WEBVTT - Why Oil Didn't Hit $200 0:00:02.720 --> 0:00:07.240 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.240 --> 0:00:11.520 Who's really happy is the market because the market's gone 0:00:11.560 --> 0:00:13.720 up thousands of points over the last four or five 0:00:13.800 --> 0:00:16.760 days since hearing about it. And the Strait is going 0:00:16.800 --> 0:00:19.040 to be opening, It's already partially opened, it's going to 0:00:19.040 --> 0:00:21.240 be opening up. 0:00:28.480 --> 0:00:31.840 I'm Stephanie Flanders, head of Government and Economics at Bloomberg, 0:00:32.000 --> 0:00:34.760 and this is Trumpnonomics, the podcast that looks at the 0:00:34.800 --> 0:00:38.479 economic world of Donald Trump, how he's shaking up the 0:00:38.479 --> 0:00:41.360 global economy and what on earth is going to happen next. 0:00:41.600 --> 0:00:41.720 Now. 0:00:41.720 --> 0:00:45.559 We're recording this in London on Wednesday, the seventeenth of June. 0:00:46.080 --> 0:00:49.239 We don't know, may never know the exact detail of 0:00:49.280 --> 0:00:52.680 the agreement between the US and Iran that we expect 0:00:52.960 --> 0:00:56.880 famous last words to be signed in Switzerland this coming Friday. 0:00:57.560 --> 0:01:00.640 But President Trump tells us the horn Mo is going 0:01:00.680 --> 0:01:03.560 to be opening up, and for now investors and those 0:01:03.560 --> 0:01:05.959 closest to the oil industry seem to believe in But 0:01:06.080 --> 0:01:09.000 what does that mean from a practical standpoint, and why 0:01:09.560 --> 0:01:12.480 there seem to be such wildly differing views inside and 0:01:12.520 --> 0:01:15.000 outside the market on how long it will take for 0:01:15.040 --> 0:01:18.040 the oil market to in some sense get back to normal. 0:01:18.280 --> 0:01:20.280 I mean, depending on who you talk to, it's either 0:01:20.319 --> 0:01:23.520 going to take months to demine the straight offol moods, 0:01:23.560 --> 0:01:27.520 fix all those damage refineries, or the whole thing could 0:01:27.560 --> 0:01:29.959 seem like a bad dream in a matter of weeks. 0:01:30.319 --> 0:01:32.039 I want to get to the bottom of that today, 0:01:32.040 --> 0:01:34.280 but I also want to step back to ask how 0:01:34.440 --> 0:01:39.000 this entire conflict since the end of February has changed 0:01:39.040 --> 0:01:41.440 the course of the global economy compared with what we 0:01:41.520 --> 0:01:44.760 might have been expecting on February twenty seventh. And if 0:01:44.800 --> 0:01:46.840 we get time, I'd also like to ask whether the 0:01:46.880 --> 0:01:50.200 global oil market has also been changed for good. I 0:01:50.280 --> 0:01:53.320 noticed the UAE said today it was working on completely 0:01:53.400 --> 0:01:55.880 eliminating its reliance on the straight offoil moods over the 0:01:55.920 --> 0:01:59.400 next few years. Well, Javier blast is absolutely the man 0:01:59.440 --> 0:02:01.120 to ask about all of that, and I'm glad to 0:02:01.120 --> 0:02:02.040 say he's on the line. 0:02:02.120 --> 0:02:04.760 Have you. Thank you so much, my pleasure, Thank you 0:02:04.800 --> 0:02:05.280 for having me. 0:02:05.840 --> 0:02:09.000 Should remind people you're the Bloomberg Opinion, the Bloomberg Opinion 0:02:09.040 --> 0:02:14.160 columnists covering energy and commodities after years and years covering 0:02:14.320 --> 0:02:16.560 those markets as a reporter, and you're also the co 0:02:16.680 --> 0:02:19.720 author of the world for sale, money power and the 0:02:19.800 --> 0:02:20.799 traders who. 0:02:20.600 --> 0:02:22.280 Barter the Earth's resources. 0:02:23.040 --> 0:02:25.400 But on the broader economic piece of the story, I'm 0:02:25.400 --> 0:02:27.840 glad to say we also have in the studio here 0:02:27.880 --> 0:02:31.440 in London, Jamie Rush, director of Global Economics at Bloomberg 0:02:31.760 --> 0:02:34.720 and co author of the Price of Money. He's worked 0:02:34.800 --> 0:02:38.040 before at the British Treasury, the New Zealand Treasury and 0:02:38.080 --> 0:02:42.560 the UK Office for Budget Responsibility. Jamie, thanks for joining pleasure. 