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Gonna cost you a little bit more to get downtown for the Fidling Market opening Day parade or the game itself, as gas today costs more than it has in nearly four years. Lois price for you is about three twenty six in Hamilton according to gas Buddy, but the average is now very close to four dollars a gallon, which is on par with the national average. So we have Iran shutting down the straight of her moves. That's the problem.
We have an explosion yesterday at major refinery in Texas just outside of Houston, and the switch to summer blended fuel all happening at the same time. The question is will we and could we see five dollars a gallon gasoline on? That is Dan Eberhard Danzen Oil and Gassingery inside with Canary and everheard capital. He's actually Landman. Landman is on the show. Dan, Good morning, how.
Are you good? Good morning? Good morning. I'm doing well.
By the way.
I'm sure presumably you've seen the show uh land Man, which is one of the best TV shows Tyler Sheridan. You just could continue to hit it in the park. But how accurate is a lot of stuff that happens in there.
I think it's I mean drama dramatized, but I mean I would say it's accurate, but it's it's more like, you know, there's weeks and weeks of normalcy and then an episode not back to right right.
Yeah, because I mean, I mean, if your life was actually like Tommy, your head would explode. I mean, there's no human it's just you can't have that much coming at you when one day it's impossible.
Oh yeah, yeah, no, it's it's you know, look, the oil business is a business like any other, but just it it gets chaotic at time. This is this is one of them.
Yeah, yeah, it's a great it's a great watch.
Yeah.
And and of course you know then there's the ex wife reality too, but that's that's probably true in life as well. So Dan, you know, I know that you've been doing this for a long time, have been covering energy markets for decades, so put it on a scale of one to ten. How serious is this hor Mooz crisis compared to others disruptions you've seen in your career.
Oh, I mean this is probably a twelve. I mean this is I think this is a bigger deal. You know, I've been kind of going back to these seventy boil shocks, and for the world, I think it's a bigger deal. For the US, I think it's not as big of a deal because of cracking and we are more self sufficient than we were. But look, the news stories are mostly about the straight of hor Moods, which is extremely important. But something that I feel like at least slightly being
lost here is so they're taking an infrastructure there. You know, look, Middle Eastern production is down about ten million barrels a day, and I think that some of this infrastructure is going to take years to rebuild.
Years to rebuild, which means four dollars gallon gasoline is here to stay.
Is after saying no, I think in the open for Moods, I think we'll see guys clean praise is fall a gallon here in the US within two weeks. But I think for Europe this is this is a bigger problem for European But it's a pretty big property entire.
If we actually de escalate, Dan, you're breaking up a lot right now. Let me I'll reset for a second here. Maybe you can get the higher ground, get a better sell. We saw Brent crude hit one hundred dollars a barrel early this month of the first time in four years.
Uh one twenty six is peak.
The closure has been called the largest energy supply to our disruptions, you said since the nineteen seventies.
I don't think that's overhyped at all.
But if we get to one fifty a barrel, we're talking five dollars gasoline. What's the reality this summer here in Cincinnati, in the tri state for that to happen.
Oh, I think I think we're you know, four dollars a gallon. I think we hit a demand destruction at five dollars a gallon. I think we're looking at people trying to, you know, use eight to ten percent less gasoline, which is a lot of trips not happening.
Yeah, I think the CEO of United said that.
You CEO of United just said that our gas prices are probably going to go up twenty percent your ticket costs go up twenty percent basically, and they're going to spend eleven billion dollars on fuel this year. So if you have a trip planned, you better book it right now because you're if you wait till the last minute, the cost is going to go through the roof.
Yeah. No, I think that we're going to be seeing that all all over the economy. And like I said, you know, every everything is the fact that you know, the price of rubber, the price of your Amazon delivery, the price of your uger, the price of your plane ticket. Oil factors into everything, So it's something we should all watch out for, and I think it if this doesn't end soon, we're going to see consumers tighten their bell a little.
Yeah, Dan, you mentioned that, you know, the hormones closure doesn't really affect the US as much because we produce so much of our own oil, but experts kind of push back on that and saying that it's because it's it's a global oil market. Everything goes into the same kettle, so to speak, no matter where it comes from from the Earth, it all goes in the same supply. So if something goes wrong anywhere, prices go up everywhere. And you mentioned also fracking and of course alternate fuel sources
and the premium basin. When we're drilling baby drill, we have venezuela as well. How much is that I'll set this.
