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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot com,

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Speaker 1: and of course on the Bloomberg terminal. Let's cut to

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Speaker 1: the chase, folks. This is about inflation, your fears, your

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Speaker 1: confidence in the American economy. We began this discussion as

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Speaker 1: a singular high point of our trip to Washington for

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Speaker 1: the World Bank and IMF meetings, and that was a

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Speaker 1: conversation heated with Adam Posen of the Peterson Institute. We

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Speaker 1: continue today the discussion Chairman Powell is looking at on

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Speaker 1: inflation targeting. Adam rejuify why we need to move from

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Speaker 1: a two percent acceptable inflation level to something that so

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Speaker 1: they are scared of a three percent level. Thanks Tom,

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Speaker 1: and thanks for having me back on surveillance. I think

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Speaker 1: we've got to get to a three percent target level

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Speaker 1: rather than a two percent target level for two big reasons.

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Speaker 1: First is, as we've seen repeatedly for the last twelve years,

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Speaker 1: when you're this close your target is too low. That

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Speaker 1: means your interest rates are too low. That means the

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Speaker 1: FED doesn't have that much flexibility, and so it's less

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Speaker 1: effective encountering recessions and it's more intrusive into markets to

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Speaker 1: get its work done. The second reason you want to

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Speaker 1: see an inflation target that's a little higher, not currently

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Speaker 1: hugely higher, but a little higher, is because it helps

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Speaker 1: restructure the economy. We're seeing this right now that labor

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Speaker 1: markets are undergoing massive change in the US, and you

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Speaker 1: need space for people to get adjustments and to make

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Speaker 1: changes both to wages into where they work. And that's

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Speaker 1: easier when they're not as close to the lower down

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Speaker 1: because people don't get don't get great wage cuss, they

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Speaker 1: only get wage zeros or wage up. What does the

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Speaker 1: linkage here of a reflation of an economy over to

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Speaker 1: nominal GDP to the great fear of the conservatives of

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Speaker 1: an overheating of the economy and those ill effects explain

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Speaker 1: the sequence of three percent persistent inflation over to a

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Speaker 1: whopping large nominal GDP. Well, the two are separate right

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Speaker 1: Overheating in some ways is driven by real factors. It's

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Speaker 1: when you have more demand than you have supplat whereas

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Speaker 1: the three percent is basically a nominal factor. It's about

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Speaker 1: what price level you you're taking, you're expecting and taking

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Speaker 1: into account. And so to talk about overheating, whether it's

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Speaker 1: a supply constraint, bottleneck or excessive fiscal policy, is something

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Speaker 1: that's it is to use the dread word transitor doesn't

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Speaker 1: mean short term over. In five minutes, Pow finally picked

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Speaker 1: up in the press conference what you and I have

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Speaker 1: been talking about for months. The transitory for economic policy

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Speaker 1: purposes needs It doesn't affect the underlying trend. Doesn't mean

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Speaker 1: it's over like that, Adam, How does the Fed keeping

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Speaker 1: rates where they are continuing to buy bonds help the

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Speaker 1: job creation that you're talking about help people rEFInd a

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Speaker 1: position at a time when prices are going up of

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Speaker 1: things like rent, which is directly affected by the feds policies. No,

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Speaker 1: at least that you're right that there is a trade

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Speaker 1: off here. That's always in economics. Nothing is costless. So

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Speaker 1: the point of going from two to three percent is

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Speaker 1: your target isn't because it's cost less. It's because the

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Speaker 1: downside risks are worse in terms of what you're focusing

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Speaker 1: on rightly, which is the finding of jobs. What we're seeing,

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Speaker 1: for example, of the massive move of workers have a

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Speaker 1: small medium enterprises to employers like Amazon, Walmart, McDonald's, Bank

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Speaker 1: of America is we've got a fact a rise in

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Speaker 1: the minimum wage in a lot of the big employers.

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Speaker 1: And this is really important to get people to make

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Speaker 1: adjustments and to resort workers into the places that are

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Speaker 1: more productive, because if you're low income worker, it's really

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Speaker 1: risky and tough to look around and move for a

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Speaker 1: new job. But if the wages go up, then there's

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Speaker 1: an incentive to get past those fixed costs. So there

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Speaker 1: was a great paper at Jackson Hole this some we're

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Speaker 1: talking about how a loose, slightly looser monetary policy environment,

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Speaker 1: slightly higher inflation environment helps you make adjustments the labor market.

