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On Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets. Each and every week, we provide end up research and data on some of the two thousand companies in one hundred and thirty industries our analysts cover worldwide. Today, we'll look at why the computer tech company Oracle reported disappointing cloud
sales last quarter. Plus, we'll look at how the one trillion dollar conglomerate for Ruture Hathaways preparing for the retirement of CEO Warren Buffett. At first, we begin with a survey from Bloomberg Intelligence entitled AI's Cross Industry Disruption. It dives into how various industries are approaching AI implementation. It's also the largest study of c suite executives that BI
has conducted. From more on this guest host Christine Keino and I were joined by Matthew Bloxham Bloomberg Intelligence tech Analysts. We first asked Matt to break down this BI survey.
So this was a big survey we did, polling the views of six hundred and four c suite executives across the range of industries across the world. Where do you kind of get trying to get a sense on how corporates are assessing the current AI situation and what they think is going to do to their businesses over the next kind of two to three years. So we kind of looked at the motivations for AI investment, what it could do to headcount, well they're expecting in terms of
revenue and profit uptick. And we had some kind of interesting results out of the survey, you know, not surprise, perhaps AI is very much at the top of the c suite agenda. Something like thirty six percent of those polls said it was their top strategic priority. In another forty seven percent said it was within the top three
strategic objectives for them. When we looked and asked about the main objectives behind their AI strategies, what came out top was improving operational efficiency, which was number one with forty seven percent of the respondents, and in second place was boosting a revenue at twenty one percent. Interestingly, headcount cuts were quite low down the pecking order. Only thirteen percent of respondents put that as their top priority, and actually it was the highest ranked in terms of the
least priority. So I think it's interesting that companies are looking to boost productivity, but they're not afraid to make investments both in technology and headcount in the near term to kind of release those opportunities. And actually, on a three year view, sixty two percent of respondents said they expect AI to lead to an increase in headcount over the next three years, an increase, not a decrease, and the average increase they're looking at is about four percent.
So that kind of flies in the face a little bit of you know, a lot of the kind of headlines we see about job cuts. I think overall, corporate see the need to invest more in staff, you know, to rule out their AI strategies in the coming years. Yeah.
Yeah, well, Matt, you mentioned thirty six percent of C suites now rank AA as their top priority. That number actually strikes me as a little low. I would have thought it would be at least half of the people's survey. But what do you think, is that something that's just set to grow in future surveys as really kind of AI becomes central to a lot of companies workflows these days.
Yeah, I think so. I mean, you know, obviously, if you if you add the forty seven percent that set, it's in the top three. I mean, you know, an overall top three priority gives you the kind of majority of the respondents. And obviously companies do have to wrestle with lots of other issues too. You know that there is going on in the world beyond AI, and obviously trade policy is another big thing that's probably on the
radar for a lot of these companies too. So yeah, you know, maybe it will kind of inch up, But I think you've given that aggregate, you know, age percent plus in the top three. Probably what you'd expect to see, Matthew.
How about return on investment here? That's kind of what the street's starting to ask for now. We know these companies can spend big money on AI, but what's the return for shareholders?
Yeah, I think that's still very opaque. And actually, when we asked the respondents to flag the biggest roadblocks they could see to AI deployment, the investment needed in AI, and the question marks around the return on investment, we're definitely up there amongst some of the most important concerns
that respondents have, alongside data security and clean data. We didn't ask much of the most specific ROI expectations cause we just kind of get the sense that it's a bit too early to get an accurate read on that. I think most companies are still kind of at a relatively early stage of their AI trials. You know, lots of them have moved out of the kind of testing lms, they're into pilot phases, some of them are even moving
into scale deployment. I think it's fair to say a lot of them are not really quite sure yet what the return is going to be and how quick it's going to come. And obviously it's kind of a bigger issue for the wider tech sector. And you mentioned Oracle as a kind of barometer for the kind of broader pulse on AI, and I think the twenty twenty six is going to be a really crucial year for kind
of what corporates make of the midterm ROI. And you know, if they don't see a big ROI, then that's probably going to slow the pace of revenue growth, and that's going to have a knock on effect to the levels of investment we're seeing made by the likes of Oracle and Open Eye on the revenues that bringing in.
