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Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast.

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Speaker 1: I'm Tracy Alloway and I'm Joe Wisen't thal Joe, things

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Speaker 1: look rough in Europe. Yeah, we we've talked about this.

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Speaker 1: We haven't done a Europe specific episode in a while,

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Speaker 1: but something we've been talking about lately is the macro forces,

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Speaker 1: shortage of energy, high inflation, but also sort of mediocre

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Speaker 1: underlying growth. Tough position right now. Yeah, you know, my

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Speaker 1: mother is actually visiting the States at the moment. She

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Speaker 1: lives in Austria, so I'm getting a firsthand picture of

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Speaker 1: a lot of the stuff that's going on there in

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Speaker 1: terms of attempts to save energy in the middle of

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Speaker 1: a heat wave, I might add, and she even had

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Speaker 1: to She had to trade in her car for she says,

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Speaker 1: for something more efficient and reasonable in the current climate.

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Speaker 1: So she gave up this very like gas guzzling convertible

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Speaker 1: in order to get some efficient like sedan. Well that's uh,

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Speaker 1: that's the goal, right everyone, Everything becomes a little bit

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Speaker 1: more efficient. Conservation is the pain? Would she come on

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Speaker 1: the podcast? I don't think so. Okay, but you know,

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Speaker 1: there's a lot going on in Europe with energy at

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Speaker 1: the moment, and it's pretty clear now. You know, we

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Speaker 1: touched on this a little bit earlier in the year,

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Speaker 1: the potential for an energy crisis in Europe, and it

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Speaker 1: now looks like Europe is firmly in one. So, for instance,

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Speaker 1: if you look up the benchmark gas features in Europe

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Speaker 1: Dutch t t F contracts, I think they're still hovering

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Speaker 1: around like two hundred euros, which is pretty close to

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Speaker 1: a record high. We know that before Russia invaded Ukraine

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Speaker 1: it was responsible for something like of Europe's energy imports.

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Speaker 1: That has obviously dropped quite a bit as Russia sort

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Speaker 1: of cuts off gas supplies. But the big question is

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Speaker 1: what can Europe do to offset this and exactly how

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Speaker 1: bad could things get this winter? Yes, this is the

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Speaker 1: key question. How bad will there be a big shortage?

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Speaker 1: You know in the summer you can sort of, you know,

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Speaker 1: not run the air conditioning is hard, or maybe you

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Speaker 1: know a lot of places don't even have air conditioning, etcetera.

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Speaker 1: Open windows is what my mother keeps telling me. It's

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Speaker 1: worth noting, by the way, that Dutch natural gas features

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Speaker 1: contract that you quoted is to around two euros is

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Speaker 1: you know, is eleven So I just think it's really,

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Speaker 1: you know, for some context, just an absolutely insane jump

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Speaker 1: and the gas shortage or the gas crisis part of it,

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Speaker 1: but also a lot of attention paid lately to the

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Speaker 1: state of the French nuclear industry, disrepair, lots of shutdowns,

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Speaker 1: reactors not operating, So there is a confluence of factors

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Speaker 1: really putting the squeeze on Europe right now. Yeah, and again,

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Speaker 1: like it is just crazy to think how far we've come,

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Speaker 1: both in terms of prices, which you pointed out, but

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Speaker 1: just in terms of the actions to try to contain

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Speaker 1: this crisis. Because I remember when Pierre and Durand came

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Speaker 1: on the show, um, you know, in the spring, and

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Speaker 1: he was talking about, oh, Europe might have to ration

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Speaker 1: and energy and that seems so extreme at the time,

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Speaker 1: and you know, fast forward a few months and that

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Speaker 1: is exactly what is happening. There's a scramble not only

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Speaker 1: to save energy, but also a scramble to store as

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Speaker 1: much gas as possible. So I am very very pleased

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Speaker 1: to say that we are going to be speaking with

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Speaker 1: two people on this topic today. We're going to have

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Speaker 1: a real discussion around the issue, get some varying viewpoints.

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Speaker 1: We're gonna be speaking with Heavy a Blast. He is,

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Speaker 1: of course a columnist over at Bloomberg Opinion and an

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Speaker 1: expert on all things energy. And we are also going

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Speaker 1: to be speaking with Alex Turnbull, who we've had on

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Speaker 1: the podcast before. He's a fun manager based in Singapore

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Speaker 1: and also a researcher in global energy. So thank you

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Speaker 1: both for coming on the show, Thank you for having me.

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Speaker 1: Thank you very much. So have it. Why don't we

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Speaker 1: start with you. Let's let's just do the basic question.

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Speaker 1: How bad do you think things are going to get

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Speaker 1: in Europe this winter? Well, it's gonna get bad. And

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Speaker 1: allow me to give you a personal example and also

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Speaker 1: show you how bad I am at investments. I use recently.

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Speaker 1: I use recently close the purchase of a house in London,

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Speaker 1: in West London. I resisted for many years. I was

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Speaker 1: very happy with my flat, but I wanted a garden,

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Speaker 1: as every middle class British person likes. And you know

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Speaker 1: I did that probably at the very peak of the market.

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Speaker 1: So that's how bad I am. So I was used recently.

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Speaker 1: I'm just doing my moving and I was thinking how

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Speaker 1: bad it will be if I could not carry my

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Speaker 1: gas and electricity contract. That I have and it's you know,

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Speaker 1: fixed for for for a number of months still ahead,

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Speaker 1: and I have to start from the scratch, just get

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Speaker 1: a new electricity and gas contract on the new your

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Speaker 1: property and currently paying about a hundred and thirty five

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Speaker 1: pounds per month for electricity and gas in my current flat.

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Speaker 1: If I have to get a new contract because prices

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Speaker 1: have gone so much up and because every utility in

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Speaker 1: the UK is already factory in the big price increase

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Speaker 1: that we're going to get from October, my bill will

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Speaker 1: go monthly from a hundred and thirty five pounds to

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Speaker 1: four hundred and seventy five pounds per month. That is

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Speaker 1: how bad it's going to get now using mine, working

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Speaker 1: class families getting electricity and gas bill, unless the government

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Speaker 1: makes an intervention of anything north of four hundred, four

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Speaker 1: hundred and fifty pounds, which is more than five hundred

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Speaker 1: dollars per month used for electricity and gas put aside

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Speaker 1: castoline prices, that's how bad it's going to get in

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Speaker 1: terms of the impact of the cost of living crisis.

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Speaker 1: And that is across Europe. What is happening in the

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Speaker 1: UK is very similar in Germany, where utilities are already

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Speaker 1: warning consumers that the utility monthly charge is going to

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Speaker 1: double at the very least starting on the first of October.

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Speaker 1: So Alex, I want to bring you in, you know,

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Speaker 1: as have you mentioned, his energy bill is going to soar,

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Speaker 1: and of course we're going to see that across Europe

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Speaker 1: if people haven't already had that rerating kick in already.

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Speaker 1: But it's one thing for prices to surge. It's another

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Speaker 1: thing for say, people do not have power, maybe people

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Speaker 1: do not have heat, or probably more likely industry in

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Speaker 1: some countries has to shut down because it's uneconomical. What

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Speaker 1: do you see as the sort of you know, is

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Speaker 1: there risk of something beyond it's just more expensive and

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Speaker 1: something more sort of fundamental hit and shortages that's coming winter.

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Speaker 1: I think in the short term it's very hard to

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Speaker 1: do a lot of substitution, which is, while we saw

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Speaker 1: not a lot of change in industrial gas demand in

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Speaker 1: Europe around last winter, there was a sense in which

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Speaker 1: everyone was kind of frozen in place, but you're already

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Speaker 1: starting to see quite substantial substitution for industrial demand. The

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Speaker 1: problem is is that as a consumer, it's Harvier points out,

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Speaker 1: there's not a lot you can really do in the

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Speaker 1: short term. But you know, here's where my story of

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Speaker 1: buying the house comes in. I bought a house briefly

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Speaker 1: before COVID in in Australia, and I was planning on

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Speaker 1: putting solar panels on it, but then I kind of

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Speaker 1: got locked out of the country for two years because

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Speaker 1: of Australia's COVID controls, and my tenant, who was not

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Speaker 1: happy with the change in power prices, basically said like,

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Speaker 1: if you want to put solar on it, and I said, yeah,

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Speaker 1: I actually I love to do that. And so that's

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Speaker 1: already knew about seventy their power demand UM and their

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Speaker 1: power bills. So in places like Australia where you are

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Speaker 1: similarly impacted by issues of gas and coal, price has

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Speaker 1: been the marginal pricing source of demand, and it's certainly

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Speaker 1: South Wales. UM. You can type of media action and

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Speaker 1: I think you're going to say a lot more of

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Speaker 1: that over time, but but that does take time, and

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Speaker 1: that demand destruction not in a bad way, and a

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Speaker 1: sense that people workout ways to consume less while preserving

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Speaker 1: their lifestyles. That is a multi year process and so

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Speaker 1: in the short run, people can't really cut their consumption

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Speaker 1: much but at a time that does tend to happen,

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Speaker 1: you know. I think the real lesson is to be

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Speaker 1: like Tracy and when you buy a house, discovery that

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Speaker 1: you actually have a mountain of coal in your basement,

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Speaker 1: which is something Tracy revealed to us in a recent episode.

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Speaker 1: That's like the ultimate hedge is to buy a house

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Speaker 1: that comes with coal. Don't worry, guys, I too bought

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Speaker 1: at the top of the market, so yes, I have

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Speaker 1: some commodity exposure to offset that purchase. But yeah, Alex,

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Speaker 1: I mean I mentioned the benchmark gas contract in Europe earlier,

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Speaker 1: hovering around like two hundred euros, and Joe pointed out

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Speaker 1: that that's up from nineteen, you know, just a little

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Speaker 1: while ago, but it has come down a little bit,

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Speaker 1: like there does seem to be some moderation recently. What's

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Speaker 1: driving that? Is that a sign that maybe we're turning

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Speaker 1: around the corner as some of these energy savings kick in,

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Speaker 1: or as Europe starts to reach its gas storage target.