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Speaker 1: This was a point I wrote about twenty five years

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Speaker 1: ago with reference to Japan, and we saw it bear

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Speaker 1: fruit under Abbey that you keep monetary policy looser if

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Speaker 1: you want to have real structural adjustment in the labor market. So,

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Speaker 1: in other words, you think that the US can draw

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Speaker 1: a direct analogy from Japan at this point, from Japan

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Speaker 1: or from Germany after the Heart's for reforms in the

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Speaker 1: in the early two thousand's. What what I think is

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Speaker 1: going on in the labor market right now Leaves in

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Speaker 1: the US is there's a structural change. As though we've

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Speaker 1: got a labor market perform we haven't had some big

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Speaker 1: legislative package. It's not government driven, but it's people, as

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Speaker 1: you've been talking about on surveillance for a while now,

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Speaker 1: it's people making up their minds that they need a

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Speaker 1: different form of work, and it's employers making up their

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Speaker 1: minds that yeah, I can afford to be a bit

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Speaker 1: more to get the rank workers and the rank relationships.

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Speaker 1: So that's a structural change for about twenty percent of

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Speaker 1: our workforce who are in the in the low income

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Speaker 1: service workers, and so we want to facilitate that change. Adam,

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Speaker 1: you've been at a central bank at these inflection points.

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Speaker 1: You were at the Bank of Inman coming down at

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Speaker 1: the two thousand and night two thousand and nine Tobacco.

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Speaker 1: I just wonder if you look to the Bank of England.

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Speaker 1: You looked at Red Nato Street where you used to be,

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Speaker 1: and they start talking about a life meeting at the

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Speaker 1: Bank of England, this like on thread Nato Street, And

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Speaker 1: what are you learning from the moment we're in and

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Speaker 1: what would you recommend to those at the Bank of

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Speaker 1: the can about making a move at this point, Jonathan,

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Speaker 1: I think we're now moving. We're now not just moving countries,

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Speaker 1: but we're moving themes because the UK is not like

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Speaker 1: the US, or like Europe or Japan right now because

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Speaker 1: of Brexit, people have underplayed I think despite all this

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Speaker 1: German drawn they've underplayed the really good effects of Brexit.

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Speaker 1: And so I've been saying for a few years, including

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Speaker 1: on this program, that bregsit takes the Bank of England

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Speaker 1: part way back to the nine seventies, and what that

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Speaker 1: means is they can't just focus on domestic inflation target

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Speaker 1: the way they had when I was there, on the

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Speaker 1: way they have. They have to keep one eye on

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Speaker 1: the markets. And that's why they're moving forward in my

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Speaker 1: view rightly though sadly, to a much sooner liftoff than

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Speaker 1: other central banks. The other thing about BREGGS is that

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Speaker 1: it exacerbates shocks that require flexibility and supply, and we're

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Speaker 1: seeing this that they're having the same reopening shock, the

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Speaker 1: same commodity shock as the euro Area or the ass

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Speaker 1: but because they've cut themselves off from workers in Europe,

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Speaker 1: which were their labors apply because they've cut themselves off

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Speaker 1: from easy importance and exports to some degree, the shock

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Speaker 1: is that much worse for Brexit, for breksit post Brexit UK.

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Speaker 1: So for these two reasons, the Bank of England is

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Speaker 1: facing a much less salutary set of outcomes than the

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Speaker 1: other central banks, and that's why it has to move

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Speaker 1: sooner in my view, even though again, to go back

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Speaker 1: to least there's a cost to it. You'll more polite

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Speaker 1: than I am. The rude way of saying everything you

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Speaker 1: just said would be that the bank having that now

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Speaker 1: has an emerging market flavor to the policy dilemma. Would

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Speaker 1: you agree with Adam? Yeah, I mean I I choose

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Speaker 1: to say part went back to the seventies. Emergant market

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Speaker 1: is waving a red flag. But I agree what what

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Speaker 1: you have is for no fault in the Bank of

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Speaker 1: England's the credibility of their anchor and the stabilization of

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Speaker 1: their economy is less closet Brexit and therefore less likely

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Speaker 1: other high income economies than it was. Pretty so, John,