All right, thanks to Matthew Bloxam Bloomberg Intelligence tech analyst. We move next to some news in the biotech space. This week, we heard that the Food and Drug Administration is investigating whether COVID nineteen vaccines caused deaths in adults. It's part of a safety review that earlier here to just be focused on children, and the investigation comes at a time when US Health and Human Services Secretary Robert F. Kennedy Junior is upbending long standing guidance for a wide
range of vaccines. From more on this guest host Christina Quino and I were joined by Sam Fazzelli, Bloomberg Intelligence director of Research for Global Industries and a senior pharmaceuticals analyst. We first asked Sam to break down what we know about the FDA's investigation.
We don't know anything. Right. Last week we heard that they've got data that shows that there were ten children's deaths. Where's the data? Show us? Right? They go and use this thing called VERSE, the Vaccine Adverse Events Reporting System,
which is totally voluntary. I can go on there and say I had chicken nuggets just around the time as my COVID shot and I had that allergic reaction, and they go, oh okay, oh dear, So I can put that on there right in order to do an analysis of that database, which we as endless try and do, which is very complicated because you need all the case background, who was that patient, what happened to them? You need to do the work. Fine, I believe that they've done
the work. Show us where's the transparency there here? I'm pretty sure I don't know for a fact that they're using the same system. Do you see people? I mean, of course, that's a ridiculous question for us falling over and dying in the streets after getting COVID shots all the time. There are the relevant there are issues that happen a lot of people to take COVID just these days are the elderly, which by definition have a higher probability of complications that in general. So we need to
keep an eye on this. I want to see the data and I want it properly scrutinized. Let us do that.
Yes, well, I mean, obviously, I guess it seems like it's in the earth that it is investigation. But I mean walk is to kind of the potential impact of this, right I Potentially you could affect public health policy, and then potentially that will have some bearing on how companies move forward, I especially the vaccine providers presumably.
Yeah, I mean so two or three things can happen. The if you can say, well, actually we didn't find the link, because it just says that they're looking at it. Number two, they say we found the link, We're going to put a black box morning into COVID vaccines. Fine, that reduces people, that increases people's hesitancy potentially, Or they can go and say we want to take it off the market. I don't think they'll do that. But let's say, let's get there. There are two companies that are most
exposed to this. Why is there? Of course has is one of the companies that sell the vaccine, but I mean, you know, there's a lot more going on, right. The ones that are much more leveraged to the vaccines are Moderna and BioNTech. What I find interesting is a Moderna who is much more leveraged to it because they're silly in themselves. They have a less of a cash cushion than BioNTech has. Let's say, the end of the year
this year is seven billion dollars in the bank. Biontics are eighteen billion dollars in the bank, and yet that's the Biotic share price that gets hit post And I don't understand why Moderna is more exposed because that cash cushion is lower. So if your revenue the drops, then
you're going to have an issue. Of course, they've been very good at cost management, so that's where I think this could end up if it goes really the wire and they go, right, we're not going to suggest this anymore, which would be I think a tragedy for the US.
So Sam, we've got we've been ten months into this administration. We've got a US Health and Human Services Secretary, Robert F. Kennedy. We've been X number of months into his leadership. How is how are farmer companies and biotech companies trying to work with this new administration because there's a lot of one to argue, there's all, you know, a lot of headbutting there.
Potentially it doesn't look like people are that worried about it. But I promise you if I went on our anonymous drug chat with clients, about two thousand people on it, and I asked, how worried are you, I tell you that no one's going to say zero. There are There's always this background and worry. Right. The thing is the sector is doing well. Only this week so far we've had close to two billion dollars of money raised from companies with good data that's driven the share pricess of
this is between five and six companies. So the sectors thriving. We need to make sure the FDA is in a place that will have very clear guideline at of people know what they're dealing with and not get advice today that in six months they go, well, whatever we said, then we don't we have a different view now, right, So that is a problem and there is something to worry about there. Let's hope that twenty twenty six becomes a lot more stable for the FDA with logical, scientific based decisions.
