Speaker 1: It's the big take from Bloomberg News and I Heeart Radio.
Speaker 1: I'm West Caasova today the slow, painful death of gasoline.
Speaker 1: Here's a fun fact for you. Gasoline consumption in the
Speaker 1: US has not returned to pre COVID levels. And what's more,
Speaker 1: people who study these things say it likely never will.
Speaker 1: This is a big deal. It's a strong sign that
Speaker 1: are long talked about goal of replacing dirty fossil fuels
Speaker 1: with cleaner forms of energy is actually starting to happen. Now,
Speaker 1: that's not to say gas is gonna disappear overnight or
Speaker 1: even soon, but what is causing gasoline used to tick downward?
Speaker 1: And where do things go from year? There's no one
Speaker 1: better to answer those questions than my colleagues who cover
Speaker 1: energy day in and day out. Chunss You in Houston,
Speaker 1: lynned One in New York, and Millie Munchie in Denver
Speaker 1: joined me now, Lynn, Chonsa, Milly, thanks so much for
Speaker 1: being here. Thank you, thank you for having us, Thank you.
Speaker 1: In this recent Bloomberg story, there is this really interesting
Speaker 1: fact that Americans are actually driving more than they have before,
Speaker 1: but they're using less gasoline. Maybe I'll start with you,
Speaker 1: why is that such a big deal. What does that mean?
Speaker 1: I mean, it's pretty incredible in and of itself. Just
Speaker 1: this inflection point, isn't it, in which we have seen
Speaker 1: our US gasoline demand peak. Why is it incredible? Like?
Speaker 1: Why is it such a significant moment in American history?
Speaker 1: A few reasons. One points to the fact that the
Speaker 1: energy transition is happening, and it's happening in the biggest
Speaker 1: gasoline consuming country in the world. But it also points
Speaker 1: to the fact that we as a country have figured
Speaker 1: out how to develop the technologies and the fuel efficiency
Speaker 1: to do more with less, which you know helps in
Speaker 1: a time of rampant inflation and recessionary fears. I think
Speaker 1: there are a lot of reasons, Gensa, can you add
Speaker 1: on to that. I think a big part of that
Speaker 1: is the fuel efficiency standards that were put in place
Speaker 1: more than a decade ago. The average lifespan of a
Speaker 1: car is about twelve years in this country, and so
Speaker 1: it's been it's been about that time, but because of
Speaker 1: the pandemic, we didn't quite see that impact till two
Speaker 1: years after the pandemic. So last year was really when
Speaker 1: we saw the compound impact of more efficient cars being
Speaker 1: able to run more miles on this fuel. How much
Speaker 1: more efficient our cars, say, you know now than they
Speaker 1: were a decade ago. Well, right now we're at a
Speaker 1: record for is something like just over twenty six miles
Speaker 1: per gallon, and that's up even from twenty one, like
Speaker 1: almost by a full mile. The twenty one number was
Speaker 1: closer to twenty five miles per gallon, and the twenty
Speaker 1: two numbers closer to twenty six miles per gallon. And
Speaker 1: so even year to year, we're seeing a pretty big
Speaker 1: gains in efficiency, and that's gonna keep going. And so
Speaker 1: I think, you know, like Lynn was saying, it's a
Speaker 1: slow process, but if you're talking about twenty or thirty
Speaker 1: years from now, could gasolene demand be a third to
Speaker 1: a half of what it is now, I think that's reasonable.
Speaker 1: And I would just add that the jump from one
Speaker 1: was much bigger than than previous years because of the
Speaker 1: fleet turnover that's coming from the more efficient cars being
Speaker 1: sold or being made. A decade ago. Gasoline demand in
Speaker 1: the four years leading up to the pandemic is pretty
Speaker 1: much stable at the peak level, and then the pandemic happened,
Speaker 1: and there was hope that maybe we would get back
Speaker 1: to that now we're realizing that we're never getting back
Speaker 1: to that. So that's one thing, which is just that
Speaker 1: cars are more fuel efficient, but there are other things
Speaker 1: involved there too. It's not just that you're able to
Speaker 1: go more miles on less gas. There's a whole bunch
Speaker 1: of other stuff happening here to Milly. Do you want
Speaker 1: to jump in on there, Yeah, totally. I mean, I
Speaker 1: think one of the things that's really interesting is obviously
Speaker 1: the adoption of electric vehicles or e v s that
Speaker 1: you know, has been very slow. To be very clear,
Speaker 1: it's like a very small percentage of the cars that
Speaker 1: are out there. What is it now? Do you know
Speaker 1: what the percentage of electric cars are? I want to
Speaker 1: say it's about one percent, really one percent, because man,
Speaker 1: we talked about them all the time, and you know,
Speaker 1: of course Tesla, but then everybody's jumping in the market.