Well, I you know, I do venezuela thing will help us in the long term. I don't think it's a fix for this because they need infrastructure to something. Yeah, that takes time and money, but I do think Look, you know, I pushed back a little bit on what you just said, because there's two prices for world oil is thought of in WTI and bread, right, there are two different prices, and the US market is mostly self contained. We import about eight percent of our oil, A lot
of that actually comes from Canada. The US is largely self contained. Otherwise this will be worse right now for US?
Yeah, yeah, I mean I guess if we're self contained, so it would be worse. It hits us less, but that that gives our economy a distinctive advantage then too. If we have a reliable supply of oil, and granted our prices will go up just because it's going to but maybe not as the rest of the world.
That gives us a pretty strategic advantage then.
Oh no, I think this is relative to Europe. This is good for us. And one of the things not being covered is the oil price really affects the price of fertilizer, which is actually a very big deal in the African economy, and they're going to be hit very negatively by by all of this.
He's Dan Eberhart, oil gas industry insider on the show this morning, and the reality of five dollars a gallon gasoline we could see it the summer is what a lot of experts are saying right now.
And who knows.
I mean, again, our supply is much better than the rest of the world ward and again we love Drill Baby Drill because of that too. Is they keep cutting the straight of her moose off every few years, and this is what winds up happening. And it's not just a physical ball play, but I think it's interesting too. The inside baseball thing here is insurance withdraw you know, there are risk premiums have gone up four or five times, meaning the outcome for cargo flow is largely the same
as a physical blockage. Can you lay that out for our listeners who and maybe myself, we don't really understand the insurance angle here.
Sure, Typically the insurance is is maybe three or four percent of a shipment, and these oil tinkers, uh, you know, I'll to one hundred million, one hundred and fifty million barrels of oil. So these are these are giant investments for people that are very expensive to ensure. That insurance through the straight and four moves is now, on my understanding, costing fifteen to sixteen percent of cargo instead of three
to four percent. And the insurance companies don't really they're they're trying to price the people so that they don't take the voyage, not so they take the voyage and take the money.
Yeah, obviously the risk goes up, the cost of insurance is going to go up as well. And that's just one of those unseen add fees that that that we all pay for when we.
Go to the pump.
Yeah. No, look this this it reverb rates through the cost of everything and it's driving everything up.
You know.
Another point I'll make is, you know, in the US, we spend three or four percent of our UH consumer spending is on energy, and a lot of third world country it's something like nine to eleven percent. So though you'll see for those folks, it's gonna it's gonna hit even even worse.
Yeah, Dan, I do a lot of my good thinking, if you can call it that, on the toilet. I I know about you, but we had a kind of a I said, you know, we have the Panama Canal and I'm looking in my head, in my mind, and I'm picturing the strain of Horror Moves, which is like a peninsula just kind of juts out there. And the problem is there's a choke point, and Iran can easily shut it down by attacking any ships that go through there. So it's very pretty narrow, about thirty miles wide if
we're going to circumvent that. Now, the terrain from Google Earth looks pretty intimidating. There's those mountains and everything else, and it's certainly not the same situation as we did in Panama.
But I'm trying to think of an alternative.
It's like, is there a way that those Gulf States can can do a pipeline or something that prevents us from happening in the future that seems like be the best bad is that a problem that's unsolvable?
I mean, in the long term, you could have a pipeline, but the problem is that you know, pipeline is going to take within years to build. Yeah, it's not something that can be done in ninety days at all.
Right, Well, that would be far more for future proofing, right at some point the Gulf States, who are pretty much united against Iran right now, is the rest of the Middle East. It seems that that'd be a good thing. That was like, hey, listen, if we just start doing pipelines now and it's going to take thirty years to build, sure, but who knows what that nation's going to look like in thirty years. It could be worse than we have right now. It seems like that'd be a good hedge against bet.
Yeah, that's the scary thought that it could be worse. I think it would be a good head But I think if somebody's got to be thinking five to ten years in the future, not about the next ninety day for that to happen, and it has happened, I forgot.
We're living in the in the day and age of investing groups of course, and sharks and everything else, and yeah, we don't even think about the next quarter. We're thinking about the next day right now. Let alone thirty years from now. There's no long term planning in any business. I forgot, I forgot what year I live in here for a second, there, Dan, So the it's about twenty million dollars, twenty million barrels a day.
I believe it's the number.