0:02:43.040 --> 0:02:46.440 Normally you're far too busy on all of our forecart 0:02:46.520 --> 0:02:49.200 and our modeling and our crack views on everything, so 0:02:49.240 --> 0:02:54.560 I'm glad I'm been able to get you into the studio. 0:02:55.600 --> 0:02:58.440 Have tell us what you understand by the opening of 0:02:58.440 --> 0:03:01.160 the Ormond straight and what would that mean and relative 0:03:01.200 --> 0:03:03.840 short term for oil prices and the oil market generally 0:03:03.880 --> 0:03:04.640 oil supplies. 0:03:05.880 --> 0:03:08.520 Let's call the reopening of the Street of Hormones the 0:03:08.680 --> 0:03:12.880 day that we see from the Persian Gulf region, so 0:03:12.960 --> 0:03:18.359 that is Saudi Arabia, the United Arab Emirates, Iraq, Kubait 0:03:18.720 --> 0:03:23.120 and Iran plaskatter more or less the same amount of 0:03:23.200 --> 0:03:25.960 oil that we were seeing on February the twenty seven. 0:03:26.760 --> 0:03:29.639 And the reason that they are so diverge in abuse 0:03:29.800 --> 0:03:33.360 is that never anything similar to what we are about 0:03:33.360 --> 0:03:37.280 to witness has been ever done. The oil industry needs 0:03:37.280 --> 0:03:42.680 to restart about Ghibet or take ten thousand oil wells. 0:03:43.040 --> 0:03:45.680 We don't know whether those wells are going to come 0:03:45.720 --> 0:03:49.680 back into life with oil flowing. They're gonna be dry, 0:03:49.760 --> 0:03:53.320 They're gonna have problems. We don't know if the pipelines 0:03:53.360 --> 0:03:57.560 are in good shape. What happens when you restart the machinery. 0:03:57.960 --> 0:04:01.560 What comes out of an oil well is not all oil. 0:04:02.160 --> 0:04:04.520 Is a bit of oil, a bit of water, a 0:04:04.520 --> 0:04:06.920 bit of gas, and a bit of sand that needs 0:04:06.920 --> 0:04:10.840 to be separated. The industrial plants that do that separation 0:04:11.040 --> 0:04:13.920 have been shut down for one hundred days. We don't 0:04:13.960 --> 0:04:16.400 know what happened when you re start then you know 0:04:16.440 --> 0:04:19.960 from the coal I sit on the optimis side, having 0:04:20.000 --> 0:04:23.320 to spend some time in recent weeks talking to people 0:04:23.320 --> 0:04:26.279 who do a lot of maintenance in these oil fields 0:04:26.279 --> 0:04:29.120 in the Middle East. My kind of expectation is that 0:04:29.200 --> 0:04:33.400 fifty percent of the production capacity comes back into what 0:04:33.480 --> 0:04:37.039 I call days, somewhere between five and ten days. We 0:04:37.200 --> 0:04:40.760 get a significant chunk of production capacity coming back and 0:04:40.920 --> 0:04:44.800 heating myself, But say somewhere between three and six weeks 0:04:44.880 --> 0:04:48.160 you get to seventy five percent. Getting back the one 0:04:48.279 --> 0:04:51.839 hundred percent, that's a bit more difficult. The final bit 0:04:52.000 --> 0:04:53.840 is going to take more time. I think that it 0:04:53.880 --> 0:04:57.840 takes perhaps months. Can it be that returning to one 0:04:57.920 --> 0:05:01.520 hundred percent takes more than a year? Yeah, that's possible. 0:05:01.640 --> 0:05:04.760 But in some ways, and excuse me to put it 0:05:04.800 --> 0:05:07.920 this way, I care very little about the last two 0:05:07.960 --> 0:05:12.520 percentage points of oil supplies coming back because two reasons. One, 0:05:12.880 --> 0:05:16.520 oil demand is weaker than we were in February the 0:05:16.520 --> 0:05:20.000 twenty seven, so the market balance at a lower production level. 