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Speaker 1: I'm allowed to make any definitive comments here. On the

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Speaker 1: one hand, I'll point out that if you talk to

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Speaker 1: your friendly prime broker about wanting to trade something which

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Speaker 1: realizes about volatility. On a good day, you may find

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Speaker 1: that actual risk taking capacity in these markets is heavily

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Speaker 1: constrained and the information in prices is not quite what

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Speaker 1: it once was. UM. So that there's that. UM. The

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Speaker 1: other thing I would point out is that that can

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Speaker 1: be both to the upside or to the downside. So

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Speaker 1: we saw a similar dynamics in coking coal for much

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Speaker 1: of this year when people were concerned about USh and

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Speaker 1: supply getting taken out of the market. But then China

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Speaker 1: open the border the Mongolia and mongol, so you took

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Speaker 1: seven million tons out from Russia, but then actually China

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Speaker 1: just board it all more or less, and then you

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Speaker 1: also had Mongolia into the market for thirty six million

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Speaker 1: tons run right currently. So as a result, coke and

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Speaker 1: cole went from say two fifty dollars to six briefly

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Speaker 1: and is now back to two hundred dollars. So, UM,

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Speaker 1: I don't think we're going to get a kind of

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Speaker 1: supply d s X macin in gas or high caloritic

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Speaker 1: value coal to fix Europe's problem that quickly. Have you

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Speaker 1: can you sort of give us the broader picture of

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Speaker 1: how you wait the different factors driving up European prices

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Speaker 1: right now because obviously everyone is, you know, quite aware

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Speaker 1: of the stress and the tensions between Europe and Russia

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Speaker 1: over the war and the declining exports. But then of

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Speaker 1: course you know there's also and this has gotten more

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Speaker 1: attention than the last couple of weeks, the French nuclear

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Speaker 1: industry has is operating a diminished capacity. France is currently

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Speaker 1: an electricity importer as opposed to an exporter. Like you know,

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Speaker 1: there's there's multiple factors and how would you attribute them? So, Joe,

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Speaker 1: You're right, there multiple factors that they are driving here

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Speaker 1: the market on gas. The most important one certainly is

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Speaker 1: Russia restricting supplies to Europe. You take Germany as an example,

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Speaker 1: Supplies are down eighty percent from where they were normally,

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Speaker 1: and that is a completely political decision by Bloodymid putting

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Speaker 1: to put pressure on Europe and drop the support on

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Speaker 1: on Ukraine. Then in electricity, the situation in France is

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Speaker 1: certainly the main driver. About fifty percent of the nuclear

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Speaker 1: reactors in France are not working at the moment, Most

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Speaker 1: of them are on maintenance revised, just checking for cracks

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Speaker 1: on some welding, and that it has really forced France

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Speaker 1: to import and usually last quantities of electricity from every

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Speaker 1: neighboring country, which is putting pressure on gas because that

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Speaker 1: means that we are consuming more gas for for power generation.

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Speaker 1: Looking forward, well, a lot of the situation in Europe

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Speaker 1: is gonna depend, I think on three factors. Number one

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Speaker 1: is what Bloodymid Putting does in the next few weeks

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Speaker 1: and months, whether he shuts down completely supplies or not.

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Speaker 1: Number two is the weather. How call is going to

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Speaker 1: be the winter in Europe or how warm. If we

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Speaker 1: get a mile winter like last year, Europe may be

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Speaker 1: able to whether the problem without much of an additional

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Speaker 1: problem it's really called in Europe, then there is trouble

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Speaker 1: in Europe. It it's called in Japan. There is also

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Speaker 1: trouble in Europe because it means that Europe is going

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Speaker 1: to have to compete with Japan for llergy supplies. And

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Speaker 1: the other big question, and Alex was talking about this earlier,

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Speaker 1: is how much consumers from myself to the big companies

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Speaker 1: are going to be able to save this winter. We

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Speaker 1: are beginning to see signs that demand in the industry

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Speaker 1: is coming down. That's in part due to high gas prices.

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Speaker 1: We are beginning to see some substitutions, some companies trying

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Speaker 1: to run on fuel oil or diesel some of their operations.

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Speaker 1: And I think that consumers are going to save quite

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Speaker 1: a lot of gas, in part because, to be frank,

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Speaker 1: I don't want to be hit by a four hundred

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Speaker 1: seventy pounds and months bill for my electricity and gas.

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Speaker 1: So yeah, I'm gonna put my thermo state a bit lower.

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Speaker 1: And how those factors are going to interact over the

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Speaker 1: next three months it's going to be the key. But

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Speaker 1: the big problem for policymakers and for traders is that

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Speaker 1: you cannot really model properly two of those factors. I mean,

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Speaker 1: you could make assumptions on savings, how much demand substitution

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Speaker 1: is gonna be, you could, you could really try to

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Speaker 1: attempt to answer that question, but you cannot really answer

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Speaker 1: the question of what bloody mill Puttin is going to

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Speaker 1: do and how call is going to be the weather

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Speaker 1: four months from now. And that is why it's so

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Speaker 1: difficult and so volatile the market right now. And Alex

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Speaker 1: said add to that that there is very little liquidity,

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Speaker 1: so the information on the price is rather imperfect at

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Speaker 1: the moment. That's really interesting. So I take the point

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Speaker 1: that it's difficult to predict what Putin is going to do,

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Speaker 1: and it's probably difficult to predict exactly what the weather

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Speaker 1: is going to be this winter, But could you make

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Speaker 1: an assumption about how or could you try to model

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Speaker 1: how well prepared Europe is for the possibility, for instance,

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Speaker 1: that Russia just cuts off all the gas, because I

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Speaker 1: think at the moment, like the flows through nord Stream

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Speaker 1: something like one to of normal capacity. What if they

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Speaker 1: just go away? How prepared would Europe be for that scenario?

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Speaker 1: If the flows of North Stream were to stop, let's

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Speaker 1: say tomorrow. You know, we we are not nearly there.

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Speaker 1: We will we will, we will not have enough gas

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Speaker 1: in the storage to make it through the whole winter

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Speaker 1: without having to save significant amount of gas. That means

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Speaker 1: demand destruction in the industry if we can't build inventories

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Speaker 1: to the eighty percent target or nine percent target that

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Speaker 1: Germany has put itself to, the Hargert higher target by

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Speaker 1: October November and then putting shuts down completely gas supplies.

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Speaker 1: We will make it through the winter barely, but we

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Speaker 1: will make it through the winter. But that's gonna still

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Speaker 1: require very high prices because you need to you need

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Speaker 1: to make sure that some industries are not consuming gas. Uh,

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Speaker 1: you have a combination of putting cats supplies, say September October,

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Speaker 1: and we have a cold winter. While that really requires

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Speaker 1: some significant savings on energy, and that will require the

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Speaker 1: German government effectively taking control of the energy sector and

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Speaker 1: saying you can consume, you cannot consume because we need to.

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Speaker 1: We need to make sure that every home has enough

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Speaker 1: gas for hitting. The priority will be the homes and

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Speaker 1: everything else will be secondary to that. But all of

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Speaker 1: those scenarios also create a problem. Even if we make

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Speaker 1: it through the winter without massive troubles us with having

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Speaker 1: to I mean, an economic recession is given, but you know,

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Speaker 1: without additional pain beyond that, we are in a very

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Speaker 1: precarious situation for the following summer and the following winter.

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Speaker 1: So this becomes a bit of a multi year problem.

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Speaker 1: So even if you make it through the winter in

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Speaker 1: twenty three, then you emerge in March of twenty three

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Speaker 1: in a very low situation of inventories and probably with

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Speaker 1: not enough time to rebuild inventories for two in any

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Speaker 1: meaningful way. So then you have another year of problem,

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Speaker 1: another year of high prices. Look, it's not how to

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Speaker 1: put it, I mean, it's not really good. It looks

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Speaker 1: very challenging. Best cases scenario we make it through the

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Speaker 1: winter without significant trouble, having to reduce demand in the

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Speaker 1: industry and paying very high prices similar to now that

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Speaker 1: I think it's best cases scenario. Worst cases scenario is

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Speaker 1: we have to race on gas significantly and paying even

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Speaker 1: higher prices than today. Alex, what is your assessment of

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Speaker 1: the inventory situation right now? And then you know if

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Speaker 1: this is like you know, we're not just talking winter,

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Speaker 1: and like, is there more capacity to import gas besides

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Speaker 1: nord Stream, like through terminals or is that just completely

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Speaker 1: maxed out basically, I I guess on on inventor is

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Speaker 1: currently depending on how you can figure your model, we're

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Speaker 1: in the seventies now. In terms of storage, there's still

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Speaker 1: to my it's pretty aggressive storage builds ahead of us.

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Speaker 1: So we will be, by my estimates, you know, in

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Speaker 1: the mid eighties by the time at peaks, which is

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Speaker 1: generally a very good place to be in terms of

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Speaker 1: storage levels. Um and if you look at your break

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Speaker 1: down the nodal consumption of the way they present the

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Speaker 1: data in Europe and industrial demands already down a lot

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Speaker 1: of places, and some of that were easier saving some

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Speaker 1: of that SF moving more of ammonia production to the States,

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Speaker 1: but that's in. Industry is already very much doing its bit.

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Speaker 1: If you assume households do very modest levels of demand constraint,

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Speaker 1: I don't think the winter is going to be that stressful. However,

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Speaker 1: every marginal gigga jewel that comes into Europe giggle, what

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Speaker 1: our or however you want to measure gas, the gas

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Speaker 1: has to come out of the lergy market, and that

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Speaker 1: is very tight. And the reason that's tied is because

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Speaker 1: it had to grow to accommodate Europe very quickly. When

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Speaker 1: it's normally had quite moderate, sort of mid to high

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Speaker 1: single digit growth at best. It's had to grow almost

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Speaker 1: this year and that's not easy to do. And the

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Speaker 1: reason that's tied is that you cannot get a lot

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Speaker 1: of incremental gas into the market without more energy landing

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Speaker 1: capacity in Europe which is coming in, but also more

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Speaker 1: export capacity from the US. So over time, I agree,

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Speaker 1: it's a multi year process, but that's spread between US

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Speaker 1: gas prices. Henry hub and what that translates to into

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Speaker 1: um TTF will converge towards Henry Hub plus a spread

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Speaker 1: over times US gas becomes essentially linked to global lergy prices.

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Speaker 1: Historically it was linked, but but it sort of broke

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Speaker 1: because the we suddenly hit a constraint in terms of

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Speaker 1: export capacity and demand in Europe. Just real quickly, to

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Speaker 1: what degree alex is this? You know, aggressive demand for

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Speaker 1: energy in Europe? How is it spilling over to other

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Speaker 1: llenergy importers? And I'm thinking, you know the natural gas

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Speaker 1: depend in Asian countries, like what is this sort of

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Speaker 1: like global knock on effect. It was quite funny as

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Speaker 1: an Australian because it very quickly blew up Asian ellergy

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Speaker 1: prices where cargoes had to be rerouted or China due

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Speaker 1: to lockdowns consume less gas, so resold cargoes and spot

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Speaker 1: markets innovated them to Europe. But then in Australia people

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Speaker 1: thought they were sort of immune, and then by April May,

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Speaker 1: Australian power prices started moving very aggressively up because the

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Speaker 1: European grid will first burn gas if it can, we'll

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Speaker 1: consume it. If it can't get that, it has to

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Speaker 1: burn coal. And the coal it burns is six thousand

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Speaker 1: killer cow coal, which is exactly what it's produced in

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Speaker 1: the Hunter Valley of Australia, where most of Australia's Eastern

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Speaker 1: grid's power plants are. So it's it's everyone has got

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Speaker 1: swept up in this to one shape or form or another.