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Speaker 1: do we need a banner on television and for radio? That,

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Speaker 1: says Posen, says uk his banana Republic work that the

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Speaker 1: governor of the Bank of England, it's the governor of

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Speaker 1: the Merchant Marquet Center. You can quite I'd rather, I'd

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Speaker 1: rather go with the child, the running around child in

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Speaker 1: the background. Governor by with the child in the background

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Speaker 1: at him. You want to do that, Adam Pison, thank

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Speaker 1: you said, it's fantastic. As a wife of the Patison

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Speaker 1: it's the cheap never dull a moment. And Steve Shiveron

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Speaker 1: knows that he is with federated or measures thrilled he

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Speaker 1: could join us this morning. Steve, if you guys change

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Speaker 1: your asset allocation or wisdom across the capitalization view from

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Speaker 1: large cap obviously a federated heritage, over to mid cap

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Speaker 1: and indeed the small cap juggernaut we're on right now,

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Speaker 1: has there been a federated shift now, we've been pretty

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Speaker 1: consistent um being overweight cyclicals amongst the large caps being neutral,

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Speaker 1: overweight small caps having some preference for international and quite frankly, Tom,

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Speaker 1: you know, there's nothing that I heard yesterday, uh from

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Speaker 1: the Federal Reserve that would that would change our thinking.

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Speaker 1: We think you still have an environment where it's risk

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Speaker 1: on for the time being. Is there a risk here

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Speaker 1: as we talk about sequencing, that all the central banks

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Speaker 1: and developed world all pushed back rate hiking and frankly

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Speaker 1: tightening policy until next year, until the data becomes indisputable

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Speaker 1: that we get a sort of collective tightening that really

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Speaker 1: puts the brakes on a rally. Yes, I think that's

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Speaker 1: absolutely a risk, and I think that you know, it

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Speaker 1: was interesting you were talking about the b o E

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Speaker 1: and sequencing in a very rare move. The Americans were

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Speaker 1: more subtle than the British. But but I think we

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Speaker 1: were doing exactly the same thing. You know. The two

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Speaker 1: takeaways from yesterday from the Fed, from my perspective, we're humility.

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Speaker 1: You know, they recognized and admitted that they've had a

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Speaker 1: misread on inflation and then op ftionality. But by saying

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Speaker 1: that they would or would take the opportunity to vary

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Speaker 1: the speed of tapering, you know, come January. I think

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Speaker 1: what they're saying is that if inflation continues to come

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Speaker 1: in hot we think it will because we think that

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Speaker 1: they're misreading the labor market here, that they would speed

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Speaker 1: up that pace. Well, why would they do that so

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Speaker 1: that they can start rate hikes earlier? And I thought

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Speaker 1: it was very telling. When Scheifel had the opportunity to

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Speaker 1: push back harder against where the market was pricing in

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Speaker 1: rate hikes for next year, he didn't. Um and admitting

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Speaker 1: that we could get the full employment by the middle

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Speaker 1: of next year suggests that the market is not crazy

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Speaker 1: and thinking about rate hike number one in June or July.

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Speaker 1: So I'm looking right now at the fact that two

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Speaker 1: year yields the US are moving lower in sympathy with

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Speaker 1: two year guilt yields, and I wonder how much some

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Speaker 1: of the central bank world is interconnected. In other words,

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Speaker 1: the rate market will move collectively or it won't move

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Speaker 1: at all. How much is that the dynamic that we're

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Speaker 1: in right now for the developed world? I think it

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Speaker 1: makes sense because I think the the inflation impulses are similar.

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Speaker 1: I mean, they certainly are connected to what's going on

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Speaker 1: with with with the pandemic and the supply chain shortages

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Speaker 1: that are part of that. I think in the United

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Speaker 1: States the labor markets tighter than it is in other

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Speaker 1: parts of the world and will remain so. But I

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Speaker 1: think that the drivers are are very similar. Lisa um

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Speaker 1: and so that's that's not unexpected. In the perfection of

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Speaker 1: federating or mes Steve, there's gonna be no window dressing,

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Speaker 1: but to the end of the year there's a bye

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Speaker 1: side sweat. How big is the sweat this year? I

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Speaker 1: think there's sweat because I think folks have been on

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Speaker 1: the wrong side of a lot of trades, and I

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Speaker 1: think you're gonna have momentum and at the end of

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Speaker 1: the year, you know, my take from the fetis equities

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Speaker 1: are going to really like the patient's message. I think

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Speaker 1: in terms of Washington, we've defanged some of the most

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Speaker 1: or potentially some of the most disruptive policy options will see.