0:05:20.360 --> 0:05:22.520 And also, because the rest of the world has moved on. 0:05:22.760 --> 0:05:27.600 You have American oil production scenes increasing significantly to an 0:05:27.600 --> 0:05:31.720 all time I may. You have Brazilian production app nearly 0:05:31.800 --> 0:05:34.960 twenty percent year on year. So we do not need 0:05:35.320 --> 0:05:38.640 to go back exactly to where we were on February 0:05:38.720 --> 0:05:42.240 the twenty seven for the oil market to revalance. So 0:05:42.320 --> 0:05:45.520 I think that on that debate of how long it takes, 0:05:45.600 --> 0:05:48.279 I am on the days and weeks rather than on 0:05:48.400 --> 0:05:49.920 the months and years. 0:05:50.600 --> 0:05:53.599 Okay, And it's interesting there's various things embedded in that, 0:05:53.760 --> 0:05:57.239 and then that sort of relatively optimism, which I notice 0:05:58.000 --> 0:06:01.640 relative to those who have sort of suggested it was 0:06:01.640 --> 0:06:03.160 all going to take a much longer. So there's a 0:06:03.240 --> 0:06:06.920 question mark about what happens when you reopen the production facilities. 0:06:07.320 --> 0:06:10.000 But they actual damage to those facilities, you know, the 0:06:10.120 --> 0:06:13.680 talk of you know, years and years of repairs. You 0:06:13.680 --> 0:06:15.480 don't think that's going to be a significant issue. 0:06:15.839 --> 0:06:19.239 No, the oil industry in the Middle East has suffered 0:06:19.400 --> 0:06:24.039 relatively little damage in the oil side from the war. 0:06:24.360 --> 0:06:28.320 What is on production facilities. There has been damage or 0:06:28.320 --> 0:06:31.360 what we call the downstream side of the industry. That's 0:06:31.440 --> 0:06:35.480 more the refining side where son refineries are going to 0:06:35.600 --> 0:06:38.960 need significant repairs, and that's going to be measured more 0:06:39.080 --> 0:06:42.039 into probably the end of the year or the beginning 0:06:42.120 --> 0:06:45.800 of twenty twenty seven. But what is the production facilities, 0:06:45.880 --> 0:06:48.080 or what we typically call in the oil industry the 0:06:48.240 --> 0:06:51.960 upstream side, so that's the oil wells, the processing centers, 0:06:51.960 --> 0:06:53.599 the pipelines, et cetera, et cetera. 0:06:54.000 --> 0:06:56.640 There has been relatively very little damage. 0:06:56.800 --> 0:07:00.320 Most of the damage that was sustained, particularly in Saudi 0:07:00.320 --> 0:07:04.040 Arabia and Kubay, has been repaired. And this is also 0:07:04.240 --> 0:07:08.839 a very important question. I was asking a few weeks 0:07:08.839 --> 0:07:11.960 ago to someone who does a lot of work in 0:07:12.000 --> 0:07:14.040 the oil fields of the Middle East, and I said, 0:07:14.040 --> 0:07:17.120 what you guys have been doing and they said, well, 0:07:17.120 --> 0:07:21.280 we have been working the oil fields, burying a few 0:07:21.400 --> 0:07:22.640 missiles here and there. 0:07:22.680 --> 0:07:23.520 But the oil. 0:07:23.240 --> 0:07:27.240 Fields were not a battleground. They were not a war 0:07:27.680 --> 0:07:30.400 vote over the oil field. This is very different to 0:07:31.000 --> 0:07:34.760 Kube nineteen nineteen, nineteen ninety one, or Olivia during the 0:07:34.760 --> 0:07:37.200 civil war in twenty eleven, where I was in the 0:07:37.240 --> 0:07:41.480 oil fields and the different factions were fighting for the 0:07:41.520 --> 0:07:43.920 controls of those oil fields. They were bombing the oil 0:07:43.920 --> 0:07:47.560 fields and the facilities were damaged in some occasions. This 0:07:47.720 --> 0:07:51.560 is a war that has not really affected the oil fields, 0:07:51.680 --> 0:07:55.680 and maintenance have been taking place, and engineers have been 0:07:55.720 --> 0:07:59.080 doing preventive war, so when the day comes that they 0:07:59.080 --> 0:08:02.440 can't re esta the world, they can't do it. 0:08:02.640 --> 0:08:06.000 I did notice our chief merging market economists actually pointed 0:08:06.000 --> 0:08:08.240 out that in some ways, if you're thinking about what's 0:08:08.280 --> 0:08:11.640 the key constraint on oil while the strait still closed, 0:08:11.720 --> 0:08:14.280 is it the sort of damage to the facilities, or 0:08:14.360 --> 0:08:16.800 is it the strait itself. And he pointed out there's 