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Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway.
And I'm Jill.
Why isn't thal Joe.
One of the weirdnesses of our current market moments is that you have all these oil analysts who keep talking about how the straight of hor Moves closure is like the theoretical exercise that the entire market used to have nightmares about. This was like the big risk in the entire oil market. And yet and yet if you look at the actual price of oil and where it's traded, I mean, it's gone up, but it's not it doesn't strike me as panic levels.
Yeah, I mean it's gone up a lot, and you know, it started the year I'm just looking it at Brent. It started the year around sixty. It had climbed to around seventy before the war started. Now one fifteen, So it's a huge move in some sense, but it's not even a twenty twenty two problems, which were very high and that all that's true, and yet there's this disconnect I don't understand, like, why isn't it at two hundred yet or whatever? Because Straightford moves is closed, etcetera. Why
isn't it even higher? But then the other thing is, okay, like prices are up a lot, But then you look at like what governments around the world are doing, and it's like hair on fire panic, particularly in East Asia. So you get stories about Korean government workers being told to drive on every drive to work depending whether their
license plate number and even an odd like extreme rationing. Yeah, and so I'm trying to like, it still feels like there are some puzzle pieces here that I'm trying to fit together.
Absolutely. The other thing I would say is it feels also like there's this disconnect between what's going on in the financial world and what's going on in the physical world.
I don't get. Yeah.
And there was this really interesting note This wasn't purely related to oil, but you could kind of extrapolate from it, But it was from Bloomberg Green Markets the other day, and they were talking about Urea coming out of the Middle East and the pricing that they've been seeing from it, and one of the analysts says, the real issue on pricing is that while sellers and buyers can quote almost any price, nothing is actually getting out of the Gulf.
That reality makes most discussion academic rather than representative of actual business. So I wonder how much of that is happening in the oil market as well, where you have all these quotes that are flashing across the screen, but like for barrels that are essentially not going anywhere for a while.
Yeah, and I still don't totally get it, because right, like, these things do have to settle at some point, and I don't know, I'm confused. And then there were those headlines early on about how physical oil quoted in Oman were fifty dollars a barrel above the front month. Many things I don't understand. So we have to talk to someone who can answer all these questions for us.
The great thing about an oil crisis, Joe, is that we will learn about all the oil benchmarks throughout the entire world. Okay, well, we really do have the perfect guest, someone who's been on the show before, who a lot of people have requested us to bring back to talk about this particular moment in time. So without further ado, we have, of course, Javier Blast. He is the energy and commodities columnist over at Bloomberg, been writing about the
stuff for a very long time. Thank you so much for coming back on our thoughts.
My pleasure seems that every time that you come back is because of a crisis.
Yep, that's right.
Okay, well, let's just jump into it. How bad is this one?
It's bad and it could get really bad. But in any energy crisis, there are two elements that are very important. One is the size of the disruption, and the size is huge. And then is the length of that disruption, how lonely goes, And so far the disruption is relatively short lived.
We have been a month.
So that's one of the reasons why we are not at crazy high oil prices. It's just because it's a bit too early. Give it up a few more weeks and certainly we will get there. But so far the crisis is relatively short lived. How shortly, well, look at twenty twenty two with Russia we are still at it four years later. Or look at how lonely it took for the resolution of the invasion of Kube in nineteen ninety.
That was about eight months.
So at times we forget how lone other crisis were, and they were a lot longer than this one.
Okay, So now connect to what we're seeing with governments around the world like already going into rationing mode almost everywhere you look, particularly see a lot in Africa, already a lot in East Asia. If the story is okay, the prices haven't exploded the crazy high levels because this is still short lived, maybe there's some buffer stocks. Why this rationing reality.
Well, you're absolutely right that what is really cushion in the market right now is a number of buffers that we're going through. One is regular inventories that every country, every refinery has to normal functioning. Then it is also the strategic inventories that some countries own, particularly industrialized countries like the United States, Europe, Japan, and also China. Those have been mobilized in most places have been released.
And also we.
