Bloomberg Audio Studios, podcasts, radio news. Almost Hakstein is with us here at Milkin. We should remind everybody we're in Beverly Hills today, which is a bit different at the Milkin Global Conference. And of course, former Middle East senior advisor to President Biden and a life long diplomat with a real sense of nuance when it comes to the energy markets.
Almost, it's great to see you. Welcome back to Bloomberg. Thank you, It's always good to be here.
Many questions about how we rationalize what we're seeing right now, the fact that oil is lower by simply even though Iran is shooting at ships. But one statement from the government that the ceasefire remains in place and we're selling oil today, is that the move Well two things.
One, remember that we're saying that oil is lower. Yes, oil is at one hundred and ten. Well, that's right, we're still in so world digit So one, we're at one hundred and ten at the start of the year, it's sixty sixty, so we're basically almost double where we were, and we're talking about nobody thinks of one hundred and ten ever as a low oil bran Well, that's fair.
That is a very high directtion only speaking though.
But here's what's happening. The market really wants to rally. They don't like bad news. Market the stock market, the stock market, the physical market and the stock market are divergent at the moment.
We may get convergence at some point. We probably will be.
We don't know if the convergence will be when the stock market realizes where the real physical market actually.
Is, or that the war actually ends.
We have an opening, and then the physical market will go to where the stock market is, but they are not in the same place. One hundred and ten dollars of brent oil is only available on a Bloomberg terminal.
You can't buy that barrel.
That barrel of brent oil is selling for one hundred and fifty, one hundred and forty five some days one hundred and fifty five, even one hundred and seventy.
Because it's only paper. It's people on Wall Street.
The real market, the real market right now, is that there is no not enough oil. We're in a demand destruction in certain countries, but they're poor countries first, so stock market doesn't care. So we are in a place where every day that goes by now with fake headlines and what happened today at the Pentagon, it's fake headlines. We're not really in a ceasefire because missiles are flying. That's usually the definition of a seasfire. Those missiles don't
fly two days in a row. We don't have a ceasfire in Lebanon because we still have fighting in Lebanon, despite the fact that we say it's a seasefire, and tankers are not moving, despite the fact that we have government officials say they are moving, they're not. So that means that there's no tankers on the water going to Asia, going to Europe, none, zero, and so that is that bite will have will deepen every day.
Okay, So I guess I don't know how do you then look at things longer term? Because I think what most folks are also thinking off of this war, the things are going to be changed forever in terms of people thinking about We talked about this yesterday about country's access to strategic commodities, whether it's oil, whether it's really ensuring that their supply chains are solid, that they can't be disrupted, and that means a lot of domestic production,
that means probably higher costs around the world. It feels like it's a very different global economy going forward.
So I think that should we prepare for that?
I think we will prepare for that, And in fact, some of it has already happened.
So this is similar to two other events.
One is the nineteen seventies, which led us to build a strategic reserve, created the IEA, the International Energy Agency. Structures of the energy market were different moving forward after the nineteen seventies.
They were very different before changed.
Forever, COVID changed how we think about supply chains. We suddenly got shocked by the supply chains, which is why we started stockpiling. We started thinking about making sure that we didn't live on one supplier, et cetera. And now what's going to happen is the straight up removes under running and control for a basically for the foreseeable future, regardless of nobody in the market should look at what the deal as eventually and believe it on straights, iran
will control the straits. Everybody in Washington may will believe it. Nobody in the Gulf, no one in the Golf will believe they know the Iranians and not going to control this. What does that mean? It means you got to change Carowa. You said you got to build out infrastructure that does two things.
One bypasses the straight up removes.
It's possible to do. Yeah, it's not even that expensive. A few billion dollars, but a few billion dollars in what we're talking about doesn't cost very much. The redundancy is important. Second, build out more storage facilities in destination countries. So we already have some storage in place like Singapore, but build them, build them out in Tokyo and Delhi, and China already has not just of oil, but of jet fuel. Airports should probably hold a little bit more
jet fuel capacity exactly, not to them. I think everybody, if you're if you're an American listening to this and you think you're going on vacation this summer plan for a very very expensive one. Driving is going to be very expensive, and so will r vs. Ur vs will be even more expensive because diesels through the room and jet fuels.