Speaker 1: It's still only one percent of cars on the road
Speaker 1: in the US, but it's rising in terms of new
Speaker 1: car sales. So that's interesting because we're talking about how
Speaker 1: it was slow to start, but now it's kind of
Speaker 1: like that stone roll downhill and it's starting to pick
Speaker 1: up speed exactly. And I think one of the things
Speaker 1: That's so interesting though, is there's two fact years there
Speaker 1: there's new car sales, but then there's the entire car fleet.
Speaker 1: People don't buy a new cars all that often, you know,
Speaker 1: they buy a new car once a decade maybe, and
Speaker 1: so sometimes people will run their car for twenty years, um,
Speaker 1: if they can get it to last that long. So
Speaker 1: Chansa had this bit of interesting reporting that you know,
Speaker 1: even if everybody in the US who's buying a new
Speaker 1: car today was to buy an e V, it would
Speaker 1: still take nine years for even half the fleet to
Speaker 1: turn over into e v's And so that really just
Speaker 1: shows you how long of a process this is. So
Speaker 1: we're at the peak, but it's a long way before
Speaker 1: we're sort of like falling off a cliff. You know.
Speaker 1: In the past, we've seen this happen where gas prices
Speaker 1: are high, people use less gas, and we've even seen
Speaker 1: people say, oh, we reached peak gaslen But this is
Speaker 1: different than that. This is different than just oh, you know,
Speaker 1: gas prices are high, so of course we're using less gas. Yeah,
Speaker 1: this is super structural. We were talking about this tons
Speaker 1: a million I and I'm going to age myself now
Speaker 1: because I remembered as we were talking that. On December,
Speaker 1: I wrote a story for Bloomberg News as an oil
Speaker 1: reporter about the US getting rid of its oil addiction
Speaker 1: and how gasoline demand here has started a d couple
Speaker 1: from gross domestic product and that was the first time
Speaker 1: that that had ever happened. And that's a big deal
Speaker 1: because the production of the U. S economy would rise
Speaker 1: kind of with gasoline. That they were so so tied together,
Speaker 1: so tied together. Yeah, they were married and then it
Speaker 1: started divorce, and that was the first time that we
Speaker 1: had seen that. You know, at that time. It was
Speaker 1: driven by as Jensa said, fuel efficiency, changing demographics, and
Speaker 1: also just the recession, like forcing people to like rethink
Speaker 1: how much money they wanted to spend on fuel. But
Speaker 1: that just gives you an idea of how long this
Speaker 1: has been happening and how like steady and structural this is,
Speaker 1: which means that it's going to take a while before
Speaker 1: we get to like zero. But what I think is interesting,
Speaker 1: just picking back up on this question of well, when
Speaker 1: gasoline prices are high, people drive less. Of course, what's
Speaker 1: really interesting right now is that people are actually driving more.
Speaker 1: If you look at the Department of Transportation, data, those
Speaker 1: miles keep hitting records, So the miles actually traveled on
Speaker 1: US roads are at records, means people are driving more,
Speaker 1: but it's happening on less gasoline, and so that really
Speaker 1: speaks to the structural nature of this. It's not just
Speaker 1: a sort of oh, prices are high, we're gonna, you know,
Speaker 1: bounce lower, then we'll bounce back up. It's really like
Speaker 1: a big structural change. Do we know where that is
Speaker 1: why people are driving more? Yeah, it's interesting because I
Speaker 1: think I don't know if everybody else is like this,
Speaker 1: but I've been still a little plain shy in the pandemic.
