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Speaker 2: Zayad Wood is Chief Emerging market Economists for Bloomberg Economics.
Speaker 2: Think about an em mission like what analog does for
Speaker 2: the United States. In his essay, over the last twenty
Speaker 2: four hours on one hundred and sixty dollars, oil went
Speaker 2: around the world. Say, let's do first principles. First, the
Speaker 2: Strait of Malacca twenty nine percent of seaborn trade Urmus
Speaker 2: Shockingly almost as much twenty six percent of seaborn trade.
Speaker 2: The sue Us Canal where t Laurarance was barely is there.
Speaker 2: How large is the Strait of Hormus? Do we understand
Speaker 2: the substantial trade that goes through there? In oil?
Speaker 3: It is large, and it's larges its concentrated. If you
Speaker 3: think about it, what it transports. It transports aill in
Speaker 3: gas and energy from the Middle East to the rest
Speaker 3: of the world, and the rest of the world sends
Speaker 3: almost everything else of the Middle East needs through that strait,
Speaker 3: So it is a lot of trade that goes there
Speaker 3: and is concentrated in a crucial commodity that is ail
Speaker 3: in gas. And the other thing with the strait of hormones,
Speaker 3: which is different than sus Canalis, not just the size,
Speaker 3: this is not alternative. So most of the oil that's
Speaker 3: going from Saudi Arabia, from Iraq, from the UAE goes
Speaker 3: through Hormus. All the energy that goes from Kuwait, Bahrain
Speaker 3: and Katar goes through Hormus. It's a big shock, twenty
Speaker 3: percent of global oil supplies. I can't think of a
Speaker 3: larger oil shock in recent history. If this is not
Speaker 3: the largest, then it's one of the largest for sure.
Speaker 2: Explain that dyne of a searge to one twenty as
Speaker 2: Bruce Kasmn just models, or to your shock of one
Speaker 2: sixty out there and then a quick retreat. How does
Speaker 2: that dynamic work out?
Speaker 3: So let's start from first principles. Right, we have a
Speaker 3: shortage of supply, we lose twenty percent of global supply.
Speaker 3: The question is then what happens to prices. So even
Speaker 3: before the war began, we looked at recent episodes of
Speaker 3: supply outages. We looked at the academic studies and the
Speaker 3: typical multiplier that we got was somewhere between say three
Speaker 3: and five. So we use four for our multiplier. You
Speaker 3: use twenty percent of supplies, you get a multiplier of four.
Speaker 3: That's an eighty percent increase in prices from a pre
Speaker 3: war price of around sixty dollars per barrel. That takes
Speaker 3: you two hundred and eight dollars per barrel. So that
Speaker 3: is our first thing, and this is where we are now.
Speaker 3: There is a lot of intensity in the war that
Speaker 3: is closing the straight of formless. But it's no longer
Speaker 3: a question about intensity. It's now a question about duration.
Speaker 3: It's no longer about you know, are we going to
Speaker 3: get negative number of ships going through homeless It is zero.
Speaker 3: Now that's not going to happen. It's a question of
Speaker 3: how long will Hormess be shot. And that's what our
Speaker 3: latest piece was about. It's about modeling duration. What happens
Speaker 3: if Hormus is shut for one month, for two months
Speaker 3: or three months.
Speaker 4: And what was your worst case scenario there in all
Speaker 4: of that modeling.
Speaker 3: Well, obviously it's shut for three months, so you get
Speaker 3: a higher price. So you get a price of around
Speaker 3: one hundred and sixty four dollars per barrel. Now you
Speaker 3: might think with a huge, you know, one of the
Speaker 3: largest energy supply shocks, you might think you might get
Speaker 3: a higher price as a result of this, But the
Speaker 3: model takes into account of other things. Because economies adapt,
Speaker 3: they don't stay static. So with higher oil prices, people
Speaker 3: consume less energy and demand comes down. With higher oil prices,
Speaker 3: producing more oil and other energy becomes profitable to supply increases,
Speaker 3: Inventory starts drowing down, people start taking more risk use
Speaker 3: in that shipping route. And even if you go outside
Speaker 3: the model such hot old price, the war may end
Speaker 3: and the waterway may reopen.
