WEBVTT - Will OPEC Ride to the Rescue? 0:00:13.320 --> 0:00:17.079 Hello, and welcome to What Goes Up Weekly Markets podcast. 0:00:17.120 --> 0:00:19.680 My name is Mike Reagan. I'm a senior editor at Bloomberg, 0:00:20.040 --> 0:00:23.279 and I'm Baldonna Higher across asset reporter with Bloomberg. And 0:00:23.400 --> 0:00:25.520 this week on the show, well, as the name of 0:00:25.560 --> 0:00:28.200 the podcast implies, we like to talk about what's going 0:00:28.320 --> 0:00:31.480 up in price, and lately that's been energy prices and 0:00:31.800 --> 0:00:35.919 obviously that has potentially huge implications for the economic rebound 0:00:36.320 --> 0:00:39.279 and the values of stocks and other assets. We'll get 0:00:39.320 --> 0:00:42.320 into it with an expert on the global energy industry 0:00:42.560 --> 0:00:45.479 and uh, you know, Vildonna. As journalists are instinct, is 0:00:45.479 --> 0:00:48.199 always to find some of the smartest people we can 0:00:48.320 --> 0:00:50.360 to explain the world to us. Luckily we didn't have 0:00:50.400 --> 0:00:52.880 to go too far this time. Yeah, we're very fortunate. 0:00:52.960 --> 0:00:55.800 We're joined this week by Javier Blass. He's a Bloomer 0:00:55.880 --> 0:00:59.560 columnist and he's the author of the World for Sale. Javier, 0:00:59.560 --> 0:01:02.120 I want to comming to the show. Hello on great 0:01:02.200 --> 0:01:04.840 week with you. Yeah, thanks for doing the Xavier. We 0:01:04.880 --> 0:01:07.480 know you must be busy this week, Javier. Obviously, this 0:01:07.600 --> 0:01:10.759 story has so many different facets to it. I actually 0:01:10.760 --> 0:01:13.120 wanted to just take a brief step back and have 0:01:13.280 --> 0:01:16.000 you maybe layout what exactly all is going on and 0:01:16.120 --> 0:01:19.559 what you're watching. Obviously, earlier this week we had news 0:01:19.680 --> 0:01:23.440 of the US and the UK imposing certain bands on 0:01:23.640 --> 0:01:27.680 on Russian oil imports. So maybe just layout for our audience, 0:01:27.959 --> 0:01:30.880 what are you watching, what all is happening, and potentially 0:01:30.920 --> 0:01:33.040 maybe even you know, what's the one next thing that 0:01:33.120 --> 0:01:36.959 you're looking for. So we can just basically go about 0:01:37.040 --> 0:01:40.280 two weeks ago, and the oil market was already quite tight. 0:01:40.800 --> 0:01:45.600 The recovery from COVID nineteen had been stronger than expected. 0:01:46.280 --> 0:01:50.440 Demand here in Europe was really booming. The same thing 0:01:50.600 --> 0:01:54.320 was happening in the United States, where demanding January probably 0:01:54.520 --> 0:01:59.080 was the best January ever for oil consumption. Everyone kind 0:01:59.120 --> 0:02:03.360 of came back round Christmas, COVID was improving and and 0:02:03.520 --> 0:02:06.320 and things started to look quite good in terms of consumption. 0:02:06.800 --> 0:02:08.480 So that was the kind of the demand side of 0:02:08.520 --> 0:02:11.799 the market. The supply side was quite tight. We have 0:02:11.960 --> 0:02:14.920 a couple of years of very low prices. I mean 0:02:15.040 --> 0:02:18.079 remember two years ago we were talking about negative prices 0:02:18.120 --> 0:02:21.280 at some point. And for West Texas, intermediated is the 0:02:21.480 --> 0:02:25.520 American crude oil benchmark. So companies have not been investing 0:02:25.600 --> 0:02:29.120 a lot and and supply was struggling, and then the 0:02:29.280 --> 0:02:33.760 oil cartel with Saudi Arabia, Russia and other countries were 0:02:33.880 --> 0:02:37.920 really keeping the market under control. So things were looking 0:02:38.040 --> 0:02:41.720 quite high and prices were rising, and then Russia launched 0:02:41.760 --> 0:02:45.880 the invasion of Ukraine. And Russia is the world's third 0:02:46.080 --> 0:02:50.040 largest oil producer, the second largest oil supporter only behind 0:02:50.160 --> 0:02:54.520 Saudi Arabia. And what happened immediately was the market prepared 0:02:54.560 --> 0:02:58.639 for the worst cases scenario, a complete cutoff of supplies 0:02:58.680 --> 0:03:01.880 from