1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,200 --> 00:00:13,200 Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Daily we bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,840 --> 00:00:23,799 Speaker 1: To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:31,160 Speaker 1: and of course, on the Bloomberg terminal. Amos Hochstein, Presidential 6 00:00:31,160 --> 00:00:34,239 Speaker 1: Coordinator for Energy Circuit Security for the President of the 7 00:00:34,320 --> 00:00:38,200 Speaker 1: United States, would like West Texas Intermediate quickly to get 8 00:00:38,240 --> 00:00:41,640 Speaker 1: back to eighty dollars a barrel. Amos, I'm gonna cut 9 00:00:41,640 --> 00:00:44,400 Speaker 1: to the chase. You've read the Washington Post, Anny Hoyer 10 00:00:44,479 --> 00:00:48,880 Speaker 1: and others. Uh lukewarm here on the microeconomics of price 11 00:00:48,960 --> 00:00:53,199 Speaker 1: theory of an eighteen cents tax on a galon of gas. 12 00:00:53,640 --> 00:00:57,920 Speaker 1: What's the plan to get oil back to eighty dollars 13 00:00:57,920 --> 00:01:02,040 Speaker 1: a barrel? Well, good morning, Tom for a little thank 14 00:01:02,080 --> 00:01:05,640 Speaker 1: you for having me. Uh. Look, since the since the 15 00:01:05,720 --> 00:01:10,760 Speaker 1: late fall when Putin had a massive troops around Ukraine 16 00:01:10,800 --> 00:01:15,520 Speaker 1: and ultimately the invasion followed by global sanctions, uh, the 17 00:01:15,560 --> 00:01:18,759 Speaker 1: price of gasoline at the pump of Americans has gone 18 00:01:18,840 --> 00:01:21,640 Speaker 1: up about two dollars UH, and diesel probably a little 19 00:01:21,640 --> 00:01:24,520 Speaker 1: bit more than that. So what we are looking at 20 00:01:25,160 --> 00:01:28,560 Speaker 1: is this historic increase in price as a result not 21 00:01:28,720 --> 00:01:32,720 Speaker 1: of normal economic times, but under a time of war, 22 00:01:33,440 --> 00:01:37,480 Speaker 1: at a time of of global security instability that is 23 00:01:37,840 --> 00:01:42,000 Speaker 1: affecting the market and as a result, as we go 24 00:01:42,080 --> 00:01:46,720 Speaker 1: into the into the driving season the summer, the President 25 00:01:46,760 --> 00:01:50,080 Speaker 1: really wants to give a break to American families during 26 00:01:50,120 --> 00:01:52,720 Speaker 1: these three months of the summer, and that's why he's 27 00:01:52,720 --> 00:01:57,520 Speaker 1: asked Congress to suspend uh the eighteen cent gas tacks 28 00:01:57,600 --> 00:02:00,480 Speaker 1: and he's called on governors to do that the same. 29 00:02:00,560 --> 00:02:03,600 Speaker 1: So if the governor's match that, uh, that we're talking 30 00:02:03,600 --> 00:02:06,400 Speaker 1: about fifty cents a gallon less. But I want to 31 00:02:06,440 --> 00:02:10,440 Speaker 1: answer your question Tom directly. Look, we have done everything 32 00:02:10,680 --> 00:02:14,320 Speaker 1: that we can to encourage the industry to increase production, 33 00:02:14,360 --> 00:02:17,960 Speaker 1: which they have, which they are going to this year record. 34 00:02:18,040 --> 00:02:20,160 Speaker 1: We're gonna get to record oil production at the end 35 00:02:20,280 --> 00:02:22,760 Speaker 1: by the end of this year or the next next 36 00:02:22,800 --> 00:02:26,320 Speaker 1: year's first quarter. Uh. We've released the President's ordered the 37 00:02:26,360 --> 00:02:30,160 Speaker 1: release of a million barrels a day from the strategic petroleumers, 38 00:02:31,080 --> 00:02:35,239 Speaker 1: and he led the effort to do two million barrels. 39 00:02:35,520 --> 00:02:38,880 Speaker 1: Here's the problem, and I know you're sitting in the Oval, Uh, 40 00:02:38,960 --> 00:02:41,840 Speaker 1: the Oval Office with a Bloomberg terminal next to you 41 00:02:41,919 --> 00:02:44,240 Speaker 1: as you talk to the President, and you can bring 42 00:02:44,360 --> 00:02:48,240 Speaker 1: up log West Texas Intermediate quarterly like I can't. Anybody 43 00:02:48,240 --> 00:02:52,359 Speaker 1: can do this, bologny. It's about distillates, and it's about 44 00:02:52,440 --> 00:02:56,960 Speaker 1: not in my backyard. How is a centrist Democrat going 45 00:02:57,000 --> 00:03:01,160 Speaker 1: to explain to left Democrats they need to come up 46 00:03:01,400 --> 00:03:05,920 Speaker 1: with a nod in my backyard policy to advocate greater 47 00:03:06,160 --> 00:03:12,239 Speaker 1: distillate capacities in America? How do you do that? So time, 48 00:03:12,280 --> 00:03:14,680 Speaker 1: you raise an excellent point that people tend to focus 49 00:03:14,720 --> 00:03:17,320 Speaker 1: a lot on the oil production, but in reality, Uh, 50 00:03:17,320 --> 00:03:21,160 Speaker 1: it's that's not the issue alone, right. Uh. During the pandemic, 51 00:03:21,360 --> 00:03:24,560 Speaker 1: just during the years of the pandemic, we lost a 52 00:03:24,600 --> 00:03:28,400 Speaker 1: remarkable amount of refining capacity in the United States. And 53 00:03:28,720 --> 00:03:31,320 Speaker 1: those refineries that went out, some of them are gone 54 00:03:31,320 --> 00:03:33,800 Speaker 1: and they're not coming back. We know that they're you know, 55 00:03:33,919 --> 00:03:36,720 Speaker 1: one of them has turned into a terminal. Uh. The others, though, 56 00:03:36,720 --> 00:03:39,400 Speaker 1: are there, and we can invest before we start talking 57 00:03:39,440 --> 00:03:43,760 Speaker 1: about building new refineries. Uh, we can bring back potentially 58 00:03:44,240 --> 00:03:46,640 Speaker 1: the old refineries that have been taken out of commission 59 00:03:46,680 --> 00:03:49,000 Speaker 1: that are still there and what we've with the President 60 00:03:49,040 --> 00:03:51,400 Speaker 1: has asked is for the industry to come to Washington 61 00:03:51,680 --> 00:03:54,960 Speaker 1: to meet with Secretary Grant Holme UH and to bring ideas. 62 00:03:55,280 --> 00:03:58,320 Speaker 1: As he said in his letter, look, he has taken 63 00:03:58,360 --> 00:04:01,080 Speaker 1: extraordinary measures over the last several months in a number 64 00:04:01,080 --> 00:04:05,080 Speaker 1: of areas, both in energy and beyond UH, he is 65 00:04:05,120 --> 00:04:08,120 Speaker 1: willing to take those measures again. We're asking the industry 66 00:04:08,160 --> 00:04:10,640 Speaker 1: to come and to give us their ideas. What do 67 00:04:10,760 --> 00:04:15,120 Speaker 1: you need from the federal government from from us that 68 00:04:15,160 --> 00:04:18,480 Speaker 1: we can be weak to work with you to increase 69 00:04:18,600 --> 00:04:21,880 Speaker 1: the capacity or finding capacity and distill it's in order 70 00:04:21,920 --> 00:04:25,240 Speaker 1: to get gasoline not only produced, but then ultimately get 71 00:04:25,320 --> 00:04:27,760 Speaker 1: gasoline and diesel to the right places around the country. 