It's about twenty percent of global petroleum consumption that goes through the Strait. And I mentioned there a few pipeline alternatives there can bypass it. So are there any of the workarounds here? I mentioned, you know, taking a kind of dig baby dig lay pipe.
In the long term, US producers can produce more, in Saudi Arabia can produce more, but again that's something that takes time. The way that I look at the problem is it's like a twenty percent of supply problem, and the buttons of the US government has are like one percent button. So I mean, we can do, you know, release the strategic particularly and reserve we countentially the thing that I've been advocating for to spend the national gas
tax for ninety days or six months. There's different levers the US government has that it can pull, but I think those are are just frankly not big enough to solve the problems in the world.
Yeah, Dan, I know you're you're a pro Trump guy, yourself a Republican, and I read something you said. You warned that steel chairs to make the industry less competitive against opek. How does steel relate to what we're talking about.
Here, Well, you know, it goes into the drilling process. The wellheads that we sell, cantry and the drilling you know, drilling rigs and all this stuff are all you know, you have metal components. So because the mettal goes up, makes the.
Yeah that makes sense. Yeah, yeah, okay, I get I get the connection there. Yeah, because you've got to pay if your your you know, it's not like the uh, the equipment you use to drill and add infrastructure is going to last forever. You've got to replace it. And so steel goes in. Once the pipes in the ground, it stays there. It's not like you pull it back out like a drill bit. I get that fifteen million barrels a day though, or twenty million, it's not easy
to offset everywhere. That's pretty much the total production of the United States, and we're the biggest producer in the world. That that's the squeeze right there. We're cranking out right now as much as we can. You run an oil field services company, land Man, when you hear there's no easy fix, is that.
This is that practical. There's got to be there's got to be something.
We can I mean we can us production kIPS potentially go up, you know, five million barrels a day, but again that would take a higher cost than you're seeing now and time. There's no easy there's there's no fix other than opening the straight. There's no fix. And I think what we're going to find out is a lot of the infrastructure and the lease has been damaged and will take a while to come back online.
Trump is going to release or talking about releasing, or has released. I guess one hundred and seventy two million barrels from the strategic poet patrols, you know, Biden at every president, I think feels like it is they've done that, and it doesn't move the needle at all because it's it's literally a spit in the ocean. I was told I was reading something from a gas buddy before you came on this morning, and there an analyst said there's a warning a double headwind.
I believe it is what they call it.
You've got the supply shock with a RAN and the I mentioned the open normal seasonal transition to the more expensive summer blend glass line required by the clean air RAG. So what does that mean in real dollars for people listening this morning?
And I think there's a lot of upward pressure on the gas price. And I was back to then into your summer plans and your your family.
Yeah, there's no claw on that money back. And you know we're twenty percent from the CEO of United Airlines, so book now, I guess the is the mantra Here. Goldman says that this rate stays closed for more than two months, oil could stay above one hundred and ten bucks a barrel through the end of twenty twenty seven. And they've already pushed their uh first Federick cut call back to September because the oil are we is this gonna factor in the stagflation in your opinion?
I think I think potentially. So look, look here here's the thing. If they if they say in an hour they're going to open the straight offour moves I think to get I think it will take six months to get the closed back to.
The law six months.
The market, Yes, the market. The market spoof The owners of the vessels are spoofed, the people on the vessels are spoofed. I mean, look, if they said they were opening in an hour, which you wanted to, would you win on the first ship going through this?
Yeah, because somebody doesn't get the memo.
Right, Yeah. So I mean if it's if it's your life and these things move incredibly slowly and what they're doing, the need to be so fast boats like the cigarette boats and basically comic casey drones to plow into the side. So I really do against the comic cosy figurette. Yeah.
And you know, you can have the United States Navy the best fighting force in the world, those small craft are gonna be very difficult to stop no matter how many drones or anything else you have activated.
You know, could be subs, could be anything.
They're gonna be really really hard to get because of the size and just how slow these targets move. He again on the show this morning is Dan Everhart. He's an oil gas industry insider, Canary and ever Heard Capital and actual landman. Dan, all the best, thanks for jumping on the show this morning and and depressing us here the day before opening day.
Thanks, thanks uh thanks for thanks for having me.
I appreciate you, buddy. Thanks again. I know you're a busy man. Not the news you wanted to hear, but that's the reality. So planning, planning, planning, Do not wait till the last minute to book your travel for the summer. The gas prices are gonna go up before they go down. Scott's Loan Show with news on the way in just minutes on seven hundred WLW