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Speaker 1: I want to bring Heavier in on the same topic. Really,

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Speaker 1: I mean, it has been a pretty rapid adjustment the

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Speaker 1: way the LERG market has done this. And you know

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Speaker 1: it used to be a fairly fragmented market and now

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Speaker 1: it's increasingly globalized because of all these pressures and some

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Speaker 1: other factors. How do you see that shaking out, Heavier

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Speaker 1: and how does it sort of change the dynamics of

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Speaker 1: the energy industry as a whole. Well, clearly, the ability

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Speaker 1: of Europe to tap the llend market has really saved

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Speaker 1: the day for Europe. This has happened only ten fifteen

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Speaker 1: years ago, where the global lending market was not nearly

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Speaker 1: as developers is today, and the ability of cargo's was

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Speaker 1: much lower, particularly on the spot market with the ability

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Speaker 1: to reroute carrigos, Europe will have had a big problem

365
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Speaker 1: and the dependency on Russia was much much higher. So

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Speaker 1: the lending market is offering a relievable to Europe in

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Speaker 1: so many ways. Um. I mean, one of the things

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Speaker 1: that we have seen that to me is very interesting

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Speaker 1: is Europe. But the Many is outbidding everyone else in

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Speaker 1: the market taking the llergy. That's one of the reasons

371
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Speaker 1: we have these very high prices in the market. I mean,

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Speaker 1: on fundamentals, as Alex was pointing out, we should not

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Speaker 1: probably have two hundred euros permica the hour of gas

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Speaker 1: because the inventories are builting in the right direction and

375
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Speaker 1: we should have enough gas um if putting was to

376
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Speaker 1: keep the flows. But obviously we need to continue outbidding

377
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Speaker 1: the whole market for llergy supplies, and for that we

378
00:22:29,080 --> 00:22:31,919
Speaker 1: need to sustain very high prices in Europe for that

379
00:22:32,000 --> 00:22:35,359
Speaker 1: to happen. What's happening there is that a number of

380
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Speaker 1: countries that were starting to rely on the global llengy

381
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Speaker 1: market for supplies middle middle income and poor countries and

382
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Speaker 1: thinking the likes of Pakistan or Banglades or even India

383
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Speaker 1: are now being um. They're seeing now that European nations

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Speaker 1: and European utilities campaign much higher prices, so they're not

385
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Speaker 1: getting the cargos that they were expecting. Some of the

386
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Speaker 1: cargos that this will be going into Asia at the

387
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Speaker 1: moment I rerouted into you Rope, and we have seen

388
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Speaker 1: power supply problems in the likes of Banglades or Pakistan,

389
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Speaker 1: which is affecting the textile industry. So in a way

390
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Speaker 1: it may be a case where Europe avoids the black

391
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Speaker 1: house that many of us we have been talking and fearing,

392
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Speaker 1: but only because the black house move somewhere else, somewhere

393
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Speaker 1: else that they cannot really pay the price that Europe

394
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Speaker 1: is paying for the llergy and then the black house

395
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Speaker 1: are happening in Pakistan or Banglades, but the black house

396
00:23:31,600 --> 00:23:35,480
Speaker 1: are actually happening. It's used differently, and that global ellergy

397
00:23:35,600 --> 00:23:40,560
Speaker 1: market is allowing that arbitrast to happen that without it, well,

398
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Speaker 1: it will not be happening in the black house will

399
00:23:42,440 --> 00:23:44,280
Speaker 1: be happening in Europe because we will not be able

400
00:23:44,320 --> 00:23:46,560
Speaker 1: to get in off GUS real quickly. Is there any

401
00:23:46,640 --> 00:23:49,399
Speaker 1: prospect in the sort of near future for there to

402
00:23:49,440 --> 00:23:52,520
Speaker 1: be a single natural gas press. I mean there's not

403
00:23:52,560 --> 00:23:54,879
Speaker 1: a single oil press, but it's close. You know, Brenton

404
00:23:54,960 --> 00:23:57,239
Speaker 1: to WTA and the other benchmarks, they tend to not

405
00:23:57,280 --> 00:23:59,960
Speaker 1: be that far off, whereas with natural gas, you know,

406
00:24:00,040 --> 00:24:02,720
Speaker 1: the gap between Henry Hub and the Dutch numbers sort

407
00:24:02,720 --> 00:24:05,080
Speaker 1: of wildly different, and it's different all around the world

408
00:24:05,280 --> 00:24:09,919
Speaker 1: because the transmission infrastructures so fragmented. But if this market

409
00:24:10,000 --> 00:24:13,119
Speaker 1: keeps getting built out and export and import terminals and

410
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Speaker 1: so on, well, is there a point in the future

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Speaker 1: where there's more or less a global natural gas price. No.

412
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Speaker 1: I think that we are still far away from that.

413
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Speaker 1: I think that we are getting a lot more integration.

414
00:24:23,040 --> 00:24:26,280
Speaker 1: And you see now that something happened in the US

415
00:24:26,359 --> 00:24:28,880
Speaker 1: and that's moving the rest of the markets, or vice versa,

416
00:24:29,000 --> 00:24:31,960
Speaker 1: something happens in Europe and and moves the global gas market.

417
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Speaker 1: But we're going to still have a lot of spreads

418
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Speaker 1: and you're not gonna have Henry hab trading at TTF level.

419
00:24:38,280 --> 00:24:42,320
Speaker 1: I think that that's that's far far away from today, Alex.

420
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Speaker 1: I want to go back to something that you said earlier,

421
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Speaker 1: which is that the informational value embedded in commodities prices

422
00:24:51,280 --> 00:24:54,360
Speaker 1: might be less than it was because of the volatility

423
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Speaker 1: in the market and the uncertainty over the outlook. Can

424
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Speaker 1: you give us a little bit more color on this

425
00:25:01,160 --> 00:25:05,120
Speaker 1: aspect of it and what it's actually like trading energy

426
00:25:05,480 --> 00:25:09,840
Speaker 1: at the moment well, I think it's with any value

427
00:25:09,840 --> 00:25:13,480
Speaker 1: at risk model. The more volatile a thing is in

428
00:25:13,520 --> 00:25:16,960
Speaker 1: general and the more thinly traded, So the less volume

429
00:25:17,000 --> 00:25:20,440
Speaker 1: going through the exchange or however you measure that liquidity,

430
00:25:21,040 --> 00:25:23,240
Speaker 1: the more you will be charged to trade that, both

431
00:25:23,280 --> 00:25:27,639
Speaker 1: by exchange margin and whoever you're trading through in my case,

432
00:25:28,480 --> 00:25:30,400
Speaker 1: or if you're a bank, you trade director the exchange,

433
00:25:30,440 --> 00:25:33,560
Speaker 1: but your internal cost of capital for that stuff goes

434
00:25:33,640 --> 00:25:39,200
Speaker 1: up pretty quickly. So yeah, if something realizes more volatility

435
00:25:39,359 --> 00:25:44,399
Speaker 1: than extremely marginal crypto tokens, then you cannot get leverage

436
00:25:44,440 --> 00:25:47,879
Speaker 1: on it, which means your ability to bet on spread

437
00:25:47,880 --> 00:25:51,120
Speaker 1: trades between Maybe I think the price is a bit

438
00:25:51,119 --> 00:25:54,760
Speaker 1: crazy today, but it's the back end. Prices are good

439
00:25:54,840 --> 00:25:57,679
Speaker 1: value that just becomes very expensive to put on, and

440
00:25:57,720 --> 00:26:01,040
Speaker 1: when you model out the returns, amount of capital get

441
00:26:01,080 --> 00:26:04,040
Speaker 1: tied up in those transactions gets to be wholly unappealing.

442
00:26:04,160 --> 00:26:06,280
Speaker 1: As a result, people just pull back from the market,

443
00:26:06,400 --> 00:26:10,320
Speaker 1: and so if you're a physical trader, it generally means

444
00:26:10,359 --> 00:26:13,600
Speaker 1: that the spot market becomes very wide and disorderly, which

445
00:26:13,640 --> 00:26:16,000
Speaker 1: is amazing if you're a glen Cora or trafficker or

446
00:26:16,040 --> 00:26:20,000
Speaker 1: the like, but for people trying to lock in like industry,

447
00:26:20,080 --> 00:26:23,359
Speaker 1: like industrials or big energy users trying to lock in

448
00:26:23,480 --> 00:26:26,400
Speaker 1: longer term prices, it becomes more or less unworkable. Both

449
00:26:26,440 --> 00:26:29,239
Speaker 1: of you. You can come in on this question. If

450
00:26:29,720 --> 00:26:32,400
Speaker 1: the price of energy or the price of a given contract,

451
00:26:32,640 --> 00:26:35,600
Speaker 1: as you say, loses some of its informational vilure or

452
00:26:35,600 --> 00:26:39,280
Speaker 1: it's less liquid or sort of you know, harder to arbitrage,

453
00:26:39,760 --> 00:26:41,800
Speaker 1: What are the what are the consequences of that? Is

454
00:26:41,840 --> 00:26:44,840
Speaker 1: it that it makes planning harder? Is it that, you know,

455
00:26:44,960 --> 00:26:47,439
Speaker 1: thinking about what you need to do for the winter, like,

456
00:26:47,560 --> 00:26:52,160
Speaker 1: what are the negative effects of prices losing their informational value? Yeah,

457
00:26:52,560 --> 00:26:55,159
Speaker 1: I think it's very hard for people to plan. I

458
00:26:55,160 --> 00:26:59,760
Speaker 1: think it's also modeling. People will assume a price on

459
00:26:59,840 --> 00:27:03,960
Speaker 1: a screen has inherent meaning, and whereas you've often got

460
00:27:04,000 --> 00:27:07,359
Speaker 1: to start to take a view as to how, for example,

461
00:27:08,280 --> 00:27:12,080
Speaker 1: growth and allergy, export capacity from the US and demand

462
00:27:12,119 --> 00:27:16,280
Speaker 1: destruction Europe and landing capacity in Germany will lead to

463
00:27:16,359 --> 00:27:20,320
Speaker 1: some sort of convergence to some arbitrage condition or close

464
00:27:20,359 --> 00:27:23,560
Speaker 1: to that arbitrage condition. Because right now it's it's it's

465
00:27:23,560 --> 00:27:27,240
Speaker 1: pretty wild. So I think that, yeah, you really have

466
00:27:27,400 --> 00:27:30,359
Speaker 1: to have a good view on value to be able

467
00:27:30,400 --> 00:27:32,919
Speaker 1: to take risk. The other thing you're seeing, of course,

468
00:27:33,000 --> 00:27:35,240
Speaker 1: is that if you want to build a solar farm

469
00:27:35,320 --> 00:27:37,960
Speaker 1: in Europe and get a p p A at what

470
00:27:38,160 --> 00:27:40,480
Speaker 1: used to be an obscene price, people will just about

471
00:27:40,520 --> 00:27:43,560
Speaker 1: take your hand off because it's at least firm, it's

472
00:27:43,560 --> 00:27:46,680
Speaker 1: a it's a it's a firm source of power, and

473
00:27:46,760 --> 00:27:49,159
Speaker 1: it's going to be a lot cheaper than spot. So

474
00:27:49,160 --> 00:27:52,080
Speaker 1: so that those guys are doing okay right now? Yeah,

475
00:27:52,119 --> 00:27:54,040
Speaker 1: I think that, I mean to our explorence, I think

476
00:27:54,040 --> 00:27:58,080
Speaker 1: that it's just planning. It's becoming very very complicated for companies,

477
00:27:58,200 --> 00:28:01,240
Speaker 1: and also the liquidity but growing in the forward market

478
00:28:01,320 --> 00:28:05,320
Speaker 1: is so thin that anyone that wants to hedge any

479
00:28:05,440 --> 00:28:09,280
Speaker 1: risks is facing a very difficult time with with additional

480
00:28:09,359 --> 00:28:12,600
Speaker 1: problem that you are hedging any race, and particularly you

481
00:28:12,640 --> 00:28:15,320
Speaker 1: are a power producer and then you want to sell forward.

