00:02Oil prices had been spiking anyway in the weeks leading up to this because there was
00:07a lot of tension out there and so there was a lot of speculation that something might
00:10happen.
00:11So oil prices have gone from about $60 a few weeks ago, $60 a barrel, up to around
00:16about $78 today.
00:18So what are the concerns?
00:19Is it the concern that the oil is going to be targeted so therefore supply will be less?
00:25Or is it the case that the Strait of Hormuz might shut?
00:28But what are the challenges to the oil price?
00:30Well it's really around the Straits of Hormuz because if that is shut, that shuts down about
00:3415% of global oil supplies and even though OPEC has announced that it will increase its
00:40output to try and counter this, it's not going to be anywhere near enough to counter that.
00:46The other big factor though too, because we're talking about energy as a complete package
00:50here, is gas, LNG.
00:52About 20% of the world's LNG is shipped out of Qatar and through the same straits.
00:59And so with drone technology these days, Iran could be just sending up drones and stopping
01:06all shipping coming through that very narrow passage for quite an extended period.
01:10So whilst we're not seeing a translation right now, because you said it had been factored
01:14in somewhat because of tensions, we're early days into this conflict now, we're two days
01:19in.
01:19If this goes on further, how could it impact oil and gas?
01:22Well the timing is everything really, because the longer this goes on, the worse it gets.
01:27So the shortages of oil and gas accumulate.
01:31As we saw when Russia invaded Ukraine, oil prices spiked at US$120 a barrel.
01:40And there are analysts this morning falling over one another to predict 100, 115, 120.
01:46One has gone as high as 150.
01:48So if that does happen, then we're looking at, well, you know, a pretty serious fallout
01:54in terms of the global economy.
01:55As consumers, we always want to know where is it going to affect our back pockets?
02:00You know, when might this flow through to the bowser?
02:02When might it flow through to energy prices?
02:05That's right.
02:05And when it might flow through to interest rates as well.
02:08Because if you think about what has been driving the inflation problem in Australia since
02:12the pandemic and since the Russian invasion of Ukraine, it's all been about oil prices.
02:18It's all been about electricity prices.
02:20And so if that continues, I mean, we'll certainly see a huge jump in electricity prices again.
02:26And that might, you know, cause the or force the Reserve Bank to take further action.
02:31More broadly speaking, when you look at the financial markets as a whole, we know it's
02:34fairly fragile and has been, but it's still keeping on, keeping on.
02:38We're seeing these companies that are valued at some of the top rates that we've seen
02:41in all time.
02:43What could something like this, a shock to the system, the financial system like this,
02:47mean for the broader financial system?
02:49Well, look, there's already a lot of nervousness out there around financial markets because
02:53of the valuations.
02:55They are extraordinarily high.
02:56We've seen software companies like Microsoft, Atlassian.
02:59Atlassian's down around 80% from its peak.
03:02They've taken a massive hit because everyone thinks they're overvalued.
03:05And that's flowing through to the financiers as well.
03:08Now, on Friday night, we saw an unknown UK financier collapse and that reverberated through
03:14global markets.
03:15You had Goldman Sachs.
03:16You had a whole lot of big name banks that took five, 7% hits to their share price.
03:21So, you know, there's a lot of nervousness out there that markets are overvalued and you
03:26really just need something else to tip the balance.
03:28And just quickly before we go in, it seems like gold is the beneficiary of all of this
03:32still.
03:32Yeah, and I mean, look, you know, we have to realise that Australia is a big exporter
03:36of energy and a big exporter of gold.
03:38And so if energy prices do spike, we'll be earning, well, the country will be earning
03:42more money at least through those means and gold as well.
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