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Speaker 1: And so I think you can have a scenario where

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Speaker 1: you know, kind of like you've got a real strong

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Speaker 1: finishing at the end of the year. And it's been

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Speaker 1: hard to stay with it because as instructive as we've been,

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Speaker 1: you know, you'd have to have been blind not to

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Speaker 1: see some of the risks that have occurred. So I

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Speaker 1: think for folks that have been in our camp, which

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Speaker 1: is to say the fundamentals are positive, respond to bad

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Speaker 1: news if it happens, don't anticipate it and get caught

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Speaker 1: off sides. You're fine. If you've been a little bit

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Speaker 1: too reactive too early. You're gonna be on the wrong

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Speaker 1: side of something. I think that's gonna be quite positive

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Speaker 1: between now on the end of the year, and you're

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Speaker 1: gonna try to window address and catch up. See just

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Speaker 1: real quick here, what's the bad news you'd respond to?

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Speaker 1: So I think you've got to look at what policy

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Speaker 1: comes out of Washington, if there's something really disruptive there

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Speaker 1: on the tax of the spending side. I think what

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Speaker 1: it really comes down to, Lisa, is we are in

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Speaker 1: a heightened risk of dual policy error, either on the

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Speaker 1: monetary policy side or the fiscal policy side. We've never

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Speaker 1: spent money like this after economies at full capacity. We've

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Speaker 1: never been this reactionary to inflation rather than anticipatory, and

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Speaker 1: those both of those things may be fine, but we

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Speaker 1: don't know. So I think you've got to have humility,

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Speaker 1: and quite frankly, really good hearing the Feds say that

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Speaker 1: they're having some humility as well, because we are in

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Speaker 1: uncharted waters on both monetary and fiscal policy. Steve, thank you,

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Speaker 1: sir for your humble opinion on this market. Stave Chevron,

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Speaker 1: Federated Steve, thank you, buddy. Good to see you. At

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Speaker 1: least that's the moment, we're in the wide range of

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Speaker 1: outcomes through next year. I've had some great interviews so

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Speaker 1: far this week. Already it was Francis Donald that called

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Speaker 1: it the anti forecast for next year. I'll be interested

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Speaker 1: to see what her research looks like into year end,

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Speaker 1: into the outlook into next year. What's the balance of

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Speaker 1: risks to use Federal Reserve language. I think the Bank

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Speaker 1: of England rate decision is fascinating because they pointed as

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Speaker 1: a slowdown in growth that they experienced over the late summer,

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Speaker 1: the idea of the delta variant. I do wonder whether

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Speaker 1: defferring rate hikes means fewer of them or just simply

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Speaker 1: concentrating them more when the data is more clear the

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Speaker 1: growth outlook as we can since August on supply issues,

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Speaker 1: was Adam Posting that talked about the lack of flexibility

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Speaker 1: around some of those supply issues, particularly in the UK.

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Speaker 1: Some unique circumstances there, perhaps tom But more broadly, if

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Speaker 1: these central banks make can move, are they making a

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Speaker 1: move into a weaker economy? And I said we could

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Speaker 1: tellmas relative because if we're talking about full percent GDP

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Speaker 1: next year in the United States and five to six

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Speaker 1: in the UK five to six real, wouldn't you in

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Speaker 1: the summer, John, We are migrating a vector to what

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Speaker 1: three percent two percent sub potential GDP? That's out the window.