72 00:04:27,760 --> 00:04:29,599 Speaker 1: I mean, at least, what's so important and what almost 73 00:04:29,640 --> 00:04:31,600 Speaker 1: is talking about is what are we going to do 74 00:04:31,680 --> 00:04:34,640 Speaker 1: to politically shift the distillate debate? To me, that's the 75 00:04:34,680 --> 00:04:36,400 Speaker 1: heart of the matter. The other heart of the matter, 76 00:04:36,480 --> 00:04:39,479 Speaker 1: almost is this idea that the response to that letter 77 00:04:39,520 --> 00:04:42,080 Speaker 1: that we're talking about from the President, from X and 78 00:04:42,560 --> 00:04:45,039 Speaker 1: from Phillip sixty six, from a whole host of other 79 00:04:45,080 --> 00:04:49,040 Speaker 1: companies was that the current administration has had obstructionist policies 80 00:04:49,080 --> 00:04:51,400 Speaker 1: when it comes to the oil and gas industries, and 81 00:04:51,440 --> 00:04:53,800 Speaker 1: that they have not been very clear. What is your 82 00:04:53,839 --> 00:04:56,240 Speaker 1: response at a time when they have been increasing production 83 00:04:56,279 --> 00:04:58,760 Speaker 1: and they invested more than they brought in during the 84 00:04:58,760 --> 00:05:04,719 Speaker 1: heart of the pandemic. So look, that's that's the difficulty here. 85 00:05:05,360 --> 00:05:08,160 Speaker 1: People say that we are standing in the way of 86 00:05:08,200 --> 00:05:10,800 Speaker 1: increased production, but look at the numbers, look at the 87 00:05:10,800 --> 00:05:14,279 Speaker 1: increase in production under the Biden administration. It's hard to 88 00:05:14,400 --> 00:05:17,120 Speaker 1: argue that we have done anything to stand in the 89 00:05:17,120 --> 00:05:21,920 Speaker 1: way of increased production. Uh, there's been an rise in 90 00:05:22,000 --> 00:05:24,160 Speaker 1: oil production. We know that by the end of the year, 91 00:05:24,200 --> 00:05:26,880 Speaker 1: at the beginning of next year, we're gonna hit record production. 92 00:05:27,160 --> 00:05:29,800 Speaker 1: So on average, the old production in the United States 93 00:05:29,800 --> 00:05:31,479 Speaker 1: in this last year and a half has been higher 94 00:05:31,520 --> 00:05:36,919 Speaker 1: than the one under our predecessor. Excuse me those records, Lisa. 95 00:05:37,080 --> 00:05:39,560 Speaker 1: Have you met with the CEOs of the big oil 96 00:05:39,600 --> 00:05:41,960 Speaker 1: companies to talk about this and to talk about how 97 00:05:42,000 --> 00:05:44,880 Speaker 1: things can be clear for them to produce more? You have, 98 00:05:45,960 --> 00:05:51,960 Speaker 1: and are there going to be certain well, sorry, go ahead, 99 00:05:52,080 --> 00:05:53,839 Speaker 1: let me know. I mean they're going to be scheduled 100 00:05:53,960 --> 00:05:57,400 Speaker 1: changes in terms of more specific policies that you'll put 101 00:05:57,440 --> 00:05:59,880 Speaker 1: out there that you think will allow them to refine 102 00:06:00,000 --> 00:06:04,640 Speaker 1: more or create more production in the near term. Well, 103 00:06:04,640 --> 00:06:07,720 Speaker 1: I think that they have. My point is that they 104 00:06:07,920 --> 00:06:10,560 Speaker 1: have the tools they need. When I meet with the 105 00:06:10,600 --> 00:06:13,560 Speaker 1: oil company executives and the c e o s, and 106 00:06:13,600 --> 00:06:15,800 Speaker 1: I've asked them over the last several months, do what 107 00:06:15,839 --> 00:06:19,039 Speaker 1: do you need from US? And and beyond what we've 108 00:06:19,040 --> 00:06:20,880 Speaker 1: talked about the last several days and the press about 109 00:06:20,920 --> 00:06:23,800 Speaker 1: the tone, what do you need? They don't need anything. 110 00:06:24,000 --> 00:06:25,880 Speaker 1: They all say they have what they need. There are 111 00:06:25,920 --> 00:06:29,840 Speaker 1: some labor shortages, there are some spare parts and so on, 112 00:06:30,040 --> 00:06:32,200 Speaker 1: but they don't need policy changes from the from the 113 00:06:32,240 --> 00:06:35,840 Speaker 1: US administration. They have what they need. In fact, when 114 00:06:35,880 --> 00:06:37,560 Speaker 1: it comes to federal land, they have more than what 115 00:06:37,640 --> 00:06:40,760 Speaker 1: they need. But as you and I both know, federal 116 00:06:40,839 --> 00:06:44,080 Speaker 1: lands where government leases are are less than ten percent 117 00:06:44,160 --> 00:06:47,960 Speaker 1: of the overall US production. So the companies actually don't 118 00:06:48,000 --> 00:06:51,360 Speaker 1: need anything. What they do need is bankers in New 119 00:06:51,440 --> 00:06:55,800 Speaker 1: York and and their funds funders to send their investors 120 00:06:55,839 --> 00:06:59,920 Speaker 1: to say, use the profits that you're having under these 121 00:07:00,000 --> 00:07:02,520 Speaker 1: record prices for the last level of months and invest 122 00:07:02,520 --> 00:07:07,200 Speaker 1: them back into the into production, investment, back into refinery, investment, 123 00:07:07,240 --> 00:07:12,400 Speaker 1: back into equipment, where that's where the rubbeats. It's not 124 00:07:12,480 --> 00:07:15,120 Speaker 1: just about the availability of the crude, it's about the 125 00:07:15,200 --> 00:07:18,400 Speaker 1: ability to turn that into product to refine it. Refining 126 00:07:18,400 --> 00:07:20,440 Speaker 1: capacity is really a critical issue here. And when you 127 00:07:20,440 --> 00:07:22,480 Speaker 1: speak to an oil executive, they say, why would I 128 00:07:22,520 --> 00:07:26,240 Speaker 1: invest in a new refinery, which is a long term investment, 129 00:07:26,480 --> 00:07:29,120 Speaker 1: when it is known that there is an intention to 130 00:07:29,200 --> 00:07:32,480 Speaker 1: get to net zero, albeit in a few decades from now. 131 00:07:32,920 --> 00:07:34,880 Speaker 1: They want they want to pivot to clean energy. So 132 00:07:34,920 --> 00:07:36,680 Speaker 1: what is your messaging to c e O S when 133 00:07:36,680 --> 00:07:39,560 Speaker 1: you're asking them to pump more also knowing that eventually 134 00:07:39,840 --> 00:07:41,440 Speaker 1: there wants to be you want to wean off of 135 00:07:41,520 --> 00:07:46,680 Speaker 1: fossil fuels. So two points one right, it is not 136 00:07:46,800 --> 00:07:50,280 Speaker 1: just about the crude oil production. It is about refining. 