Drassia. These are millions of barrels of oil used. 0:03:01.880 --> 0:03:07.240 To put a few numbers, Russia sports about eight million 0:03:07.320 --> 0:03:11.079 barrels a day between crude oil and refined products. That is, 0:03:11.680 --> 0:03:14.040 that's quite a lot. That will be enough to supply 0:03:14.520 --> 0:03:20.040 the whole of Germany, France, the UK, Spain and Italy together, 0:03:20.600 --> 0:03:23.160 and you will still have a bit of extra barrels 0:03:23.200 --> 0:03:28.200 to supply another smaller European country. What happened was the 0:03:28.320 --> 0:03:30.960 fear of sancience. We didn't have at that point any 0:03:31.040 --> 0:03:34.639 official sancios on Russia, but companies were fearing that that 0:03:34.840 --> 0:03:38.760 was coming and they started to take actions themselves. They 0:03:39.120 --> 0:03:42.440 boycott Russian oil, They imposed what we call in the 0:03:42.480 --> 0:03:47.040 oil market self sancions that started to reduce the flow 0:03:47.120 --> 0:03:51.040 of Russian oil. Some companies started to announce that they 0:03:51.080 --> 0:03:54.080 were not gonna buy any Russian oil, and then more 0:03:54.200 --> 0:03:58.160 recently it was the United States President by then here 0:03:58.200 --> 0:04:01.920 in the UK Prime Minister Johnson who announced official bands 0:04:02.080 --> 0:04:05.800 you cannot buy any Russian oils and that really has 0:04:06.400 --> 0:04:12.680 tightened the supply picture significantly and the market will use well, 0:04:13.200 --> 0:04:16.040 it went up quite a lot. We touched a hundred 0:04:16.080 --> 0:04:19.600 and thirty nine dollars apparrel, which is choose under the 0:04:19.800 --> 0:04:22.760 peak that the record all time high that we said 0:04:23.000 --> 0:04:25.400 um in two thousand and eight, that was hundred and 0:04:25.520 --> 0:04:30.640 forty seven dollars. And then the market really started to think, okay, 0:04:30.760 --> 0:04:34.640 what if it's a complete shutdown of Russian oil exports, 0:04:34.680 --> 0:04:38.200 can we can we manage? And many people were while 0:04:38.440 --> 0:04:42.600 that happened that really it's very difficult to manage, and 0:04:42.680 --> 0:04:46.279 we're gonna see two hundred dollars, two hundred and fifty dollars. 0:04:46.560 --> 0:04:50.760 So analys and traders were starting to really put very 0:04:50.880 --> 0:04:55.240 high numbers. But at the same time, these very high 0:04:55.880 --> 0:04:59.720 oil prices are beginning to have an impact on this 0:05:00.000 --> 0:05:03.360 pectations of economic growth. We may have our recession kid 0:05:03.480 --> 0:05:05.680 in Europe, and that's what at the same time, that's 0:05:05.760 --> 0:05:08.520 copying the price. So you have the two pressures, and 0:05:08.560 --> 0:05:11.360 the market is trying to to find out how he's 0:05:11.360 --> 0:05:13.720 gonna play out in the next few months. But at 0:05:13.760 --> 0:05:16.559 the end of the day, what everyone is looking, every 0:05:16.640 --> 0:05:20.080 oil trade that is looking is the war in Ukraine. Yeah, 0:05:20.200 --> 0:05:21.760 but I have here. I was sticking back to when 0:05:21.800 --> 0:05:24.280 I was a kid, and um, you know, don't let 0:05:24.360 --> 0:05:26.280 my boyish looks for you, but I was actually a 0:05:26.440 --> 0:05:31.279 kid in the nineteen seventies. And I remember nineteen seventy nine, 0:05:31.520 --> 0:05:36.080 after the Iranian Revolution, I picked up I was a 0:05:36.120 --> 0:05:39.120 paper boy, and I picked up our local newspaper and 0:05:39.160 --> 0:05:40.880 they're on the front page was a picture of my 0:05:41.040 --> 0:05:43.480 best friend's mom. You know, it's the seventies. So she 0:05:43.560 --> 0:05:47.080 had her bell bottoms on and smoking a cigarette and 0:05:47.200 --> 0:05:49.480 she was sitting on a patch of grass outside of 0:05:49.520 --> 0:05:52.279 a gas station. And and obviously the story was about 0:05:52.360 --> 0:05:56.360 the gas shortages that the US experience back then. And 0:05:56.600 --> 0:06:00.760 I'm thinking, now, you know, a rising prices is one 0:06:00.839 --> 0:06:03.160 thing for the