482
00:28:15,359 --> 00:28:18,119
Speaker 1: I mean, this is the moment where you will think, well,

483
00:28:18,200 --> 00:28:20,639
Speaker 1: you know, prices are a record high. You are a

484
00:28:20,640 --> 00:28:25,199
Speaker 1: power producer, sell forward looking revenue a gray market. But

485
00:28:25,280 --> 00:28:29,520
Speaker 1: obviously if the market moves against you and it goes

486
00:28:29,600 --> 00:28:33,200
Speaker 1: even higher than you are going to be facing huge

487
00:28:33,320 --> 00:28:37,520
Speaker 1: margin calls and those marketing calls could just potentially blow

488
00:28:37,680 --> 00:28:40,200
Speaker 1: a company completely out of the water and run out

489
00:28:40,200 --> 00:28:43,080
Speaker 1: of credit, not because it made a wrong call. Actually

490
00:28:43,080 --> 00:28:47,160
Speaker 1: it was heading at risk selling selling forward the electricity

491
00:28:47,360 --> 00:28:51,600
Speaker 1: looking fantastic prices, but then marking calls hit you. You

492
00:28:51,640 --> 00:28:54,120
Speaker 1: don't have the credit to pay them, and you could

493
00:28:54,120 --> 00:28:57,720
Speaker 1: go ballly up just because of that. So it is

494
00:28:57,760 --> 00:29:02,120
Speaker 1: a very difficult market. And I think that for the

495
00:29:02,240 --> 00:29:06,840
Speaker 1: market right now in terms of offering a product for um,

496
00:29:07,000 --> 00:29:10,480
Speaker 1: playing off risk, it's just not having the value that

497
00:29:10,520 --> 00:29:13,000
Speaker 1: they used to have. So we have seen a number

498
00:29:13,000 --> 00:29:16,240
Speaker 1: of efforts to obviously mitigate some of the impact of

499
00:29:16,520 --> 00:29:19,600
Speaker 1: higher energy prices. What do you think is most helpful

500
00:29:19,920 --> 00:29:23,160
Speaker 1: or most effective at the moment? Have you? And actually

501
00:29:23,320 --> 00:29:25,400
Speaker 1: when I ask you also, what do you think is

502
00:29:25,520 --> 00:29:28,960
Speaker 1: the least effective? Just because I want to hear have

503
00:29:29,120 --> 00:29:32,520
Speaker 1: you a rant about things? I think that the most

504
00:29:32,920 --> 00:29:35,560
Speaker 1: effective thing that you're going to need to do right

505
00:29:35,600 --> 00:29:39,760
Speaker 1: now is I mean, we really are going to have

506
00:29:39,800 --> 00:29:44,440
Speaker 1: to support the poorest families through the winter. It's just

507
00:29:44,520 --> 00:29:47,640
Speaker 1: going to be catastrophic. I cannot really think what it's

508
00:29:47,680 --> 00:29:51,520
Speaker 1: going to be for you know, poor working class families

509
00:29:51,600 --> 00:29:55,560
Speaker 1: in Europe when they start facing a bill that is

510
00:29:55,760 --> 00:29:59,600
Speaker 1: four hundred five hundred euros or dollars, and that is

511
00:29:59,680 --> 00:30:03,880
Speaker 1: more most likely all the discretionary spending monthly, it's just

512
00:30:04,000 --> 00:30:06,680
Speaker 1: going to pay electricity and gas. And they may have kids,

513
00:30:06,680 --> 00:30:09,320
Speaker 1: they may have elderly people that they need just to

514
00:30:09,400 --> 00:30:12,320
Speaker 1: keep warm at home. I mean, you know, you don't

515
00:30:12,360 --> 00:30:15,240
Speaker 1: need the lights to go off to face a problem

516
00:30:15,400 --> 00:30:19,440
Speaker 1: where people cannot really heat themselves, and and and and

517
00:30:19,000 --> 00:30:23,640
Speaker 1: and access electricity. If it's just too expensive, then you

518
00:30:23,680 --> 00:30:28,560
Speaker 1: could have the same problem. So assisting that class of people,

519
00:30:28,800 --> 00:30:31,680
Speaker 1: it's going to be an absolutely priority. And I don't

520
00:30:31,720 --> 00:30:36,680
Speaker 1: see nearly enough in Europe down'nt about that. Providing blankets

521
00:30:36,680 --> 00:30:40,480
Speaker 1: support to everyone, no matter what the wealth is, no

522
00:30:40,520 --> 00:30:43,520
Speaker 1: matter what the salary is, it's the wrong answer to it.

523
00:30:43,520 --> 00:30:46,120
Speaker 1: It's just supporting demand in a moment that you need

524
00:30:46,200 --> 00:30:48,880
Speaker 1: to be restraining demand. So I think that target is

525
00:30:48,920 --> 00:30:54,160
Speaker 1: support is critical. Providing blankets support as many governments, particularly

526
00:30:54,160 --> 00:30:57,440
Speaker 1: the UK has been providing, where everyone is basically getting

527
00:30:57,760 --> 00:31:00,920
Speaker 1: a reveate and and a money for the government is

528
00:31:00,960 --> 00:31:03,280
Speaker 1: the wrong way to do. And then we're gonna get

529
00:31:03,400 --> 00:31:05,360
Speaker 1: We're gonna need in Europe to get a lot more

530
00:31:05,400 --> 00:31:10,360
Speaker 1: serious about trying to to be clear to people of

531
00:31:10,400 --> 00:31:13,440
Speaker 1: what's coming. I mean, the Bank of England press conference

532
00:31:13,800 --> 00:31:18,000
Speaker 1: when they increase interest rates was it was hard to

533
00:31:18,080 --> 00:31:21,600
Speaker 1: listen to because the governor said, we're gonna have even

534
00:31:21,720 --> 00:31:25,040
Speaker 1: higher inflation and we're gonna have a one year long recession.

535
00:31:25,640 --> 00:31:28,560
Speaker 1: But at least you could criticize whether he was to

536
00:31:29,400 --> 00:31:33,080
Speaker 1: to a slow racing interest rates. But it's the first

537
00:31:33,080 --> 00:31:37,480
Speaker 1: time that I see a policymaker, a central bank, governor,

538
00:31:37,520 --> 00:31:41,800
Speaker 1: a finance minister just telling the public what is coming

539
00:31:42,480 --> 00:31:46,000
Speaker 1: and warning in very clear terms what's coming. I think

540
00:31:46,040 --> 00:31:49,760
Speaker 1: that it is time that prime ministers and under finance

541
00:31:49,840 --> 00:31:52,880
Speaker 1: ministers start to be clear to the population about what's

542
00:31:52,920 --> 00:31:55,320
Speaker 1: coming and start to prepare in the population for it

543
00:31:56,120 --> 00:31:59,560
Speaker 1: and then offers some solutions. But at the moment in

544
00:31:59,600 --> 00:32:03,840
Speaker 1: Europe that he's not even an acknowledgement what'scoming and how

545
00:32:03,920 --> 00:32:07,840
Speaker 1: body is coming. So I'm thinking still about you know,

546
00:32:07,920 --> 00:32:10,560
Speaker 1: the sort of the tail of the two homes and

547
00:32:10,640 --> 00:32:14,480
Speaker 1: Tracy's house with the big pile of coal underneath, and

548
00:32:14,520 --> 00:32:17,840
Speaker 1: then Alex's house where there's you know, solar panels on

549
00:32:17,880 --> 00:32:20,680
Speaker 1: the roof, and it feels like these are like the fork,

550
00:32:20,960 --> 00:32:25,280
Speaker 1: the fork in the road, the two different directions. I've

551
00:32:25,280 --> 00:32:28,160
Speaker 1: gone the non E S T route. Yeah, yeah, exactly.

552
00:32:28,200 --> 00:32:30,840
Speaker 1: So it's like, does this is this a moment where we,

553
00:32:31,320 --> 00:32:33,080
Speaker 1: uh the world sort of backtracks on some of these

554
00:32:33,160 --> 00:32:37,240
Speaker 1: E s G goals and uh start maybe reopening opening

555
00:32:37,240 --> 00:32:39,960
Speaker 1: new coal mines which maybe a few years ago seemed unthinkable.

556
00:32:40,400 --> 00:32:45,160
Speaker 1: Or is this really catalyzed an acceleration of different renewable

557
00:32:45,240 --> 00:32:47,720
Speaker 1: energy sources? And it seems like maybe it's both one

558
00:32:47,720 --> 00:32:49,680
Speaker 1: and one or the other. But Alex, I'm curious, like

559
00:32:50,400 --> 00:32:53,000
Speaker 1: really both of you though, like what do you see

560
00:32:53,000 --> 00:32:55,400
Speaker 1: as the sort of like first and second order effects

561
00:32:55,440 --> 00:33:00,320
Speaker 1: of this in terms of where energy investment goes from here? Well,

562
00:33:00,480 --> 00:33:02,800
Speaker 1: personally that if you look at what's in the I

563
00:33:03,000 --> 00:33:06,080
Speaker 1: R A bell, Uh, there's a there's a lot of

564
00:33:06,080 --> 00:33:10,760
Speaker 1: clues there, and particularly things that Joe Mansion was very

565
00:33:10,840 --> 00:33:13,360
Speaker 1: keen on. The US is going to export a lot

566
00:33:13,400 --> 00:33:16,360
Speaker 1: more lergy, there will be more pipeline takeaway capacity to

567
00:33:16,400 --> 00:33:19,640
Speaker 1: places like West Virginia. That is absolutely not an accident,

568
00:33:19,760 --> 00:33:23,480
Speaker 1: at least from Joe's point of view. Um, And but

569
00:33:23,600 --> 00:33:27,080
Speaker 1: I think similarly, you're starting to see in places in

570
00:33:27,160 --> 00:33:31,080
Speaker 1: Europe where Italy basically allows you to write down the

571
00:33:31,240 --> 00:33:34,120
Speaker 1: entire cost of getting the heat pump. That sort of

572
00:33:34,160 --> 00:33:37,239
Speaker 1: demand destruction and pretty muscular approaches to that are going

573
00:33:37,280 --> 00:33:40,560
Speaker 1: to be more common. Europe is quite perverse, and particularly

574
00:33:40,680 --> 00:33:45,440
Speaker 1: the Netherlands until recently, whereby you get sort of protected

575
00:33:45,440 --> 00:33:47,600
Speaker 1: by the government on gas prices, but you have full

576
00:33:47,640 --> 00:33:51,720
Speaker 1: pass through a power prices which are effectively gas prices.

577
00:33:51,760 --> 00:33:56,600
Speaker 1: So you're discouraging people from switching their heating to electrification

578
00:33:57,080 --> 00:34:01,760
Speaker 1: through the structure of your have your electricity and gas tariffs.

579
00:34:01,800 --> 00:34:03,880
Speaker 1: And I think there's there's a lot of clean up

580
00:34:03,960 --> 00:34:07,560
Speaker 1: to be done there. But in coal, for example, I

581
00:34:07,600 --> 00:34:10,320
Speaker 1: think I don't think that's going to happen. The only

582
00:34:10,400 --> 00:34:13,840
Speaker 1: reason the only grade of coal that is going bananas

583
00:34:13,960 --> 00:34:15,560
Speaker 1: right now is the one that you can burn in

584
00:34:15,600 --> 00:34:19,799
Speaker 1: European coal plants which have been reopened, or the other

585
00:34:19,840 --> 00:34:25,359
Speaker 1: grades like you know, Indonesian lower calorific grades hundred type

586
00:34:25,400 --> 00:34:28,479
Speaker 1: stuff that's already started selling off pretty heavily because China

587
00:34:28,560 --> 00:34:30,799
Speaker 1: is just importing less coal and producing more of its own.