137 00:07:50,480 --> 00:07:52,600 Speaker 1: And as I said before, we lost a lot of 138 00:07:52,600 --> 00:07:55,320 Speaker 1: refining over the last several years, specifically during the pandemic 139 00:07:55,800 --> 00:07:57,640 Speaker 1: UH and we'd like to see that come back. But 140 00:07:57,680 --> 00:07:59,760 Speaker 1: you raise it a fair question, why why do you 141 00:07:59,800 --> 00:08:01,760 Speaker 1: make those investments and that and that's what we have 142 00:08:01,840 --> 00:08:04,520 Speaker 1: to talk about. We need to make sure that we 143 00:08:04,600 --> 00:08:07,920 Speaker 1: have enough oil and gas in the economy now over 144 00:08:07,960 --> 00:08:10,880 Speaker 1: the next several years to meet the demand that we 145 00:08:10,920 --> 00:08:13,239 Speaker 1: have in the economy. And you're right, we're not shying 146 00:08:13,280 --> 00:08:16,320 Speaker 1: away from our climate goals, and they're aggressive, and we 147 00:08:16,360 --> 00:08:20,240 Speaker 1: want to accelerate. We want to see the accelerate the 148 00:08:20,320 --> 00:08:24,360 Speaker 1: movement to electric vehicles. UH the goals of I know 149 00:08:24,400 --> 00:08:28,800 Speaker 1: the goal is about new car sales. You have several 150 00:08:28,840 --> 00:08:35,200 Speaker 1: American companies and global car companies saying that their vehicles 151 00:08:35,200 --> 00:08:38,760 Speaker 1: will be electric, so and that that's just new car sales. 152 00:08:38,800 --> 00:08:41,520 Speaker 1: So we'll have a tail on that as the rest 153 00:08:41,520 --> 00:08:45,040 Speaker 1: of the industry catches catches up. So the argument that 154 00:08:45,080 --> 00:08:47,880 Speaker 1: we're we don't want to invest in refining or invest 155 00:08:48,000 --> 00:08:52,520 Speaker 1: in oil production now because of these policies, I don't 156 00:08:52,520 --> 00:08:55,720 Speaker 1: know that that really follows through UM and and meets 157 00:08:55,720 --> 00:08:58,440 Speaker 1: the fact. We know we have the demand. So I 158 00:08:58,440 --> 00:09:00,080 Speaker 1: think that we'd like to work together with the IT 159 00:09:00,200 --> 00:09:03,160 Speaker 1: with the with the industry, tell us, tell us what 160 00:09:03,200 --> 00:09:06,520 Speaker 1: you need, and tell us how you plan to use 161 00:09:06,559 --> 00:09:11,559 Speaker 1: your record profits investing back into UH, into the industry, 162 00:09:11,840 --> 00:09:14,839 Speaker 1: into production, into refining so that Americans can pay a 163 00:09:14,880 --> 00:09:17,960 Speaker 1: little bit less at the pump and have the products 164 00:09:17,960 --> 00:09:21,040 Speaker 1: that they need during this time almost we just have 165 00:09:21,160 --> 00:09:23,360 Speaker 1: a little bit of time left. Has there been any 166 00:09:23,400 --> 00:09:28,400 Speaker 1: discussion about reducing demand or possibly putting out some sort 167 00:09:28,440 --> 00:09:31,280 Speaker 1: of guideline to pull back in terms of how much 168 00:09:31,320 --> 00:09:33,920 Speaker 1: people use, akin to what we're seeing in the gas 169 00:09:34,000 --> 00:09:40,240 Speaker 1: base over in Germany. Well, first, I think on natural gas, 170 00:09:40,880 --> 00:09:43,960 Speaker 1: Europe and the United States are are vastly different UH 171 00:09:44,040 --> 00:09:46,960 Speaker 1: in our systems. Our price here is about six dollars. 172 00:09:46,960 --> 00:09:50,320 Speaker 1: There's about forty dollars on natural glass. But look, the 173 00:09:50,559 --> 00:09:54,760 Speaker 1: we're we have provided record investment through the infrastructure legislation 174 00:09:54,760 --> 00:09:59,440 Speaker 1: that passed UH into mass transit UH and into into 175 00:09:59,679 --> 00:10:03,640 Speaker 1: rail UH that these are the things to convert people from. 176 00:10:03,679 --> 00:10:06,640 Speaker 1: If we had a better rail and mass transit system 177 00:10:06,679 --> 00:10:10,400 Speaker 1: that was efficient and fast, then people All studies show 178 00:10:10,440 --> 00:10:13,720 Speaker 1: people would move from using vehicles to moving mass transit 179 00:10:14,000 --> 00:10:16,640 Speaker 1: to using mass transit. So yes, we we'd like to 180 00:10:16,679 --> 00:10:19,440 Speaker 1: put the investments to work. That's what President Biden has 181 00:10:19,480 --> 00:10:22,840 Speaker 1: been offering all along. How can we move people away 182 00:10:22,920 --> 00:10:26,640 Speaker 1: from driving their cars to mass transit UH and to rail, 183 00:10:27,080 --> 00:10:29,640 Speaker 1: and how do we move from gasoline cars to electric 184 00:10:29,760 --> 00:10:33,320 Speaker 1: vehicles which will also reduce the demand for gasoline. But 185 00:10:33,400 --> 00:10:35,520 Speaker 1: we have to also be realistic that we need that 186 00:10:35,720 --> 00:10:39,040 Speaker 1: supply today as we get towards that better future that 187 00:10:39,080 --> 00:10:41,880 Speaker 1: you're talking about. Thank you for the brief. Almost Axtein 188 00:10:42,000 --> 00:10:45,000 Speaker 1: is with the White House and with President Biden with 189 00:10:45,160 --> 00:10:56,000 Speaker 1: energy policy. Maria today, oh in Brussels, and now is 190 00:10:56,040 --> 00:10:59,560 Speaker 1: the Baltic States consider Ukraine as they consider Russia a 191 00:10:59,640 --> 00:11:03,600 Speaker 1: convert station with the President of Lithuania, Maria, good morning, 192 00:11:05,000 --> 00:11:07,240 Speaker 1: Thanks Toma. Let's go straight of course, with the President 193 00:11:07,240 --> 00:11:10,640 Speaker 1: of Lithuania, Mr. And Alzeta. From day one you've said 194 00:11:11,080 --> 00:11:14,280 Speaker 1: Russia is a threat to European security. Ukraine has to 195 00:11:14,320 --> 00:11:17,000 Speaker 1: win and we need to see native troops deployed in 196 00:11:17,080 --> 00:11:19,360 Speaker 1: big numbers on the eastern flank. But I want to 197 00:11:19,400 --> 00:11:22,120 Speaker 1: ask you about a very delicate situation for you, a 198 00:11:22,120 --> 00:11:25,920 Speaker 1: so I appreciate you taking the time today on Kleinigrad. 199 00:11:26,000 --> 00:11:27,839 Speaker 1: When you look at it on a map, it's between 200 00:11:27,920 --> 00:11:31,720 Speaker 1: your country Lithuania Poland, but it belongs to the Russian Federation, 201 00:11:31,800 --> 00:11:35,680 Speaker 1: and the Russian Federation now openly accuses you your country 202 00:11:36,000 --> 00:11:39,679 Speaker 1: a blocking transport from the Russian Federation to Klenigrat. They 203 00:11:39,720 --> 00:11:44,000 Speaker 1: say there could be real repercussions. Are you concerned. We 204 00:11:44,520 --> 00:11:49,120 Speaker 1: got used to that kind of manipulation, this information and 205 00:11:49,559 --> 00:11:55,520 Speaker 1: threatening it comes very often, and you've got used to 206 00:11:55,559 --> 00:12:01,000 Speaker 1: have this very dangerous neighbor very near to and this 207 00:12:01,200 --> 00:12:04,640 Speaker 1: is nothing special. I just want to say that this 208 00:12:04,720 --> 00:12:09,280 Speaker 1: issue we are talking this is not bilateral issue between 209 00:12:09,520 --> 00:12:13,480 Speaker 1: Lithuenia and Russia. I would like to remind you that 210 00:12:14,320 --> 00:12:19,640 Speaker 1: in March, the European Council decided on the fourth package 211 00:12:19,679 --> 00:12:26,760 Speaker 1: of sanctions, which include some ferous metals iron steel and 212 00:12:26,960 --> 00:12:31,600 Speaker 1: also some luxury goods. And what is Luthenia is doing. 