economy. It's it's obviously going to be 0:06:03.240 --> 0:06:05.320 a headwind for the economy, But I'm starting to worry 0:06:05.360 --> 0:06:08.960 about actual shortages. So I'm curious how you're thinking about 0:06:09.040 --> 0:06:11.760 the potential for for shortages, whether it be in the 0:06:11.880 --> 0:06:14.960 US and Europe, sort of where we might look for 0:06:15.040 --> 0:06:18.280 those first? What what kind of products might be in 0:06:18.360 --> 0:06:23.919 short supply? First, I'm reading about potentially um European factories 0:06:24.000 --> 0:06:26.320 that won't be able to keep operating if if energy 0:06:26.400 --> 0:06:28.800 prices get too high. How are you thinking about the 0:06:28.839 --> 0:06:32.000 potential for shortages and where would you look for for 0:06:32.160 --> 0:06:34.640 it first? Well, what we are seeing at the moment, 0:06:34.880 --> 0:06:37.680 for for now is it's a huge price increase. I 0:06:37.680 --> 0:06:40.320 mean a few days ago we went about a hundred 0:06:40.320 --> 0:06:43.840 dollars a barrel for oil, and we went almost up 0:06:43.920 --> 0:06:46.560 to a hundred and forty in a matter of just 0:06:46.800 --> 0:06:49.680 a few days. It has come down juice a bit. 0:06:49.800 --> 0:06:54.040 So whatever goes up also sometimes comes down. But if 0:06:54.120 --> 0:06:58.120 we think about physical shortages, we have not yet seen them, 0:06:58.920 --> 0:07:02.840 but they are certain corners of the energy market that 0:07:02.920 --> 0:07:07.400 they start to look extremely tight, and as time goes 0:07:07.800 --> 0:07:10.400 that's where we can see some of the shortages. I'm 0:07:10.480 --> 0:07:15.080 thinking in particular about diesel in Europe, which is very 0:07:15.240 --> 0:07:19.320 very tight, and we really qual lot on diesel important 0:07:19.360 --> 0:07:24.320 from Russia, from Russian refineries. That market is quite tight 0:07:24.440 --> 0:07:27.200 at the moment, and I would not be surprised if 0:07:27.880 --> 0:07:32.040 the conflict in Ukraine continues that we may see at 0:07:32.120 --> 0:07:36.200 some point that there are actual shortages. We have seen 0:07:36.240 --> 0:07:41.840 already sound refineries in UH in Central Europe Northwestern Europe 0:07:42.440 --> 0:07:46.520 is starting to impost caps on the amount of diesel 0:07:46.600 --> 0:07:50.280 that they're selling to their distributors. So it's beginning to 0:07:50.360 --> 0:07:54.480 be quite real. But um it has not yet happened 0:07:54.520 --> 0:07:56.840 at the retail level, and I think it will take 0:07:56.880 --> 0:08:00.040 a bit more time to that to emerge. Who be 0:08:00.120 --> 0:08:03.360 the customers most affected there? I'm guessing trucking firms that 0:08:03.480 --> 0:08:06.920 sort of thing. Yeah, I mean diesel is mostly about trucking. 0:08:07.040 --> 0:08:10.400 I mean diesel is also very much consume in certain 0:08:10.440 --> 0:08:15.080 European countries as as because the car fleet is very 0:08:15.160 --> 0:08:18.600 much on on diesel countries like like France, and you know, 0:08:18.680 --> 0:08:20.480 it used to be also the case here where I 0:08:20.560 --> 0:08:23.720 am in the United Kingdom. But it's it's the trucking 0:08:23.840 --> 0:08:27.120 industry which is going to suffer the most. And the 0:08:27.240 --> 0:08:31.080 problem with that is that it means that everyone suffers 0:08:31.160 --> 0:08:34.360 because we transport everything trucking is is the backbone of 0:08:34.400 --> 0:08:38.079 our economy. So if if truckers have to pay and 0:08:38.160 --> 0:08:40.040 the trucking companies have to pay a lot more for 0:08:40.160 --> 0:08:43.160 the diesel, that means everything that we buy on the 0:08:43.200 --> 0:08:46.400 supermarket is going to be more expensive because they're gonna 0:08:46.440 --> 0:08:48.719 pass the cost increase. So we can see quite a 0:08:48.800 --> 0:08:54.000 lot of inflation in you know, supermarkets, grocery shopping here 0:08:54.040 --> 0:08:58.560 in Europe for sure. So happier um And for listeners 0:08:58.880 --> 0:09:01.760 whenever you're listening to the we're actually speaking today. It's