Speaker 1: I'm doing more road trips than I am plane trips. Obviously,
Speaker 1: you know, not everybody has returned to office, and so
Speaker 1: those miles could keep climbing, you know, as more people
Speaker 1: make that shift. And the other thing that's a big
Speaker 1: factor is that, you know, I think people sort I
Speaker 1: just want to get out, even if it's just like
Speaker 1: a Sunday afternoon drive, like bringing back that thing that
Speaker 1: past time people used to have. Yeah, I mean, I
Speaker 1: think a lot of people traveled to see family this
Speaker 1: year for the first time for Thanksgiving and the Christmas
Speaker 1: holiday in three years. So I think that there's also
Speaker 1: just a pickup from people who have felt trapped for
Speaker 1: the past three years and when I hit the road again.
Speaker 1: And just to add on to what Milly said about
Speaker 1: working from home, I think part of that dynamic also
Speaker 1: involves people driving not at peak hours, so it's more
Speaker 1: spread out when when people are driving, So that kind
Speaker 1: of lessons congestion and can make cars more efficient because
Speaker 1: you're not stopping more. So does it naturally follow that
Speaker 1: if Americans are using less gasoline cast pressure are pretty
Speaker 1: high right now, that those cast prices are going to
Speaker 1: continue to drop as cars become more fuel efficient and
Speaker 1: less demand for gasoline is just there. Oh here it
Speaker 1: comes to bad news. Well, I think long term that's
Speaker 1: what it means. Less demand. Um won't mean cheaper fuel,
Speaker 1: and not just cheaper fuel, but the fact that it
Speaker 1: won't contribute to inflation as much and it probably won't
Speaker 1: loom as large. And you know, the the American consciousness
Speaker 1: is something that's intrinsic to the American economy. But in
Speaker 1: the short term, what this means is that we could
Speaker 1: actually be more prone to supply shocks and price spikes. Yeah,
Speaker 1: just to add to what Chenzo was saying, I think
Speaker 1: one of the things for prices is that you sort
Speaker 1: of have to take two views on it. If you're
Speaker 1: looking with a really zoomed out lens and you want
Speaker 1: to look at the big picture over you know, the
Speaker 1: next decade or two decades. Of course, falling demand is
Speaker 1: going to mean lower prices, But when you look at
Speaker 1: the next couple of years in particular, it's going to
Speaker 1: be a little bit more bumpy than that. And part
Speaker 1: of that is because supply of gasoline is actually falling
Speaker 1: faster than demand is. When it comes to the folks
Speaker 1: that make gasoline, that's the oil refiners. They take crude
Speaker 1: oil and they process it into fuels like gasoline and diesel.
Speaker 1: They're looking at like the sunset for their industry, so
Speaker 1: they don't want to put a lot of more money
Speaker 1: into things, and they are actually pulling back. They're cutting
Speaker 1: production capacity. That capacity has already dropped by about a
Speaker 1: million barrels a day since and that is a faster
Speaker 1: rate than the rate that demand is falling right now.
Speaker 1: And so even though demand is falling, it's causing this
Speaker 1: sort of mismatch in the market between supply and demand,
Speaker 1: and that's what's going to cause the bumps consumers could
Speaker 1: see the kinds of price bikes that we saw in
Speaker 1: continue for the next couple of years. One of the
Speaker 1: big things that drove gasoline prices last year in two
Speaker 1: was actually this refining side of things. It was the
Speaker 1: fact that there just wasn't enough for finding capacity. It
Speaker 1: wasn't because there wasn't enough actual oil to turn into gasoline.
Speaker 1: And so those kind of spikes are probably likely to
Speaker 1: keep happening. They will be isolated. I don't want to
Speaker 1: say that like, oh this means, you know, start holding
Speaker 1: gasoline or something like that. They're going to be short
Speaker 1: term spikes, but they will be there and it's going
Speaker 1: to be rocky, and so it's sort of hard to say,
Speaker 1: you know, we're gasoline what prices will be at any
Speaker 1: given moment because of those possibilities of spikes and even
Speaker 1: some possible outages. I remember there were some isolated incidences,
Speaker 1: especially around like peak driving times around I think it
Speaker 1: was in the summer of one some states actually like
Speaker 1: we're turning drivers away or drivers were lighting up for
Speaker 1: hours to fill up on gasoline. Um and that again
Speaker 1: was an infrastructure problem, was not an actual supply problem,
Speaker 1: and so, you know, like so many things that have
Speaker 1: happened in the last few years, we're seeing these infrastructure
Speaker 1: squeezes and we're specifically a drop in investment in that infrastructure.