213 00:12:31,720 --> 00:12:36,760 Speaker 1: Luthenia is just implementing those sanctions according to the rules 214 00:12:36,840 --> 00:12:41,360 Speaker 1: and prescriptions of European Commission. Now we are in the 215 00:12:41,480 --> 00:12:45,640 Speaker 1: situation they where we have to apply those sanctions in 216 00:12:45,800 --> 00:12:50,840 Speaker 1: post and this creates, of course some tension between Lithenia 217 00:12:50,920 --> 00:12:55,040 Speaker 1: and Russia. But I think that Russia is just acting 218 00:12:55,440 --> 00:13:00,000 Speaker 1: this proportionally and they are trying to use the supportunity 219 00:13:00,040 --> 00:13:03,680 Speaker 1: the just to blow the propaganda bubble. I would name 220 00:13:03,720 --> 00:13:06,680 Speaker 1: this like this, but when you say it's the propaganda bubble, 221 00:13:07,000 --> 00:13:09,559 Speaker 1: was specifically because the Russians what they say is that 222 00:13:09,880 --> 00:13:14,080 Speaker 1: you're preventing the Russian Federation from supplying a territory of 223 00:13:14,080 --> 00:13:17,280 Speaker 1: the Russian Federation, that is kelen Grad. What's the propaganda 224 00:13:18,640 --> 00:13:22,520 Speaker 1: no blockade? If we are talking about passengers, because you're 225 00:13:22,559 --> 00:13:27,040 Speaker 1: talking in action blocade could be seen by Russia's knowledge located, 226 00:13:27,120 --> 00:13:31,440 Speaker 1: because if we are talking about non sanctioned goods, we 227 00:13:31,520 --> 00:13:35,520 Speaker 1: are talking about passengers, there's not locate. There's absolutely free 228 00:13:35,559 --> 00:13:42,440 Speaker 1: movement between the territory of Russian mainland and region rout 229 00:13:42,520 --> 00:13:45,760 Speaker 1: the territory of Luthenia. Now we are talking about this 230 00:13:45,960 --> 00:13:52,640 Speaker 1: concrete group, and of course we need precise setting of 231 00:13:54,960 --> 00:13:59,920 Speaker 1: just specifical features and tragulement how we can apply these 232 00:14:00,440 --> 00:14:04,440 Speaker 1: this fourth package of sanctions, and we are waiting for 233 00:14:05,160 --> 00:14:09,320 Speaker 1: European Commission's explanation to give that guidance. I wonder ever 234 00:14:09,400 --> 00:14:11,920 Speaker 1: since the ward started, is Vladimir Putting always on your 235 00:14:11,920 --> 00:14:15,360 Speaker 1: mind the idea that for Lithuania the Baltics, this is 236 00:14:15,400 --> 00:14:19,480 Speaker 1: almost an existential threat potentially too. No, we are concentrated 237 00:14:19,840 --> 00:14:24,240 Speaker 1: on our economic progress, prosperity of our people, and you know, 238 00:14:24,760 --> 00:14:27,720 Speaker 1: we don't have the time to think all the time 239 00:14:27,720 --> 00:14:32,520 Speaker 1: about Vladimir Puttin. Of course, we understand that situation in 240 00:14:32,560 --> 00:14:38,280 Speaker 1: the eastern part of Europe is really dangerous and we 241 00:14:38,880 --> 00:14:43,760 Speaker 1: strongly condemned this war against Ukraine. We are a very 242 00:14:43,840 --> 00:14:48,800 Speaker 1: keen support of Ukraine trying to help to assist down 243 00:14:48,840 --> 00:14:54,160 Speaker 1: by all means, by military mean, economically, homanitarian means, and 244 00:14:54,280 --> 00:14:58,640 Speaker 1: of course political component is very important too. So this 245 00:14:58,800 --> 00:15:02,040 Speaker 1: is a reason why I in his very enthusiastic supporter 246 00:15:02,360 --> 00:15:07,680 Speaker 1: of candidate granting candidate status to Ukraine, and I hope 247 00:15:07,800 --> 00:15:10,880 Speaker 1: very much, I am. I am looking forward that it 248 00:15:11,240 --> 00:15:15,320 Speaker 1: it will happen this this evening. And of course you've 249 00:15:15,320 --> 00:15:17,720 Speaker 1: said Ukraine has to win because it's the right thing. 250 00:15:17,800 --> 00:15:20,320 Speaker 1: But if it doesn't and it gets defeated by Russia, 251 00:15:20,720 --> 00:15:23,760 Speaker 1: the repercussions of that could be enormous for the rest 252 00:15:23,840 --> 00:15:25,560 Speaker 1: of Europe. What do you mean by that and what 253 00:15:25,600 --> 00:15:29,200 Speaker 1: does victory Ukraine mean for you? The victory of Ukraine 254 00:15:29,240 --> 00:15:35,040 Speaker 1: means a victory of just historic truth, because they are 255 00:15:35,080 --> 00:15:40,720 Speaker 1: fighting for their freedom, for the right of the country, 256 00:15:40,960 --> 00:15:44,120 Speaker 1: of the people of the country to decide about the future, 257 00:15:44,280 --> 00:15:50,320 Speaker 1: about their destiny, and nobody else and especially external forces 258 00:15:50,680 --> 00:15:55,000 Speaker 1: cannot decide where Ukraine have to do, what Ukraine have 259 00:15:55,080 --> 00:15:58,600 Speaker 1: to do, and we have it should go. Ukraine is 260 00:15:58,720 --> 00:16:03,960 Speaker 1: according to to to I am fully convinced that Ukraine 261 00:16:04,440 --> 00:16:12,160 Speaker 1: is European nation because they prove every day by fighting 262 00:16:12,960 --> 00:16:18,680 Speaker 1: against the aggressor that they defend European values, they defend 263 00:16:18,840 --> 00:16:22,560 Speaker 1: democratic values, and so they are fighting not only for 264 00:16:22,680 --> 00:16:25,680 Speaker 1: the freedom, they are fighting for our freedom from the 265 00:16:25,800 --> 00:16:29,000 Speaker 1: freedom of European Union too. And certain next week there's 266 00:16:29,040 --> 00:16:31,360 Speaker 1: a NATO meeting, of course President Biden will be there. 267 00:16:31,400 --> 00:16:34,920 Speaker 1: The Boltics your country. You've said, we need more troops here, stations. 268 00:16:34,960 --> 00:16:37,600 Speaker 1: The eastern flank needs to be a priority. This is 269 00:16:37,640 --> 00:16:40,720 Speaker 1: not just about China. Russia's an equal threat. What are 270 00:16:40,760 --> 00:16:42,920 Speaker 1: you going to tell the President of the States. This 271 00:16:43,000 --> 00:16:48,720 Speaker 1: is very important to have very adequate evaluation of the situation. 272 00:16:48,760 --> 00:16:52,760 Speaker 1: What is happening in the eastern flank of Natal And 273 00:16:52,880 --> 00:16:57,320 Speaker 1: we see the security issue is becoming more and more important. 