0:08:16.880 --> 0:08:18.960 kind of been a natural experiment that the attacks have 0:08:19.080 --> 0:08:21.760 hit facilities on both sides of the Strait, but the 0:08:21.840 --> 0:08:25.160 non hill move sites have kept operating while the homo's 0:08:25.160 --> 0:08:27.760 activity felt so the difference was clearly not about the 0:08:27.800 --> 0:08:30.280 attacks damaging the facilities, it was where their energy could 0:08:30.280 --> 0:08:32.920 actually get out. Before I get onto Jamie on the 0:08:33.040 --> 0:08:35.160 broader economics, I just want to sort of tick off 0:08:35.200 --> 0:08:36.800 a couple more things with you have yet the other 0:08:36.840 --> 0:08:40.000 things that people talk about, which again embedded in your 0:08:40.040 --> 0:08:45.440 first answer, seemed to be not compelling constraints, the demining 0:08:45.480 --> 0:08:48.280 of the Strait again talk of that taking months and months, 0:08:48.320 --> 0:08:51.800 and also that it's not an issue for the sort 0:08:51.800 --> 0:08:55.320 of stability of the market and the pricing to have 0:08:55.480 --> 0:08:58.520 all of those reserves having been run down over the 0:08:58.559 --> 0:09:01.560 last few months. There's no expectation that all of these 0:09:01.640 --> 0:09:04.840 reserves have to be back up before you before prices 0:09:04.880 --> 0:09:05.640 start to come down. 0:09:06.600 --> 0:09:08.680 Now, I think that we will need to rebuild some 0:09:08.800 --> 0:09:11.800 of those inventories. Certainly, if we look at demand for 0:09:11.880 --> 0:09:14.679 oil in twenty twenty seven, we need to assume that 0:09:14.800 --> 0:09:16.880 it's not the oil barrels that we are going to 0:09:16.960 --> 0:09:19.640 consume or burn, but it's also the oil barrels that 0:09:19.640 --> 0:09:22.120 we are going to put aside and put back into 0:09:22.120 --> 0:09:24.720 a staategic reserves. So the demand may be a bit 0:09:24.760 --> 0:09:27.360 a bit higher than we think. One constraint is going 0:09:27.440 --> 0:09:29.280 to be the amount of vessels that they are available. 0:09:29.320 --> 0:09:32.320 We need to reposition all the oil tankers back into 0:09:32.320 --> 0:09:34.079 the Middle East, and some one of those tankers are 0:09:34.120 --> 0:09:36.600 now at the wrong location because they are picking up 0:09:36.760 --> 0:09:39.600 crude oil, say in the Gulf of Mexico for Japan, 0:09:39.760 --> 0:09:42.560 rather than picking up crude oil in the Middle East 0:09:42.559 --> 0:09:43.319 the Persian Golf. 0:09:43.360 --> 0:09:45.880 So you have to recall some of those basons. 0:09:45.920 --> 0:09:49.000 And we are starting to see diversions on some vessels 0:09:49.000 --> 0:09:52.560 that they were close to turn around Africa into going 0:09:52.600 --> 0:09:55.560 into the Atlantic. They are performing your turns and they're 0:09:55.600 --> 0:09:58.280 going back to the Indian Olsa and heading back into 0:09:58.840 --> 0:10:00.480 the Middle East. So we are beginning to kind of 0:10:00.520 --> 0:10:02.760 reposition all the vessels. That takes a bit of time. 0:10:02.840 --> 0:10:05.520 These vessels they move at not that the speed of 0:10:06.120 --> 0:10:07.440 a high speed train or a car. 0:10:07.480 --> 0:10:09.680 I mean, they make about twenty. 0:10:09.440 --> 0:10:11.960 Five kilometers per hour or take if we put it 0:10:12.000 --> 0:10:14.960 in card terms, So it takes time to move them around. 