Speaker 1: And that's like a theme that is played out in
Speaker 1: a lot of corners in the energy and transition. Biden
Speaker 1: is you know, consistently going out there and asking the
Speaker 1: refiners why they aren't refining more? Why can't you just
Speaker 1: build a new refinery in the United States? What's the problem? Like,
Speaker 1: clearly there's the demand, and you know, you have the
Speaker 1: refiners and you have the oil and gas producers all
Speaker 1: collectively saying, well, give us a signal that demand that
Speaker 1: is here to stay and that it's a permanent piece
Speaker 1: of demand, and then we'll put the money in it.
Speaker 1: But if you're not going to show us that, then
Speaker 1: why would we sink you know, billions and billions of
Speaker 1: dollars into building a new refinery for you. So it's
Speaker 1: a theme that has played out in a lot of
Speaker 1: different parts of the energy system, and it's going to
Speaker 1: keep playing out over the span of many years because
Speaker 1: there is still a heavy dependence upon fossil fuels, not
Speaker 1: just in America, but like around the world, and yet
Speaker 1: the industry is already trying to move past it. Len
Speaker 1: Milly Chance, I please stay with me. We'll keep this
Speaker 1: conversation going. After the break. Are we going to start
Speaker 1: to see things breakdown, maybe more leaks and spills and
Speaker 1: just other things as a result of companies not wanting
Speaker 1: to put money into something that they no longer see
Speaker 1: as being a long term investment. Yes, I mean, I
Speaker 1: think that it's inevitable that you're going to see that
Speaker 1: you've got really aging infrastructure. And obviously the companies are
Speaker 1: going to meet the minimum standards that they have to meet.
Speaker 1: They're not gonna let things sort of fall into neglect.
Speaker 1: But I think that, like you're not going to see
Speaker 1: billions of dollars being poured into assets that even ten
Speaker 1: years from now, are not going to be profitable. There's
Speaker 1: no real incentive for them to do that. And so
Speaker 1: for them it is sort of writing the wave down
Speaker 1: and to try to do that as profitably as possible.
Speaker 1: That means keeping their margins high, too, and so they
Speaker 1: wanna calibrate their production based on that margin and not
Speaker 1: really based on, you know, what the overall need is.
Speaker 1: Because one of the You know, one of the things
Speaker 1: that Lynn mentioned too, is that we still use a
Speaker 1: lot of fossil fuels. We talk about the big energy
Speaker 1: transition which we are in the middle of right now,
Speaker 1: and we're talking about peak gasoline, but if you look
Speaker 1: at the level of where gasoline has peaked out, it's
Speaker 1: really high compared to twenty years ago. Even so, we
Speaker 1: are using a ton of gasoline even though it's at
Speaker 1: a peak. And then that's the disconnect that's really driving
Speaker 1: the supply bumps and things. And they also make stuff
Speaker 1: like diesel and JEFF fuel and petro chemical components and
Speaker 1: all of that, which diesel is the highest margin. Refiners
Speaker 1: make much more money making diesel nowadays than they do gasoline.
Speaker 1: And of course there's the huge export market that they've
Speaker 1: tapped into in over the past two In one or
Speaker 1: two decade, they're just sending everything to Latin America, and
Speaker 1: those countries use it not only for world fuel but
Speaker 1: for power generation and all that. So do you think
Speaker 1: that we're gonna now start to see a big shift
Speaker 1: away from gasoline and toward making plastics, diesel, jet fuel
Speaker 1: and all the other things that are still worth investing in.
Speaker 1: Over a longer period of time. I think that's already
Speaker 1: happening elsewhere in the world. Um, I think in the US,
Speaker 1: gasoline is still the most in demand fuel, and about
Speaker 1: half of the crew that's process in the US has
Speaker 1: turned into gasoline. That's a much higher percentage than anywhere
Speaker 1: else in the world. But I think, yeah, last year,
Speaker 1: we already started to see refiners kind of tote more
Speaker 1: toward making diesel, which has been higher demand globally, and
Speaker 1: Russia exports a lot of so that shift is already
Speaker 1: kind of happening. Then when you look down the road,
Speaker 1: we're talking about how it's going to be kind of
Speaker 1: a slow decline, it's going to be bumping and messy.