Speaker 5: Doctor David.
Speaker 2: A personal question here, and we say good morning to
Speaker 2: all of our reporters. Our economists are teams in the
Speaker 2: Greater Middle East, Ethan Browner in Tel Aviv and Jumana
Speaker 2: in Dubai with Zayoud. What is the conversation a family
Speaker 2: and friends in Dubai right now? Is it one big
Speaker 2: exit this weekend? What is the mood and the ground
Speaker 2: Not so much bloomberg people, but just in general in
Speaker 2: Dubai about getting through the weekend, getting the April.
Speaker 3: So I was in Dubai last week. I came from
Speaker 3: Dubai to London actually on Monday, on a pre plan
Speaker 3: trip before the war. What it felt like in Dubai.
Speaker 3: It felt the headlines felt worse than real life for sure,
Speaker 3: so it felt better than headlines, but it had that
Speaker 3: COVID feel to it, where you didn't feel an imminent
Speaker 3: threat to physical safety, but you didn't know that there
Speaker 3: was an extern danger out there. Things work quieter, and
Speaker 3: at some point because people were moving less, people were
Speaker 3: working from home. At some point the airport was shot.
Speaker 3: That had the COVID feel to it. It didn't feel
Speaker 3: as dangerous as I think back. Now i'm outside, I
Speaker 3: see the headlines and it feels like it's a bit
Speaker 3: more dangerous. But when I was there, it didn't feel
Speaker 3: so threatening.
Speaker 2: So thank you so much. Saying with us with Bloomberg
Speaker 2: Economics out of London and of course always out of Dubai.
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: Leslie vin Ja Murray. She's with the Chicago Council of
Speaker 2: Global Affairs, of Wesleyan, of LS and of Columbia. Doctor
Speaker 2: ven Jam Murray is definitive on conflict, Leslie. It's a war,
Speaker 2: not a conflict, isn't it.
Speaker 6: Yes, I think it's safe to say it's a war.
Speaker 6: You know, we could double down on definitions, but I
Speaker 6: think anybody looking at the Middle East is looking at
Speaker 6: not only a war, but a widening war and an
Speaker 6: asymmetric war if you look at what Iran is doing
Speaker 6: and the Persian Gulf and the Strait of Hormuz. Not
Speaker 6: a war that I think President Trump well self admittedly,
Speaker 6: you know, according to today's news, hadn't planned for the
Speaker 6: possibility that Iran might close the Strait of Hormuz. It's
Speaker 6: it's kind of it's sort of difficult to even.
Speaker 5: Say the words.
Speaker 6: Does it seem such an obvious thing even to people
Speaker 6: just reading the papers that it was always stability.
Speaker 2: Into the press conference in eighteen minutes, the news conference
Speaker 2: at the Pentagon, the Secretary of Defense, a chairman of
Speaker 2: the Joint Chiefs of Staff. How alone is America? Where
Speaker 2: are our l eyes. Besides the Charles de Gaulle steaming East.
Speaker 6: Look, America's you know, European allies are lending their bases
Speaker 6: for defensive purposes. America's non treaty allies in the in
Speaker 6: the Gulf are being hit and are under attack. The
Speaker 6: new Iatolas has said that he will go after American
Speaker 6: interests in the region. So America's allies and partners were
Speaker 6: not asked to come along until after the strikes began.
Speaker 6: There was no real process of building a consensus or
Speaker 6: making the case for war, laying out what might lie ahead,
Speaker 6: and so now they're scrambling. I think the latest in Europe,
Speaker 6: of course, is a deep frustration, probably behind closed doors,
Speaker 6: anger that the US is effectively, you know, lifting sanctions
Speaker 6: on Russia's oil exports.
Speaker 2: Well we heard that from the leadership in Germany.
Speaker 7: Well exactly, exactly.
Speaker 4: Yeah, I'm so great to bring that up, Leslie. Yeah,
Speaker 4: because I wanted to talk about what all of this
Speaker 4: means for Putin and for Russia. We heard yesterday that
Speaker 4: Russia has been giving Tehran some intelligence. And now, of course,
Speaker 4: you know these sanctions, people countries can buy sanctioned Russian
Speaker 4: crew that's already at Sea. What is this doing for
Speaker 4: Putin's empire. Well, in the short term, it's certainly helping him.