Wednesday, 0:09:02.360 --> 0:09:04.840 March nine, and there was a big drop in oil 0:09:04.920 --> 0:09:08.439 prices today. Part of the reason people are pointing to 0:09:08.960 --> 0:09:12.600 is that there are some signals that some producers United 0:09:12.640 --> 0:09:17.280 Arab Emirates and Iraq might uh you know, start producing 0:09:17.320 --> 0:09:19.079 more to try to make up for some of the 0:09:19.200 --> 0:09:22.800 lost Russian supply. How do you think about sort of 0:09:22.880 --> 0:09:26.640 the whole geo politics of oil right now, the relationships 0:09:26.760 --> 0:09:30.360 between Russia and the rest of the big expert in countries. 0:09:30.400 --> 0:09:34.400 I mean, I get the impression that um, Russia has 0:09:34.440 --> 0:09:37.880 a pretty significant influence on OPEC in general these days. 0:09:38.720 --> 0:09:42.280 How do all the geo politics fit together as far 0:09:42.360 --> 0:09:45.120 as whether we can expect some other countries to to 0:09:45.280 --> 0:09:49.400 pick up the lost supply. Mike, You're absolutely right. And 0:09:49.480 --> 0:09:52.280 this is what really gets very interesting from the mix 0:09:52.360 --> 0:09:56.439 of politics and oil because for many years Rosa was 0:09:56.600 --> 0:10:00.319 almost an enemy of OPEC. They didn't talk U Ussia 0:10:00.440 --> 0:10:04.080 was completely independent um and they were at times fighting 0:10:04.160 --> 0:10:07.640 the OPEC group and Russia will see the oil market 0:10:07.720 --> 0:10:12.200 completely different. That changes about three years ago where Russia 0:10:12.320 --> 0:10:15.240 and Saudi Arabia the site to work together in the 0:10:15.320 --> 0:10:17.480 oil market, and that led to the creation of a 0:10:17.559 --> 0:10:20.840 new group that we call OPEC Plass, and the Plass 0:10:21.040 --> 0:10:24.199 is mostly Russia. There are other few countries, but the 0:10:24.320 --> 0:10:28.240 Plass is Russia all the sudden, after fighting for so 0:10:28.360 --> 0:10:33.120 many years, Read and Moscow were really working together in 0:10:33.200 --> 0:10:36.360 the oil market. And now we have this tension because 0:10:37.160 --> 0:10:40.640 in another situation, typically what the White House will have 0:10:40.760 --> 0:10:44.079 done was go to Saudi Arabia and as the southeast 0:10:44.200 --> 0:10:47.400 place can you increase production is a hundred and twenty 0:10:47.440 --> 0:10:50.040 a hundred and thirty dollars a barrel, and the South 0:10:50.200 --> 0:10:53.439 is most likely will have delivered because they are not 0:10:53.600 --> 0:10:57.120 really interested. They are always the South is one high prices, 0:10:57.200 --> 0:11:00.160 but they don't really want super high prices that get 0:11:00.160 --> 0:11:03.600 a lot of inflation and potentially an economic recession. You're 0:11:03.640 --> 0:11:07.320 selling oil. You really want a healthy economy, and these 0:11:07.360 --> 0:11:10.920 prices are not good for a healthy economy. But now 0:11:11.000 --> 0:11:14.200 it's different. The Saudist and the Russians are working together, 0:11:14.320 --> 0:11:17.680 and the last thing I believe that Saudi Arabia once 0:11:17.800 --> 0:11:21.920 is upset Bladimir Putin has been very interesting that through 0:11:22.000 --> 0:11:26.000 this conflict, Bladimir Puttin has been talking to Muhammad bin Salman, 0:11:26.280 --> 0:11:28.800 who is the Crown Prince of Saudi Arabia, and they 0:11:28.840 --> 0:11:32.199 have been talking about energy and energy corporation. So I 0:11:32.280 --> 0:11:35.120 think that OPEC may not come to the rescue this 0:11:35.280 --> 0:11:45.679 time just because they're just working with the Russians. The 0:11:45.880 --> 0:11:49.719 geopolitics of this, to me are incredibly interesting, and I 0:11:49.800 --> 0:11:52.640 want to ask you to actually bring in two other players, 0:11:52.720 --> 0:11:58.120 which is Venezuela and Iran, because there's talks potentially of 0:11:58.360 --> 0:12:02.319 some of their oilso twice also coming online and potentially 0:12:02.360 --> 0:12:05.480 helping to offset some of the squeeze that we're seeing. 