Yeah, well, Sam, you know, speaking of the sector is doing overall. But what do you think is going to be the key differentiator amongst the companies between the successes and I guess the less successful in twenty twenty six.
It's always been the same clinical data. Get me a drug that's showing me clean data. Don't give me press releases with some cut off the data, and the next press release is a different cut of the data. Publish dator take it to medical conferences. The reason these companies are up, most of them and have been able to raise money is that that they've been very transparent with
their data they presented. You can analyze it. Some more transparent or some of them are presenting a medical conferences like the ones we just had ash the American Societical Hematology. That is what drives this sector. Give me good clinical data. Of course, M and A is great because they come and you get a price and you decide to share. Price goes there. But it's clinical data that is that data that gets them to being taken out our.
Thanks to Sam Fazzelli, Bloomberg Intelligence, Director of Research for Global Industries and senior pharmaceuticals analysts. Coming up, we'll look at why the restaurant and gift shop chain Cracker Barrel cut its sales outlook for the year. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence via Bigo on the terminal.
I'm Paul Sweeney and this is Bloomberg.
This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio.
We move next to some earnings in the tech sector. This week, the computer tech company Oracle posted quarterly cloud sales that missed analyst expectations. This suggests that it will take longer than expected for the company's recent huge AI bookings to pay off. For more on all of this, guest's hosts Isabel Lee and I were joined by Anna rag Rana, Bloomberg Intelligence technology analysts. We first asked him to give us his take on Oracle's results so there were.
A few thanks to keep in mind. You know, the number one thing is cloud infrastructure growth consensus was sixty nine percent. They came at sixty six. I know it's a very big number. However, in the cloud world, missing by even one percentage point.
Is not good.
So that's first thing. But you know, there's a very logical reason about it. Everybody can see the backlock, so it's not as if they don't have a business there. But converting that backlog into sales is an issue. Everybody knows that there is a capacity constraints out there, whether it's data center, whether it's networking, et cetera. Power is a very big issue for example. So that's one area
of it. But although I would say the management did not harp on it as much as we would wanted them to be that to explain why the growth can improve going forward. So that's one factor. But I think the biggest question is something that we had discussed earlier also is everybody is questioning that out of their big backlock, which is over five hundred billion right now, three hundred plus billion of that comes from OpenAI. Now open ai
currently or the order book is from open Ai. By the end of this year, open ai will have a revenue rund it of about twenty billion. So everybody is saying, okay, well tell me, if you have revenue of twenty billion, how are you going to spend three hundred billion just with Oracle? So there's a big question mark. But then your question is, well, why didn't this happen when they
first announced it? Well, their bottle was at the top at that point, and right now Google's Gemini has caught up, So people don't know what will open AI's future look like two years from now, three years from now, and so forth. So there are multiple factors that are going into this equation. And not to mention that capex is going to go up by fifteen billion, so thirty five
billion going to fifty billion. So it's a big, big, you know, change across four or five different vectors that are having an impact.
So the cloud strategy of Oracle continues to evolve. What is the next major inflection point for you when you see these cloud companies really move towards more AI driven efforts.
So the big thing is that five hundred billion of backlock needs to bleed into revenue. For that, they need to open new data center. But even to open new data center, they need more cash. So the big catalyst
for them is they need to go out. Most likely they need to create a special purpose vehicle where they can raise funds with the help of private equity investors, private credit and basically you know, keep that off Oracle's balance sheet, and that will help pacify this fears that they actually have a way to finance this big order book that they have.
All right, look, well you mentioned open AI. Can you re fresh my memory? Because I have no idea where do they get their money that they like? Where are they getting the money to? I don't do all this stuff.
So the single biggest is the consumer app right now, That's where most of the money is coming in because you know, if you want the best model, you're going to pay twenty dollars a month. I mean, you can get the free version of it. But that's one area. They have over nine hundred million users right now, but only a small portion of them are paying customers. So
that's one. Second is if you as a company, let's say you're you know, let's call a hypothetical bank and you're creating a chat pot which needs intelligence or in large language, more, you're going to use APIs from open Ai and that gets embedded intelligence into whatever system that you're creating, your chatboard, but that becomes smarter. They get paid from that. So those are the two I think big elements or the big sources of revenue for them.