274 00:16:57,800 --> 00:17:03,680 Speaker 1: The threats are becoming char lines very fast. I don't 275 00:17:03,760 --> 00:17:08,560 Speaker 1: want to to to to talk about some some some 276 00:17:09,040 --> 00:17:12,000 Speaker 1: threats which are theoretical, but we first of all, we 277 00:17:12,080 --> 00:17:15,760 Speaker 1: have to spend much more attention to the security of 278 00:17:15,800 --> 00:17:21,240 Speaker 1: feast and flank in order to make deterrence factors as 279 00:17:21,359 --> 00:17:26,879 Speaker 1: most effective if it is possible. And this is very important, 280 00:17:27,280 --> 00:17:31,720 Speaker 1: not to show our willingness in case of aggression, but 281 00:17:31,840 --> 00:17:35,920 Speaker 1: to show that we are ready to increase a number 282 00:17:35,960 --> 00:17:41,199 Speaker 1: of troops, to increase military equipment, in our countries, and 283 00:17:41,320 --> 00:17:44,760 Speaker 1: of course very important is to switch to the current 284 00:17:44,920 --> 00:17:49,880 Speaker 1: ear policy regime in Bolti countries to air defense regime. 285 00:17:50,160 --> 00:17:53,880 Speaker 1: It is very important too, and I'm looking forward that 286 00:17:54,000 --> 00:18:00,200 Speaker 1: conclusion text of NATO will be suitable to cooperate who 287 00:18:00,240 --> 00:18:04,800 Speaker 1: work with the leading country of our e FB troops 288 00:18:04,800 --> 00:18:10,240 Speaker 1: in Lithuenia, namely Germany. I signed the communic with the 289 00:18:10,720 --> 00:18:16,119 Speaker 1: German Chancellor all of Charles two weeks ago and according 290 00:18:16,160 --> 00:18:21,960 Speaker 1: to this communic, Germany is committed to send additional troops 291 00:18:22,040 --> 00:18:25,840 Speaker 1: up to brigade level so that scale up for a 292 00:18:25,880 --> 00:18:29,240 Speaker 1: military presence in Lithenia. And I think this is very 293 00:18:29,240 --> 00:18:32,960 Speaker 1: important to increase ort to scale up the military presence 294 00:18:33,359 --> 00:18:36,480 Speaker 1: of other countries in Baltic, other Baltic countries too in 295 00:18:36,560 --> 00:18:39,080 Speaker 1: Latin Estonian. Namely, Well, President, thank you so much for 296 00:18:39,080 --> 00:18:41,360 Speaker 1: your time. We appreciate it, of course, and Bloomberg has 297 00:18:41,359 --> 00:18:43,240 Speaker 1: always and your message is clear a peacement is not 298 00:18:43,280 --> 00:18:46,919 Speaker 1: gonna work with Russia. Thanks so much, Tom, Thank you 299 00:18:46,960 --> 00:18:50,520 Speaker 1: so much Maria. Today in a conversation, folks, I honestly 300 00:18:50,560 --> 00:18:53,119 Speaker 1: never framed in my lifetime. I never thought we would 301 00:18:53,160 --> 00:18:56,879 Speaker 1: hear a kind of tone those statements from a member 302 00:18:57,280 --> 00:19:04,600 Speaker 1: of the Baltic States, and Rita soon joins us here 303 00:19:04,920 --> 00:19:07,080 Speaker 1: with energy aspects, and I do want to note we 304 00:19:07,160 --> 00:19:10,200 Speaker 1: protect the copyright of all of our guests. I can't 305 00:19:10,200 --> 00:19:13,879 Speaker 1: say enough about the acuity of energy aspects. Uh notes 306 00:19:13,960 --> 00:19:16,400 Speaker 1: you can get them from their people as you can. 307 00:19:16,920 --> 00:19:20,160 Speaker 1: And Dr Son, I want to speak here about demand, 308 00:19:20,880 --> 00:19:24,359 Speaker 1: which the fears are premature. And what I love about 309 00:19:24,440 --> 00:19:28,800 Speaker 1: the energy aspects note is our geographic it is the 310 00:19:29,000 --> 00:19:34,600 Speaker 1: elosticities are responsiveness of demand. It's different on the Pacific 311 00:19:34,680 --> 00:19:38,520 Speaker 1: RIM than it is in Europe, etcetera, etcetera. What part 312 00:19:38,680 --> 00:19:41,960 Speaker 1: of your oil demands study now is the most important 313 00:19:42,000 --> 00:19:47,360 Speaker 1: for our listeners and viewers. I would say, first of all, 314 00:19:47,440 --> 00:19:49,840 Speaker 1: thank you Tom, very kind words indeed, but I would 315 00:19:49,840 --> 00:19:52,560 Speaker 1: say have to we have to focus on Asia because 316 00:19:52,600 --> 00:19:54,600 Speaker 1: all the focus right now is on the US in 317 00:19:54,680 --> 00:19:57,000 Speaker 1: terms of the market right and obviously with the US 318 00:19:57,080 --> 00:20:00,840 Speaker 1: federising interest rates, everybody is now expect geting a recession. 319 00:20:01,119 --> 00:20:03,520 Speaker 1: The questions have moved from oh are we going to 320 00:20:03,560 --> 00:20:05,800 Speaker 1: be in a recession to how deep is it going 321 00:20:05,840 --> 00:20:08,080 Speaker 1: to be? To how does it compare to pass recessions? 322 00:20:08,320 --> 00:20:12,679 Speaker 1: Whereas nobody is actually looking at emerging markets Asia is 323 00:20:12,760 --> 00:20:15,840 Speaker 1: eighteen months behind us in the reopening cycle. They have 324 00:20:16,080 --> 00:20:19,080 Speaker 1: just started to reopen from COVID and by the way, 325 00:20:19,200 --> 00:20:22,760 Speaker 1: China hasn't even started to reopen, So there's quite a 326 00:20:22,800 --> 00:20:25,680 Speaker 1: lot of upside to those demands. Even our own demount 327 00:20:25,760 --> 00:20:30,120 Speaker 1: numbers depending on that cadence of the Chinese reopening at least, 328 00:20:30,160 --> 00:20:34,320 Speaker 1: so this is absolutely critical. The hyper analysis of microeconomics 329 00:20:34,359 --> 00:20:37,639 Speaker 1: of Emerita send different from what we see at JP Morgan, 330 00:20:38,040 --> 00:20:42,240 Speaker 1: but both of them are completely focused on demand responsiveness 331 00:20:42,280 --> 00:20:45,080 Speaker 1: on the Pacific RIM. That's the common feature of two 332 00:20:45,119 --> 00:20:48,159 Speaker 1: different houses, and sure there's a lot of distinction in 333 00:20:48,240 --> 00:20:51,639 Speaker 1: each region. The overall picture, though, is a tight oil market, 334 00:20:51,720 --> 00:20:54,680 Speaker 1: and I'm rita you highlight that as well. How much 335 00:20:54,880 --> 00:20:58,000 Speaker 1: is what we're seeing right now a brief cooling in 336 00:20:58,119 --> 00:21:01,439 Speaker 1: some of the fears of the tightness of the market 337 00:21:01,520 --> 00:21:05,399 Speaker 1: before we reassert price up for there for a barrel 338 00:21:05,440 --> 00:21:08,520 Speaker 1: of crude, especially as some people think that there already 339 00:21:08,720 --> 00:21:11,520 Speaker 1: is a recession and our word baked into the price 340 00:21:11,560 --> 00:21:16,840 Speaker 1: of oil. Yeah, I mean, look, have the balances necessarily 341 00:21:16,880 --> 00:21:19,800 Speaker 1: turned out to be exactly what we had forecast after 342 00:21:19,800 --> 00:21:23,119 Speaker 1: the Russian invasion? No, Russian supplies are still hitting the 343 00:21:23,160 --> 00:21:26,960 Speaker 1: market probably about a million barrels per day or more 344 00:21:27,000 --> 00:21:29,520 Speaker 1: more or less more than what we had expected. But 345 00:21:29,560 --> 00:21:31,720 Speaker 1: they are still down about a million barrels per day. 346 00:21:31,880 --> 00:21:34,600 Speaker 1: But equally we've had the SPR at the same time, 347 00:21:34,640 --> 00:21:36,800 Speaker 1: demand is still coming in higher. So to your point, 348 00:21:36,840 --> 00:21:40,639 Speaker 1: the market is incredibly tight despite some of those moving parts. 