WEBVTT - Chevron CEO Mike Wirth Talks Energy Markets, Iran War

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News. Welcome to our continuing

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<v Speaker 1>coverage from the Milk and Global Conference here in Beverly Hills, California.

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<v Speaker 2>I'm Romain Bostic and I'm Katie Greifeld.

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<v Speaker 1>We got a lot to talk about today, of course.

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<v Speaker 1>This is a very sprawling conference here, more than three

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<v Speaker 1>hundred sessions, and a big topic in a lot of

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<v Speaker 1>those sessions, Katy Greidfeld, is energy.

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<v Speaker 2>It's hard to ignore, of course, and you can see

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<v Speaker 2>the reaction in markets today. And this is a story

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<v Speaker 2>that you know, we've been coming to grips with over

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<v Speaker 2>the past two months, and it just continues.

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<v Speaker 1>And absolutely we came into today thinking that we were

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<v Speaker 1>still in a ceasefire, thinking that we were making progress

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<v Speaker 1>towards a reopening up the straight Oh horror, moose. But

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<v Speaker 1>you've seen the headlines, You've heard them here on Bloomberg Television,

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<v Speaker 1>and that conversation continues right now with the CEO of Chevron,

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<v Speaker 1>Mike Worth. Mike, great to have you here on the

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<v Speaker 1>free here. Of course, I have to start with the

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<v Speaker 1>news of the day here. Whatever ceasefire that we did

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<v Speaker 1>have in the Middle East, at least for right now,

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<v Speaker 1>seems to have broken down. A lot of questions right

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<v Speaker 1>now out about just how prolonged disclosure of the straight

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<v Speaker 1>or hormones will be and just how much it's going

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<v Speaker 1>to affect the economy.

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<v Speaker 3>I think it's still difficult to say. Romaine, it sounded

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<v Speaker 3>as if there were plans to try to establish a

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<v Speaker 3>transit corridor. Now we've got these reports that there have

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<v Speaker 3>been some kinetic activity in the region. I've been in

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<v Speaker 3>touch with our people that manage our shipping assets in

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<v Speaker 3>the region, and we remain concerned about the security of transit.

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<v Speaker 3>So you know, it seems like we still have, you know,

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<v Speaker 3>some issues to work through.

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<v Speaker 1>You are no stranger to Washington. You've had a seat

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<v Speaker 1>at the President's table more or less multiple times here.

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<v Speaker 1>What would your advice be to the administration to try

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<v Speaker 1>to bring this to some sort of conclusion.

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<v Speaker 3>Well, my advice to the president really relates to energy markets,

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<v Speaker 3>not to diplomacy and negotiations. And you know, I've advised

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<v Speaker 3>people in the administration that this the buffers and system

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<v Speaker 3>that help ensure supplies are available to markets are being

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<v Speaker 3>drawn down, and what that does is it creates more

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<v Speaker 3>upside price pressure, potentially more volatility and more risk, and

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<v Speaker 3>so I can find my discussions really to the energy system,

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<v Speaker 3>not to diplomacy or the military side of things.

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<v Speaker 1>Fair enough.

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<v Speaker 2>It is interesting though, you think about where the US

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<v Speaker 2>sits in this. You look at net exports coming from

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<v Speaker 2>the US. They've certainly increased. We saw that last week

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<v Speaker 2>as well. But how long can that sort of continue

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<v Speaker 2>and plug the gaps that we're starting to see in

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<v Speaker 2>the global supply chain when it comes to energy markets.

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<v Speaker 3>Well, the US is the largest producer in the world,

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<v Speaker 3>and we've been exporting products crude oil gas in growing

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<v Speaker 3>quantities in recent years, and so it's a good thing

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<v Speaker 3>for the world that the US is able to help

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<v Speaker 3>meet the need. That said, twenty percent of the world's

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<v Speaker 3>energy supply flows through the straight of hornm moves. That's

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<v Speaker 3>oil and that's liquefied natural gas, it's refined products. Goes

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<v Speaker 3>to Europe and Asia primarily, and both of those regions

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<v Speaker 3>are seeing the impact of having that much cut off.

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<v Speaker 3>The US can't make up all of that supply. Inventories

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<v Speaker 3>in the system are being drawn down and the supply

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<v Speaker 3>situation is tightening, and that's a concern.