0:12:06.160 --> 0:12:09.599 And that is also the other hugely interesting side of 0:12:09.640 --> 0:12:14.760 the geopolitics. We have sanciens on already two other countries, 0:12:14.800 --> 0:12:19.400 as you mentioned, Iran and Venezuela. On Venezuela is mostly 0:12:19.520 --> 0:12:22.680 lane to the oppression of the regime of Maduro against 0:12:22.720 --> 0:12:25.319 the opposition. In the case of Iran is about the 0:12:25.400 --> 0:12:28.439 nuclear program. So now the United States is working to 0:12:28.600 --> 0:12:31.040 try to see if they can't reach some kind of 0:12:31.120 --> 0:12:36.320 agreement with both countries that can resolve the outstanding political issues, 0:12:36.360 --> 0:12:39.640 the national security issues, and then that will mean the 0:12:39.800 --> 0:12:42.400 return of oil from both countries, and that could be 0:12:42.760 --> 0:12:46.520 quite significant. Iran, there was a nuclear deal, probably can 0:12:46.600 --> 0:12:49.720 put on the market between half a million and six 0:12:49.800 --> 0:12:53.400 hundred thousand bars a day quite quickly, and then going 0:12:53.559 --> 0:12:56.280 perhaps too about a million parars a day within one year. 0:12:56.800 --> 0:13:00.240 Venezuela is less clear, but perhaps can put a few 0:13:00.360 --> 0:13:03.480 hundred thousand extra, a few hundred thousand powers of the 0:13:03.679 --> 0:13:06.360 extra into the market. But when you are in a 0:13:06.520 --> 0:13:09.000 very tight situation and I'm fearing that you may lose 0:13:09.200 --> 0:13:11.880 quite a lot of supply from from Russia, that will 0:13:11.920 --> 0:13:15.880 be extremely helpful. But it gets very complicated for the 0:13:15.960 --> 0:13:19.640 White House because now both Venezuela and Iran knows that 0:13:19.720 --> 0:13:23.280 the United States really want to reach a deal. So 0:13:23.440 --> 0:13:26.880 you don't have in a negotiation table the last thing 0:13:26.960 --> 0:13:28.880 that you want on the other side of the table 0:13:29.000 --> 0:13:31.160 is that the other that you know, they know that 0:13:31.280 --> 0:13:33.760 you are in a bit of a weak position. So 0:13:34.120 --> 0:13:37.040 it just getting extremely interesting to observe. And that's the 0:13:37.080 --> 0:13:39.400 other thing that the oil market is looking. So it's 0:13:39.520 --> 0:13:45.079 this massive kind of four dimensional geopolitical chess on oil 0:13:45.200 --> 0:13:50.600 with Vasia, the Southeast Iran, Venezuela, and the White House 0:13:51.200 --> 0:13:54.520 right and then here in the US Saviera. Obviously domestically, 0:13:54.960 --> 0:13:58.280 it's a huge political football, as we say, um, I 0:13:58.320 --> 0:14:01.720 remember a few years ago when oil prices were crashing, 0:14:01.760 --> 0:14:03.679 there was a lot of talk about, well, what is 0:14:03.679 --> 0:14:06.400 sort of the break even uh price for oil? To 0:14:06.520 --> 0:14:09.480 make a lot of the fracking projects in the US 0:14:09.559 --> 0:14:12.319 economically viable, I have to assume at over a hundred 0:14:12.320 --> 0:14:16.520 dollar barrel. Basically every project in the US is viable now. 0:14:17.200 --> 0:14:19.360 But there is a lot of debate about whether you know, 0:14:19.800 --> 0:14:24.120 U Republicans claiming Biden is holding back production and the 0:14:24.160 --> 0:14:28.360 White House pushing back saying, well, there's nine thousand approved 0:14:28.880 --> 0:14:31.200 licenses that aren't being used. How do you see that 0:14:31.240 --> 0:14:33.520 all playing out? I mean, has the US shale industry 0:14:33.760 --> 0:14:36.880 sort of been you know, bitten once by by oversupply 0:14:37.040 --> 0:14:39.560 and and and we'll be a little reluctant to to 0:14:39.880 --> 0:14:43.240 turn on the spickets too much this time. Where is 0:14:43.280 --> 0:14:46.160 this price is so high that it'll it'll be full 0:14:46.160 --> 0:14:49.400 steam ahead with all the US projects. Mike. The price 0:14:49.520 --> 0:14:51.200 is so high that I think that you could go 0:14:51.520 --> 0:14:54.120 and drilling your back job and you can find oil. 0:14:55.480 --> 0:15:00.120 It will be profitable. I