349 00:21:40,680 --> 00:21:44,879 Speaker 1: I think the bottom line is underlying infantries are so low. 350 00:21:45,119 --> 00:21:48,320 Speaker 1: Spec capacity is so low that you only need a 351 00:21:48,359 --> 00:21:51,080 Speaker 1: little bit of movement, like such as Libya going offline 352 00:21:51,080 --> 00:21:53,600 Speaker 1: for a couple of days. You can really swing balances 353 00:21:53,600 --> 00:21:56,639 Speaker 1: from being solvable to unsolvable in the matter of hours. 354 00:21:56,960 --> 00:22:00,280 Speaker 1: So what we're seeing right now is again this fear 355 00:22:00,320 --> 00:22:03,879 Speaker 1: of a recession turning people to kind of doubt the 356 00:22:03,920 --> 00:22:06,639 Speaker 1: demand recovery and say, Okay, you know, we've got all 357 00:22:06,680 --> 00:22:10,119 Speaker 1: these SPR barrels, but if demand doesn't keep up, prices 358 00:22:10,160 --> 00:22:12,280 Speaker 1: are going to come down. But I will also highlight 359 00:22:12,320 --> 00:22:15,160 Speaker 1: a couple of other things, more technical factors. We tend 360 00:22:15,200 --> 00:22:19,919 Speaker 1: to get sovereign producer hedging at this time, large producers 361 00:22:19,960 --> 00:22:23,720 Speaker 1: in North America, even in Asia, and that has started. 362 00:22:23,760 --> 00:22:27,479 Speaker 1: And it's a low liquidity environment, which means that even 363 00:22:27,640 --> 00:22:31,160 Speaker 1: take away all the fundamentals, there will be some downward 364 00:22:31,160 --> 00:22:34,640 Speaker 1: pressure on prices in the near term, but ultimately, especially 365 00:22:34,640 --> 00:22:36,520 Speaker 1: going into the winter, we think prices are going to 366 00:22:36,560 --> 00:22:38,359 Speaker 1: get head back higher. And so I'm reading maybe the 367 00:22:38,359 --> 00:22:40,720 Speaker 1: best way to characterize this is a head fake if 368 00:22:40,760 --> 00:22:44,840 Speaker 1: you believe that this is hedging by sovereign entities. How 369 00:22:44,960 --> 00:22:46,920 Speaker 1: much of a head fake could it be? How much 370 00:22:46,960 --> 00:22:49,840 Speaker 1: do you still see energy prices rising heading into the 371 00:22:49,840 --> 00:22:54,479 Speaker 1: winter months. I mean, do we think prices are going 372 00:22:54,520 --> 00:22:59,639 Speaker 1: to go back to a hundred forty dollar range for crude? Yes? Absolutely, 373 00:23:00,040 --> 00:23:03,240 Speaker 1: But does that mean that we don't fall ten dollars first? 374 00:23:03,320 --> 00:23:05,520 Speaker 1: I think we could definitely go down first, and I 375 00:23:05,520 --> 00:23:08,040 Speaker 1: think for traders that matters a lot, right, it's always 376 00:23:08,040 --> 00:23:10,480 Speaker 1: about the entry point, But I think more in terms 377 00:23:10,480 --> 00:23:14,680 Speaker 1: of consumers and refiners, ultimately the trajectory is higher. And again, 378 00:23:14,760 --> 00:23:17,760 Speaker 1: forget crew prices for a second. Think about diesel gasoline. 379 00:23:17,960 --> 00:23:21,400 Speaker 1: Those prices are barely moved because the underlying fundamentals are 380 00:23:21,480 --> 00:23:24,200 Speaker 1: so strong right now. Crew tends to move a lot 381 00:23:24,280 --> 00:23:27,720 Speaker 1: more with these macro headlines. Product prices don't, and I 382 00:23:27,760 --> 00:23:30,879 Speaker 1: think that really tells you where the fundamentals are. And 383 00:23:30,920 --> 00:23:33,280 Speaker 1: I think going into the winter, the risk of a 384 00:23:33,359 --> 00:23:36,360 Speaker 1: diesel price bike is much much higher. Okay, Well in Rita. 385 00:23:36,440 --> 00:23:38,400 Speaker 1: As we talk about going into the winter, let's talk 386 00:23:38,400 --> 00:23:41,000 Speaker 1: about whether or not Europe is going to be adequately 387 00:23:41,040 --> 00:23:43,600 Speaker 1: prepared for the cold weather. You are Germany today triggering 388 00:23:43,600 --> 00:23:46,800 Speaker 1: phase two of its emergency gas plan, the alarm phase. 389 00:23:46,840 --> 00:23:49,520 Speaker 1: I believe it's called what happens if we start to 390 00:23:49,560 --> 00:23:54,800 Speaker 1: see actual gas rationing in Europe. I think there's a 391 00:23:54,840 --> 00:23:56,840 Speaker 1: real risk of that. I mean, we believe that our 392 00:23:56,880 --> 00:23:59,880 Speaker 1: team absolutely believes that we've already put together a list 393 00:23:59,880 --> 00:24:04,120 Speaker 1: of which industry is going to be hurt, so steel, cement, fertilizer, 394 00:24:04,200 --> 00:24:07,040 Speaker 1: and so on. But I would say that we are 395 00:24:07,080 --> 00:24:10,560 Speaker 1: starting to see countries restart cold plants. So I think 396 00:24:10,560 --> 00:24:12,920 Speaker 1: the choice has been made again. It was always about 397 00:24:12,960 --> 00:24:15,800 Speaker 1: kind of green energy versus energy security. I do think 398 00:24:16,040 --> 00:24:19,680 Speaker 1: we're starting to see the move towards guaranteeing let's keep 399 00:24:19,680 --> 00:24:22,680 Speaker 1: the lights on, UH and as long as whoever has 400 00:24:22,760 --> 00:24:26,360 Speaker 1: coal capacity decides to bring cold capacity back, then I 401 00:24:26,440 --> 00:24:29,439 Speaker 1: don't think the downturn in industry is going to be 402 00:24:29,560 --> 00:24:33,640 Speaker 1: as severe as we are expecting right now, just assuming 403 00:24:33,640 --> 00:24:36,080 Speaker 1: that gas gets turned off and recent thank you so 404 00:24:36,160 --> 00:24:38,680 Speaker 1: much just a brilliant note from Energy Aspects this morning 405 00:24:38,680 --> 00:24:46,800 Speaker 1: out of Houston and London. Let's go right there now 406 00:24:46,800 --> 00:24:49,600 Speaker 1: with Andrew Lenoor's chief US economist, City Bank, of course, 407 00:24:49,600 --> 00:24:52,480 Speaker 1: with an important call for a much higher rate of 408 00:24:52,600 --> 00:24:55,600 Speaker 1: terminal value and all the other mathematical mambo. JOm do 409 00:24:55,760 --> 00:24:57,960 Speaker 1: am do I want to go to ten am tomorrow morning, 410 00:24:58,480 --> 00:25:00,919 Speaker 1: which you and I agree in my McKee agrees, I 411 00:25:00,920 --> 00:25:06,280 Speaker 1: think all agree. Inflation expectations are important. They have spiked up. 412 00:25:06,720 --> 00:25:12,080 Speaker 1: Are we unanchored in our expectations? Yeah? Critically important time. 413 00:25:12,160 --> 00:25:15,159 Speaker 1: I think that was kind of the last data point 414 00:25:15,280 --> 00:25:17,840 Speaker 1: that the FED could still point to and say there 415 00:25:17,920 --> 00:25:23,080 Speaker 1: was some notion that we weren't on a more inflationary journey. 