And there is a huge you could say, looking ahead, all the enterprises around the world will have some intelligence into their code applications and they're going to use model from somebody, whether it's Google, whether it's Entropic, whether it's open Ai.
Our thanks to Ana rog Rana, Bloomberg Intelligence technology analyst. We move next to some news at Berkshire Hathaway. This week, the firm annows a handful of leadership changes, including the retirement of its longtime chief financial officer, Mark Hamberg. This comes as the one trillion dollar conglomerate prepares for the
retirement of CEO and billionaire investor Warren Buffett. For more on this, co host Scarlo fil and I were joined by Matthew Palasola, Bloomberg Intelligence senior analysts covering the P and C insurance industry. Your first AaTh Matthew to talk to us about some of the turner on we're seeing at Berkshire.
So the big news I think the bigger news of the announcements was Todd Colmbs, the one of the investment deputies and CEO of Geico, is moving to JP Morgan. So I don't know if that was a plan thing or what, but that seems like an, you know, kind of an unwelcome shake up in light of Buffett leaving at the end of the year. I would say his
investment track record at Berkshire not very transparent. They don't really tell you what the investment managers are doing aside from Buffett, so you know, I think many of the big moves are made by Buffett anyway. And I actually do think that Geico had some issues with loss costs going up, so the cost of car accidents was going up a lot. Combs's reaction was to like cut a lot of costs and shed a lot of policies, which is actually the opposite of what I thought Berkshire would do.
I thought they'd kind of ride it out and maybe gain some market share. And I do think Progressive handle that environment a little bit better, so I think it will be a manageable loss. But probably the biggest.
News, yeah, Todd Coms. We should mention was already a JP Morgan board member, so he had a relationship with the bank and he's going to be advising Jamie Diamond and other senior JP Morgan leaders on strategic issues. Let's talk a little bit about the changes that involve a new General Council position over at Berkshire as well. So this is a brand new position that they're creating versus I guess in the past they just relied on the daid outside.
Help outsourced it, I believe to a firm that was associated with Charlie Munger. You know, not a huge deal, I don't think. I mean, I think it makes sense for them to have their own GC. Why not I mean Berkshire Hathaway. I think really the outsourcing was in part due to it being you know, related to the
company anyway. So I think it's important. Obviously they're going to face tons of legal issues across all of their companies, and I think, you know, probably each one has their own individual but it would be uh, probably makes a lot of sense to have this all roll up to someone at the top.
What's the call, what's the sentiment out there on the street.
It's tough because you can look at it and say, out of their core competencies, are they going to do any of that any better? Now, right, you've got Buffett going away. You've got a g Chain who is in charge of the insurance operations. He's he's getting old, he's been selling a lot of stocks and maybe he leaves and he was kind of the magic sauce behind a
lot of the insurance business. So you know, you've kind of got these two titans of the company perhaps being gone and saying, well, how could they be good as good in investing or as good at the insurance business. And it would be tough to say that they would be. But when you have Able coming in, it was a positive sign of some shake up. And maybe you know
his strength is he's not Buffett. Well, his weaknesses he's not Buffet also, right, but his strength is he doesn't have to do things the same way, and you know, perhaps he takes a different lookie capital allocation. So I think the street's hopeful that we see some more capital allocation come out of Berkshire.
All right, thanks to Matthew Pallizola, Bloomberg Intelligence Senior insurance analyst. We move next to some news at the American restaurant and gift shop chain Cracker Barrel this week the change that it expects sales for the current fiscal year to fall faster than it previously forecast. This suggests Cracker Barrel brand is hurting from the firestorm that erupted following its attempts to use a new streamline logo. The company also planned to update its dining rooms to give them a
more modern feel. For more on all of this, guest host Christine Aquino and I were joined by Michael Haylen, Bloomberg Intelligence Senior restaurant and food service analyst. First asked Michael to break down Cracker Barrow's most recent earnings report.
