00:00Big picture first, a lot coming at us. We're trying to figure out, and I think a lot of it
00:03has to do with how long this war goes on. But short term, long term, how are you thinking about
00:08the global energy markets?
00:11I would say both short term and I think short term, we are right on the precipice of what could
00:16be a global energy crisis. If we don't get traffic moving through the Strait of Hormuz soon, and even at
00:25a reduced rate would be fine, but we've got to get some sort of movement going.
00:30If we don't see that by the end of next week, I would say that we're looking at shortages across
00:37Asia and all sorts of other dislocations that are going to happen simply because you've got tons of tankers just
00:45sitting there.
00:46Okay, you've got storage facilities filling up to the point where producers in the Middle East are already having to
00:52cut production. And yet that oil is desperately needed everywhere else, particularly in Asia and then Europe.
00:59We've already got a crisis in natural gas prices in Europe simply because Qatar has shut down natural gas production.
01:07And that's not something that can be turned on immediately. That's going to take a while to restart, even if
01:12the hostilities ended tomorrow.
01:14And I think that the world is really waiting to hear from the Trump administration. What are their plans to
01:21alleviate this crisis? Because it doesn't have to get as bad as it could get. There are steps and things
01:28that we can do right now to start alleviating this crisis.
01:33Ellen, like what, for example, does it mean reinsurance for ships that are in the region to provide at least
01:41confidence to the folks who are at the shipping companies that, okay, your investments will be protected? What could the
01:48Trump administration do?
01:50I mean, I would say that's like the tip of the iceberg. We need some concerted military effort to protect
01:58ships. Now, I understand that's very difficult when the primary issue here are drones that are flying, and it's really
02:04hard to protect against that.
02:05But there's got to be some kind of military presence protecting tankers. There are other things that can be done.
02:13They can reroute ships out of the current traffic scheme that takes them right through Iranian waters to a shipping
02:22route that's farther south that used to be used in, you know, before 1979, that might take them somewhat away
02:29from the Iranian shoreline.
02:31They can make efforts to, and I said this recently in a piece for Atlantic Council, to remove the Iranian
02:39military presence from certain islands in the Strait of Hormuz that ships have to pass by in order to get
02:45out.
02:46If our military can remove Iranian troops from those islands, then there's a much better chance in ships having actual
02:53safe passage.
02:54And then there's just this issue of these drones flying everywhere that are now starting to hit oil production, oil
03:01facilities, oil infrastructure across the Middle East.
03:04There was an oil field in Iraq that was hit recently. You've got refineries that are being hit.
03:11These are the kinds of things that can't necessarily be repaired quickly and that are also jacking up oil prices
03:17in addition to this tanker crisis.
03:18Well, let's, you know, it's interesting. We've been thinking about history as a guide or not as a guide, Ellen.
03:24And we were talking with a guest about the energy crisis during the 70s, right, when there were lines in
03:30the United States and on even license plates.
03:33Yeah, we brought that up with Steve Moore.
03:35Exactly.
03:35Earlier this week.
03:36And we've talked about, you know, early 90s, right, the Persian Gulf War and what we saw in terms of
03:42energy prices.
03:42You've got, it's fair to say, you know, you now have the U.S. that's kind of energy, has energy
03:49independence.
03:50You've got alternative energy at play.
03:52So what's similar?
03:53What can we lean on in terms of history?
03:55What can we not?
03:57So I think that the U.S., I wouldn't say we're energy independent, but I would say that we are
04:01particularly isolated from some of these issues that other countries are going to face much sooner than us.
04:07I mean, some countries have ample storage.
04:09China's got a lot of oil in storage, but other countries don't.
04:13And so they're going to start to feel the effects first.
04:15It's interesting.
04:16These are the two historical examples that were pulled.
04:18I would actually look a little bit farther back to the Suez crisis in the 1950s.
04:24And actually, before Britain and France went and invaded the Suez Canal to try to take it back from Nasser,
04:32they and the United States, all three of them,
04:34coordinated plans for what to do in the event that there was an energy crisis involving the Suez Canal.
04:41And there were actually all sorts of plans put in place for which ships would go where and how Europe
04:46would be supplied with oil in the event that they couldn't get it through the Suez Canal.
04:50And the fact that we didn't put these plans in place, we didn't even reach out to communicate to the
04:55people who might be most affected by this,
04:57I think is a serious problem.
04:59And we should be correcting that.
05:01We should be looking at this example, establishing coordinating committees, talking to these Asian countries,
05:06and seeing what can be arranged so that we can make these oil shortages that they might suffer less,
05:14particularly if this military confrontation is going to last for six months now.
05:19I mean, just earlier we were here in four weeks and now we're here in six months.