416 00:25:23,119 --> 00:25:26,560 Speaker 1: And as that University of Michigan five to tenure expectation 417 00:25:26,760 --> 00:25:29,399 Speaker 1: lifts above three percent UM and we'll see where it 418 00:25:29,440 --> 00:25:33,080 Speaker 1: comes in tomorrow. Uh, that that just increases the concern 419 00:25:33,240 --> 00:25:37,000 Speaker 1: that there really is an embedded sense to this inflation. 420 00:25:37,040 --> 00:25:39,200 Speaker 1: I think we already saw it in in the labor market, 421 00:25:39,200 --> 00:25:41,440 Speaker 1: like you were just talking about where we have wage 422 00:25:41,440 --> 00:25:44,280 Speaker 1: growth by various different measures, you know, four to six 423 00:25:44,320 --> 00:25:47,880 Speaker 1: percent wage growth. Chare Powell was talking about that yesterday. Um. 424 00:25:47,920 --> 00:25:50,240 Speaker 1: And then you have price growth that is, you know, 425 00:25:50,359 --> 00:25:53,000 Speaker 1: six percent plus depending on the measure that that you 426 00:25:53,040 --> 00:25:55,200 Speaker 1: look at. Um. So, so I think there's a notion 427 00:25:55,240 --> 00:25:57,600 Speaker 1: of a wage price firal here. Um. I think a 428 00:25:57,640 --> 00:25:59,800 Speaker 1: little bit of what we're seeing. University of Michigan is 429 00:25:59,800 --> 00:26:02,640 Speaker 1: can firming that also. Um. Just like Mike McKie was saying, 430 00:26:02,640 --> 00:26:04,560 Speaker 1: it's it's not that the five to tenure expectation is 431 00:26:04,600 --> 00:26:07,840 Speaker 1: a correct expectation, but it just tells you something about 432 00:26:07,880 --> 00:26:12,360 Speaker 1: how inflation is becoming a structural factor in the economy. Yeah, 433 00:26:12,359 --> 00:26:14,200 Speaker 1: but just as quickly as people get used to that, Andrew, 434 00:26:14,240 --> 00:26:16,960 Speaker 1: how much is a labor market shifting already? And we're 435 00:26:16,960 --> 00:26:19,720 Speaker 1: not necessarily seeing that and claims going up although you 436 00:26:19,720 --> 00:26:21,440 Speaker 1: know they picked up a little bit, but really it's 437 00:26:21,440 --> 00:26:23,760 Speaker 1: not that significant. How much are we seeing just job 438 00:26:23,800 --> 00:26:27,600 Speaker 1: listings being taken down or not filled or companies pairing 439 00:26:27,680 --> 00:26:31,520 Speaker 1: back some of their business ambitions. Yeah. I think that's 440 00:26:31,560 --> 00:26:34,160 Speaker 1: what's difficult here is as an consists, you're always looking 441 00:26:34,200 --> 00:26:37,240 Speaker 1: at two things. You're looking at the level of activity 442 00:26:37,280 --> 00:26:39,280 Speaker 1: and the level of strength, but then you're also looking 443 00:26:39,280 --> 00:26:41,240 Speaker 1: at the direction of travel and really what you want 444 00:26:41,240 --> 00:26:43,240 Speaker 1: to get right, is the direction of travel, because that's 445 00:26:43,240 --> 00:26:45,560 Speaker 1: going to determine where you're going. And we know a 446 00:26:45,560 --> 00:26:47,320 Speaker 1: lot of things are very strong. You know, the labor 447 00:26:47,359 --> 00:26:50,159 Speaker 1: market has been very strong, continues to be very strong, 448 00:26:50,800 --> 00:26:55,280 Speaker 1: lots of job openings, relatively few unemployed individuals. UM. But 449 00:26:55,520 --> 00:26:57,520 Speaker 1: you know that that kind of leading edge of the 450 00:26:57,520 --> 00:27:00,920 Speaker 1: direction of travel, the weekly initial job bubless claims data, 451 00:27:00,960 --> 00:27:04,280 Speaker 1: that's giving me a lot more of a real time 452 00:27:04,280 --> 00:27:06,840 Speaker 1: signal of the labor market, and something like job openings 453 00:27:06,880 --> 00:27:09,359 Speaker 1: which has lagged a couple of months. UM. So if 454 00:27:09,400 --> 00:27:12,359 Speaker 1: you look at those initial claims again, the levels still 455 00:27:12,480 --> 00:27:16,040 Speaker 1: very low. Hard to think that. Um, it's a difficult 456 00:27:16,080 --> 00:27:18,600 Speaker 1: time to find a job in most sectors at least 457 00:27:18,920 --> 00:27:21,639 Speaker 1: because the vacancies are so high. So it's not so 458 00:27:21,720 --> 00:27:24,359 Speaker 1: much of a concern about the labor market being soft today. 459 00:27:24,400 --> 00:27:27,720 Speaker 1: Everybody would agree it's strong today. UM. But I'm watching 460 00:27:27,760 --> 00:27:30,199 Speaker 1: those claims. I think that what we're seeing now is 461 00:27:30,240 --> 00:27:32,640 Speaker 1: you know, kind of some seasonal noise. Nothing to get 462 00:27:32,680 --> 00:27:35,959 Speaker 1: too concerned about. Um, But it's definitely the case if 463 00:27:36,000 --> 00:27:38,840 Speaker 1: you bring economists like me back on this show, UM, 464 00:27:38,960 --> 00:27:40,640 Speaker 1: a month from now, two months from now, when we've 465 00:27:40,640 --> 00:27:43,280 Speaker 1: seen these initial jobless clams that have continued to trend up, 466 00:27:43,680 --> 00:27:46,159 Speaker 1: we'll have a lot more pessimistic view. Well, Thomas on 467 00:27:46,200 --> 00:27:48,080 Speaker 1: a really good job today, not just talking about their 468 00:27:48,119 --> 00:27:51,760 Speaker 1: domestic labor market, but looking internationally and what the ramifications 469 00:27:51,800 --> 00:27:54,840 Speaker 1: from some of the global downdraft has been. And that 470 00:27:54,880 --> 00:27:56,800 Speaker 1: has been in the stronger dollar. And in addition to 471 00:27:56,880 --> 00:27:59,360 Speaker 1: jobless claims, we also got the current account balance out 472 00:27:59,600 --> 00:28:02,240 Speaker 1: for the United States, which is surprised to the downside. 