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Speaker 1: We don't know where the X axis is. I really

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Speaker 1: have trouble right now with the Fed parlor game. I'm

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Speaker 1: focused on what corporations are doing, Beckton Dickinson today with

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Speaker 1: a major buy back, speaking of decades, and you're Denny

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Speaker 1: joins us right now, Dr R Denny of your Denny research,

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Speaker 1: And I just want to get to the inflation story

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Speaker 1: right away, and let's go back to the seventies even

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Speaker 1: sixties playbook. There is the cost, there is the push,

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Speaker 1: there is the demand, There is the poll. What kind

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Speaker 1: of inflation are we enjoying? Well? It does have some

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Speaker 1: similarity is with the nineteen seventies. In the nineteen seventies,

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Speaker 1: everything that could go wrong on the inflation front seemed

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Speaker 1: to go wrong. For example, uh, we closed the gold

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Speaker 1: window and so the dollar took a dive, which then

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Speaker 1: caused commodity prices to soar. Food prices went up. There

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Speaker 1: was an issue with anchovies off the coast of Peru,

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Speaker 1: which somehow had an impact on soybean prices. Don't ask

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Speaker 1: me how that worked exactly, but it did. And then

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Speaker 1: we had two oil shocks and we had costs of

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Speaker 1: living adjustments, so all those shocks went right through into wages.

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Speaker 1: We don't have a cost of living adjustments anymore. But

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Speaker 1: we've probably got the UH labor movement in UH in

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Speaker 1: control now more so than ever before UH. And it's

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Speaker 1: not really a movement, it's just a shortage of workers,

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Speaker 1: and so wages are going up. And I think the

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Speaker 1: supply disruptions explained why productivity it took a dive there

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Speaker 1: in the in the third quarter. But I think companies

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Speaker 1: are already responding anecdotally anyways to the labor shortages. They're

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Speaker 1: going to be chronic, and I think we are going

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Speaker 1: to see a tremendous amount of automation. Do the mere

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Speaker 1: mortals at the FED risk of policy error? Well, they

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Speaker 1: are mere mortals, So we gotta start. We got to

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Speaker 1: start with that insight, which you correctly point out. But

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Speaker 1: I think that there's sort of a view out there

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Speaker 1: which I share, that they are behind the curve. Contrary

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Speaker 1: to what the FED chair has been saying, the economy's

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Speaker 1: done awfully well, certainly in the first half of the

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Speaker 1: year and uh second half it's the supply distructions that

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Speaker 1: we don't want to see, the pressures on the pricing

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Speaker 1: inflations I go into wages. Uh So I think they're

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Speaker 1: a little bit late. But look, my job isn't to

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Speaker 1: tell the Fed what to do, is just to anticipate

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Speaker 1: what they're gonna do. And what they're gonna do is

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Speaker 1: uh taper as we know, as we all know, and

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Speaker 1: they're probably gonna stick with it through the middle of

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Speaker 1: next year, and then I actually will not be surprised

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Speaker 1: if they raised the inflation target from two percent to

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Speaker 1: three percent, because it's going to be an even more liberal,

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Speaker 1: more progressive it next year the way I see it. Wait,

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Speaker 1: hold on a second, Can you elaborate a little bit

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Speaker 1: on that, because that's the point that Adam Posen has

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Speaker 1: made as well, that perhaps they're not going to try

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Speaker 1: to fight higher inflation on a base level, but rather

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Speaker 1: embrace it. What will sort of trigger that shift in mentality, Well,

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Speaker 1: I think the Feds are going to have to at

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Speaker 1: some point concede the inflation is not transitory, but it

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Speaker 1: is persistent. Right now. What they're saying is that the

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Speaker 1: supply chain disruptions are persistent. Well yeah, so what does

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Speaker 1: that mean. It means that inflation ry pressures are gonna

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Speaker 1: stay persistent. So I think, um, I think much will

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Speaker 1: depend on the FED chair. I don't think it's going

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Speaker 1: to be pale. I think it's likely to be brainer.

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Speaker 1: I think there's gonna be a couple of openings that

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Speaker 1: get filled by more progressive kind of people. If it

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Speaker 1: is simply going to become more politicized, more progressive, and uh,

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Speaker 1: I think more inclined to say, well, you know what,

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Speaker 1: two percent too low? Three percents fine, and if it's

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Speaker 1: a little bit above three percent for a while, we

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Speaker 1: can live with it. They really don't want to raise

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Speaker 1: interest right, um more than they have to, and they'll

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Speaker 1: move the gold post. Okay, So you mentioned the nineteen seventies,

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Speaker 1: which is basically a trigger for a lot of people

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Speaker 1: watching the bond market. I wonder where the analogy start

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Speaker 1: and where they drop off, especially if you do have

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Speaker 1: a more devish FED that is more willing to allow

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Speaker 1: inflation to hover around the three percent level. Are we

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Speaker 1: really heading into a period where inflation could get away

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Speaker 1: from the FED? Or do you think that the Fed

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Speaker 1: can keep control over it just i'lbeit perhaps in a

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Speaker 1: bit of a higher rate. Yeah, well, I'm I'm actually

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Speaker 1: an optimist on the inflation outlook in terms of over

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Speaker 1: the next few years. I don't think this is going

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Speaker 1: to be the nineteen seventies all over again. The big differences.