mean, it's a d LD 0:15:00.160 --> 0:15:02.520 as a barrel. It is more than an offer almost 0:15:02.560 --> 0:15:05.360 every project to make money. But the problem is the 0:15:05.440 --> 0:15:07.520 sailing industry in the US have gone through a really 0:15:07.600 --> 0:15:10.080 tough time. The last couple of years have been difficult 0:15:10.920 --> 0:15:14.000 investors and unhappy. They are focusing on returns. They don't 0:15:14.040 --> 0:15:17.960 want companies to grow production because they think that they 0:15:18.000 --> 0:15:21.200 will float the market and trigger another price collapse. And 0:15:21.280 --> 0:15:24.280 they really want to focus on pay down there and 0:15:24.400 --> 0:15:27.880 deliver big dividends to US buy backs, dividends. That's the 0:15:27.960 --> 0:15:31.160 game in town. And that means that executives on the 0:15:31.440 --> 0:15:33.960 on the U s sail industry are very reluctant to 0:15:34.000 --> 0:15:37.800 increase production very fast. And then the whole industry fields 0:15:38.000 --> 0:15:41.680 under attack by the White House, the Energy Transition, the 0:15:41.800 --> 0:15:45.000 signaling from the Biden administration of the future that is 0:15:45.000 --> 0:15:48.640 going to be fossil fuel, more focused on solar renewables, 0:15:49.320 --> 0:15:53.080 electric vehicles, and they kind of feel that they are 0:15:53.120 --> 0:15:56.360 not to make any favors to the administration. So you 0:15:56.480 --> 0:16:00.040 have this tension going on right now, and I I 0:16:00.200 --> 0:16:03.680 think that both sides will find a compromise. Prices are 0:16:03.800 --> 0:16:07.800 high enough for anyone in the US industry to may money, 0:16:08.400 --> 0:16:11.160 and I think that the administration, the Biden administration, some 0:16:11.320 --> 0:16:14.080 point is going to realize that it has a big 0:16:14.160 --> 0:16:18.160 asset at home that a provide security can produce oil, 0:16:18.560 --> 0:16:20.120 and it will find a way used to kind of 0:16:20.200 --> 0:16:24.040 work together with with the industry. I'm really curious if 0:16:24.120 --> 0:16:26.200 maybe you can give us a time frame of how 0:16:26.320 --> 0:16:31.440 quickly US supplies could come online. I'm you know, we 0:16:31.600 --> 0:16:34.320 hear and read all of these different stories, but what 0:16:34.440 --> 0:16:37.120 I'm uncertain of is how quickly any of this can 0:16:37.240 --> 0:16:41.480 actually come online. Even with the case for Iran or Venezuela, 0:16:41.480 --> 0:16:44.720 I'm hearing months or even you know later, way down 0:16:44.920 --> 0:16:48.080 later this year. So what do the timeframes actually look like. 0:16:48.880 --> 0:16:51.480 So in the case of it Ran in Venezuela, very 0:16:51.560 --> 0:16:54.360 much depends. You need a political agreement with those countries 0:16:54.400 --> 0:16:56.720 and it just we don't know when when that was 0:16:56.760 --> 0:17:00.320 gonna be achieved. We we previously thought that there was 0:17:00.400 --> 0:17:03.920 a firm deadline, a red line of last week for 0:17:04.040 --> 0:17:07.800 our Iranian deal. That that that that ended, and we 0:17:08.080 --> 0:17:12.240 we still are observing the conversations and the negotiations continuing, 0:17:12.359 --> 0:17:14.680 so we don't really know when that's gonna happen. And 0:17:14.800 --> 0:17:16.520 if there is a deal, it's gonna take probably a 0:17:16.600 --> 0:17:19.280 couple of months before any extra oil could come from 0:17:19.400 --> 0:17:23.399 from Iran. Venezuela is even more complicated. The conversations have 0:17:23.600 --> 0:17:25.960 used started, and I don't think that we're about to 0:17:26.040 --> 0:17:29.440 see a production increase in Venezuela also a country that 0:17:29.640 --> 0:17:32.480 first of all will need to make investments on his 0:17:32.640 --> 0:17:36.680 industry to growth. And then in the US, the shale industry. 0:17:36.760 --> 0:17:41.760 We call shale in in oil short cycle because it 0:17:41.960 --> 0:17:46.760 can really go faster than the traditional big, big projects 0:17:46.800 --> 0:17:49.400 of big oil, which used to take five or six 0:17:49.560 --> 0:17:53.280 years from finding the oil to to kind of starting production. 