Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Welcome to our continuing
Speaker 1: coverage from the Milk and Global Conference here in Beverly Hills, California.
Speaker 2: I'm Romain Bostic and I'm Katie Greifeld.
Speaker 1: We got a lot to talk about today, of course.
Speaker 1: This is a very sprawling conference here, more than three
Speaker 1: hundred sessions, and a big topic in a lot of
Speaker 1: those sessions, Katy Greidfeld, is energy.
Speaker 2: It's hard to ignore, of course, and you can see
Speaker 2: the reaction in markets today. And this is a story
Speaker 2: that you know, we've been coming to grips with over
Speaker 2: the past two months, and it just continues.
Speaker 1: And absolutely we came into today thinking that we were
Speaker 1: still in a ceasefire, thinking that we were making progress
Speaker 1: towards a reopening up the straight Oh horror, moose. But
Speaker 1: you've seen the headlines, You've heard them here on Bloomberg Television,
Speaker 1: and that conversation continues right now with the CEO of Chevron,
Speaker 1: Mike Worth. Mike, great to have you here on the
Speaker 1: free here. Of course, I have to start with the
Speaker 1: news of the day here. Whatever ceasefire that we did
Speaker 1: have in the Middle East, at least for right now,
Speaker 1: seems to have broken down. A lot of questions right
Speaker 1: now out about just how prolonged disclosure of the straight
Speaker 1: or hormones will be and just how much it's going
Speaker 1: to affect the economy.
Speaker 3: I think it's still difficult to say. Romaine, it sounded
Speaker 3: as if there were plans to try to establish a
Speaker 3: transit corridor. Now we've got these reports that there have
Speaker 3: been some kinetic activity in the region. I've been in
Speaker 3: touch with our people that manage our shipping assets in
Speaker 3: the region, and we remain concerned about the security of transit.
Speaker 3: So you know, it seems like we still have, you know,
Speaker 3: some issues to work through.
Speaker 1: You are no stranger to Washington. You've had a seat
Speaker 1: at the President's table more or less multiple times here.
Speaker 1: What would your advice be to the administration to try
Speaker 1: to bring this to some sort of conclusion.
Speaker 3: Well, my advice to the president really relates to energy markets,
Speaker 3: not to diplomacy and negotiations. And you know, I've advised
Speaker 3: people in the administration that this the buffers and system
Speaker 3: that help ensure supplies are available to markets are being
Speaker 3: drawn down, and what that does is it creates more
Speaker 3: upside price pressure, potentially more volatility and more risk, and
Speaker 3: so I can find my discussions really to the energy system,
Speaker 3: not to diplomacy or the military side of things.
Speaker 1: Fair enough.
Speaker 2: It is interesting though, you think about where the US
Speaker 2: sits in this. You look at net exports coming from
Speaker 2: the US. They've certainly increased. We saw that last week
Speaker 2: as well. But how long can that sort of continue
Speaker 2: and plug the gaps that we're starting to see in
Speaker 2: the global supply chain when it comes to energy markets.
Speaker 3: Well, the US is the largest producer in the world,
Speaker 3: and we've been exporting products crude oil gas in growing
Speaker 3: quantities in recent years, and so it's a good thing
Speaker 3: for the world that the US is able to help
Speaker 3: meet the need. That said, twenty percent of the world's
Speaker 3: energy supply flows through the straight of hornm moves. That's
Speaker 3: oil and that's liquefied natural gas, it's refined products. Goes
Speaker 3: to Europe and Asia primarily, and both of those regions
Speaker 3: are seeing the impact of having that much cut off.
Speaker 3: The US can't make up all of that supply. Inventories
Speaker 3: in the system are being drawn down and the supply
Speaker 3: situation is tightening, and that's a concern.