588
00:34:31,239 --> 00:34:35,080
Speaker 1: So I think the China impact is going one direction,

589
00:34:35,280 --> 00:34:39,560
Speaker 1: and the europe gas shortage and then substitution dynamics going another.

590
00:34:40,120 --> 00:34:42,719
Speaker 1: I think realistically, talking to people in the coal industry.

591
00:34:42,760 --> 00:34:45,000
Speaker 1: They expect to have a really good time for two

592
00:34:45,040 --> 00:34:47,920
Speaker 1: years and then be back to maybe not very good times.

593
00:34:48,520 --> 00:34:51,720
Speaker 1: Opening new minds would seem to be a poor financial decision,

594
00:34:52,239 --> 00:34:55,640
Speaker 1: but no doubt someone will try it. Yeah, I I

595
00:34:55,960 --> 00:34:58,040
Speaker 1: kind of agree with Alex. I think that we don't

596
00:34:58,040 --> 00:35:01,600
Speaker 1: want to see international call mine in just having a boom,

597
00:35:01,920 --> 00:35:04,240
Speaker 1: but we're going to see more coal mining in China

598
00:35:04,320 --> 00:35:06,759
Speaker 1: and in India. And you know, the expectation is for

599
00:35:06,880 --> 00:35:10,520
Speaker 1: this year global call demand to heat too much the

600
00:35:10,680 --> 00:35:13,080
Speaker 1: two thousand and thirteen peak, and in two thousand and

601
00:35:13,120 --> 00:35:16,200
Speaker 1: twenty three, on an annual basis, we will said probably

602
00:35:16,360 --> 00:35:19,600
Speaker 1: a new all time high. I think that the biggest

603
00:35:19,600 --> 00:35:23,080
Speaker 1: consequence of the current crisis is going to be a

604
00:35:23,160 --> 00:35:28,239
Speaker 1: sharper focus on energy security. Um that was I want

605
00:35:28,239 --> 00:35:33,040
Speaker 1: to say abandoned, but the energy security took a backseat

606
00:35:33,120 --> 00:35:36,720
Speaker 1: to climate change over the last five years or so.

607
00:35:36,920 --> 00:35:39,000
Speaker 1: I think that you are going to have now energy

608
00:35:39,040 --> 00:35:42,399
Speaker 1: security at the same level as climate change in terms

609
00:35:42,400 --> 00:35:46,680
Speaker 1: of concerns by policymakers, and that most likely it's gonna

610
00:35:46,719 --> 00:35:49,960
Speaker 1: mean slow down in some of the climate change initiatives

611
00:35:50,000 --> 00:35:52,440
Speaker 1: you're going to have. You're going to keep a lot

612
00:35:52,520 --> 00:35:57,040
Speaker 1: more of coal fire generation um on a standby. At

613
00:35:57,120 --> 00:36:00,759
Speaker 1: least you're not gonna shut down the plants and and

614
00:36:00,880 --> 00:36:03,600
Speaker 1: dismantled them for good. You will keep them on on

615
00:36:03,840 --> 00:36:07,840
Speaker 1: on standby. Uh. I think that's gonna be a reconsideration

616
00:36:07,920 --> 00:36:11,000
Speaker 1: of nuclear in many in many countries. I mean, we

617
00:36:11,040 --> 00:36:14,120
Speaker 1: are beginning to see when the Germans, despite everything, they're

618
00:36:14,160 --> 00:36:17,960
Speaker 1: beginning to warm up to the idea that maybe keeping

619
00:36:18,000 --> 00:36:21,080
Speaker 1: the plants a bit longer was not such a bad idea.

620
00:36:22,000 --> 00:36:24,960
Speaker 1: But I do think that we're gonna see also many

621
00:36:25,000 --> 00:36:30,200
Speaker 1: individuals were possible to try to install solar panels on

622
00:36:30,239 --> 00:36:31,879
Speaker 1: their houses. So I think that we're going to see

623
00:36:31,880 --> 00:36:35,319
Speaker 1: on the next few years of boom on solar installation

624
00:36:35,600 --> 00:36:40,239
Speaker 1: on on on individual houses. That it's gonna depend a

625
00:36:40,280 --> 00:36:42,880
Speaker 1: bit on prices. I mean, the price of solar panels

626
00:36:42,960 --> 00:36:46,520
Speaker 1: is starting to to to to go up. Uh. Speaking

627
00:36:46,560 --> 00:36:49,959
Speaker 1: from from on experience about this house, because that would

628
00:36:50,000 --> 00:36:51,920
Speaker 1: be my first investment on the house to put the

629
00:36:51,920 --> 00:36:55,080
Speaker 1: solar panels. I do have solar panels for the hot water,

630
00:36:55,200 --> 00:36:58,560
Speaker 1: so I think that the shower is guarantee over the winter.

631
00:36:58,600 --> 00:37:00,600
Speaker 1: It may not be very warm, but it's gonna be

632
00:37:00,880 --> 00:37:04,160
Speaker 1: at least there, but I would not be surprised if

633
00:37:04,160 --> 00:37:07,319
Speaker 1: in many European countries we see many houses we don't

634
00:37:07,400 --> 00:37:10,440
Speaker 1: have a solar panel today that they will have a

635
00:37:10,480 --> 00:37:14,319
Speaker 1: sonar panel by because I think that people have learned

636
00:37:14,320 --> 00:37:17,280
Speaker 1: a lesson and say, well, if I can generate myself

637
00:37:17,320 --> 00:37:20,799
Speaker 1: a bit of electricity, that is going to be very important.

638
00:37:20,880 --> 00:37:24,040
Speaker 1: The other thing that I for the first time beginning

639
00:37:24,040 --> 00:37:27,319
Speaker 1: to see a lot of attention on is modeling electricity

640
00:37:27,320 --> 00:37:30,879
Speaker 1: demand for the next few years. Electricity demanding in many

641
00:37:30,880 --> 00:37:34,800
Speaker 1: OI city countries have been relatively flat despite economic growth

642
00:37:34,840 --> 00:37:36,600
Speaker 1: over the last few years. But we are going to

643
00:37:36,680 --> 00:37:40,440
Speaker 1: put quite a lot of more electricity consumption into the grids,

644
00:37:40,480 --> 00:37:44,719
Speaker 1: coming from electric vehicles, coming from heat pumps. And that

645
00:37:44,800 --> 00:37:48,160
Speaker 1: means that previous assumptions that electricity demand was not going

646
00:37:48,200 --> 00:37:51,319
Speaker 1: to increase need to be revised. And I see a

647
00:37:51,360 --> 00:37:53,960
Speaker 1: lot of people now beginning to spend quhi lot of

648
00:37:54,040 --> 00:37:56,960
Speaker 1: time of modeling electricity consumption in Europe and in the

649
00:37:57,040 --> 00:37:59,960
Speaker 1: US for the next five or ten years. And then

650
00:38:00,040 --> 00:38:02,600
Speaker 1: messages scom is that the demand is going to go

651
00:38:02,760 --> 00:38:05,800
Speaker 1: up and I'm going to having some cases quite meaningful.

652
00:38:22,080 --> 00:38:24,560
Speaker 1: Alex talk to us a little bit more about what

653
00:38:24,719 --> 00:38:27,560
Speaker 1: China is doing here. I mean both in terms of

654
00:38:28,040 --> 00:38:32,040
Speaker 1: energy transition um such as it is in China, but

655
00:38:32,719 --> 00:38:37,000
Speaker 1: also in terms of securing additional gas supplies, because one

656
00:38:37,000 --> 00:38:39,319
Speaker 1: of the interesting things we've seen the summer is that

657
00:38:39,440 --> 00:38:41,600
Speaker 1: while it seems like the rest of the world is

658
00:38:41,640 --> 00:38:44,920
Speaker 1: really scrambling to get as much lergy as possible before

659
00:38:44,960 --> 00:38:50,240
Speaker 1: the winter, China has mostly stayed out of that market

660
00:38:50,280 --> 00:38:52,719
Speaker 1: and doesn't really seem to be ramping up imports or

661
00:38:52,920 --> 00:38:56,200
Speaker 1: not trying to secure additional supply. What's going on there?

662
00:38:56,320 --> 00:38:59,239
Speaker 1: And if they come back into the market, you know

663
00:38:59,280 --> 00:39:01,319
Speaker 1: at the last minute, it is that going to drive

664
00:39:01,400 --> 00:39:05,720
Speaker 1: up prices? Yeah, it may well do if they do that. Though,

665
00:39:06,320 --> 00:39:10,080
Speaker 1: if you look at the data for China's pipeline imports

666
00:39:10,160 --> 00:39:15,719
Speaker 1: from Kazakhstan, Turkmenistan and Russia, they are more or less

667
00:39:15,800 --> 00:39:18,240
Speaker 1: running those pipelines flat out at this point in time.

668
00:39:18,680 --> 00:39:22,520
Speaker 1: So they have massively increased their purchases from Russia Kazakhstan.

669
00:39:22,760 --> 00:39:26,560
Speaker 1: The data is getting a little bit well, accuracy is

670
00:39:26,600 --> 00:39:28,399
Speaker 1: more contested than it was a couple of months ago,

671
00:39:29,280 --> 00:39:31,000
Speaker 1: but they appeared to be buying a lot more and

672
00:39:31,040 --> 00:39:35,600
Speaker 1: that's that's relatively uncontested. There's also longer term and this

673
00:39:35,680 --> 00:39:38,279
Speaker 1: is a big question for the allergy market is and

674
00:39:38,800 --> 00:39:41,800
Speaker 1: is that they're talking about doing a very large pipeline

675
00:39:41,800 --> 00:39:44,800
Speaker 1: power of Siberia too, which would then lead to a

676
00:39:44,880 --> 00:39:48,319
Speaker 1: question of world how much more ellergy is China really

677
00:39:48,320 --> 00:39:52,920
Speaker 1: going to import because a lot of the power that China,

678
00:39:53,280 --> 00:39:55,640
Speaker 1: a lot of the allergy that China is imported historically

679
00:39:55,760 --> 00:40:00,640
Speaker 1: is very seasonal. It's often geared towards heating in northern

680
00:40:00,719 --> 00:40:05,640
Speaker 1: China in the winter, and recent promulgations from the relevant

681
00:40:05,719 --> 00:40:08,480
Speaker 1: organs have indicated they want to go very hard on

682
00:40:08,520 --> 00:40:11,560
Speaker 1: heat pumps also for for actual load balancing and their

683
00:40:11,560 --> 00:40:13,680
Speaker 1: power grid. They now want to do I think it's

684
00:40:13,680 --> 00:40:16,480
Speaker 1: two hundred and fifty gigawats are pumped hydro so that

685
00:40:16,520 --> 00:40:19,839
Speaker 1: they can better utilize their coal resources. So China's making

686
00:40:19,840 --> 00:40:23,960
Speaker 1: a push much like everywhere else, for essentially friend shoring

687
00:40:24,000 --> 00:40:28,400
Speaker 1: their energy supply to people in the Greater Eurasian land mass,

688
00:40:28,840 --> 00:40:31,480
Speaker 1: as well as also just trying to reduce their alliance

689
00:40:31,600 --> 00:40:35,520
Speaker 1: on gas full stop because they are price sensitive like

690
00:40:35,560 --> 00:40:37,839
Speaker 1: everyone else, and if they have a lot of high

691
00:40:37,920 --> 00:40:41,240
Speaker 1: quality coal they can burn instead and ellen j costs

692
00:40:41,239 --> 00:40:44,359
Speaker 1: forty bucks or more per gig a dual equivalent. Then

693
00:40:44,560 --> 00:40:47,480
Speaker 1: they absolutely don't have time for that, have you. I

694
00:40:47,520 --> 00:40:50,440
Speaker 1: just want to go back to something you're talking about before,

695
00:40:50,440 --> 00:40:54,600
Speaker 1: and this idea of energy security may be becoming on

696
00:40:54,680 --> 00:40:57,840
Speaker 1: the same level as a priority of climate, but you know,

697
00:40:58,000 --> 00:41:01,600
Speaker 1: just in general sort of Europe's specifically, and then more broadly,

698
00:41:01,680 --> 00:41:05,040
Speaker 1: like what do people think about e s G these days?