Speaker 1: What do you see, let's say five years from now,
Speaker 1: ten years from now, what is the overall picture of
Speaker 1: US gasoline use? Look like? The good thing about it
Speaker 1: is that ch did that work for us in this story,
Speaker 1: and there's a forecast in the story by a very
Speaker 1: well respected energy outfit saying that just what through seven,
Speaker 1: we're talking about like a fifteen percent decline in gasoline demand.
Speaker 1: So if you paste that out a little further, maybe
Speaker 1: in a couple of decades we're talking about like a
Speaker 1: very considerable cut and not just like the hey, we're
Speaker 1: peaking where we are at now, but like an actual
Speaker 1: halving or even more than that. I don't know, what
Speaker 1: do you think, Millie. Am I a fortune teller? Your
Speaker 1: crystal ball might be shinier than mine. But I think
Speaker 1: that you're right in that if you look at some
Speaker 1: of the forecasts, that we are peaking or half peaked
Speaker 1: and we're never going to hit those pre COVID levels again.
Speaker 1: I think that's one of the things that's really interesting
Speaker 1: is that you know, there was this idea that two
Speaker 1: would be a year that we would hit those pre
Speaker 1: COVID levels again. Everybody was going out and seeing family
Speaker 1: and going back to offices. But the latest data that
Speaker 1: is a little bit backward looking. But so it's just
Speaker 1: come in and it shows that actually, No. Two, we
Speaker 1: did not hit those levels again. We didn't even hit
Speaker 1: I didn't even hit twenty one levels. That's crazy, right,
Speaker 1: So even though you know people are out there driving,
Speaker 1: it's the efficiency that's driving that decline. Overall, that momentum
Speaker 1: I think is only going to accelerate, right, because we
Speaker 1: know that evs are a large part of what consumers
Speaker 1: are going to be buying in the next few years.
Speaker 1: We know that the current administration has put an even
Speaker 1: tougher efficiency standards, and so that will continue to mean
Speaker 1: that the cars that are getting put on the road
Speaker 1: today are using less and less gasoline. Ena milly Lynn,
Speaker 1: thanks for taking the time to talk with me today.
Speaker 1: Thank you, Thank you for having Thank you so much.
Speaker 1: Gasoline is bumpy right down. We'll bring with it all
Speaker 1: kinds of disruptions and complications. Mark Finley is a fellow
Speaker 1: in Energy and Global Oil at Rice University's Baker Institute
Speaker 1: for Public Policy. He is with me now from Houston
Speaker 1: to tell us what we're in for. Mark, thanks so
Speaker 1: much for being here. Thanks for having me. Wes, we've
Speaker 1: been talking about how gasoline dependence is just starting to
Speaker 1: look like it's taking downward in the US, and yet
Speaker 1: we are still really dependent on it. You study this
Speaker 1: all the time. Can you kind of give us a
Speaker 1: broader picture of what it means that our dependence on
Speaker 1: gasoline is like slowly loosening its script. It's slowly loosening
Speaker 1: its script, but it's likely to be a bumpy road.
Speaker 1: And I think that the experience of the last year
Speaker 1: shows us that even as we push for a rapid
Speaker 1: transition away from fossil fuels, we need to make sure
Speaker 1: that the current system continues to function because we need,
Speaker 1: in the meanwhile for our economic and our national security
Speaker 1: to have an energy system that is functional and provides affordable, secure,
Speaker 1: reliable energy throughout the transition. While in reality, there's not
Speaker 1: a lot that any president can do to affect short
Speaker 1: term gasoline prices, it's screamed at you from every street
Speaker 1: corner in foot high numbers, and so it becomes a
Speaker 1: kind of a general indicator of how the world is going.
Speaker 1: And so I think we economists, if we crunch the numbers,
Speaker 1: gasoline doesn't look like it's that big of a deal.
Speaker 1: I mean, it's only four or five percent of the
Speaker 1: consumer spending basket that's used to calculate inflation, but it
Speaker 1: has an outsized impact because of its volatility and the
Speaker 1: centrality to our life, and the fact that it's so
Speaker 1: widely known. I can't tell you what I paid for
Speaker 1: milk last week, but I can tell you that I've
Speaker 1: paid three o nine point nine a gallon. You know,
Speaker 1: on our drive down to South Carolina yesterday, one thing
Speaker 1: you touched on was the national security implications of gasoline.