0:10:15.000 --> 0:10:19.439 But there are about sixty seventy tank has already waiting 0:10:19.480 --> 0:10:21.880 in the Gulf of Man, ready to go the moment 0:10:21.880 --> 0:10:24.319 that the strade opens. I think that the mining is 0:10:24.360 --> 0:10:27.360 a question. There are areas of the stradio hormones that 0:10:27.360 --> 0:10:29.800 they are clear of minds, close to the Omani coust, 0:10:29.920 --> 0:10:32.880 close to the Iranian cost, so that is a vailable 0:10:33.400 --> 0:10:35.240 and I think that what we need is a proof 0:10:35.280 --> 0:10:38.360 of concept the oil shipping industry. There are a number 0:10:38.400 --> 0:10:42.040 of ship owners who have a reputation for being I 0:10:42.080 --> 0:10:45.360 think that the sympathetic term is more adventurous at the 0:10:45.440 --> 0:10:49.120 non sympathetic term is more buccaneering. But they will be 0:10:49.160 --> 0:10:52.160 the first ones to cross the stradio hormones. They will 0:10:52.200 --> 0:10:55.400 be the proof of concept that actually you can do it. 0:10:55.880 --> 0:10:59.080 And when they do it, we will start with a trickle, 0:10:59.160 --> 0:11:01.000 but the flood will follow very quickly. 0:11:01.480 --> 0:11:05.360 So, Jamie, where is it that Bloomberg Economics thinks oil 0:11:05.400 --> 0:11:07.600 prices or what are our kind of best guesses of 0:11:07.800 --> 0:11:11.720 how quickly the oil market can adjust and what that 0:11:11.840 --> 0:11:14.760 means for prices, Because obviously it doesn't seem like we're 0:11:14.760 --> 0:11:17.120 going to get back to where we were before the 0:11:17.160 --> 0:11:20.760 conflict anytime soon, but it's still going to fall. 0:11:21.080 --> 0:11:23.680 Yeah, I mean, I suppose we're using similar rules of 0:11:23.720 --> 0:11:26.240 thumb to others. If you go into this into the 0:11:26.280 --> 0:11:29.760 Iran conflict, what happened to oil prices when we lost 0:11:29.760 --> 0:11:32.960 the supply, Well, that gives you a rough feel for 0:11:33.000 --> 0:11:35.120 what might happen to prices. They go down right if 0:11:35.160 --> 0:11:36.760 you use kind of these rules of thumb, they weren't 0:11:36.760 --> 0:11:39.080 a bad guide on the way in. Let's just imagine 0:11:39.080 --> 0:11:41.360 that you get five million barrels a day, which is 0:11:41.520 --> 0:11:45.720 very conveniently five percent of global supply, an elasticity of 0:11:45.800 --> 0:11:49.160 four So if you lose one percent supply, prices go 0:11:49.280 --> 0:11:51.600 up by four percent. Well, that means you might get 0:11:51.600 --> 0:11:55.200 a drop in prices of around about twenty percent, which 0:11:55.240 --> 0:11:58.480 takes you from ninety dollars down to seventy to seventy five. 0:11:58.679 --> 0:12:00.560 So I think that's the kind of range you'd expect 0:12:00.559 --> 0:12:03.920 oil prices to settle in if that's the kind of 0:12:03.960 --> 0:12:06.080 increase in supplied the BC over the over the next 0:12:06.120 --> 0:12:06.960 month or so. 0:12:07.040 --> 0:12:09.280 I remember even a debate on this podcast, for we 0:12:09.360 --> 0:12:11.640 had Ziad and Haveavier at the beginning of the conflict, 0:12:11.679 --> 0:12:14.280 and you know, very focused on the significance of the 0:12:14.280 --> 0:12:17.440 straight Orfom moves, and at that point and I remember 0:12:17.520 --> 0:12:20.480 feeling that it maybe was on the low side. We 0:12:20.600 --> 0:12:24.560 had as our kind of dark downside scenario that the 0:12:24.600 --> 0:12:26.760 oil price would go to one hundred and ten, and 0:12:26.880 --> 0:12:30.480 Havevier and many others were saying, surely that the downside 0:12:30.600 --> 0:12:33.080 could be a lot higher than that, despite the fact 0:12:33.160 --> 0:12:36.480 that the conflict has continued so much longer than people 0:12:36.480 --> 0:12:38.840 would have expected or hoped at that time from an 0:12:38.840 --> 0:12:41.640 economic standpoint, why have they not gone as high as 0:12:41.679 --> 0:12:42.199 some thought? 0:12:42.720 --> 0:12:44.240 Well, I'll punt it back to have and tell us 0:12:44.240 --> 0:12:47.040 what is wrong. I mean, there are a couple of factors, well, 0:12:47.040 --> 0:12:50.240 a couple of things to think about. One is as havier. 0:12:50.240 --> 0:12:52.720 It set out that the adjustment that China has made 0:12:52.720 --> 0:12:55.480 to its importance of oil has been a big insulating factor. 