Enter the crisis with a market that was over supply. There was even floating storage, that is when an oil tanker has been loaded is on the high seas but they cannot find a buyer and just basically sits on the high seats looking for someone who will take the oil. And we have quite a lot of that just going into the crisis. So there was quite an element of buffer through the system, and probably a larger buffer than in normal circumstances because the market was over supply. That
is helping to cushion or to mitigate the crisis. Where we are seeing some actions by government is where countries are closer to the crisis, which is destrait or hormones. So the closer that you are to that location, the more action you need to take because you typically depend more of that flow of oil coming from the Middle East, and also because you are impacted earlier. If you are moving oil from say Saudi Arabia into India, that's only a few days at most a week of sailing time.
You are moving that to say the Philippines, that's about fifteen days. It's longer you are moving that oil into Europe, probably around three weeks. And it's even longer you are moving that oil into say the United States, where Saudi oil takes about forty days. So all of that means that the crisis is felt in some places.
Quicker than in other places.
Also, it's how the global oil market works. And to put it in quite simple terms, and I'm afraid that I have to go with colonial vocabulary, but the oil market is divided in two large chunks.
East of swet and west of sweth.
This is like, you know, the British Empire was still around and everything was east or west of the Sweat Canal. Countries that they are east of Swift, mostly Asia, rely a lot on Middle East oil these days, and therefore they are impacted earlier on the crisis. West of Swift Europe, Western Europe and the whole American continent is a bit detached from that market, and therefore the crisis will hit them much later.
So I know a bunch of MH bros Are going to get mad at me for even asking this, But like, could you get a situation where you can't get oil at any price in certain countries?
I mean, in an absolutely full blown crisis where we have this the hormones closed for many months, we may have a lang word in Iran. Yes, I think that we can get into a situation that, no matter what you are offering for a barrel of oil, no one is willing to sell because that will be a wall of esport bands where every country is trying to keep the oil for themselves, et cetera. And I think that, yes, I can't see an scenario in which, no matter how
much you are paying for a barrel of oil. You may not find a buyer, or you may find enough barrels for whatever you are offering, but that will be in that really extreme extreme situation.
I have a very rudimentary oil one on one class. Actually, I found a free book on my sidework called Oil one O one.
Yesterday and I picked it up. I should have read I don't know.
It's crazy, No, it's it's really it's a it's like a fall on book. You know this book, Morgan Downey. It's a very thick book Oil one on one. Someone just put it on my sidewalk. Anyway, I have an oil one on one.
Wait are you sure? Someone's not like they'll lure you out of your house.
But I'm gonna ask you an oil one on one question because it when we see, okay, Brent crude one fifteen twenty five is at the time, how is the Brent benchmark formed?
Oh course, okay?
Sorry now is a simple question and a complicated one. Effectively, we are talking about a bunch of crude oil from the North Sea ok So, mostly UK and Norway, but also crude oil from Texas that comes across the Atlantic and through effectively bias and sellers on the physical market, we get a price that then cascade into the financial market.
But here is a very important.
I guess the reason I'm asking is because I associate with Brent with the North Sea, and that's west of the Seuez. And so when we're talking about east of the Sewez oil, why is this the price and how connected is that price to the oil moving that actually affects these markets. I guess that's sort of why the question is on my mind.
Now that that's a crucial question.
They are about two hundred and fifty different grades of crude oil that we track on a given time, and Brain is used effectively a short ham for the average barrel in the world, and it's not really the average barrel, and certainly not the average barrel that comes from the Middle East. So you will have to look at benchmarks like Oman Dubai that they are closer to the quality of the Middle East oil, and those benchmarks are a
bit higher than what Brain is trading today. But if I may suggest, forget about the price of a barrel of oil, Okay, no one cares about the price of oil unless you are someone producing oil in Texas or Saudi Arabia or you are someone who owns a refinery. Those are the people that care about the price of a barrel of crude. The rest of us, you and I, we care about the price of our refined product because
that's what we consume. We consume gasoline, we consume diesel, or we consume other refined products that they are embedded into a service that we are buying. Think about an airfare ticket where inside that ticket there is a big proportion of it that is jet fuel, or you are buying I don't know, a cap made of plastic, well, that is, you are buying effectively some kind of transformed NAFTA. And obviously you know the transformation and the retail marking
and so on. But what matters really is the price of refined products, and they're actually we are beginning to see, particularly in the East, in the Southeast Asian markets, some very extreme prices. So well, if you look at the price of crude or brain or WTI or Roman, things look relatively contained. You know, we are treading around one hundred and one hundred and ten dollars a barrel, that
is well below the all time high. You look at the course of diesel in Singapore, which is a benchmark for the Southeast Asia market.