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Speaker 1: Productivity collapsed during the nineteen seventies. It went all the

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Speaker 1: way down to zero. I don't think that's where we're heading,

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Speaker 1: notwithstanding this morning's disappointing news or surprising news, whatever it was.

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Speaker 1: But I think productivity is going to make a comeback,

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Speaker 1: and that's uh, that's an important offset to wages going

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Speaker 1: up faster than prices. You folks mentioned that we're gonna

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Speaker 1: be putting a lot of weight on real wages, but

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Speaker 1: I think we want we want to look at real

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Speaker 1: wages relative to productivity. The only way that real wages

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Speaker 1: can actually go up is if productivity makes a comeback.

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Speaker 1: If it doesn't, then we're gonna have a wage s

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Speaker 1: price spiral, which was really what the nineteen seventies was

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Speaker 1: all about. Okay, how do we calculate will calculate that

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Speaker 1: our guests that and when do we do it? Is

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Speaker 1: that a first half two thousand twenty two exercise, or

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Speaker 1: are we that data dependent on rising wages? Well, at

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Speaker 1: this point, the productivity story really is anecdotal. You know,

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Speaker 1: we can see that companies are scrambling to increase their

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Speaker 1: productivity with robotics, with automation, with artificial intelligence. The good

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Speaker 1: news is the technologies there and it's relatively cheap and

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Speaker 1: implementable to to make that happen. So I don't think

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Speaker 1: we're gonna have to wait all that long. I think

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Speaker 1: by the second half of next year we're gonna see

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Speaker 1: that inflationary pressures abate, partly because of productivity and partly

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Speaker 1: because supply chain distrust options get amaliorated. Um and uh

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Speaker 1: that's a big issue, is uh, the supply chain disruptions.

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Speaker 1: So I think we're gonna have more cars by the

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Speaker 1: second half of next year, more supply and that could

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Speaker 1: take a lot of pressure off inflation. The bond vigilance

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Speaker 1: stay in hibernation, the net well, you know, it's hard

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Speaker 1: to uh for them to have much of an impact

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Speaker 1: when the Fed basically has been rigging the bond market.

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Speaker 1: I mean, they've been so aggressive in that market that

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Speaker 1: it's it's hard to even call it a market. It's

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Speaker 1: not a free market, certainly, but I think by by

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Speaker 1: some time next year we'll see two on the on

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Speaker 1: the ten year. We also have to factor in demographic factors.

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Speaker 1: Here in the seventies we had a tremendous influx of

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Speaker 1: baby boom workers. Now they're retiring and we're seeing that

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Speaker 1: the growth rate in the labor force is close to zero.

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Speaker 1: The only way this economy is going to grow on

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Speaker 1: a tent trend basis is of productivity makes a comeback,

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Speaker 1: and I'm optimistic on gonna catch up at as always

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Speaker 1: Edie Antenny, the original man of coining the phrase, the

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Speaker 1: author of Bond Vigilantes. Ellen Wald, Senior Fellow in Atlantic Council,

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Speaker 1: joining us for a brief visit this morning. Ellen, the

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Speaker 1: spread is narrowed between West Texas Intermediate and Brent Crude.

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Speaker 1: Do you just apply within your macro view that Brent

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Speaker 1: will widen out higher or or West Texas Intermediate comeback lower? Well,

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Speaker 1: you know, one of the one of the interesting things

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Speaker 1: is that w t I has been doing better recently,

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Speaker 1: particularly with foreign buyers, because it was it was priced

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Speaker 1: a bit lower, and so we saw some increase in

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Speaker 1: exports from the US to China and other countries. If

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Speaker 1: that spread collapses, then uh, the US benchmark may become

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Speaker 1: less interesting to uh to foreign buyers, and that may

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Speaker 1: actually help gasoline prices at home a little bit. Well,

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Speaker 1: it may help at home a little bit. But are

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Speaker 1: we are we at attention points at gasoline? I see

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Speaker 1: it a triple a unleaded three forty a gallon. The

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Speaker 1: moving average back at a hundred dollars of barrel was

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Speaker 1: like three fifty eight a gallon? Or is this time different?