Speaker 4: I mean indirectly and directly, directly with the sale of oil,
Speaker 4: for sure, but indirectly in that America has its focus elsewhere.
Speaker 4: That's not only helping Russia, that's also helping China. You know,
Speaker 4: this isn't this is an old story, not a news story.
Speaker 6: When America has its eyes off the prize, China benefits
Speaker 6: from the disruption, from America's distraction from seeing the West
Speaker 6: at odds with itself, if not torn apart Russia also,
Speaker 6: so I think for America's European allies, which quite frankly
Speaker 6: have gotten very little bandwidth or playtime in this war,
Speaker 6: this is a terrible turning up the tide. They will
Speaker 6: be impacted much more by gas than by the US,
Speaker 6: as we know a gas prices, but it really is
Speaker 6: it's coming out of time when they're squeezed at home,
Speaker 6: when you know, the war with Ukraine continues. So we're
Speaker 6: not even talking about the war in Ukraine right now,
Speaker 6: We're only talking about the Middle East.
Speaker 2: The rising sun across Lake Michigan, leslie Ven Jamine in Chicago.
Speaker 2: We will continue, whether we welcome all of you fifteen
Speaker 2: minutes from a press conference of the Pentagon. Of course
Speaker 2: Michael Barro will be along with the news, including this
Speaker 2: horrific clash crash I should say, of a flying tanker
Speaker 2: for the Air Force Alexis CHRISTOPHERUS with Leslievingerburry.
Speaker 4: Thank you, Leslie. Now we're shifting the talk about this
Speaker 4: war from intensity to duration. What are you going to
Speaker 4: be listening for during this press conference that we're awaiting
Speaker 4: here at the top of the hour from the Defense Secretary.
Speaker 6: I have some sort of plan for what to do
Speaker 6: about the build up and the Persian Gulf, of how
Speaker 6: to manage the global political economy, whether they're going to
Speaker 6: seriously consider escorting ships through the Strait of Hormues, and
Speaker 6: what conditions would need to be met in order for
Speaker 6: that to be safe. I think you know, more importantly,
Speaker 6: what is the plan for ending the war under what conditions?
Speaker 6: And what we really need to straight talk on the
Speaker 6: reality that even when the United States ends the war,
Speaker 6: the war won't be ended, and so what will the
Speaker 6: plan be for the period when America is no longer
Speaker 6: directly striking but Iran is certainly likely to continue the war.
Speaker 6: What conditions might Iran ask from the United States and
Speaker 6: from Israel in order to help stabilize the global political
Speaker 6: economy and flows of ships through that strait, and what
Speaker 6: would the US be willing to give.
Speaker 7: I don't think we're going to hear.
Speaker 6: Very much about that last point, but it is clearly
Speaker 6: what needs to be discussed.
Speaker 4: President Trump seems to be digging in his heels. He's
Speaker 4: not a man who likes to lose or to admit
Speaker 4: that he's losing. So I'm wondering what an exit ramp
Speaker 4: might even look like, because we know many lawmakers are
Speaker 4: now calling for an exit to this war, especially in
Speaker 4: the year with midterm elections, What might that even look like? Leslie.
Speaker 6: I think with President Trump, it's, you know, he's going
Speaker 6: to be in a quandary. This is not a president
Speaker 6: that will be in any way, shape or form please
Speaker 6: to see rising oil prices and perpetual instability. If there
Speaker 6: isn't some sort of negotiation, I think them more likely
Speaker 6: that he will declare, you know, a success in depleting
Speaker 6: and diminishing Iran's ability to project power externally and signal
Speaker 6: that he's going to end strikes, but maybe not you know,
Speaker 6: very hard to predict what will happen. I doubt that
Speaker 6: he will get into this question of Iran's ongoing leverage.
Speaker 7: Even after that moment, Leslie.