0:12:56.240 --> 0:12:59.560 More broadly, though, I think the oil market, its role 0:12:59.600 --> 0:13:02.720 in the globe economy has changed immeasurably over the last 0:13:02.960 --> 0:13:04.720 ten to fifteen years. So if you go back to 0:13:04.720 --> 0:13:07.720 twenty eleven, which is the last time we saw a 0:13:07.720 --> 0:13:10.600 sustained period of oil at one hundred dollars a barrel, well, 0:13:10.640 --> 0:13:13.520 two things have happened since then. We've seen the price 0:13:13.520 --> 0:13:15.760 of everything else has gone up by about forty percent, 0:13:16.000 --> 0:13:19.200 related to the price of oil, and the efficiency with 0:13:19.240 --> 0:13:23.480 which we use oil has gone up by about twenty 0:13:23.480 --> 0:13:26.320 five percent if you put these things together, or to 0:13:26.360 --> 0:13:28.640 get an oil price shock of one hundred dollars a 0:13:28.640 --> 0:13:32.200 barrel now or how it felt like in twenty eleven, 0:13:32.400 --> 0:13:34.079 you'd actually need oil to move to one hundred and 0:13:34.160 --> 0:13:37.120 ninety dollars a bowl. So just those two factors alone 0:13:37.200 --> 0:13:41.400 explain part of the economy's resilience and also perhaps why 0:13:41.440 --> 0:13:43.520 the oil price itself hasn't jumped quite so much. 0:13:43.520 --> 0:13:45.840 And there's also this point about the demand destruction. But 0:13:45.920 --> 0:13:48.480 you know, as the price goes up, you're gotting reduced demand, 0:13:48.559 --> 0:13:50.560 which in turn prevents it from going higher and high. 0:13:50.800 --> 0:13:52.680 But I should be fair to you, have you the 0:13:52.760 --> 0:13:55.520 really high end numbers that you talked about was if 0:13:55.559 --> 0:13:58.960 there were serious attacks on, for example, desalination plants, which 0:13:59.040 --> 0:14:01.839 clearly didn't happen. So I don't think you were making 0:14:01.960 --> 0:14:04.760 sort of super high productions if that didn't happen. But 0:14:04.840 --> 0:14:07.520 it was certainly the case that a lot of people 0:14:07.559 --> 0:14:10.520 thought that prices would go higher than they have, and 0:14:10.520 --> 0:14:13.440 they've certainly been surprised at how long they've been under 0:14:13.440 --> 0:14:15.839 one hundred dollars in many cases, certainly in the last 0:14:15.920 --> 0:14:18.079 few weeks. So what's your explanation. 0:14:18.800 --> 0:14:22.960 It's quite interesting because I was sanguine on where prices 0:14:23.000 --> 0:14:26.360 were going to go if unless we have an open war, 0:14:26.440 --> 0:14:30.640 and we started, you know, seeing Iran and his rivals 0:14:30.640 --> 0:14:34.000 start getting the oil fields, which really never happened. 0:14:34.280 --> 0:14:35.840 The oil price surprise me. 0:14:35.920 --> 0:14:39.240 To the downside, the steel which has been I will 0:14:39.320 --> 0:14:42.880 have expected that prices will have been more sustained over 0:14:42.920 --> 0:14:45.560 one hundred dollars. I think that Jamie allude to some 0:14:45.680 --> 0:14:48.000 of the of the factors, and there are a number 0:14:48.040 --> 0:14:50.800 of them, but you have to say, well, you can 0:14:50.840 --> 0:14:52.800 only name one, and only one. 0:14:52.720 --> 0:14:53.840 Will be against China. 0:14:54.040 --> 0:15:00.000 China surprised me because reduced oil imports by tanker by 0:15:00.280 --> 0:15:03.400 forty five percent relative to pre war level, and we 0:15:03.440 --> 0:15:05.800 don't really know how that happened. I mean, we have 0:15:05.920 --> 0:15:10.080 our suspicions lower demands on shifts on refineries, but we 0:15:10.160 --> 0:15:14.880 do think that some kind of inventory droughtdown happened, whether 0:15:14.920 --> 0:15:19.640 that was commercial inventories or strategic inventories. You look at 0:15:19.720 --> 0:15:23.240 India was important in May of twenty twenty six exactly 0:15:23.480 --> 0:15:25.440 as much oil as it was important in May or 0:15:25.480 --> 0:15:28.520 twenty twenty five. So the fact that China came down 0:15:28.920 --> 0:15:32.160 allow a number of other economies in Asia to continue buying. 