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<v Speaker 2>And you know, you think about the US and where

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<v Speaker 2>we stand when it comes to production. That of course

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<v Speaker 2>has insulated the US consumer to some degree from some

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<v Speaker 2>of the higher prices that we're seeing in Asia, that

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<v Speaker 2>we're seeing in Europe. And I just wonder, from where

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<v Speaker 2>you're sitting, how long you think that will continue to

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<v Speaker 2>be the case, or you know, is the US heading

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<v Speaker 2>towards the situation where consumers are going to see the

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<v Speaker 2>same sort of prices that we're starting to see in Asia.

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<v Speaker 3>I think the real thing is the US is not

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<v Speaker 3>going to see supply outages. We're starting to see risks

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<v Speaker 3>of supply outages in some of these economies. In Europe.

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<v Speaker 3>You're seeing flights canceled and schedules re optimized because jet

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<v Speaker 3>fuel is getting very, very tied in Europe. We've seen

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<v Speaker 3>a number of economies in Asia that have instituted policies

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<v Speaker 3>to reduce demand because they're concerned about n out of supply.

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<v Speaker 3>Countries like Australia that have shut down most of their

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<v Speaker 3>refining capacity and are heavily dependent upon imports are taking

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<v Speaker 3>measures to address that. So I think the US is

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<v Speaker 3>going to see the price pressures. It's a global market.

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<v Speaker 3>These prices are set in global commodity markets. But the

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<v Speaker 3>risk of supply outages in other parts of the world

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<v Speaker 3>is much higher than is here in the US.

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<v Speaker 1>I'm curious. I mean, Chevron has made some big investments

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<v Speaker 1>in the Middle East in recent times. Here has the

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<v Speaker 1>situation over the last couple of months disrupted any of

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<v Speaker 1>that change your plans at all.

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<v Speaker 3>We've got some production in Kuwait and Saudi Arabia that

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<v Speaker 3>has been slowed down as we don't have the ability

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<v Speaker 3>to evacuate it out of the region and storage is filling,

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<v Speaker 3>so we've seen some reductions in rates of production. We

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<v Speaker 3>produce natural gas offshore in the Mediterranean that supplies Israel,

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<v Speaker 3>Jordan and Egypt. Our facilities there are running at full capacity.

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<v Speaker 3>We've get some petrochemical joint ventures in the region that

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<v Speaker 3>are cut back in terms of their production. So we're

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<v Speaker 3>feeling this. We're less exposed to the Middle East than

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<v Speaker 3>some of our peers, and so on a relative basis,

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<v Speaker 3>the impact that our company has been lower than it

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<v Speaker 3>has been for some others.

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<v Speaker 1>I feel costs you about three billion dollars in the

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<v Speaker 1>most recent quarter. A lot of the volatility that we've

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<v Speaker 1>seen in this market. I am curious as to how

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<v Speaker 1>you forecast going forward without necessarily being able to necessarily

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<v Speaker 1>forecast military diplomatic solution to all of this.

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<v Speaker 3>Well, Forecasting in a commodity business is always a challenge

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<v Speaker 3>because we have to assume what commodity markets will do

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<v Speaker 3>and they surprise us. What we're doing now is really

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<v Speaker 3>work with scenarios, and so we look at different scenarios

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<v Speaker 3>for when things might resume to a more normal state.

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<v Speaker 3>What that means for supplying the world. What it also

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<v Speaker 3>means for demand as you see demand adjustments, and so

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<v Speaker 3>we can't predict what the price will be and what

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<v Speaker 3>supply and demand will be. We're looking at a range

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<v Speaker 3>of alternatives and trying to use those to inform decision making.

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<v Speaker 2>And Mike, we only have about thirty seconds off of you,

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<v Speaker 2>but do you have any plans to increase production in

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<v Speaker 2>places such as the Permians such as our as we

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<v Speaker 2>talk about these supply shortfalls.

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<v Speaker 3>Yeah, we're up a quarter on quarter, same quarter last year,

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<v Speaker 3>five hundred thousand barrels a day, So we are growing.

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<v Speaker 3>Our plans are to grow seven to ten percent globally

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<v Speaker 3>this year. Demand is growing about two percent, So we're

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<v Speaker 3>investing to grow at a rate greater than global demand.

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<v Speaker 3>Is and those supplies are sorely needed in the market.

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<v Speaker 1>Mike really appreciate you taking time for us the year

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<v Speaker 1>visy absolutely, Mike worked there the CEO of Chevron Alive

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<v Speaker 1>from the Milken Conference here in Beverly Hills, California,