The price there is.
Approaching two hundred dollars a barrel, which is something that we have never seen. So the refined product is where really we are seeing the real tension.
This is exactly what I want to ask you. So if you look at the benchmark prices for crude oil, we've seen higher prices before, right and relatively recently in twenty twenty two. But if you look at the refined products, we're getting to places again that we haven't seen. What explains that disconnect, Like back in twenty twenty two, why didn't we see the higher cost of crude feed into refined products the way that we seem to be seeing now.
For two reasons. One is because we have lost not only a lot of crude oil production, but we have lost a significant chunk of refined production. The Middle East also has a lot of refinedes which are esport refineries.
They are just devoted to the xport market.
And the global trade of refined products is a lot smaller than the global trade of crude oil, So even a small reduction of supply could have a much larger impact. You think about the market for the global market for
clude oil, which is one hundred million barrels. Around sixty million are traded globally, but if you look at the market for say, get fuel, that market is a lot smaller, and we have lost a significant proportion of the refineries who are serving that international market for jet fuel, and therefore prices are reacting much more stronger than we saw in previous crisis. There is also the way that the
whole of refining works. So refineries are slowing down intake of clude oil because there is not enough crude oil in the market, but we have not really seen get the consumers reacting the same way. So what is happening is the refining wall is acting as a buffer in between crude oil that is not there and consumers that they have not yet realized that the crude oil is
not there. So the refined market is trying to basically get that two together, and the way that it can only do it is by extreme pricing and indicating the consumers, hey, I don't have enough crewe to make these refined products, so please can you stop demanding the refined products? And the police is basically two hundred dollars a barrel.
Diesel I should just say. We're recording this on March thirty first, and a headline related to this, Trump tells allies to buy us jet fuel or take it from horrormos.
I have no idea if we have spare jet fuel, you know that, speaking of refined products doing East Asia, one of the charts that's probably gone the most viral is that Singapore jet fuel chart, and that, more than any other chart, price shows that gap that Havevier is talking about between the underlying quoted prices of barrels, which is high, but that getual price is way above now the twenty twenty two highs.
So that speaks to it.
Have you you're this down in Houston, are any Americans from your perspective, are we going to pick up the slack? Do you see American oil entrepreneurs doing more drilling and exploration to take advantage of these high prices?
I mean, for sure, at one hundred dollars oil, everyone is going to try to do more. It just basically because he makes a lot of money. I mean, a US shale producer in Texas was looking to sell his oil about six weeks ago for sixty dollars a barroil and it can sell the oil at one hundred today, So everyone who can increase production a bit is going to try. But do I see a massive amount of extra drilling coming in the US over the next three months,
which is what really we needed. No, that's not going to happen over the next three months. And also we are losing so much oil that you know, it doesn't matter what the US shale producers do. I mean, it will help on the margins, but the gap is big. And you know, I have been discussing with some of the colleagues on the newsroom and with analyst and traders.
How big is the gap? Is eight million? Is a nine million? Is ten? Is twelve?
I mean, at the end of the day, it almost doesn't matter because we are talking about that about ten percent of the global oil supply. I mean, whether it's eight percent or eleven percent, it really doesn't really matter. We are losing so much oil that either the conflict and soon or prices need to move much much higher. I mean, I am surprised that we are not much higher.
And in some ways it really speaks how good the White House has been at joubone in the market, make verbal intervention, make threats, make promises, a lot of them falls, but it has worked in preventing a lot of the panic buying that we have seen in previous crisis.
What's going on with you as natural gas because if you look there, I mean we're talking about like muted market moves in the oil market, even though those have risen. If you look at that gas, not gas has actually come down.
Yeah, not gas in the United States is trading almost as a six month low, which, considering what is happening on the global energy market, almost incredible. I mean, the reason there is US shale, and the reason is that you cannot esport gas easily. For exporting gas, you first need to cool it down liquifi. That basically means having an enormous fridge that cools gas from you know, room temperature to minus one hundred.