Speaker 2: You and I were inflicted with the eight hundred and
Speaker 2: fifty pages of Henry Kissinger. You had to read Diplomacy
Speaker 2: just to show up with the course. Venjaminy did better
Speaker 2: than me in class, Alexis, I don't know if you
Speaker 2: do that. At the back end of that book, Secretary
Speaker 2: Kissinger talks about the new World Order reconsidered. What does
Speaker 2: the new world order look like when this war ends?
Speaker 6: You know, at the moment, we're not moving into another order.
Speaker 6: We've clearly abandoned. The United States has abandoned many of
Speaker 6: the norms and the laws for you know, how we govern.
Speaker 6: It's certainly abandoned the principle that you work very closely
Speaker 6: with a certain set of pre agreed We are much
Speaker 6: more into might makes right, into a heavy transactionalism. But
Speaker 6: I think the real concern is that we're moving into
Speaker 6: a period where there isn't an alternative order, where alliances
Speaker 6: aren't going to be permanent. You're not going to know
Speaker 6: exactly who your friend or who your enemy is where
Speaker 6: deals are done with a variety of partners, some more
Speaker 6: seemly and less unseemly than others. So unfortunately we are
Speaker 6: not seeing our leaders map out an alternative version. We
Speaker 6: know that Mark Karney has talked about middle powers. I
Speaker 6: was just in India at the Razina Dialogue, where you know,
Speaker 6: India is talking about, as it has been, multiple alignments
Speaker 6: in order to protect its strategic autonomy and enable it
Speaker 6: to do what it wishes to do, which is to
Speaker 6: focus on development and poverty alleviation. I think many countries
Speaker 6: across Europe are going to be adopting a similar, similar strategy.
Speaker 6: How do you I develop multiple alignments with other Middle
Speaker 6: powers on the economic front. I think on the strategic
Speaker 6: consecurity front, the West is still going to try to
Speaker 6: lean into itself, but when the US behaves like this,
Speaker 6: that makes it very much harder for its Western allies
Speaker 6: to go along.
Speaker 2: Doctor Vinja, Mary, thank you so much in Chicago with
Speaker 2: the Chicago Council on Global Affairs. Stay with us. More
Speaker 2: from Bloomberg Surveillance coming up after this.
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Speaker 2: Michael Durremberger's deeply experienced in multi syllable titles and phrases
Speaker 2: that we're invented three security structures, Ago, securitized, securitization and that,
Speaker 2: and he joins us this morning Michael uh in Nierrenburger's
Speaker 2: chief executive officer, chairman and president of Rhythm Capital over
Speaker 2: cocktail conversation, how do you respond to OMG private credit?
Speaker 2: It's a disaster.
Speaker 5: How do you respond to this? I, you know, listen,
Speaker 5: there's going to be pockets of private credit that are
Speaker 5: that are going to you know, right now. Obviously in
Speaker 5: the news private credit is negative. I don't think all
Speaker 5: private credit is negative, to be totally honest. I think
Speaker 5: there's been some obviously there's been some headlines with some
Speaker 5: of the other larger asset managers that have put up gates,
Speaker 5: and I think a lot of that has to do
Speaker 5: with what we what we've seen the distribution of private
Speaker 5: credit into retail and when you take products that may
Speaker 5: not be one hundred percent suited for retail and retail
Speaker 5: wants their money out because equity markets have turned over
Speaker 5: and folks are looking for liquidity. It creates a little
Speaker 5: bit of what what we'll call it is a so
Speaker 5: called run on the bank.
Speaker 2: Michael, you have a resume here that you know, like
Speaker 2: literally he could have written the screenplay for Margin Call.
Speaker 8: I mean, you have so much experience here institutionally. What
Speaker 8: was your response when you first heard about private credit
Speaker 8: for that matter of private equity and retail accounts?
Speaker 5: You know, it's first of all, when you look at
Speaker 5: our franchise, we don't have we don't really have private
Speaker 5: credit going into retail at this point. And I think
Speaker 5: where you're going to see and you've heard it from
Speaker 5: some of the larger banks UH such as JP Morgan,
Speaker 5: where folks are going to reevaluate the distribution of private
Speaker 5: credit into the retail.
Speaker 2: From you von steinas this morning my art.