0:17:53.720 --> 0:17:57.359 But short in oil means actually several months, it's not 0:17:57.680 --> 0:18:00.040 a few days, and it's a bit more complete. It 0:18:00.280 --> 0:18:03.080 that use, you know, the flick of a switch. It used. 0:18:03.359 --> 0:18:06.560 The company's needs to drill, they need to find them workers, 0:18:07.000 --> 0:18:09.760 and it's not very different to the rest of the 0:18:09.920 --> 0:18:13.920 American economy. Workers are in sort of supply. They move 0:18:14.040 --> 0:18:17.320 away from sail, they went somewhere else to work. Um, 0:18:18.000 --> 0:18:20.600 they're making more money that they were making back, you know, 0:18:20.960 --> 0:18:23.080 when they were working in Texas, so they don't really 0:18:23.119 --> 0:18:26.040 want to go back. And in general, the industry is 0:18:26.119 --> 0:18:28.879 finding that they have a lot of supply chains that 0:18:29.320 --> 0:18:32.000 is affecting other parts of the economy and they're also 0:18:32.080 --> 0:18:35.640 suffering them. So what executives are telling me is, look, 0:18:36.560 --> 0:18:39.640 it's a hundred dollars pluss. Oil will drill more. We'll 0:18:39.680 --> 0:18:42.680 try to increase production, but don't expect that tomorrow we're 0:18:42.720 --> 0:18:45.080 gonna be pumping more than expect even next month or 0:18:45.160 --> 0:18:47.480 on a couple of months from now. I think that 0:18:47.600 --> 0:18:50.160 most people think that the first that we can see 0:18:50.280 --> 0:18:53.760 a reaction from the U sil industry in terms of 0:18:53.920 --> 0:18:59.920 extra barrels is probably around late summer. Right. I want 0:18:59.920 --> 0:19:05.080 to ask you about the pipelines from Russia to Europe. Um. Obviously, 0:19:05.160 --> 0:19:08.040 the nord Stream to project was canceled as a result 0:19:08.080 --> 0:19:10.360 of the invasion, but if you look at a map 0:19:10.400 --> 0:19:13.439 of Ukraine, there are a bunch of pipelines going right 0:19:13.520 --> 0:19:16.240 through headed to Europe, and I can't help but worry, 0:19:17.119 --> 0:19:20.680 UM if somehow they're disrupted, either a bomb hits one, 0:19:21.200 --> 0:19:24.520 or the electricity is taken out, or the the people 0:19:24.560 --> 0:19:26.800 who maintain them, you know, I know it's typically not 0:19:26.920 --> 0:19:28.879 a huge staff needed to maintain one of them, but 0:19:28.960 --> 0:19:31.359 you do need people to to keep the gas flowing. 0:19:31.800 --> 0:19:36.000 How big of a risk are these pipelines to um 0:19:36.240 --> 0:19:39.440 some sort of disruption because of the war? UM? And 0:19:40.040 --> 0:19:41.480 I would I would tend to think that would be 0:19:41.520 --> 0:19:44.440 a major crisis situation if for Europe, if something like 0:19:44.560 --> 0:19:46.720 that were to disrupt that supply. What how are you 0:19:46.760 --> 0:19:49.760 thinking about that? Well, we're keeping a very close high 0:19:49.800 --> 0:19:53.280 on those four pipelines, is the main concern of the market. 0:19:53.359 --> 0:19:56.719 Are exactly four pipelines. One is for oil we call 0:19:56.760 --> 0:20:00.920 it Druzba, and three are for natural gas called Surd, Youth, 0:20:01.080 --> 0:20:05.280 Progress and Brotherhood, and everyone is looking at them. There 0:20:05.320 --> 0:20:10.960 are UM stations on the border between Ukraine and Western Europe, 0:20:11.080 --> 0:20:14.200 so we can monitor the flows almost on real time 0:20:14.280 --> 0:20:17.480 on the Bloomberg terminal, and I have monitors all the 0:20:17.600 --> 0:20:22.520 time to try to see the flows there, and surprisingly 0:20:22.720 --> 0:20:25.560 nothing has happened. I mean, we're talking about oil and 0:20:25.680 --> 0:20:28.080 natural guys, that's two things that don't go well with 0:20:28.240 --> 0:20:32.160 bombs and missiles and so on. And two weeks into 0:20:32.240 --> 0:20:37.120 the war nothing has happened to them. Incredibly more gases 0:20:37.160 --> 0:20:40.880 flowing through Ukraine today into Europe that there was flowing 0:20:40.960 --> 0:20:44.560 two weeks ago before before the war started. But if 0:20:44.640 --> 0:20:47.320 anything were to happen to those pipelines, it will be 0:20:47.680 --> 0:20:52.280 really really bad. DRUSBA on oil prices will go high 0:20:52.800 --> 0:20:55.920 and it would be complicated because sound refineries they don't 0:20:55.960 --> 0:20:59.399 have much option to that pipeline. If we stuffered a 0:20:59.480 --> 0:21:02.680 problem on any of the three natural gas pipelines, or 0:21:03.040 --> 0:21:06.240 god forbid on the three at the same time, it's 0:21:06.280 --> 0:21:09.280 almost game over for natural gas supply in Europe. That 0:21:09.359 --> 0:21:12.280 will be really difficult. I mean, we can do it, 0:21:12.920 --> 0:21:15.800 but it would be difficult and super expensive. Natural gas 0:21:15.880 --> 0:21:19.000 prices will just fly and it will they will go 0:21:19.320 --> 0:21:23.000 high and off that today's super high prices will look like, 0:21:23.400 --> 0:21:27.200 oh gosh, do you remember when prices were low like that? 0:21:27.359 --> 0:21:30.040 That's the kind of I mean, everyone is super nervous 0:21:30.080 --> 0:21:33.000 about it, and is that there even enough US energy 0:21:33.200 --> 0:21:37.119 to sort of get there in time? No, you, you 0:21:37.200 --> 0:21:39.720 will not be able to to to to supply with 0:21:39.920 --> 0:21:42.359 with allengy. You we will have to adjust that the 0:21:42.440 --> 0:21:45.760 hard way. Super high prices. Everyone in Europe trying to 0:21:45.800 --> 0:21:51.440 reduce consumption and the industry, the manufacturing industry, energy intensive companies. 0:21:51.480 --> 0:21:57.320 Would you simply shut down? That's a scary prospect. I 0:21:57.440 --> 0:21:59.480 wanted to ask you if you can maybe talk about 0:21:59.560 --> 0:22:02.879 the con sumer aspect here, because we've heard some service 0:22:03.000 --> 0:22:05.760 in the US and also in Europe of consumers saying 0:22:05.760 --> 0:22:09.479 that they're willing to tolerate higher gas prices. But then 0:22:09.520 --> 0:22:11.760 I'm wondering what you think happens when when we do 0:22:11.880 --> 0:22:14.560 actually start to see higher and higher gas prices at 0:22:14.560 --> 0:22:16.200 the pump, and how that plays into all of this. 0:22:17.000 --> 0:22:22.639 I think that consumers generally understand that facing Bladimir Putin 0:22:22.880 --> 0:22:25.200 is going to have an economic cause, and they understand 0:22:25.240 --> 0:22:28.840 that is a big supplier of natural resources, particularly oil 0:22:28.920 --> 0:22:31.159 and gas, so they are expecting that this is going 0:22:31.240 --> 0:22:34.439 to have a cause. But we are in the early 0:22:34.600 --> 0:22:39.119 days of the conflict, and the key question needs if 0:22:39.200 --> 0:22:42.440 this continues and we are three months from now, six 0:22:42.560 --> 0:22:45.240 months from now, and you know, let's hope that doesn't 0:22:45.320 --> 0:22:48.280 happen because the human cause in Ukraine would be massive. 0:22:48.800 --> 0:22:51.440 But if that continues for a long time, I don't 0:22:51.480 --> 0:22:54.560 know if the public is going to be as accepting 0:22:54.840 --> 0:22:56.800 as it is now At the moment, I think that 0:22:57.040 --> 0:23:01.720 there is acute sense of acceptance that this is a 0:23:01.880 --> 0:23:04.919 price that they're willing to pay. It depends also how 0:23:05.040 --> 0:23:07.320 high prices go. One thing is that the oil price 0:23:07.440 --> 0:23:10.399 goes to a hundred and twenty dollars a barrel. Another 0:23:10.520 --> 0:23:12.360 thing is that goes to a hundred and seventy five 0:23:12.480 --> 0:23:15.280 or two hundred dollars a barrel um. So that is 0:23:15.680 --> 0:23:18.480 and then political leaders are going to have to do 0:23:18.600 --> 0:23:20.959 a bit of education. They're going to have to address 0:23:21.080 --> 0:23:24.040 the nation and and tell them what is going to 0:23:24.119 --> 0:23:27.320 happen and why we are paying higher prices for gas 0:23:27.480 --> 0:23:31.240 and and and and utilities. That has started and we 0:23:31.320 --> 0:23:33.720