0:15:32.440 --> 0:15:34.960 I think that the use of the state petroleum reserves 0:15:35.000 --> 0:15:37.840 in the West, particularly the US in Japan, very early 0:15:37.840 --> 0:15:41.200 in the conflict was very important and a significant change 0:15:41.200 --> 0:15:44.640 of how we have used the SPR in the past. 0:15:44.640 --> 0:15:47.880 I mean, you look at the conflict of Livia, the 0:15:48.120 --> 0:15:50.360 kind of the previous time that we use the sat 0:15:50.520 --> 0:15:54.400 Patrolan reserves. It took about six months of civil war 0:15:54.520 --> 0:15:56.600 for the West to decide that there was a time 0:15:56.600 --> 0:15:59.920 to use the SPR. Similar situation in nineteen nineteen nine. 0:16:00.040 --> 0:16:02.640 In ninety one during the basis of Kubei here we 0:16:02.760 --> 0:16:05.560 used the SPR before the second week of the conflict 0:16:05.680 --> 0:16:08.680 have ended so very, very different. And there are a 0:16:08.800 --> 0:16:11.760 number of other factors that I think that they're important. 0:16:11.760 --> 0:16:15.600 By going to number name only two more one U 0:16:15.600 --> 0:16:19.840 allude to it demand destruction. We saw a significant amount 0:16:19.840 --> 0:16:24.240 of oil consumption just to disappear without really causing a 0:16:24.360 --> 0:16:28.160 lot of damage to the global economy. Perhaps it's because 0:16:28.200 --> 0:16:30.880 we are having this narration from the West and we 0:16:30.920 --> 0:16:33.520 didn't suffer and this was more of a crisis that 0:16:33.560 --> 0:16:37.600 affected the number of economies in Southeast Asia poor economies, 0:16:37.640 --> 0:16:41.240 but people in Europe, in Japan, in certainly in the 0:16:41.320 --> 0:16:44.560 US and Canada didn't have to change the day to 0:16:44.640 --> 0:16:48.880 day way of living, driving, flying around. 0:16:49.040 --> 0:16:49.800 Nothing changed. 0:16:49.840 --> 0:16:52.560 So that was very interesting how demand came down without 0:16:52.560 --> 0:16:55.360 affecting those economies. And the other one is the fact 0:16:55.440 --> 0:16:58.960 that the Estrado hormus was never really truly close. There 0:16:59.000 --> 0:17:03.400 were two big pipelines that provide bypass routes around the 0:17:03.440 --> 0:17:06.000 Straateia hormones, one through Saudi Arabia, the other one through 0:17:06.040 --> 0:17:10.520 the United Arab Emi dates and also towards the very 0:17:10.800 --> 0:17:13.199 end of the crisis, and let's hope that this is 0:17:13.240 --> 0:17:17.359 the very end of the crisis. We saw whether started 0:17:17.560 --> 0:17:21.480 that trick call one or two oil tankers a week 0:17:21.960 --> 0:17:25.119 crossing the straight of hormones, what we call dark modes, 0:17:25.280 --> 0:17:29.600 or they're beacon the location beacon off at night, very 0:17:29.640 --> 0:17:32.240 close to the coast, closer to the coast that typically 0:17:32.320 --> 0:17:35.080 you see these big vessels with are about three hundred 0:17:35.119 --> 0:17:38.919 and thirty meters long. And that started like one or 0:17:38.960 --> 0:17:42.600 two a week, and very quickly by last week it 0:17:42.800 --> 0:17:45.800 was one or two or even three a day. And 0:17:45.880 --> 0:17:50.359 that makes a big difference because you only need five 0:17:50.520 --> 0:17:53.040 or six a day, and you are pre war levels. 0:17:53.080 --> 0:17:55.960 When people say, oh, you know, before the war, about 0:17:56.040 --> 0:17:58.800 sixty vessels were crossing the Straight of hormones every day. 0:17:59.280 --> 0:18:02.560 That really include with every kind of vessel from from 0:18:02.600 --> 0:18:06.040 the big oil tankers to a small fishing troller. For 0:18:06.119 --> 0:18:12.399 the big tankers, we need about seven a day big 0:18:12.440 --> 0:18:14.639 oil tankers to cross the Straight of hormones and we 0:18:14.680 --> 0:18:18.080 are at pre war esport levels, so that's also important 0:18:18.160 --> 0:18:18.720 to remember. 0:18:18.920 --> 0:18:20.840 It's funny because we've been focused on this issue for 0:18:20.880 --> 0:18:24.440 so long and there's still things that I haven't had before. 