699
00:41:05,400 --> 00:41:09,600
Speaker 1: Do you see some of the resolve weakening on uh,

700
00:41:09,640 --> 00:41:12,040
Speaker 1: you know, some of these efforts that were very popular

701
00:41:12,160 --> 00:41:16,719
Speaker 1: and the twenty tends to reduce emissions. Do you see

702
00:41:16,760 --> 00:41:19,799
Speaker 1: a sort of like actual backlash coming to this and

703
00:41:19,880 --> 00:41:22,600
Speaker 1: maybe like people questioning it's like was going you know,

704
00:41:22,800 --> 00:41:27,120
Speaker 1: was trying to discourage investment. Really useful exercise given where

705
00:41:27,120 --> 00:41:30,239
Speaker 1: we are with you know, coal demand today. Like what

706
00:41:30,280 --> 00:41:33,120
Speaker 1: do you see as the sort of near term future

707
00:41:33,200 --> 00:41:34,759
Speaker 1: of e s G either at a sort of like

708
00:41:34,800 --> 00:41:38,839
Speaker 1: corporate level or just a sort of policy level. Well,

709
00:41:38,880 --> 00:41:42,320
Speaker 1: to me, it was very interesting when earlier this month

710
00:41:42,360 --> 00:41:45,919
Speaker 1: he now goes, we have the glenk Or first half

711
00:41:46,040 --> 00:41:49,399
Speaker 1: results and they have the conference call, and obviously glint

712
00:41:49,480 --> 00:41:52,040
Speaker 1: Or is the word's largest commoti trade. There is a

713
00:41:52,080 --> 00:41:55,480
Speaker 1: big miner of coal is the largest exporter or thermal

714
00:41:55,560 --> 00:41:58,919
Speaker 1: call in the c BORN market, and typically you will

715
00:41:58,960 --> 00:42:03,440
Speaker 1: expect so own investors or sell side analysts just giving

716
00:42:03,480 --> 00:42:05,640
Speaker 1: the company a bit of a hard time. Why you

717
00:42:05,719 --> 00:42:09,960
Speaker 1: are still um investing in call? Why you are not

718
00:42:10,160 --> 00:42:13,080
Speaker 1: spinning of the business while you're not selling it? Sell

719
00:42:13,120 --> 00:42:16,200
Speaker 1: it to the Chinese. It was a typical question and

720
00:42:16,360 --> 00:42:19,839
Speaker 1: in this conference called actually a cell side analyst from

721
00:42:19,920 --> 00:42:24,560
Speaker 1: a big major American bank asked the CEO of glen Core.

722
00:42:25,120 --> 00:42:27,920
Speaker 1: He said something like, you know the world is short

723
00:42:28,000 --> 00:42:32,360
Speaker 1: of energy. What is going to take you to start

724
00:42:32,400 --> 00:42:35,200
Speaker 1: investing in coal mines to help the world in the

725
00:42:35,239 --> 00:42:38,759
Speaker 1: short time with supply? And to me that was the

726
00:42:38,880 --> 00:42:40,680
Speaker 1: kind of a hard moment. I mean like when you

727
00:42:40,719 --> 00:42:44,120
Speaker 1: know when a cell side analyst it's kind of saying no, Actually,

728
00:42:44,280 --> 00:42:46,960
Speaker 1: the question here to us is why these guys are

729
00:42:47,000 --> 00:42:50,759
Speaker 1: not investing modern call. That's how a back said, I

730
00:42:50,800 --> 00:42:54,160
Speaker 1: think e SD is taking right now. I mean black

731
00:42:54,280 --> 00:42:58,239
Speaker 1: Rock put it quite well um earlier this year when

732
00:42:58,239 --> 00:43:00,759
Speaker 1: it was just describing his views of about some of

733
00:43:00,880 --> 00:43:04,319
Speaker 1: their shareholder resolutions on climate chains, and they said that

734
00:43:04,680 --> 00:43:08,520
Speaker 1: those resolutions they needed to take into account the current

735
00:43:08,560 --> 00:43:13,319
Speaker 1: geopolitical context but the energy market pressures and the implication

736
00:43:13,400 --> 00:43:17,040
Speaker 1: of both into inflation. I think for the time being

737
00:43:17,719 --> 00:43:20,560
Speaker 1: E s D has gone at least on energy and commodities,

738
00:43:20,680 --> 00:43:26,920
Speaker 1: has come from really they must have item the hottest

739
00:43:26,920 --> 00:43:29,719
Speaker 1: selling item to a bit of them a day is

740
00:43:30,080 --> 00:43:33,160
Speaker 1: I asked recently a big European institutional investor about E

741
00:43:33,320 --> 00:43:36,680
Speaker 1: s G and and he was saying to me that

742
00:43:36,840 --> 00:43:40,920
Speaker 1: is very yesterday. Is not really what I'm focusing right now.

743
00:43:41,440 --> 00:43:43,480
Speaker 1: Is it gonna go away? No? I don't think it's

744
00:43:43,480 --> 00:43:46,839
Speaker 1: gonna go away. This is a cyclical business. High prices

745
00:43:47,239 --> 00:43:49,640
Speaker 1: give way to low prices, and I think that at

746
00:43:49,640 --> 00:43:52,280
Speaker 1: that point E s G is going to be back.

747
00:43:52,800 --> 00:43:55,680
Speaker 1: But for the time being, I think that you're going

748
00:43:55,719 --> 00:43:58,320
Speaker 1: to have a lot of investors to spaying lip service

749
00:43:58,400 --> 00:44:01,240
Speaker 1: to E s D and climate means. And at the

750
00:44:01,280 --> 00:44:03,759
Speaker 1: same time as a glink or are you going to

751
00:44:03,800 --> 00:44:05,640
Speaker 1: put modern money into the core of business or not?

752
00:44:06,840 --> 00:44:08,160
Speaker 1: Can I just say something the on the E s

753
00:44:08,239 --> 00:44:12,640
Speaker 1: G thing, Yes, sir, I think there is a real

754
00:44:13,480 --> 00:44:17,520
Speaker 1: problem with the interactions between both investors in the companies

755
00:44:18,120 --> 00:44:23,720
Speaker 1: in that people do not make big, good, equiliberal models

756
00:44:23,760 --> 00:44:26,800
Speaker 1: of what demand should be for these fuels over time.

757
00:44:27,520 --> 00:44:32,120
Speaker 1: And so when the war happened, obviously there was some

758
00:44:32,239 --> 00:44:35,160
Speaker 1: quantum of gas and coal taken out of the market,

759
00:44:35,960 --> 00:44:39,200
Speaker 1: and then there was sort of a record scratch, and

760
00:44:39,239 --> 00:44:43,360
Speaker 1: the s G investors could not change their tune or answer, well,

761
00:44:43,400 --> 00:44:46,120
Speaker 1: how does this change things? You know, how do we

762
00:44:46,160 --> 00:44:50,320
Speaker 1: get the fuel supply? Should we think about the geopolitical

763
00:44:50,440 --> 00:44:53,520
Speaker 1: risk waiting of our fuel supply? There was absolutely no

764
00:44:53,600 --> 00:44:56,520
Speaker 1: response to that. But unfortunately, and this has been no

765
00:44:56,600 --> 00:45:00,080
Speaker 1: credit to people on the in the energy sector, is

766
00:45:00,160 --> 00:45:03,520
Speaker 1: they have not developed a coherent response aside from Harada,

767
00:45:03,560 --> 00:45:06,200
Speaker 1: let's drill some holes now, and so I suspect we're

768
00:45:06,200 --> 00:45:08,360
Speaker 1: going to probably get over investment and then the energy

769
00:45:08,360 --> 00:45:12,080
Speaker 1: sector probably look silly again in due course, especially the

770
00:45:12,120 --> 00:45:16,600
Speaker 1: most marginal fuels, namely thermal coal. And so I I

771
00:45:16,640 --> 00:45:19,319
Speaker 1: think there needs to be a lot more of an

772
00:45:19,360 --> 00:45:23,759
Speaker 1: effort two model the world well so that we can

773
00:45:23,760 --> 00:45:26,160
Speaker 1: pick up things, you know, like we did in our

774
00:45:26,160 --> 00:45:29,239
Speaker 1: paper that China was probably just going to step away

775
00:45:29,239 --> 00:45:33,160
Speaker 1: from coking coal maybe forever, and that's that stuff is important,

776
00:45:33,160 --> 00:45:35,440
Speaker 1: but it's it's hard graft modeling, and it is not

777
00:45:35,520 --> 00:45:39,480
Speaker 1: done enough today anyway, Alex and have you we want

778
00:45:39,480 --> 00:45:42,319
Speaker 1: to give you guys the opportunity to ask each other

779
00:45:42,520 --> 00:45:45,400
Speaker 1: a question. So, um, maybe we start with Alex, is

780
00:45:45,400 --> 00:45:48,600
Speaker 1: there anything that you want to ask? Have you? Yeah?

