when, but 0:23:42.720 --> 0:23:44.840 they will, and there's probably two million packs a day 0:23:44.840 --> 0:23:49.000 of demand that can come back once China, you know, 0:23:49.160 --> 0:23:51.840 we opened to the world and you start having people 0:23:51.880 --> 0:23:55.080