And sixty celsius.
The illiquifies, and then you can put it on a tanker and send it to the rest of the market. Because we have limited equofaction capacity. When it does increase in quite quickly, that creates a bottleneck. That means that the US and Canadian gas effectively strapped inside North America, and that's keeping prices completely detached from the global market, and that is a huge difference from previous episodes of
high energy prices. Even in twenty twenty two, the price of US natural GUS went from around three and a half dollars four dollars to almost ten dollars per British thermal unit. This time's staying at around three, actually below three dollars at mbtu, And that is incredible because it means that the heavy US industry electricity generators, chemical companies, fertilizer companies, is like, there is no crisis. Well, everyone else in the world is suffering. The US is completely insulated.
There is something odded perverse about some of the disparate impacts here in terms of who is behind and who has catalyzed this war, and which side of the Suez you're on there, and who is feeling the brunt of it. But that actually, you know, you mentioned fertilizer. We've talked about fertilizer on the podcast.
These are the.
Type of things in a food insecurity that creates serious political instability potentially around the world.
How worried are you you?
We all know you as the oil and the oil guy, but you've written a lot about food over the years. I remember you wrote a great piece about in twenty twenty two about how rice is going to come to the rescue and people couldn't get as much wheat, So I know you know the food world too. How concerned are you about food? And yeah, the sort of fallout from that.
Today, I'm not very concerned.
This could all change if the war just goes on for months, if President Trump decides that he wants to invade Iran with ground troops, et cetera, et cetera. But now I'm not very concerned for a number of reasons. Twenty twenty two was a huge shock to the global food market because it affected a bread basket region of
the world. If you look at Russia and Ukraine at the time, combined, the accounted for around a quarter of global exports of wheat and barley, around fifteen percent of global exports of corn, and even much higher percentage for some vegetable oil like rape seed and some flour. The Russian invasion of Ukraine, the battleground was one of the most some of the richest fertile farmland in the planet. The battleground of the crisis in the Middle East is desert and a piece of seed that we call the
Strait of Hormuz. It doesn't have the same impact in terms of global supply. It does have an impact on fertilizer prices. So it did also the twenty twenty two war between Asia and Ukraine, which is still ongoing. But fertilizer prices require time to have an impact on food production. And also, while yes, the numbers are very scary, and you look at the global fertilizer market, just focusing on Yurea, you look at that market and say, oh boy, it's
going up a lot. We are approaching the twenty twenty two record high. But that is a problem in many markets. It is a problem that is not a food problem. It will be a fyscal problem. And the reason is that Yurea fertilizer in particular, is massively subsidized in the developing world, particularly in places like India and Pakistan. So the problem there is going to be for the Indian government Cana the Ford and spend billions of dollars estra
subsidizing fertilizer less. So is it going to be a food crisis in India because the fertilizer, i think, is going to be there it's just that you are the finance minister in India.
You have a big problem. And there that's how I'm seeing the problem.
And also the global food market is in a better position that almost any.
Time in the last two or three DCS.
Inventories of weed are very high, inventories of rice in particular an all time high. And while you mentioned rice, while we are worried about fertilizer prices, et cetera, et cetera, if you look at the most important benchmark for rice prices in Asia is about to hit at nineteen year low.
Good.
Well, if you're a farmer, no, not if.
You're the vast majority of people who need eat. Most people aren't farmers.
Sure, but look, as I said, this all depends on how lonely it stays. Because you know, you have fertilizer prices for several months high, diesel prices very high. Then you start eroding the flexibility on the system and you don't want to go. The weather can be very funny and you we get bad weather when we just really need good weather. So my main concern right now will be what I'm going to be looking at. This lasts a couple of more months. Then my main focus is
going to be how good is the monsoon. Are we going to have a good monsoon season in India or is it going to be a bad one, because if we have a bad one, then we have a problem.
Yeah.
I've been reading about the fertilizer urea tenders that the Indian government does periodically. It's just really interesting, like, you know, this big exercise to purchase subsidized urea and so far from what I understand, they've been putting it off because of the uncertainty and prices. So who knows what's going to happen. But okay, Ukraine and Russia have come up a couple of times in this conversation. What's going on
with Russian oil? Right now? Listeners can't see, but Javier is smiling, tell us have you.