Guidance was cut, and this was their fiscal first quarter, so it's always tough to have a guidance revenue and EBITDAC cut after your first report. But they hadn't seen a bounce yet in their traffic post logo change, controversy and everything that went along with it, you know, on the positive side, they said, you know, traffic has now steadied at this down ten to eleven percent level, which is translating into a you know, a down a mid
single digit same store sales. You know, so if you're if you're a glass half full investor, you're saying that, you know, after the stabilization comes in improvement. You know, their new guidance has a pretty wide range. So the low end of the range is assuming no improvement through year end, which we think could be sounds pretty conservative to us, you know, and then on the higher end they would see a gradual slow improvement in traffic going forward.
So what are they going to do? You know, it's it's going to be a continue to be about improving the operations, right. That's been you know, a key tenant under under CEO Julie Messino. It's also going to be food innovation. It's going to be Southern favorites, it's going to be twists on old classics. It's going to bring be bringing back items that people love and want to see return to the menu. But I think what really stood out is their willingness to listen more closely to
their customers. I think that's a big key point of focus for them moving forward after the controversy that they suffered.
Well, Michael, So in terms of what are they going to do right, it seems as a cutting capex is a part of the plan. Is that something that you think wood single discipline or does it actually risk slowing to turn around even more?
Well, they're going to still refresh the stores. What they're cutting back on is a more extensive remodel, which was in tandem with the logo change, which was something that was angering customers.
Right.
So I think the capex change is probably you know, the lowered capex is probably smart. But they're gonna continue to refresh their stores. They're gonna continue to give them a fresh coat of pain, improve floors where they need to clean up the bathrooms, things of that nature that nobody's gonna get up in arms over.
I'm actually surprised in hindsight that maybe this manager team kept their jobs there. I mean, this was a real self inflicted wound there. What's the shareholder's been saying. Has it been any pushback?
Yeah, So listen, Julie Messino. The you know that you make a great point, Paul and Julie Messino. The reason why I believe she's still there is that she was doing a great job until this controversy hit. You know, this is a chain that had been bleeding traffic for years. Right, They've been really struggling for a long time to bring in younger consumers, right, and she had shown pretty good success over the twelve months leading into the logo change.
Same store sales at the restaurants were up five percent in the August quarter. So I think that's why the proxy fight kind of failed, the attempt to remove her from the board failed, and why she still has her job right now is that this chain was a mess prior to her arrival, and she was showing some pretty good progress up until August o.
Right, thanks to Michael halein Bloomberg Intelligence, senior restaurant and food service analyst coming up. But look at how earnings at the food and beverage company Campbell's were impacted by the holiday season. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence via Bigo on the terminal. I'm Paul Sweeney, and this is Bloomberg.
This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio.
We moved next to the quarterly earnings for the food and beverage company Campbell's, known for its iconic soups and snacks. This week, the company reported first quarter earnings that beat analysts expectations. This was positive largely thanks to some holiday inventory build by retailers. For more on this and her outlook on packaged foods, Scarlett and I were joined by
Deanna Pain Bloomberg Intelligence Consumer staples analysts. We first asked about Campbell's two businesses, that snacks business and the meals and beverages portfolio.
You know, for meals and beverages, there's some headwinds on ready to serve soup, whereas broth and condensed soup, which is usually used in cooking, is improving. You know, you have V eight, which is not really it's a brand that is not really doing that well. So you do well to me.
To me, that's like my healthy eating for the day. When I drink a little one in the morning, when you're.
On a plane, you'll get a VA and you're like, I'm good.
I'm good, I'm good.
Workout, no need to go to the gym exactly.
So, but it's still facing some headwinds for snacks. It's it's kind of I found out odd because there seems to be a buyer cation of the consumer trends. Here. You have salty snacks being you know, challenged by people trying to eat healthier, reducing their sodium, but then you have cookies outperforming. So I guess it's the salad with the fries.
All right, which I love.
By the way, Yes, yeah, absolutely. Campbell Wills agreed to take a forty nine percent stake in Lot Regina. What is law Regina? What's Campbell's trying to do here?
Yeah, so that is the supplier for REOs, which they bought it a year or so ago, and that it makes it kind of like have a little bit more control on the supply side. There has been some headwinds on this brand because tomatoes are being exported or imported to the United States, so they have to face some tariffs. So you know, with this, they're they're trying to not only off sat tyres, but have a little bit more on the on the supply chain, have a little bit more control on that.