05:22So, you know, there are things that we can do to help.
05:26And I think that we're not necessarily doing them.
05:29We're speaking with Dr. Ellen Wald.
05:31She's president of Transversal Consulting.
05:32She's senior fellow at the Atlantic Council.
05:34She's the author of Saudi Inc. about Aramco and the country of Saudi Arabia.
05:39I bring that up right now because a story just crossing our Bloomberg terminal.
05:42This is a Bloomberg exclusive about how Saudi Arabia has stepped up direct engagement with Iran
05:47to try and contain a war in the Middle East that's wreaking havoc and stressing global markets.
05:52This is according to several European officials.
05:54Bloomberg News is the first to report on these Saudi efforts.
05:58You know the country of Saudi Arabia very well.
06:00You understand how inextricably bound it is to Aramco and the oil industry.
06:05As the price of oil goes up, that's a good thing for the kingdom of Saudi Arabia.
06:11So there is this, you know, it's an awkward question to ask,
06:16but there are these sort of competing tensions here when it comes to Saudi Arabia
06:20and its role in ending this conflict.
06:24Well, let's remember, it's only a good thing for Aramco if they can actually sell oil.
06:28You know, if they can't actually sell any oil at, you know, $91 a barrel.
06:33It's just sitting there and it's at risk.
06:36Now, Aramco is actually in a very unique situation and they have the ability to send oil out to their
06:43port in Yanbu,
06:44which is on the Red Sea, and they can send about seven million barrels a day that way.
06:50And so they have that ability.
06:52They're using that ability.
06:54They also have oil stored all over the place and that they can utilize at least to avert, you know,
07:01energy shortages or they can fulfill their customer orders from that for a period of time.
07:07Then they'll obviously have to refill their storage.
07:10You know, they could make a lot more money if they could sell more than seven million barrels a day,
07:16but they can't get it out of the Persian Gulf.
07:20So it's kind of interesting.
07:22I do think that the real winners here are Russia and the U.S. oil industry.
07:27If the U.S. oil industry or at least some parts of the U.S. oil industry could put more
07:32rigs into production
07:33and produce more oil and sell more oil, they could certainly make money off of this.
07:37And Russia is, of course, making a lot of money as well.
07:41Well, do we see U.S. producers kind of kick into high gear over this or not so fast?
07:45So this is this is the interesting question, because initially I think they're very wary of,
07:51you know, of putting in more capital, of doing this because they've been burned before.
07:56And so I think that, you know, if they were receiving some kind of guidance from the Trump administration,
08:01some kind of thoughts on on what would be helpful, they might be likely to, you know,
08:07to put more investment into to produce more if they had a sense that, OK, yes, you know,
08:13this is going to be valuable over the next several months as opposed to, well, you know,
08:17the conflict could be over in five days and then, you know, we've just wasted our time and money.
08:22Hey, one thing I wanted to ask you, because for some reason, because I have my dumb moments,
08:28is China and China and energy.
08:30I know that they are reliant so much on the global energy markets,
08:34but I had no idea all the refining that goes on there,
08:37because I know that they specifically, the Chinese government, I think this was earlier this week,
08:42has told the country's top oil refiners to suspend exports of diesel and gasoline.
08:48I didn't know that they were the third largest supplier of oil products into the region.
08:51So I do think about where the pressure comes maybe from the U.S. to kind of put an end
08:58to this,
08:58because how much does China get hurt in all of this?
09:01Well, exactly. I mean, China gets huge amounts of oil and products from the Middle East.
09:07They're also, by the way, invested in refineries and in petrochemical facilities in Saudi Arabia.
09:13So they may be losing money in that there also.
09:16But yeah, China is saying, hey, we need to conserve this for domestic use,
09:20because we can't necessarily depend on these imports that we may have been getting from the Middle East.
09:26So we're not going to be selling to the region.
09:28And now they're leaving other Asian customers there high and dry.
09:36And they're saying, well, we used to get this diesel from these refiners in China.
09:39Now, where are we going to get it?
09:41You know, we can't get it from the Middle East.
09:43And I think there's a whole lot of dislocation that's happening now.
09:47And I do believe the market will sort it out.
09:50People will have to pay higher prices.
09:52But there's also this element of we're missing a huge amount of supply right now.
09:57Hey, Ellen, we only have 20 seconds left.
09:58We started the conversation out.
09:59You said if things don't get cleared up by the end of next week,
10:02then we'll face a full-blown crisis.
10:04What does that mean for oil prices?
10:05Just 20 seconds.
10:12Do we go back up to 140?
10:16I definitely think 120 is possible.
10:18I mean, we're already at 90, 92.
10:20So if nothing moves, then we could definitely see 100, I would say, by early next week.
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