Well it's almost like, oh boy, if we didn't have enough with the Middle East, here is Ukraine and you can not blame. Ukraine is fighting for survival. So they are hitting Russia as hard as they can wherever they can, and that means hitting the oil terminals. In the past, they were hitting the terminals in the south of the country that's the Black Sea. But they have found a corridor to send drones, long distant drones into the north, into the Baltic and I think that the Russians were
caught completely off guard. They didn't think that that Ukraine will be able to hit the terminals in the far north of Russian territory, so they were not very well protected or Ukrainians were extremely good at it. But the terminas have been damaged significantly. We don't know for sure the stand of the damage, but looking at the satellite pictures, it looks bad enough. So we may be also losing potentially one million barros a day of Russian oil. And
it's not really the time. Again, you cannot blame Ukraine, but it's not really the time when you want to be losing more oil.
Yeah, it's pretty well right.
So in some sense there have been the stories about okay, Russia benefiting because of relaxed sanctions and surging prices. But on the other hand, just from the global perspective, here is more supply that's being taken off the market. So I mentioned, or it's been Tracy mentioned recording this March thirty.
First in the morning. Last night we got the Wall Street Journal headline that maybe Trump will be comfortable ending this war even if the straight of horror moves is not back to normal, and Iran passed a law that codified that said the straight of horror moves won't go back to normal, and it's going to collect a toll, it says, and so forth, Let's say, okay, the war ends. Let's say Trump decides to unilaterally and the war without resolution here, and like, how big of a fundamental change
is this to the Middle East? If it's sort of accepted that Iran has a straight of horror moves toll booth, could this be a tolerable situation for the region.
Like what is the significance of that?
I would be so price if the region was to be happy with Iran having a toll boot on the straight. I don't think that any countries would be happy that an international astraite just becomes, you know, a toll boot for passing ships. I mean, like what it stops Morocco or Gibraltar or Spain to impose a similar situation in the Mediterranean or Denmark, in in the Danish streets, in in the Baltic I mean you or Singapore on the Singapore and Australia, you create a very very bad precedent
for international piece and I'm free shipping. I would be surprised if countries in the in the Middle East were happy to it.
Would they needed to accept it?
I mean a current prices of one hundred dollars, say that you you know, you are an export country and you have to pay half a dollar per barrel as a fee. I think that that's something that everyone will say, Well, you know, I mean, we're still selling the oil at one hundred dollars, so instead of one hundred, we are selling that ninety nine and a half. That's pretty good to me. So I suppose that some of the oil
will flow. But you led Iran basically to dictate terms and dictate terms forever, and that will mean also that that Iran has a very tight grip on policy and economic decisions that his neighbors have been doing independently before. So I cannot see that on the long term. I don't see also countries like China being particularly happy with
that arrangement. But if anything, over the last five years or so, we have seen things on international diplomacy and international security that I said before, Now that's not going to happen, and then I have to eat my heart.
Sorry, I just got a visual of having eating his hat.
Okay with with I sprinkles and olive oil on top of.
Tomatoes. Yeah, okay. One thing that people have talked about for I'm pretty sure the duration of all of our careers are attempts to move away from pricing oil in dollars.
And if you think.
About the current situation, there's something very poor verse about seeing the dollar go up because there's a scramble for barrels of oil because of an action taken by the United States. From your contacts in the oil market, is anyone talking about like actual currency pricing for barrels at the moment? Is this something that is going to get renewed traction?
No, I don't hear anyone.
I mean, certainly Iran may be happy to take other currencies, has been relatively happy to take Chinese juan and also the other currencies, which has problems on compatibility. Everyone else will still want the dollar. And the way that it was put to me to a leading producing country in the Middle East, and I was talking to the head of the central bank. I'm gonna not name the country, but they said to me, so if I switched from the dollar to say the Juan. I moved from a
relatively high interest rate to a low interest rate. I moved from full compatibility to a lot of problems to convert. And I moved from maximum liquidity to no liquidity whatsoever. And then the central bank governors like, why I would like to do that? Why I would like to really take a step back on my currency. And I think that the Juan is not there yet. For oil producers and everyone that is using other currencies that the dollar to price the oil or to invoice the oil, they
are doing it because they are under American sanctions. They are not doing it because they want to do it. They are doing it because they have no other options that to do it, just because they are on the naughty corner of the US dressury.