Speaker 5: Our view, and when you when you look at the
Speaker 5: private credit markets, take take for example, to take for
Speaker 5: example Sculptor, we have a large multistrat fund where there's
Speaker 5: a fair amount of credit in there. It's liquid credit,
Speaker 5: it's marked, it's marked. When you take some of the
Speaker 5: private credit that goes into retail, and it's not liquid
Speaker 5: private credit, and folks want their money out there not
Speaker 5: going to be able to get their money out and
Speaker 5: that that's what you're seeing now in the marketplace. You're
Speaker 5: seeing folks put up the gates. I looked at the
Speaker 5: market reaction yesterday, and you looked at the treasury market,
Speaker 5: which you know, the front end of the treasury market
Speaker 5: really sold off pretty dramatically, and it seemed to me
Speaker 5: that it was really a liquidation event that you're seeing
Speaker 5: with a lot of a lot of folks in the marketplace.
Speaker 5: But when I look at private credit, you know, it's
Speaker 5: a huge market. You know, we don't look at these
Speaker 5: large club deals to be quite frank, you know, we
Speaker 5: look at our prestline business where we do direct lending there.
Speaker 5: So you know, I think private credit it has a
Speaker 5: bad it's getting a bad name right now. Not all
Speaker 5: private credits band is whatever.
Speaker 2: There's some jargon liquidation event. That's when the kid goes
Speaker 2: on spring Bright.
Speaker 4: Just so you know, very Michael, you say servicing is
Speaker 4: the key differentiator. Why do they have such a huge advantage.
Speaker 5: Because you could you could affect an outcome, take take
Speaker 5: a homeowner, take a mortgage. If you go out and
Speaker 5: you take out a mortgage. You know, one of the
Speaker 5: things we do at our company, we own one of
Speaker 5: the largest mortgage servicers in the US, were the fourth largest,
Speaker 5: including all the large banks we work with it.
Speaker 3: I did not know that.
Speaker 5: Yeah, we have a you know, for example, eight hundred
Speaker 5: and fifty billion dollars and mortgage servicing rights. We touch
Speaker 5: four million consumers. So what happens a mortgage or has
Speaker 5: an issue, we work with that consumer. You figure out
Speaker 5: a modification or some kind of plan to keep them paying.
Speaker 5: That's a huge advantage versus somebody that's going to go
Speaker 5: out into the public markets buy an asset, let someone
Speaker 5: else control the service thing.
Speaker 4: So you say you have options when you're in servicing.
Speaker 5: Yeah, and you could affect an outcome and you could
Speaker 5: work with a homeowner, which I think is extremely important.
Speaker 5: And we've seen that over the years and that's one
Speaker 5: of the one of the ways that we actually built
Speaker 5: built our business.
Speaker 4: Just I got to ask you about mortgage rates then,
Speaker 4: I mean, because we're starting to tick higher. Spring buying
Speaker 4: season has begun, even though the weather doesn't feel like
Speaker 4: it in New York City, What is this really going
Speaker 4: to be a downer for the housing market. This was
Speaker 4: supposed to be the year things bounced back and possibly
Speaker 4: swing to being a buyer's market.
Speaker 5: Dare I say, yeah, you know, I looked at mortgage
Speaker 5: rates this morning, mortgage rates today or in and around
Speaker 5: where we close the end of the year. If you
Speaker 5: look at the treasury market, the ten year has been
Speaker 5: in a range of give it a take a low
Speaker 5: force to kind of four and a quarter. Where we
Speaker 5: sit right now. I think mortgage rates will continue that
Speaker 5: the administration is doing all they can to bring mortgage
Speaker 5: rates lower. Whether they're able to achieve that or not.
Speaker 5: I don't think you can control such a large market,
Speaker 5: but I think, you know, we're going to sit here.
Speaker 5: I think the housing market is okay. You look at
Speaker 5: our data around the consumer right you know it's actually
Speaker 5: in pretty good The consumers in pretty good shape.
Speaker 2: One more question, with great respect and great honor, we're
Speaker 2: going to go to Breaking News and then to Michael
Speaker 2: Barr here, folks, micro leader. When all over the zeitgeist
Speaker 2: right now, everybody's playing clips of mister Irons and margin Call.