Can I ask you why this is happening right now? If it was President Biden and you were advising him, you know, were you guys pushing to do something to this effect? In Iran? They have been a threat for how many decades, right.
We used to joke and every people come and say, oh my god.
We're We've had people come on and say, listen, this was long overdue. It was time to do something. We knew this was a country that hated America.
Yes, by the way, they're not alone. If we're going to war against every country that hates America.
Then there's a list that we may have to go to war for a few more months, a few more years. North Korea is very funny act. North Korea is doing a lot on nuclear they hate America. We're not going to war there. Iran is a place where we First of all, we had a deal with Iran to not go to a nuclear weapon called JCPOA in twenty fifteen.
President Trump got out of that in twenty nineteen.
Probably should have stayed in because the deal we're talking about now that we will get is going to be very similar to that.
There'll be some cosmetic changes, be very similar. We didn't have to do this war.
I understood some of the rationale of the June War several months ago. They were cheating on the nuclear side. If they're not going to go back into a deal, a limited strike and the Orionings didn't strike back, and the proxies didn't strike back, they didn't close the straits. It was limited in scope, it was limited in time, and so I understood that this war was a moment
of opportunity. There were a lot of protests that were rising up, and President Trump said, helps on the way, and all of a sudden got painted into the corner and then started coming up with the reasons why we're in this war. Nobody really knows why we're in this war. No American really knows why.
We're in this war.
I don't even think.
Yeah, but that doesn't matter from the administration, but they change. But they changed in storage. Though.
I want to ask you about what's about to happen in Iran when it comes to their own oil storage, because there's nowhere to put the oil. At this point, they're loading tankers almost they're putting oil supposedly on trains to China. The President says the whole underground infrastructure is going to blow up, which I'm not sure is true. But if they have to start shutting wells, that's going to be a pretty major moment in something that could happen in days or weeks, do you.
Well, First of all, it was supposed to happen already several days ago. So that's so it didn't happen.
Here's the fine, because I've dealt with there is real economies of oil where you look at the Baker Hughes manual of what you do in this situation.
Then there's wartime and stress time. They're very different.
I was spent I spent a lot of time in southern Iraq trying to help them refix and so. And if you went down there, no manual told you to do it. They were they should have been shutting There is a way. Iran is a very good engineering country. They have remarkable engineering talent. They've been in the oil business one hundred years. They know what they're doing when we did them. I was in charge of the sanctions fifteen years ago to twenty twelve, and we took them down to like nine hundred.
Thousand dolls of exports.
And instead of doing all of what President Trump suggests, you know, things blowing up and just shutting everything down, there are ways for them to do wartime economizing. Right, So you shut down one field, do some maintenance on it, then you bring.
It back, you shut down the next one.
You can do a rotation, you can put you can set fields on fire, which is a by design which doesn't put any pressure on the pipes below ground.
I don't expect to see any explosions.
They are hurting economically, they are devastating economic pain and ron and.
Yet here we are still at war with them.
This is I mean, they can handle the pain. I'm just saying they can handle the pain. And their view is how long can you handle the pain? And I'll tell you this, We're going towards a cliff on oil and oil products by the end of this month.
Physical shortages.
We have physical shortage already, but it just in countries we don't care about. So then they they will write because they're poor. But then it'll go to middle income countries like Vietnam and Thailand. Then it goes to Japan and Korea, and then it comes here.
And here's the thing. You want to fly out of the United States. You can say we have oil, we have jet fuel. Okay, can't take it with you when you fly out.
You've got to be able to refill somewhere else.
Its way through manufacturing.
Some legends like you are feeling it, and.
It spends a lot of money, hundreds of billions of dollars, which is not dependent on but they're not depending on consumer. What happens when consumers say I can't spend this, I have no money.
I almost thank you. It's great to have you on Bloomberg. I hope milk and treats you well. Alongside Carol Master. I'm Joe Matthew. This is balance of power. Lie from La Only.
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