Speaker 1: Can you talk a little bit about that some more,
Speaker 1: because we've really seen it in the past year, especially
Speaker 1: since Russia invaded Ukraine. To me and I was once
Speaker 1: upon a time and energy security specialist at the CIA,
Speaker 1: it's it's a matter of how dependent our economy is
Speaker 1: on energy and on fossil fuels, I mean oil. Even
Speaker 1: though the U s economy has diversified and become more
Speaker 1: efficient over the decades, oil is still the single biggest
Speaker 1: source of energy. And while the United States is broadly
Speaker 1: self sufficient, that doesn't mean that the US can hide
Speaker 1: from developments around the world. You know, when Russia invaded
Speaker 1: the Ukraine, combined with you know, the COVID recovery and
Speaker 1: production discipline from countries like Saudi Arabia, oil prices rose significantly,
Speaker 1: and they rose everywhere. And I think that's the key point,
Speaker 1: you know, from a national security perspective, is that if
Speaker 1: something goes wrong anywhere, the price goes up everywhere, including here,
Speaker 1: We'll be right back. We you start looking at this
Speaker 1: question of the oil infrastructure that you mentioned at the top,
Speaker 1: and making sure that the system to both refine and
Speaker 1: deliver oiling gasoline around the country maintains its integrity. What
Speaker 1: are your concerns about that? It's a great point, West,
Speaker 1: I mean, we don't actually consume oil. You know, the
Speaker 1: oil has to be made into useful things. And so
Speaker 1: while people like me focused on the price of crude oil,
Speaker 1: what really matters is what the things that we turn
Speaker 1: it into. Gasoline, diesel fuel, jet fuel, petrochemicals for plastics
Speaker 1: and pharmaceuticals for example. That entire system needs maintenance. And
Speaker 1: so you know, while the President last year, you know,
Speaker 1: was in the Secretary of Energy, we're encouraging US producers
Speaker 1: to ramp up their investment in domestic production of crude oil.
Speaker 1: The US has actually lost some refining capacity in recent years.
Speaker 1: The US used to be the biggest center for refining
Speaker 1: in the world. It's now been surpassed by China. And
Speaker 1: partly the number of US for fine reas that have
Speaker 1: closed have been because refiners are looking at the advent
Speaker 1: of electric vehicles and also potentially converting themselves to biorefineries
Speaker 1: as well. And uniquely, actually, US refineries are built to
Speaker 1: make gasoline. US refiners are potentially the most at risk
Speaker 1: because they're built to make the product that's going away,
Speaker 1: as I suppose the oil industry sees diminishing returns on gasoline.
Speaker 1: We're talking about a pretty long time horizon, but they're
Speaker 1: thinking about the future and what investments they want to make.
Speaker 1: Do you think that there is going to be less
Speaker 1: investment in just keeping that system going? I mean, do
Speaker 1: you worry about things going wrong in a way that
Speaker 1: has harmful impacts? Well, the continued flow of hydrocarbons is
Speaker 1: still essential to our economic well being, and I think,
Speaker 1: you know, both in terms of producing and in terms
Speaker 1: of refining. You know, we've seen that financial investors have
Speaker 1: turned their attention towards, you know, the energy transition to
Speaker 1: find angial guidance for the domestic oil industry, you know
Speaker 1: has been don't invest and even if you're making money,
Speaker 1: return it to shareholders, because we're not convinced that you
Speaker 1: guys have a long term market here. But the challenge
Speaker 1: that that raises is that, as we saw last year,
Speaker 1: high prices are still a risk to our economy, and
Speaker 1: we've seen political unrest not only here in the United
Speaker 1: States but around the world as a result of the
Speaker 1: spike of energy prices that we've seen over the last year.
Speaker 1: When you look down the road and think about how
Speaker 1: gasoline is slowly decreasing, but evs are also only slowly increasing.
Speaker 1: At what point did those lines sort of cross where
Speaker 1: evs or other renewable energies gather speed and then we
Speaker 1: start really looking at a pretty significant transition. Well, it
Speaker 1: depends on where you are in the world. In Europe,
Speaker 1: you know, the share of electric vehicles in new car
Speaker 1: sales as much higher than the United States. In China,
Speaker 1: it's dramatically higher. But then in other emerging economies, poorer countries,
Speaker 1: you know, the share of electric vehicle sales is dramatically lower.