781
00:45:48,600 --> 00:45:51,520
Speaker 1: I mean when you talk to all the trading houses,

782
00:45:51,560 --> 00:45:53,880
Speaker 1: I mean, what is the general sentiment of the guys

783
00:45:53,920 --> 00:45:56,759
Speaker 1: who are in physical training that you talk to. I

784
00:45:56,760 --> 00:45:58,680
Speaker 1: mean there's a I talked to a lot of the

785
00:45:58,719 --> 00:46:03,360
Speaker 1: folks in Singapore, but it's clearly uh, it just seems

786
00:46:03,400 --> 00:46:07,919
Speaker 1: like complete disorder and European power right now. I think

787
00:46:07,920 --> 00:46:12,640
Speaker 1: that everyone is trying to balance the res of supply

788
00:46:13,080 --> 00:46:16,879
Speaker 1: and under accession that is coming in Europe. I see

789
00:46:16,880 --> 00:46:21,759
Speaker 1: a still most trade that's quaite, bullies, thermal call and

790
00:46:21,960 --> 00:46:26,880
Speaker 1: allergy supplies and and gas in Europe. Um with oil,

791
00:46:27,000 --> 00:46:31,120
Speaker 1: they have a bit of a less clear outcome because

792
00:46:31,120 --> 00:46:34,000
Speaker 1: there are so many there are so many moving pieces,

793
00:46:34,000 --> 00:46:36,080
Speaker 1: and each of those moving pieces is a million to

794
00:46:36,160 --> 00:46:38,759
Speaker 1: two million barrels a day appears. I mean, it's going

795
00:46:38,800 --> 00:46:42,399
Speaker 1: to be a deal with Iran nuclear there is are

796
00:46:42,400 --> 00:46:45,480
Speaker 1: the sunctions in you the European suctions on Russia are

797
00:46:45,480 --> 00:46:48,200
Speaker 1: really gonna hit hard or not. You know, it's it's

798
00:46:48,280 --> 00:46:51,560
Speaker 1: China gonna rebound from from COVID or it's gonna remain

799
00:46:51,560 --> 00:46:54,719
Speaker 1: doing with the zero zero COVID policy, So they're a

800
00:46:54,719 --> 00:46:57,760
Speaker 1: bit confused. But one thing that a lot of people

801
00:46:57,840 --> 00:47:00,560
Speaker 1: seem to think is that we are not yet over

802
00:47:00,760 --> 00:47:04,040
Speaker 1: on oil with with diesel in particular, and I hear

803
00:47:04,120 --> 00:47:07,319
Speaker 1: a lot of concerns about the diesel situation come in

804
00:47:07,400 --> 00:47:11,719
Speaker 1: later this year in Europe. That is one that perhaps

805
00:47:11,880 --> 00:47:13,759
Speaker 1: we are not on the season, so it's kind of

806
00:47:13,840 --> 00:47:15,840
Speaker 1: drop a bit out of the rather from from a

807
00:47:15,880 --> 00:47:18,120
Speaker 1: lot of people, but there is a lot of concerns

808
00:47:18,160 --> 00:47:20,680
Speaker 1: on physical trading houses where Europe is going to have

809
00:47:20,800 --> 00:47:24,000
Speaker 1: enough diesel disc this winter. They just real quickly what

810
00:47:24,120 --> 00:47:27,000
Speaker 1: is the issue there, why diesel specifically, and why the

811
00:47:27,080 --> 00:47:31,000
Speaker 1: seasonal element of it. Well, obviously we need more diesel

812
00:47:31,080 --> 00:47:34,120
Speaker 1: because diesel is is also heating oil for for winter

813
00:47:34,239 --> 00:47:37,200
Speaker 1: and we still used, particularly in German, equal lot of

814
00:47:37,239 --> 00:47:39,920
Speaker 1: heating oil for for the winter. And also because we

815
00:47:39,960 --> 00:47:43,319
Speaker 1: are beginning to to to get a sense that if

816
00:47:43,320 --> 00:47:46,719
Speaker 1: there is a problem of gas supply or companies see

817
00:47:46,800 --> 00:47:50,520
Speaker 1: these guys high gas prices remaining, a lot of the

818
00:47:50,560 --> 00:47:53,080
Speaker 1: incentive is to try to run on on diesel or

819
00:47:53,120 --> 00:47:57,360
Speaker 1: heating oil through the winter because economically makes makes sense.

820
00:47:57,400 --> 00:48:00,120
Speaker 1: And you know, we we have seen even huge the

821
00:48:00,200 --> 00:48:03,560
Speaker 1: national like B S a F the big German chemical

822
00:48:03,640 --> 00:48:07,520
Speaker 1: company talking about using fuel oil or or or diesel

823
00:48:07,520 --> 00:48:12,000
Speaker 1: as an alternative to us and sorry, and a lot

824
00:48:12,040 --> 00:48:14,000
Speaker 1: of a lot Previously a lot of the diesel was

825
00:48:14,080 --> 00:48:18,840
Speaker 1: coming from from Russia. So from February, in theory, Europe

826
00:48:18,880 --> 00:48:21,000
Speaker 1: is not going to be important any diesel from Russia.

827
00:48:21,200 --> 00:48:23,719
Speaker 1: And that's when you know, we have been talking about sanctions.

828
00:48:23,960 --> 00:48:27,200
Speaker 1: But all the announcements on sansions work for tomorrow, but

829
00:48:27,280 --> 00:48:30,239
Speaker 1: that tomorrow is getting closer and closer by the day.

830
00:48:30,239 --> 00:48:33,879
Speaker 1: By December, Europe cannot buy Russian crewd anymore. We're still

831
00:48:34,360 --> 00:48:38,080
Speaker 1: buying it, and by February we cannot buy refined products.

832
00:48:38,160 --> 00:48:40,960
Speaker 1: And when you take that amount of supply from the market,

833
00:48:41,000 --> 00:48:45,680
Speaker 1: then it gets complicated. So Alex, my my question to you.

834
00:48:45,680 --> 00:48:48,080
Speaker 1: You are based in Singapore, you have a very very

835
00:48:48,080 --> 00:48:51,680
Speaker 1: good view about Asia. How you see the response, But

836
00:48:51,760 --> 00:48:54,840
Speaker 1: I'm very very curious because we sometimes forget about Japan,

837
00:48:55,280 --> 00:48:58,120
Speaker 1: you know, particularly from the point of view Europe. But

838
00:48:58,280 --> 00:49:01,520
Speaker 1: you know, it is still the four largest oil consumer,

839
00:49:01,760 --> 00:49:03,759
Speaker 1: is a huge importance of l n G has a

840
00:49:03,840 --> 00:49:06,560
Speaker 1: huge nuclear industry. I mean to me, it's one of

841
00:49:06,600 --> 00:49:11,279
Speaker 1: the most important energy countries. Even if the demand there

842
00:49:11,360 --> 00:49:13,880
Speaker 1: is no lower rowing, but it's still a huge consumer.

843
00:49:14,320 --> 00:49:17,120
Speaker 1: How do you what do you think the Japanese government

844
00:49:17,160 --> 00:49:20,239
Speaker 1: in particular, and and that kind of intersection between the

845
00:49:20,560 --> 00:49:25,360
Speaker 1: Japanese government of the Ministry of um of Metty and

846
00:49:25,360 --> 00:49:30,000
Speaker 1: and the Japanese trading companies Showa Shasha and what are

847
00:49:30,040 --> 00:49:33,359
Speaker 1: they thinking, how they're responding to these crisis that has

848
00:49:33,400 --> 00:49:37,040
Speaker 1: put the war of energy upside down. When I speak

849
00:49:37,080 --> 00:49:41,200
Speaker 1: to people there and some people and Metty, they are

850
00:49:41,400 --> 00:49:44,200
Speaker 1: engaging and as broad and I would say as deeper

851
00:49:44,320 --> 00:49:47,560
Speaker 1: rethink of some of these issues, both for both for

852
00:49:47,600 --> 00:49:51,719
Speaker 1: the energy shock reasons but also for security reasons due

853
00:49:51,760 --> 00:49:56,000
Speaker 1: to recent developments as much as anything since the nineties seventies.

854
00:49:56,000 --> 00:49:59,880
Speaker 1: I'd say there is all sorts of there're things of

855
00:50:00,000 --> 00:50:06,759
Speaker 1: are considered quite um futuristic. For example, like using ammonia

856
00:50:07,000 --> 00:50:11,279
Speaker 1: made from renewables in Australia, you can blend about of

857
00:50:11,280 --> 00:50:13,800
Speaker 1: it into the fuel of a coal fire power plant

858
00:50:13,840 --> 00:50:18,080
Speaker 1: without substantial retrofits. That's all been pulled forward I would

859
00:50:18,120 --> 00:50:21,800
Speaker 1: say five years, so they are considering that sort of stuff.

860
00:50:22,040 --> 00:50:24,040
Speaker 1: They're also considering and that they are, and they have

861
00:50:24,120 --> 00:50:27,719
Speaker 1: been doing a lot more renewables as well, both in

862
00:50:27,840 --> 00:50:32,000
Speaker 1: terms of looking at agri volta x so view to

863
00:50:32,080 --> 00:50:35,759
Speaker 1: heat stress from from the recent really brittle weather. They've

864
00:50:35,760 --> 00:50:40,800
Speaker 1: had people looking at basically putting solar in the middle

865
00:50:40,840 --> 00:50:44,279
Speaker 1: of fields to reduce heat stress on plants because you

866
00:50:44,320 --> 00:50:47,279
Speaker 1: don't actually lose much of anything in yield. So there's

867
00:50:47,280 --> 00:50:49,520
Speaker 1: a lot of stuff which is a little bit maybe

868
00:50:49,520 --> 00:50:52,919
Speaker 1: not science fiction, but further down the the I guess

869
00:50:52,960 --> 00:50:55,359
Speaker 1: critical path that has now been pulled forward as well

870
00:50:55,400 --> 00:50:58,600
Speaker 1: as of course I'm trying to get nuclear plants restarted,

871
00:50:59,360 --> 00:51:01,319
Speaker 1: but I think there's a sort of recognition that we

872
00:51:01,360 --> 00:51:06,640
Speaker 1: are unlikely to unless Saudi Arabia were to evaporate or

873
00:51:06,680 --> 00:51:10,640
Speaker 1: Australia you know, levitated off into the outer galaxy or

874
00:51:10,640 --> 00:51:13,239
Speaker 1: something like that, you're unlikely to generate as big as

875
00:51:13,280 --> 00:51:17,080
Speaker 1: shock for them in terms of energy. Ever. Again, real quickly,

876
00:51:17,239 --> 00:51:19,240
Speaker 1: and we're just about to wrap it up, but Alex,

877
00:51:19,239 --> 00:51:22,719
Speaker 1: since you mentioned heat stress, this seems to be a

878
00:51:22,840 --> 00:51:24,920
Speaker 1: thing that bubbles up everywhere. And you know, we have

879
00:51:25,560 --> 00:51:28,640
Speaker 1: part of this story with the French nuclear is that

880
00:51:28,680 --> 00:51:30,879
Speaker 1: they had to pair back because the rivers were still

881
00:51:30,920 --> 00:51:33,680
Speaker 1: hot that they couldn't dump the additional hot water. We

882
00:51:33,760 --> 00:51:37,000
Speaker 1: know that there are concerns with river levels in Germany.

883
00:51:37,120 --> 00:51:40,080
Speaker 1: It's also in the American Southwest, very big concerns about

884
00:51:40,320 --> 00:51:45,320
Speaker 1: water levels. Like to what degree is climate itself contributing

885
00:51:45,440 --> 00:51:49,840
Speaker 1: to strains on the production of energy around the world.

886
00:51:51,120 --> 00:51:54,239
Speaker 1: Can I give you a specific example. So so, so

887
00:51:54,280 --> 00:51:57,160
Speaker 1: there's a there are a couple of ucail plants in Switzerland,

888
00:51:57,239 --> 00:51:59,360
Speaker 1: one of the one of which was just in the

889
00:51:59,360 --> 00:52:01,080
Speaker 1: middle of so a little lot of fish island and

890
00:52:01,120 --> 00:52:04,799
Speaker 1: a river and does not have a cooling towel. So

891
00:52:04,920 --> 00:52:07,680
Speaker 1: the design was the river is always cold in Switzerland,

892
00:52:08,120 --> 00:52:09,879
Speaker 1: we can just use the river to call the plant.

893
00:52:09,960 --> 00:52:14,320
Speaker 1: No problems, right. Unfortunately, now you get to a point

894
00:52:14,360 --> 00:52:17,480
Speaker 1: where they can't run the plant as hard because the

895
00:52:17,520 --> 00:52:20,280
Speaker 1: water level, the temperature in the river gets too high.