Speaker 2: When a grizzled pro like you sees those clips, or
Speaker 2: when you first saw margin call, is that even remotely
Speaker 2: real or was it just Hollywood?
Speaker 5: Now listen, margin call. You know, we've seen it during
Speaker 5: twenty twenty, the COVID period. Then we've saw it during
Speaker 5: the Great Financial Crisis. I think the difference today is
Speaker 5: folks that have experienced, like ourselves, understand how to one
Speaker 5: navigate the navigate the system, but also work with your
Speaker 5: large lenders around getting rid of margin calls on the
Speaker 5: assets that you financed.
Speaker 2: Where's your shadow right now? Where's your mystery shadow within
Speaker 2: the depth system right now?
Speaker 5: I'm concerned a little bit about liquidity. I do think
Speaker 5: when you look at some of the you know, some
Speaker 5: of the folks out there, you sorry, Like I brought
Speaker 5: up yesterday's price action in the front end of the
Speaker 5: treasury market. Yeah, should to your treasury be at three
Speaker 5: and three quarters when we when we saw we got
Speaker 5: employment report before. I don't. I don't think so. I
Speaker 5: do think that, you know, the the market's taken out
Speaker 5: any not any chance, but the market's taken out that
Speaker 5: the Fed is not going to cut rates this year.
Speaker 5: I don't agree with that. I think Goldman came out
Speaker 5: as well and said that you know, they're still calling
Speaker 5: from one or two rate cuts I look at the
Speaker 5: I look at forward rates. I do think we're going
Speaker 5: to see rates come come down, particularly in the front end.
Speaker 5: I think the back end is troubled, right because we
Speaker 5: got to fund this war, we got you know, we
Speaker 5: have this massive deficit which we still have to issue
Speaker 5: a lot of debt. So I think long rates, you know,
Speaker 5: could be a little bit challenged.
Speaker 2: Here we're in a four ninety eighty nine right now,
Speaker 2: in a thirty year bond. Michael Darrenburg, don't be a stranger.
Speaker 2: Love having you, and thank you so much. Rhythm Capital
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or
Speaker 1: watch us live on YouTube.
Speaker 2: This is the perfect guest to frame out why equals
Speaker 2: C plus I plus G plus NX. Kathleen bus Johnsion
Speaker 2: nails it each and every day as chief economist at Nationwide,
Speaker 2: and we're thrilled that she could join us today. All
Speaker 2: the secondary stuff, the noise at the back end of March.
Speaker 2: Kathy where we try to frame out our guestimate of
Speaker 2: where we are. What does the noise tell you about
Speaker 2: getting the GDP back to tuish or two point xish?
Speaker 5: Can we get there?
Speaker 3: Well?
Speaker 7: Good morning time.
Speaker 9: Well, I would argue that we were there ahead of
Speaker 9: the Aridian conflict, having an impact on energy prices in
Speaker 9: that filtering through and being a negative shock to economic activity,
Speaker 9: at least temporarily. So when I look at the revised
Speaker 9: data the GDP for fourth quarter, if you look at
Speaker 9: the core GDP number, it was you know, two percent,
Speaker 9: and I think you know about two percent, and we
Speaker 9: are on pace even for the first quarter to see
Speaker 9: real GDP growth.
Speaker 7: Overall three percent.
Speaker 9: And if we look at that core two percent, right, So,
Speaker 9: but but things change a lot with the conflict, and
Speaker 9: that you know, looking to second quarter, we just marked.
Speaker 7: Down our growth estimate. There we are below one percent.
Speaker 2: You're below one percent with this war. Wow, that's the
Speaker 2: first I've heard that.
Speaker 4: Yeah, that's that's and I wonder, I mean again, we
Speaker 4: were talking with our previous guest about you know, the
Speaker 4: shock and oil being transitory, and this hit to GDP
Speaker 4: maybe transitory, but I'm wondering what it would do enough
Speaker 4: damage to possibly push the economy into a moderate recession
Speaker 4: in the short term.
Speaker 7: Well, we don't have that inner profile right now. That's
Speaker 7: that's in our.