Speaker 1: And so we're going to see you know, that crossover
Speaker 1: west will take place at different times depending on where
Speaker 1: you are around the world, and that's going to really
Speaker 1: create headaches for a global marketplace that's going to be
Speaker 1: trying to reallocate supply. Um. You know, we've seen some
Speaker 1: major disruptions of crude oil and refined product flows as
Speaker 1: a result of the Russian invasion of Ukraine. This change
Speaker 1: will be dramatically bigger than that in terms of barrels
Speaker 1: that need to be reallocated, although it will take place
Speaker 1: on a slower time horizon. Oh and by the way
Speaker 1: that growth of electric cars, while it reduces our dependence
Speaker 1: on oil and the energy security risks around that, it
Speaker 1: creates new vulnerabilities. For example, China dominates the global production
Speaker 1: of electric vehicles and of batteries, as well as of
Speaker 1: the processing and refining of a lot of the metals
Speaker 1: that are used to make batteries and other modern electronics.
Speaker 1: And so in the sense, you know, we have to
Speaker 1: be alert to the potential risk of transferring one vector
Speaker 1: of vulnerability into another one as we go through this transition,
Speaker 1: and policy can try to manage that if we're alert
Speaker 1: to the rising risks. Can you talk about it a
Speaker 1: little bit more, because that's a really interesting point. I mean,
Speaker 1: here we are engaged in a pretty big chip war
Speaker 1: between the US and China, and if we're now talking
Speaker 1: about the guts of an e V also being in
Speaker 1: the middle of that tugger war between the world's two
Speaker 1: biggest economies, how do you manage that? As you say, well,
Speaker 1: I mean when I was an analyst at the agency
Speaker 1: doing energy security, we thought about vulnerability risks and offsets
Speaker 1: in terms of how do you manage energy security? Question is,
Speaker 1: you know, what can you do to manage your vulnerability
Speaker 1: to a disruption, how do you manage the riskiness of it,
Speaker 1: and how do you manage in the event of a
Speaker 1: natural disruption, how can you offset it. So for oil,
Speaker 1: we've been thinking about us for fifty years. We've tried
Speaker 1: to diversify our economy away from our dependence on oil.
Speaker 1: We've built up capacity to build strategic stocks, and we
Speaker 1: have allies like Saudi Arabia who holds spare capacity, and
Speaker 1: other members of the International Energy Agency who helped each
Speaker 1: other in a time of crisis. We've had fifty years
Speaker 1: of practice of building an energy security infrastructure, and d
Speaker 1: u S and its allies are only just beginning the
Speaker 1: process of doing that for new forms of energy to
Speaker 1: manage the risks through the energy transition. We started out
Speaker 1: this episode talking about how the loosening grip of our
Speaker 1: dependence on gasoline is gonna be rough and bumpy, and
Speaker 1: you are really getting a clear picture of just how
Speaker 1: difficult it is going to be to strike this balance.
Speaker 1: It's critical. I mean, we have to do it. We
Speaker 1: have to move to a lower emission world, or or
Speaker 1: I should say, we need to move to a an
Speaker 1: outcome that reduces and slows the growth and reduces the
Speaker 1: atmosphere countsant rations of c O two. But we can't
Speaker 1: do it at the expense of economic well being, and
Speaker 1: certainly not on the basis of putting it on the
Speaker 1: backs of the lowest income households and the poorest countries
Speaker 1: around the world, and so it needs continued attention throughout
Speaker 1: the process. Mark Finley, thanks so much for talking with
Speaker 1: me today. Thanks for having Wes. You can read more
Speaker 1: from Millie, Munchy, Linduan and Chens as you at Bloomberg
Speaker 1: dot com. Thanks for listening to us here at The
Speaker 1: Big Take, the daily podcast from Bloomberg and I Heart Radio.
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Speaker 1: is Vicky Ergalina. Our senior producer is Katherine Pink, Our
Speaker 1: producer is and associate producer is Sam Debauer. L'm silly
Speaker 1: is our engineer original music by Leo Sidrin. I'm West Cansova.
Speaker 1: We'll be back tomorrow with another big take. H