896
00:52:20,600 --> 00:52:22,439
Speaker 1: And it's not that the river is about to boil

897
00:52:22,520 --> 00:52:24,920
Speaker 1: off or anything like that, but you will kill the

898
00:52:25,000 --> 00:52:29,360
Speaker 1: fish who don't really handle temperatures above centigrade. So that

899
00:52:29,480 --> 00:52:32,520
Speaker 1: there's all these kinds of subtle constraints in these systems

900
00:52:32,560 --> 00:52:35,680
Speaker 1: that you just kind of glide over as an assumption.

901
00:52:36,320 --> 00:52:40,760
Speaker 1: But as the climate changes and systems change, these become

902
00:52:40,960 --> 00:52:43,000
Speaker 1: real issues in terms of how you can run a

903
00:52:43,480 --> 00:52:47,120
Speaker 1: fleet of power assets, right, and then it becomes almost

904
00:52:47,160 --> 00:52:52,200
Speaker 1: self reflexive because as the energy crisis worsens climate change,

905
00:52:52,640 --> 00:52:55,760
Speaker 1: some of those like second order effects make it harder

906
00:52:55,840 --> 00:52:58,960
Speaker 1: to transport commodities or produce commodities, and then you have

907
00:52:59,040 --> 00:53:01,640
Speaker 1: to go back to dirty your energy like coal. I'm

908
00:53:01,640 --> 00:53:04,720
Speaker 1: thinking specifically about the water levels of the Rhine issue,

909
00:53:04,719 --> 00:53:08,080
Speaker 1: the fact that it's more difficult to get commodities up

910
00:53:08,120 --> 00:53:10,520
Speaker 1: the river given that the water levels are so low.

911
00:53:10,800 --> 00:53:13,960
Speaker 1: All right, Alex and haav A, that was a fascinating discussion.

912
00:53:14,040 --> 00:53:15,960
Speaker 1: I feel like we covered quite a lot of ground

913
00:53:16,160 --> 00:53:19,799
Speaker 1: on what is a complicated topic. So thank you so

914
00:53:19,880 --> 00:53:22,359
Speaker 1: much both of you for coming on all thoughts. Thank you,

915
00:53:22,440 --> 00:53:24,239
Speaker 1: thank you very much, and that was great. Thank you

916
00:53:24,280 --> 00:53:41,600
Speaker 1: so much for coming up, So Joe, that really was

917
00:53:42,120 --> 00:53:46,040
Speaker 1: an informative and thought provoking conversation. I thought, so one

918
00:53:46,080 --> 00:53:50,160
Speaker 1: thing I hadn't realized, but both have A and Alex

919
00:53:50,480 --> 00:53:52,520
Speaker 1: kind of brought it into sharp relief, was just the

920
00:53:52,600 --> 00:53:56,120
Speaker 1: idea of maybe the price of commodities aren't telling you

921
00:53:56,160 --> 00:53:58,440
Speaker 1: as much as they used to. In the current environment.

922
00:53:58,600 --> 00:54:02,640
Speaker 1: It seems like traders are having um some difficulty with volatility,

923
00:54:02,719 --> 00:54:04,920
Speaker 1: you know, have a mentioned margin, and the fact that

924
00:54:05,040 --> 00:54:07,840
Speaker 1: it's difficult to trade if you think that your position

925
00:54:07,920 --> 00:54:10,560
Speaker 1: is going to blow up, you know, in the next

926
00:54:10,600 --> 00:54:12,960
Speaker 1: week or two. And then the other thing that really

927
00:54:13,000 --> 00:54:16,759
Speaker 1: struck me is the follow on uncertainty from all of

928
00:54:16,800 --> 00:54:22,920
Speaker 1: that on actual companies and manufacturers and producers. Because I

929
00:54:22,960 --> 00:54:25,719
Speaker 1: think Heavier was the one who made this point. It

930
00:54:25,840 --> 00:54:30,200
Speaker 1: does seem like a huge impediment to investment and just

931
00:54:30,440 --> 00:54:33,400
Speaker 1: normal business if you think you aren't going to be

932
00:54:33,440 --> 00:54:37,799
Speaker 1: able to hedge your energy needs totally, so many interesting things.

933
00:54:37,840 --> 00:54:39,839
Speaker 1: That's like a really big one. And of course, you

934
00:54:39,840 --> 00:54:42,080
Speaker 1: know some of our conversations earlier this year with the

935
00:54:42,120 --> 00:54:44,719
Speaker 1: Salton posts that were kind of about that and how

936
00:54:44,840 --> 00:54:48,239
Speaker 1: these energy trading shops were the new banks, and if

937
00:54:48,239 --> 00:54:52,400
Speaker 1: there's a decrease in liquidity, yeah, then you know that

938
00:54:52,520 --> 00:54:55,399
Speaker 1: creates all kinds of new issues. You know. The other

939
00:54:55,400 --> 00:54:58,480
Speaker 1: thing I was thinking about is this idea of Europe

940
00:54:58,840 --> 00:55:01,600
Speaker 1: being far and away the top bidder for l en G.

941
00:55:01,920 --> 00:55:04,360
Speaker 1: You know, one of the stories that gets told throughout

942
00:55:04,400 --> 00:55:09,200
Speaker 1: history is e MS and particularly like frontier markets really

943
00:55:09,239 --> 00:55:13,200
Speaker 1: get hit hard in a fed hiking cycle. Interest rates

944
00:55:13,200 --> 00:55:15,279
Speaker 1: go up with liquidity drains, and we are seeing some

945
00:55:15,360 --> 00:55:18,680
Speaker 1: of that, but there's also now this other cycle layered

946
00:55:18,719 --> 00:55:21,839
Speaker 1: on top of it, where many of those same countries,

947
00:55:22,000 --> 00:55:26,239
Speaker 1: in addition to seeing highersrust rates, are also seeing the

948
00:55:26,360 --> 00:55:29,640
Speaker 1: energy that they might have bought get bit away. And

949
00:55:29,680 --> 00:55:32,360
Speaker 1: so is Javeer puts it, you know, it's like basically

950
00:55:32,400 --> 00:55:37,840
Speaker 1: shifting blackouts this winter from Europe to poorer countries. Yeah,

951
00:55:37,880 --> 00:55:40,960
Speaker 1: and this to me is a very very big takeaway

952
00:55:40,960 --> 00:55:42,880
Speaker 1: from the conversation. There are a number of them, but

953
00:55:43,719 --> 00:55:46,560
Speaker 1: the globalization of the l en G market that we've

954
00:55:46,600 --> 00:55:50,520
Speaker 1: seen in recent years, and there's been so much focus

955
00:55:50,560 --> 00:55:54,920
Speaker 1: on what's happening in Europe because of Europe's proximity to Ukraine,

956
00:55:55,120 --> 00:56:01,320
Speaker 1: um and because it's the most directly hit by Russia's invasion,

957
00:56:01,920 --> 00:56:06,759
Speaker 1: but the knock on effects are arguably bigger in a

958
00:56:06,880 --> 00:56:11,279
Speaker 1: country like say Pakistan, which I mean my mother used

959
00:56:11,280 --> 00:56:13,640
Speaker 1: to live in Pakistan too, um, so I know that

960
00:56:13,680 --> 00:56:16,480
Speaker 1: there are many, many blackouts in Pakistan and it's sort

961
00:56:16,520 --> 00:56:19,239
Speaker 1: of a constant issue there, But it seems like they

962
00:56:19,320 --> 00:56:21,799
Speaker 1: might actually suffer a lot more than Europe. Even though

963
00:56:21,800 --> 00:56:25,560
Speaker 1: the focus is on Europe at the moment, yeah, absolutely, Yeah,

964
00:56:25,640 --> 00:56:28,040
Speaker 1: so many interesting things that that conversation. It's such a

965
00:56:28,120 --> 00:56:29,839
Speaker 1: treat to like talk to people who are just like

966
00:56:30,080 --> 00:56:33,400
Speaker 1: so in the leads and can get so technical and

967
00:56:33,480 --> 00:56:36,560
Speaker 1: detailed and also can explain things so clearly, you know that, lad.

968
00:56:36,719 --> 00:56:40,840
Speaker 1: I think that last point that Alex made probably deserves

969
00:56:40,880 --> 00:56:44,800
Speaker 1: its own episode, Heat Stress on the energy system itself,

970
00:56:44,880 --> 00:56:47,400
Speaker 1: because you know, he mentioned that situation, and it's like,

971
00:56:47,560 --> 00:56:50,440
Speaker 1: you put up a nuclear plant in Switzerland, y oh,

972
00:56:50,440 --> 00:56:52,480
Speaker 1: We're always going to have access to plenty of cold water.

973
00:56:52,520 --> 00:56:57,520
Speaker 1: It's literally Switzerland, and then suddenly that gets called into question,

974
00:56:57,680 --> 00:56:59,719
Speaker 1: and then I think, you know, there's uh, you know,

975
00:56:59,800 --> 00:57:03,000
Speaker 1: the water levels elsewhere are an issue. We saw it

976
00:57:03,000 --> 00:57:05,200
Speaker 1: in Texas on the flip side when we had those

977
00:57:05,239 --> 00:57:08,040
Speaker 1: freezes and some of those natural gas power plants that

978
00:57:08,080 --> 00:57:12,080
Speaker 1: hadn't been properly winterized went down at the exact moment

979
00:57:12,080 --> 00:57:14,840
Speaker 1: that everybody was cranking up their heat. Like all kinds

980
00:57:14,840 --> 00:57:19,520
Speaker 1: of interesting interplay between climate change or extreme weather events

981
00:57:20,000 --> 00:57:24,320
Speaker 1: and the production and transmission of energy itself. That feels

982
00:57:24,360 --> 00:57:27,400
Speaker 1: like a whole episode at some point in the future.

983
00:57:28,520 --> 00:57:31,760
Speaker 1: It's another all thoughts episode that has led to another

984
00:57:31,800 --> 00:57:34,640
Speaker 1: all thoughts episode in the future. Those are the best ones.

985
00:57:34,800 --> 00:57:36,800
Speaker 1: Those are the best, and those are those are two

986
00:57:36,840 --> 00:57:41,680
Speaker 1: great guests for um for talking about them for sure. Okay,

987
00:57:41,680 --> 00:57:44,000
Speaker 1: shall we leave it there. Let's leave it there. This

988
00:57:44,040 --> 00:57:46,919
Speaker 1: has been another episode of the All Thoughts podcast. I'm

989
00:57:46,920 --> 00:57:49,640
Speaker 1: Tracy Alloway. You can follow me on Twitter at Tracy

990
00:57:49,680 --> 00:57:52,160
Speaker 1: Alloway and I'm Joe wi isn't Thal. You can follow

991
00:57:52,160 --> 00:57:55,280
Speaker 1: me on Twitter at the Stalwart. Follow our guests on Twitter.

992
00:57:55,320 --> 00:57:59,480
Speaker 1: Alex Turnbull He's at lex b H. Turnbull and Javier

993
00:57:59,520 --> 00:58:03,840
Speaker 1: Blocks He's at Xavier Blocks. Follow our producer Carmen Rodriguez

994
00:58:03,920 --> 00:58:07,040
Speaker 1: at Carmen Armine and check out all of our podcasts

995
00:58:07,040 --> 00:58:10,880
Speaker 1: Bloomberg onto the handle at podcasts. Thanks for listening.