Speaker 9: Base case, and I do think it's a temporary shock,
Speaker 9: assuming right that this conflict doesn't go on for months.
Speaker 7: You know that it's rather weeks, as we all talk about.
Speaker 9: So when we model that growth in the second quarter
Speaker 9: we thought would be around two percent, we've taken a
Speaker 9: full percentage.
Speaker 7: Point off, so we're zero point ninety be exact.
Speaker 9: But you know the point is in the second half
Speaker 9: of the year, we think growth will rebound. But that
Speaker 9: assumes oil supplies, energy supplies, commodity supplies are up and
Speaker 9: running again.
Speaker 7: And that's what we have to watch.
Speaker 2: Have you interpolated off a barrel of oil where a
Speaker 2: gallon of gas is going I believe it's a three
Speaker 2: sixty two off triple A let it, But Kathy bus johnsick.
Speaker 2: There's modeling being done. Analog and our team are modeling
Speaker 2: out one twenty ish barrel and if it's a longer
Speaker 2: duration out to one sixty and then it gives way.
Speaker 2: They're very optimistic that it'll come back down, But can
Speaker 2: you get out over four dollars a gallon.
Speaker 7: If we.
Speaker 9: Have oil prices go up to one hundred and twenty
Speaker 9: or more than I think, yes, you can get to
Speaker 9: four dollars a gallon. What we're working for with in
Speaker 9: our base case is that we get to around three
Speaker 9: seventy five a gallon, and that would be the peak
Speaker 9: right now in the second quarter. But yeah, certainly, I
Speaker 9: mean the size of the move and oil prices and
Speaker 9: also the duration is.
Speaker 7: Really key, and just everything so fluid.
Speaker 2: Right now, we go to John Tucker, Surveillance Petroleum Correspondent,
Speaker 2: John thirty two gallons in the hommer age two at
Speaker 2: Kathy's three dollars seventy five cents is one hundred and
Speaker 2: twenty dollars fill up.
Speaker 5: And that's one hundred and twenty dollars.
Speaker 3: I'm not going to spend buying other stuff.
Speaker 4: So because you're on you're on Tuition Island, on Tuition Island,
Speaker 4: and things are getting rough on Tuition Island and no reason.
Speaker 5: It's like when I go now, even though it's not empty,
Speaker 5: I still feel love.
Speaker 2: So I'm hoarding. You're hoarding, okay, Alexis Christopher is to
Speaker 2: finish up with Miss Johnson.
Speaker 4: Also, I just want to share with you all what's
Speaker 4: coming over the bloomberg right now. European countries including France
Speaker 4: and Italy have now open talks with Tehran trying to
Speaker 4: negotiate a deal to guarantee safe passage for their ships
Speaker 4: through the Strait of Hormuz. I'm wondering how much this
Speaker 4: rise in oil and every day stuff we use, like
Speaker 4: going to the gas pump is going to pull back
Speaker 4: the consumer in this environment, because we know that the
Speaker 4: consumer has really been a pillar of economic strength for
Speaker 4: years now.
Speaker 7: Yeah.
Speaker 9: No, absolutely, it's a tax on the consumer, right, it's
Speaker 9: hots on the economy. It doesn't necessarily become a long
Speaker 9: lasting inflationary impact unless it persists and it gets embedded
Speaker 9: in inflation expectations.
Speaker 7: But I think certainly the first.
Speaker 9: Round impact its attacks and it's going to just as
Speaker 9: we discussed, you know, Dell was joking, it pulls away
Speaker 9: for the available discretionary spending on other items, and that's
Speaker 9: why you get to hit to economic growth for the
Speaker 9: period where we see this elevated gasoline prices, and the
Speaker 9: longer that persists, the longer the hit. I would also add,
Speaker 9: there's business and consumer confidence that we also model It's
Speaker 9: not just the direct impact of higher energy prices, but
Speaker 9: how does that affect confidence and business leaders? Right now,
Speaker 9: Uncertainty is still very high, so they start to pull back.
Speaker 2: Kathy, Thank you so much, Kathleen Bus John Sick chief
Speaker 2: economists nationwide.
Speaker 3: There.
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