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Speaker 1: So it does seem that gasoline prices are starting to

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Speaker 1: uh to calm down. We're not seeing as many many

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Speaker 1: increases as we were previously, so I do think that

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Speaker 1: we're kind of coming to an equilibrium in terms of

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Speaker 1: gasoline prices at this time. We've got plenty you know

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Speaker 1: of gasoline in storage, some of the recent numbers from

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Speaker 1: the EIA or showing that, um, you know that that

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Speaker 1: crude and gasoline stores are are increasing a little bit.

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Speaker 1: So I think that's helped push the numbers down. Of course,

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Speaker 1: if we have a very big demand over the Thanksgiving holiday,

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Speaker 1: that could certainly cause some some prices to rise. Ellen. Honestly,

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Speaker 1: the idea that Biden is planning to release some of

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Speaker 1: these stores in the strategic reserves. How dramatic a response

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Speaker 1: would that be? You know, I don't think that it

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Speaker 1: would produce quite as dramatic a response as he or

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Speaker 1: his administration is really hoping for. If you look at

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Speaker 1: the global picture in terms of oil UH, you know,

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Speaker 1: we've got Opeque looking to increase production by four hundred

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Speaker 1: thousand barrels a day starting in UH in December. Plus

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Speaker 1: you've got global consumption at about a hundred million barrels

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Speaker 1: a day, which is basically where it was pre pandemic,

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Speaker 1: and so the US could do an SPR release, but

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Speaker 1: refineries are running pretty much at capacity. We've had some

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Speaker 1: declined in the total amount of capacity of our refining

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Speaker 1: since the pre pandemic days. But if there's a bigger

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Speaker 1: SPR release, that's not necessarily going to translate into more

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Speaker 1: gasoline and lower prices. For the long term, we could

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Speaker 1: see a brief, you know, brief push down, but in general,

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Speaker 1: unless it's repeated, I don't think it's going to help

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Speaker 1: all that much in the long term. Ellen. There's also

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Speaker 1: a question about what President by the stance has been

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Speaker 1: towards the shale industry. Is there anything identifiable from your perspective,

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Speaker 1: that the Biden administration could do to try to prompt

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Speaker 1: more pumping in the shale patch or whether that's even

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Speaker 1: appropriate in this type of situation. Yeah, I think it's

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Speaker 1: it's definitely a factor in higher oil prices. I know

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Speaker 1: that Biden really wants to blame Russia and Opeque for

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Speaker 1: failing to produce more, but they are actually increasing production

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Speaker 1: at a pretty good clip compared to the US oil industry,

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Speaker 1: which is not really increasing production at nearly that clip.

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Speaker 1: We heard that there was eleven point five million barrel

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Speaker 1: today produced last week in the U s which is

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00:24:50,160 --> 00:24:53,040
Speaker 1: a slight take upward. It's really not enough of an

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Speaker 1: increase to bring oil prices down, and the Biden administration

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Speaker 1: has certainly made a lot of producers very weird area

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Speaker 1: of increasing production. It's not just about investment and UH

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Speaker 1: and UM the desire for capital discipline. It's also a

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Speaker 1: concern over growing regulations and the methane rules that were

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Speaker 1: announced earlier this week are not helping things. I do

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Speaker 1: think we will continue to see a slight increase upward,

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Speaker 1: but unless the Biden administration comes out in a big

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Speaker 1: way and says, Hey, we want to encourage investment in

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Speaker 1: this and we're going to help the situation. We're going

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Speaker 1: to do what we can to assist in UH in

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Speaker 1: more production. I don't see a major increase in production

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Speaker 1: happening anytime soon. Allen, thank you so much. Greatly appreciated

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Speaker 1: with the Atlantic Council on Oil. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from

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Speaker 1: seven to ten a m. Eastern on Bloomberg Radio and

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00:25:49,000 --> 00:25:52,800
Speaker 1: on Bloomberg Television each day from six to nine am

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Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

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Speaker 1: Bloomberg dot com, and of course on the terminal. I'm

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Speaker 1: Tom keene In. This is Bloomberg