So I feel like the twenty twenty two twenty twenty three inflation crisis, commodities crisis really delivered a near death blow to a lot of the decarbonization dreams of the twenty tens and so forth. And we saw, you know, we know, a bunch of companies and country sort of quietly ditched their goals of zero and all that. It seems like this is going to have a further effect on this, but especially because Asian economies, I imagine it sounds like coal is going to be ramped back up, et cetera.
But there's an interesting dynamic, and I forget who talked about it. You know, we did this episode about how this could even further accelerate the Chinese ev exports, et cetera. And efforts to reduce oil consumption. Could we see this situation in which we essentially have electrification without decarbonization, that basically we see this boom for electrification. Maybe you're the
one who used this term. Someone was talking about it might have just been new but more electric cars and more coal at the same time.
I think that we can.
I think that that's a very good way to put it, because I think that we can't have a simultaneous poosh to try to get to reduce your dependence on oil
and to reduce your dependence on middle least oil. In particular, it's going to be see unsafe, particularly if we run somehow still has some control, whether it's a tool both or some kind of de facto control over the over the street or hormones who would like to be dependent of of you know, Middle East and oil in that situation, because you think that there's going to be a crisis six months down the road, and the solution for that is going to be, you know, more generation with coal.
And we are seeing that just you know, across the whole of Asia, whether it's poor countries like Pakistan or India or the most developed countries in the region like Japan, all of them are going for more coal right now.
But I think that we're going to see also.
Over the medium and a longer time, we're going to see a movement for more solar alongside batteries. So I can see the role of energy liquefied natural gas squeeze out of the electricity system with a push for more coal as the immediate future, and more you know down
the road with more solar and more batteries. Effectively, you know, at least for a few years, means perhaps more electrification, but with more carbon intensive production of that electricity, which is not exactly what the doctor recommended.
Now, Havy. One of the reasons we wanted to talk to you other than a bunch of our listeners have been clamoring for us to have you on. But you of course, wrote an excellent book called The World for Sale, Money, Power, and the Traders who Barter the Earth's resources. You're very plugged in to the commodity You've seen what's been the most surprising reaction or thing that you've heard from that space over the past month or so.
I mean, I think that there are a couple of things that they are very interesting. One is how little relative the price of natural guys in Europe, which was the epicenter of the twenty twenty two.
Crisis, has moved.
Yes, sure, the price of natural gas we refer to the benchmar as TTF as a Dutch benchmark for Europe, has gone up a lot, about seventy percent since the crisis started, but it's around the same level as it was fourteen months ago. And actually today, or the last time I checked the price this morning was lower than four weeks ago.
So it went up a lot.
At the beginning of the war and since then has kind of flattened or came down. That is an indication of how much allergy supplies coming into the market. A lot of it is coming from North America, the US and Canada. That really is something that a lot of traders physical traders knew was coming, but I think it
still has surprise on hedge funds. And alongside is the price of electricity, because at times we focus on oil and we see energy crisis through the lens still of nineteen seventy, nineteen seventy three, nineteen seventy nine, the first and second oil crisis. But the global economy has changed a lot since then. And yes, of course gasoline and diesel are very important, but electricity is really what powers today the global economy. You go to your bakery downstairs
or your coffee shop, that's all electricity. And the price of electricity increase a lot. In twenty twenty two, particularly here in Europe, we saw prices. We look at German prices as a benchmark for the whole of Europe, and I typically look at the one year forward because they kind of smooth out a lot of the you know, months and.
Day to day volatility.
The one year forward for electricity prices in Germany went up to nearly one thousand euros per meke up an hour.
It's now around ninety.
So when people talk about are we seeing an energy crisis like twenty twenty two, I said, look, you look at refined products or even clude oil. Yes, it's bad. You look at gas in Europe, it's getting uncomfortable, but it's not bad.
In the US.