Here's my Raios story. I mean, it's it for people to art in New York City. It's a very famous restaurant in New York. It's very difficult to get a table there, to get a reservation. On my thirty years of Wall Street, I've asked people to take me. Who I know go there to take me. I haven't gone once. Really, Yeah, I mean it's impossible. Like I never asked people to take me out on their great golf course. I just
wait for the invite to come. But for REO's, I've actively tried to get and haven't gotten through.
Anyone who has an invite into Rio's, let possible, you know. You know I did actually get to eat there. We ordered take out during the pandemic when there's do take out. Yeah, so that was my one time I got to eat.
Right, very good.
But Diana, I want to ask you about, of course, the controversy that surrounded Campbell's. Just last month, there was an executive he was a vice president of the IT department who talked about how the company's products are being made for poor people and you know, had some disparaging remarks about some of the employees, the Indian employees. Is that something that's going to cast a pall over Campbell's. I mean, do you see any long term effects from that?
Well, they did not address that during the call, but I think it's it might be a short term headwind if there's any boycott happening. I don't I'm not necessary I don't necessarily think that there's going to be one. It's just one executive, and the company went ahead and kind of tried to put on record that they're not necessarily agreeing with what he said, So it's you know it, I don't necessarily see that as a significant headwind for the company.
Package good companies. I kind of think of them kind of a GDP top line growth story at best. What's the twenty twenty six out for your companies?
Are?
What are investors looking for?
So for twenty six, they're hoping that there's some light
at the end of the tunnel in terms of volume growth. Again, it might be a second half of the year story because comps get a lot easier going forward, but you know, profitability seems to be a little bit more difficult because they have tariffs, they have to contend, costs steal are a little bit higher, specific specifically on the employee side, and there's also marketing that they have to do because they want to spur growth and pricing is not necessarily
the you know, the only lever that they have.
To But you know, I think about Campbell's and other packaged foods companies and how much competition they must face from private label products. I go to the supermarket, I'm going to get the check and brought that's cheapest, and it's usually the ones sold by the supermarket and not Campbell's or anyone else's. So that's I mean. And for private label, you don't need to do any marketing exactly, So what is there how do they counter that?
Well, more marketing. They're they're trying to work with the with the retailers to position themselves in the best part of the shelf to be able to move that product. Yeah, well, obviously retailers have to contend with increasing their private label perenetration. At the same time have a good relationship with this national brand, so they're not necessarily want them to go
against you know, the products. So they're trying to there's some negotiations happening and usually you know, when I speak to retailers, because I do cover Canadian retailers, they mentioned that they tried to expand their private label into white spaces not necessarily served by national brands, So you're while your minds might see some you know, condensed soup private label, it's not as as intricate or better quality than probably Campbell's.
Thanks to Diano Rossero pea Bloomberg Intelligence consumer staples analysts on Bloomberg Intelligence, we often look at research from Bloomberg and EF previously known as New Energy Finance. They're the team at Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, and agricultural sectors. This week, we took a look at the renewable fuels business.
According to bn EF, last year, the US imported over eight hundred million gallons of biodiesels, but this year we're on track to import just ten percent of that. The US is now the largest producer of biofuels in the world. For more, I was joined by Anna Davies, Bloomberg bn EF head of Renewable Fuels. I first asked Anna to break down what biofuels are and how that business has changed under the new Trump administration.
So when we say renewable fuels, we're mostly meaning biofuels at the comment, and these are things you might be familiar with, like ethanol and biodiesel that are mixed into your gas or diesel streams. There's some new ones coming as well. There's one called renewable diesel, which unlike biodiesel, it's basically identical to fossil diesel, but just made from
crops or waste speed stalks. So that means you can basically substitute it one for one into your diesel stream and you don't have to worry about engine performance and things. And then also there's a bio version of jet fuel called sustainable aviation fuel.
All right, all right, so I've heard of those. Now my minderstanding is we do produce some of that stuff here in the US, but we also import a lot. So how's that whole world changing?