0:18:24.800 --> 0:18:28.320 So the mats go as Basically, you need about fifteen 0:18:28.359 --> 0:18:31.119 million borrowers a day of crude oil esports to go 0:18:31.240 --> 0:18:33.480 back to pre war level through the Straight of hormones. 0:18:33.840 --> 0:18:36.720 Each of what we call a BLCC very large crew 0:18:36.920 --> 0:18:40.840 carrier is two million barrels thereabouts, so it's about seven 0:18:40.920 --> 0:18:44.720 seven and a big tankers gives you there. And if 0:18:44.760 --> 0:18:47.320 you consider that, probably we are going to still see 0:18:47.600 --> 0:18:52.119 those bypass pipelines working. Actually probably we only need to 0:18:52.200 --> 0:18:56.760 cross through proper a stray hormos about ten million barrels, 0:18:57.080 --> 0:18:59.439 which is five vessels a day. It is not a 0:18:59.520 --> 0:19:04.000 huge even if you have to basically seek sag. I'm 0:19:04.040 --> 0:19:07.200 on the minds it's only five tankers a day. It 0:19:07.280 --> 0:19:10.480 is not fifty sixty one hundred veersels a day. 0:19:10.960 --> 0:19:14.040 I love that VLCC. There's very large containers. If I'm 0:19:14.040 --> 0:19:15.639 just going to start referring to that, you know with 0:19:15.680 --> 0:19:17.879 people who you have your VLC, you have your very 0:19:17.920 --> 0:19:33.600 large car. Jamie. Have you mentioned about the sort of 0:19:33.680 --> 0:19:39.280 relatively muted impact on activity, certainly in the more advanced economies. 0:19:39.520 --> 0:19:41.080 So I guess that sort of takes us to this 0:19:41.200 --> 0:19:45.040 kind of second piece of just okay, assuming that this 0:19:45.240 --> 0:19:48.840 is some kind of turning point, some kind of reopening point, 0:19:49.480 --> 0:19:52.600 thinking about what path the global economy is on now 0:19:52.920 --> 0:19:57.520 relative to what we would have expected in mid February 0:19:57.680 --> 0:20:00.240 or you know, even the beginning of the year. How 0:20:00.280 --> 0:20:02.920 has this conflict changed the world from an economic standpoint. 0:20:03.760 --> 0:20:05.560 Well, I think we take a step back and look 0:20:05.600 --> 0:20:08.800 at kind of economic outlook over the past year as 0:20:08.840 --> 0:20:12.080 it looked at each point. So let's think about the 0:20:12.119 --> 0:20:15.600 impact of tariffs, the uncertainty that cause, and the impact 0:20:15.600 --> 0:20:17.480 that had on the economy. Well, the economy was in 0:20:17.480 --> 0:20:20.800 a pretty much global slowdown, in twenty twenty five. As 0:20:20.840 --> 0:20:22.720 we got towards the end of twenty twenty five, though, 0:20:22.720 --> 0:20:26.280 things were really changing. Uncertainty basically disappeared. We knew what 0:20:26.280 --> 0:20:29.400 Trump's end game was roughly with tariffs, and the economy 0:20:29.440 --> 0:20:32.840 was starting to really recover. You saw that in advanced economies, 0:20:32.840 --> 0:20:35.760 you saw it in developing economies, and of course you 0:20:35.800 --> 0:20:38.159 had the AI boom sort of supercharging all of that. 0:20:38.240 --> 0:20:40.040 So things were really looking up. At the start of 0:20:40.040 --> 0:20:42.560 the year February the twenty seventh, the global economy looked 0:20:42.560 --> 0:20:45.200 great and it doesn't look like that now. So if 0:20:45.280 --> 0:20:47.879 we've got a global GDP tracker, which kind of uses 0:20:48.119 --> 0:20:50.840 machine learning methods to combine lots and lots of information 0:20:51.280 --> 0:20:54.439 soft information, which is kind of very very timely, and 0:20:54.480 --> 0:20:58.600 you can see that immediately after the straight shut the 0:20:58.640 --> 0:21:02.120 global economy started down. There are a few reasons why 0:21:02.160 --> 0:21:04.200 that's the case. Right. One is that there's the direct 0:21:04.240 --> 0:21:07.320 effects of oil prices being higher, squeezing consumers making it 0:21:07.320 --> 0:21:09.320