They have not even noticed that there is a crisis. You look at the electricity market, it's like someone said the word crisis because we are a normal prices here. I mean like I have not seen anything moving, and I think that that has been quite at the center conversations.
And it's also one of the reasons when I told to central banks which they are a bit more at ease that they were in twenty twenty two, because in twenty twenty two, the four major energy commodities electricity, natural gas, call an oil, all of them went out simultaneously and they went to a stream crisis. So far from these crisis we have seen a movement in oil and a bit of natural gas in Europe and Asia, not everywhere
else has barely moved. Electricity is just basically relaxing and having a very Spanish Yesta.
All right, HARBYA, thank you so much for coming back on our thoughts. Really appreciate it.
My pleasure.
Joe, great to talk to have you as always. A couple of things stood out to me from that conversation, So it seems like everything is very relative in commodities at the moment, Like the relative price moves really seem to matter and like be quite different to each other. So the idea that maybe we shouldn't be focusing on the crude price so much. It's more the refined products where we're releasing the impact, which is what matters for
you know, everyday consumption and economic growth. And then secondly the idea that we still don't have that much movement in natural gas, yeah, which is kind of weird, but also relevant if you're worried about inflation, because that would be I think like the primary channel electricity prices through which you would see higher prices through the economy.
Yeah, I mean, look also, I mean gasoline prices are going to go to five dollars very plausibly. Diesel prices in the US are up, So it's gonna there's gonna
be a strain. But I do think that is, as you say, the really key thing it is like that that you know, what really helped me understand this was just this idea of distance between the straight and where you're an end consumer, right, and you have to figure too that like, if the distance is fairly narrow and short and you're getting your oil from your next door neighbor, you're gonna have less, you know, less reason to hold
a lot of stocks and so forth. And so when you see these headlines in East Asia, like they're already in rationing mode, Like I sort of get it. Whereas in other parts, you know, there's not a ton of imports west of Suez from Saudi Arabia Saudi Arabia, but there is some. So in some of these areas or some of these longer distances, like the Philippines, et cetera,
this sort of drop dead date or whatever. Maybe that's a little too extreme, but the sort of the true moment the crisis hits hasn't hit yet.
Everything's relative, Joe, especially geography. Well, the other thing I was thinking, though, is, you know, these buffer stocks have helped the market whether this crisis so far. But I just like, I have to imagine that if things were to get resolved in the next I don't know a week or two or even month, that everyone around the world is going to be scrambling to rebuild some of their stoles oil. So I just don't see like that
immediate pressure on price necessarily dissipating that fast. But there still seem to be a lot of people in the oil market who think it is.
It's a pretty weird time. And you know, one of the things I think, like in the very early days of the war, well, one thing that perhaps kept oil prices someone contained was like, oh, Trump is going to talk over right, There's not much appetite for any pain.
And then I think the next step, which we're in right now, is and this next leg up that we've seen, we have seen bent futures trade closed yesterday at the highest prices yet in this crisis, the next leg is probably well Trump couldn't check it out if you wanted to, because Iran get to say. And then the next stage maybe well maybe Trump latterly decides to end the war. Iran's still controls the straight Uorford moods to some extent.
How does the world live with a toll booth, etc. Which is not great for anyone not thrilled, But also perhaps I don't know, maybe like the market could live with that for a while. So we seem to be maybe moving I don't know. It'll be interesting to see if this latest headline, how long that stays with us? And if that becomes the new meta that or the new narrative that will just be Yes, this is not great.
But this is not great is better than no movement at all.
It's very seven stages of great.
Yeah, it does feel it does.
Feel like we moved from denial to like depression and then reconstruction, acceptance finally exceptions. Yeah, all right, shall we leave it there?
Let's leave it there.
This has been another episode of the Authoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our guest Javier Bloss at Javier Bloss, and of course, check out all of his Bloomberg opinion columns. Follow our producers Carmen Rodriguez at Carmen Arman, dash Oil, Bennett at Dashbot at, Kalebrooks and Kale Brooks. And from our Odd Lots content go to Bloomberg dot com. Slash odd Lots were a daily newsletter and all of our episodes and you could shout about all these topics twenty four to seven in our discord Discord dot gg slash online and if.
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