Yes, so we produce a lot of it at home, and we're growing our production. Ethanol is the biggest, but there's a growing segment of these drop in fuels that I mentioned, like jet fuel and renewable diesel. We produce a decent amount of that here in the US, and we're increasing the capacity to do so. There's a lot of old oil refineries actually in California and the Gulf Coast that they're converting to take in biofeedstocks rather than fossil fuel feedstocks. But we also import a lot of
these fuels. Nest Days a big producer in Singapore and Rotterdam, and a lot of that gets imported here for use in our markets.
So do we need imports though? Because I'm just looking here, you know, I guess last year we imported over eight hundred million gallons of biodiesels. This year we're on track to import just ten percent of that. Yeah, wow, is that just tariffs?
This is policy policy changes the US. The main reason biofuels get off the ground anywhere is due to policy, because otherwise they wouldn't. The economics on their own don't work. Biofields are more expensive than their fossil counterparts, so you usually need some policy to incentivize them. The US has a main policy called the Renewable Fuel Standard, which obligates refine to blend in certain amounts of biofuels into their
refining streams. We also have tax incentives, and we've kind of both of those have now been changed in the last year or so, which is really causing the market to whiplash. In the tax incentive side, of things. There used to be a tax incentive called the Blenders Tax Credit, which was basically one dollar per gallon for all biofuels
in the US, and that's a pretty attractive offer. It's been it ended in twenty twenty four, and it's been replaced by the Clean Fuel Producers at tax credit or the forty five Z. Now that tax credit is a sliding scale based on your emissions, and most biofuels aren't zero emissions, so they still have sum so they don't get the full dollar value anymore. And now only domestically produced fuels are eligible for that tax credit, so imports
no longer get it. And then on top of that, the volume obligation is currently being set by the Environmental Protection Agency, that's the agency that oversees this program, and they have proposed a volume for twenty twenty six and
twenty seven that's quite aggressive, that's quite strong. It would basically require hire all of the US capacity to be operational in producing fuels and likely also either imported fuels or feedstocks, because we need to actually meet that be able to produce that somehow.
Well, this administration is definitely pro farmer, like all that kind of stuff, some of the feedstocks you would put put into renewable energy. So that's a good thing, right, It is a.
Good thing, that is I think one of the reasons for a lot of these changes is to promote domestic soybean oils use in biofuels. The challenge is that only works if you have access to US soybeans. So, for instance, a lot of the biodiesel production, those conventional biodiesel facilities, they're located in the Midwest, right near soybean farms, right near crushing capacity, so it's relatively easy for them to
use soybean oil. But a lot of these newer facilities producing renewable diesel or jet fuel are located in California or the Gulf Coast, and there it's much harder. You'd have to bring it in by rail, and there's not much capacity there, and it's a lot easier to bring a shipment full of waste oil from China, say, than to even get access to the soybeans. So it's unclear of those facilities we'll be able to switch.
So I was at a Bloomberg Philanthropy sponsored conference at the Plaza Hotel a couple of months ago talking about this transformation evolution into cleaner energy, and the guests we had on non US guests, international guests, their basic message was, Hey, we being the rest of the world, We're moving forward with this stuff. We're not slowing down or stopping us. If you want to come along, that's great. If you don't,
that's great too. Is that kind of how the world's thinking about it, at least in the short term it is.
I think everybody is taking a bit aback by it because the US has generally had the most attractive incentives. You can stack all these credits and you get an attractive number that can kind of bridge that cost gap. But there is a lot of policy momentum in the rest of the world moving forward rather than back, and so you can see a lot of the shift happening.
For instance, Europe, the EU and the UK both instituted a sustainable aviation field mandate this year, so we anticipate a lot of those volumes from Singapore might flow that way. Singapore itself has a new staff mandate, so they might
even keep the volumes at home. And then China is an interesting one to watch because they're building a lot of new capacity to produce these fuels, so it's unclear whether their feedstocks will go elsewhere or if they'll keep a lot of it domestically for increasing their own production.
Our thanks to Anna Davies, Bloomberg bn EF, Head of Renewable Fuels. That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries. And remember you can access Bloomberg Intelligence via b I go on the terminal ump Paul Sweeney, Stay with us. Today's stop stories and global business headlines are coming up right now