473 00:28:02,280 --> 00:28:05,399 Speaker 1: We have a record trade deficit once again as the 474 00:28:05,440 --> 00:28:08,720 Speaker 1: strong dollar allows the US to import more goods. How 475 00:28:08,760 --> 00:28:11,640 Speaker 1: does this factor into your view on the GDP level, 476 00:28:11,960 --> 00:28:15,440 Speaker 1: considering the prowess of the dollar and the ongoing sort 477 00:28:15,440 --> 00:28:18,160 Speaker 1: of disinflationary object of that, but not the money coming 478 00:28:18,200 --> 00:28:21,200 Speaker 1: back into the U S economy. Yeah, so the tree 479 00:28:21,240 --> 00:28:24,040 Speaker 1: balance has really been kind of swinging around wildly, which 480 00:28:24,080 --> 00:28:29,280 Speaker 1: is kind of a combination of the post COVID reopening 481 00:28:29,359 --> 00:28:31,680 Speaker 1: phase of the economy as as trade kind of gotten 482 00:28:31,680 --> 00:28:36,639 Speaker 1: more fully restarted, um as the economy is reopened globally, 483 00:28:36,760 --> 00:28:39,800 Speaker 1: and then this kind of pattern of well, you had 484 00:28:39,840 --> 00:28:42,719 Speaker 1: renewed waves of COVID which are disrupting goods, and then 485 00:28:42,760 --> 00:28:46,000 Speaker 1: you have supply chain issues right on top of that. UM. 486 00:28:46,040 --> 00:28:48,880 Speaker 1: So I'm really being very careful with that trade data 487 00:28:48,960 --> 00:28:51,480 Speaker 1: right now in terms of interpreting it as any kind 488 00:28:51,480 --> 00:28:55,360 Speaker 1: of longer term trend UM and where the economy is going. UM. 489 00:28:55,400 --> 00:28:59,200 Speaker 1: If I look at the effect of the stronger dollar, UM, 490 00:28:59,240 --> 00:29:02,640 Speaker 1: I think, what one thing that's maybe surprising, maybe even 491 00:29:02,640 --> 00:29:04,880 Speaker 1: a little bit surprising to to me, and how this 492 00:29:04,920 --> 00:29:07,880 Speaker 1: has played out. UM. You know, like Tom was saying, 493 00:29:08,240 --> 00:29:11,640 Speaker 1: we have revised up our terminal Fed funds policy rate 494 00:29:11,640 --> 00:29:14,720 Speaker 1: forecast to above four percent. Now I've been getting there 495 00:29:14,720 --> 00:29:17,920 Speaker 1: in the first quarter of three UM. So you know, 496 00:29:17,960 --> 00:29:20,959 Speaker 1: we're really getting rates to quite high levels in the US. UM. 497 00:29:21,000 --> 00:29:23,240 Speaker 1: That's not an out their view anymore that your market 498 00:29:23,280 --> 00:29:25,680 Speaker 1: has been pricing something not too far off from that, 499 00:29:25,880 --> 00:29:28,400 Speaker 1: and when we were at higher yield levels. UM. And 500 00:29:28,480 --> 00:29:31,480 Speaker 1: the dollar, yes, his strengthen, UM. But you know, if 501 00:29:31,480 --> 00:29:33,720 Speaker 1: you had just told me six months ago, you know, 502 00:29:33,760 --> 00:29:35,720 Speaker 1: we're all going to kind of think that Fed funds 503 00:29:35,720 --> 00:29:38,280 Speaker 1: effective is getting above three and a half percent. UM, 504 00:29:38,280 --> 00:29:39,920 Speaker 1: where's the US dollar? I would have thought a lot 505 00:29:39,960 --> 00:29:42,560 Speaker 1: stronger than where it is now. So I think relative 506 00:29:42,600 --> 00:29:45,000 Speaker 1: to that counter factual, it's you know, maybe not as 507 00:29:45,040 --> 00:29:48,240 Speaker 1: much of a slowing factor for the economy. Andrew I 508 00:29:48,240 --> 00:29:50,480 Speaker 1: mentioned this earlier in the show. But when Powell was 509 00:29:50,520 --> 00:29:53,320 Speaker 1: testifying on Capitol Hill yesterday and Elizabeth Warren was asking 510 00:29:53,360 --> 00:29:55,760 Speaker 1: him if a rate high would solve higher grocery prices 511 00:29:55,840 --> 00:29:58,640 Speaker 1: or higher prices at the pump, his answer obviously was no. 512 00:29:58,800 --> 00:30:00,640 Speaker 1: The FED isn't equipped to deal with some of those 513 00:30:00,640 --> 00:30:04,040 Speaker 1: more supply side driven challenges. What is your confidence that 514 00:30:04,080 --> 00:30:07,040 Speaker 1: the Fed actually can get demand down enough to the 515 00:30:07,080 --> 00:30:12,400 Speaker 1: extent that it actually will offset persistent tight supply. Yeah, 516 00:30:12,400 --> 00:30:15,240 Speaker 1: it's a really important question, and you know those questions 517 00:30:15,240 --> 00:30:18,680 Speaker 1: that share powell answering UM yesterday and you know again today, 518 00:30:18,720 --> 00:30:21,760 Speaker 1: just to show how difficult this moment is for monetary 519 00:30:21,760 --> 00:30:25,320 Speaker 1: policy and for policy makers. UM, when there's a supply 520 00:30:25,400 --> 00:30:28,120 Speaker 1: side constraint and it's persistent, the only thing you can 521 00:30:28,160 --> 00:30:31,160 Speaker 1: do is gamp demand to try to bring the economy 522 00:30:31,160 --> 00:30:35,080 Speaker 1: back into equilibrium and bring inflationary pressure down. UM. I'm 523 00:30:35,200 --> 00:30:38,280 Speaker 1: very confident to answer your question that the Fed will 524 00:30:38,320 --> 00:30:43,600 Speaker 1: be able to slow demands sufficiently UM to bring demand down. UM. 525 00:30:43,640 --> 00:30:47,080 Speaker 1: The issue is how much slowing is that going to be? 526 00:30:47,160 --> 00:30:49,600 Speaker 1: How much of an output gap does the FED need 527 00:30:49,680 --> 00:30:52,960 Speaker 1: to create, um, how much weakness in the labor market. 528 00:30:53,000 --> 00:30:55,520 Speaker 1: If you look at the FED Summary of Economic Projections, 529 00:30:55,560 --> 00:30:58,000 Speaker 1: they have the unemployment rate that just moves up by 530 00:30:58,040 --> 00:31:01,280 Speaker 1: a few tents of a percentage point um. So if 531 00:31:01,320 --> 00:31:04,720 Speaker 1: you keep moving interest rates higher in financial conditions, it 532 00:31:04,760 --> 00:31:07,880 Speaker 1: will slow down the economy. Um. The real issue for 533 00:31:07,880 --> 00:31:09,840 Speaker 1: the petistant whether or not they can slow it down. 534 00:31:09,880 --> 00:31:12,040 Speaker 1: It's can they slow it down and have it be 535 00:31:12,080 --> 00:31:15,720 Speaker 1: a relative moderate slow down and still get inflationary pressure down? 536 00:31:15,720 --> 00:31:17,880 Speaker 1: And thank you so much Andrew Holland Horst for City 537 00:31:17,880 --> 00:31:21,240 Speaker 1: Group here with that shocking terminal rights statistic about four percent. 538 00:31:21,720 --> 00:31:24,160 Speaker 1: I'm going to call that on the edge of outlier 539 00:31:24,320 --> 00:31:28,400 Speaker 1: on Wall Street. This is the Bloomberg Surveillance Podcast. Thanks 540 00:31:28,440 --> 00:31:31,760 Speaker 1: for listening. Join us live weekdays from seven to ten 541 00:31:31,800 --> 00:31:35,640 Speaker 1: a m Eastern on Bloomberg Radio and on Bloomberg Television 542 00:31:36,000 --> 00:31:40,000 Speaker 1: each day from six to nine am for insight from 543 00:31:40,040 --> 00:31:44,600 Speaker 1: the best in economics, finance, investment, and international relations. And 544 00:31:44,680 --> 00:31:49,840 Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg 545 00:31:49,880 --> 00:31:53,200 Speaker 1: dot com, and of course on the terminal. I'm Tom 546 00:31:53,280 --> 00:32:03,000 Speaker 1: Keene and this is Bloomberg