Speaker 2: And you know, you think about the US and where
Speaker 2: we stand when it comes to production. That of course
Speaker 2: has insulated the US consumer to some degree from some
Speaker 2: of the higher prices that we're seeing in Asia, that
Speaker 2: we're seeing in Europe. And I just wonder, from where
Speaker 2: you're sitting, how long you think that will continue to
Speaker 2: be the case, or you know, is the US heading
Speaker 2: towards the situation where consumers are going to see the
Speaker 2: same sort of prices that we're starting to see in Asia.
Speaker 3: I think the real thing is the US is not
Speaker 3: going to see supply outages. We're starting to see risks
Speaker 3: of supply outages in some of these economies. In Europe.
Speaker 3: You're seeing flights canceled and schedules re optimized because jet
Speaker 3: fuel is getting very, very tied in Europe. We've seen
Speaker 3: a number of economies in Asia that have instituted policies
Speaker 3: to reduce demand because they're concerned about n out of supply.
Speaker 3: Countries like Australia that have shut down most of their
Speaker 3: refining capacity and are heavily dependent upon imports are taking
Speaker 3: measures to address that. So I think the US is
Speaker 3: going to see the price pressures. It's a global market.
Speaker 3: These prices are set in global commodity markets. But the
Speaker 3: risk of supply outages in other parts of the world
Speaker 3: is much higher than is here in the US.
Speaker 1: I'm curious. I mean, Chevron has made some big investments
Speaker 1: in the Middle East in recent times. Here has the
Speaker 1: situation over the last couple of months disrupted any of
Speaker 1: that change your plans at all.
Speaker 3: We've got some production in Kuwait and Saudi Arabia that
Speaker 3: has been slowed down as we don't have the ability
Speaker 3: to evacuate it out of the region and storage is filling,
Speaker 3: so we've seen some reductions in rates of production. We
Speaker 3: produce natural gas offshore in the Mediterranean that supplies Israel,
Speaker 3: Jordan and Egypt. Our facilities there are running at full capacity.
Speaker 3: We've get some petrochemical joint ventures in the region that
Speaker 3: are cut back in terms of their production. So we're
Speaker 3: feeling this. We're less exposed to the Middle East than
Speaker 3: some of our peers, and so on a relative basis,
Speaker 3: the impact that our company has been lower than it
Speaker 3: has been for some others.
Speaker 1: I feel costs you about three billion dollars in the
Speaker 1: most recent quarter. A lot of the volatility that we've
Speaker 1: seen in this market. I am curious as to how
Speaker 1: you forecast going forward without necessarily being able to necessarily
Speaker 1: forecast military diplomatic solution to all of this.
Speaker 3: Well, Forecasting in a commodity business is always a challenge
Speaker 3: because we have to assume what commodity markets will do
Speaker 3: and they surprise us. What we're doing now is really
Speaker 3: work with scenarios, and so we look at different scenarios
Speaker 3: for when things might resume to a more normal state.
Speaker 3: What that means for supplying the world. What it also
Speaker 3: means for demand as you see demand adjustments, and so
Speaker 3: we can't predict what the price will be and what
Speaker 3: supply and demand will be. We're looking at a range
Speaker 3: of alternatives and trying to use those to inform decision making.
Speaker 2: And Mike, we only have about thirty seconds off of you,
Speaker 2: but do you have any plans to increase production in
Speaker 2: places such as the Permians such as our as we
Speaker 2: talk about these supply shortfalls.
Speaker 3: Yeah, we're up a quarter on quarter, same quarter last year,
Speaker 3: five hundred thousand barrels a day, So we are growing.
Speaker 3: Our plans are to grow seven to ten percent globally
Speaker 3: this year. Demand is growing about two percent, So we're
Speaker 3: investing to grow at a rate greater than global demand.
Speaker 3: Is and those supplies are sorely needed in the market.
Speaker 1: Mike really appreciate you taking time for us the year
Speaker 1: visy absolutely, Mike worked there the CEO of Chevron Alive
Speaker 1: from the Milken Conference here in Beverly Hills, California,