00:00Matt, go on your Bloomberg Terminal, 30-day look, vessels, of course, on your screens in blue.
00:06This is the Strait of Hormuz, Persian Gulf, Oman Gulf, major exporting hub, of course, in Iran,
00:13which was attacked on the weekend, and some reporting today from Axios that the U.S. president
00:18is weighing a seizure of some other assets in that part of the world.
00:22We're also getting some lines coming through out of Dubai, and the international airport
00:26there being temporarily suspended about 30 minutes back, and we're also trying to figure
00:30out, really, what tanker traffic is really like, given a lot of reports, right?
00:35If you're Chinese or Russian-linked, you get free passage, everything but American and Israeli
00:40also get free passage.
00:42On the Bloomberg Terminal, you do have some data on this.
00:44We're looking at 24-hour rolling data every 30 minutes, so suffice to say, if there's something
00:50there that is visible, that is moving, then this might be able to capture that.
00:54It's also worth pointing out, though, that some of the tankers in that part of the world
00:58have maybe turned off some of their signaling mechanisms in order to, of course, avoid...
01:02There's a lot of jamming that's taking place across GPS, too, so that's also affecting
01:06the ability of folks to figure out, really, where things are in real time.
01:11But based on our understanding, it's effectively at about near zero as far as tanker traffic is
01:16concerned, whether that's...
01:18The orange line is bidirectional.
01:20East to west is in blue.
01:22West to ease is in yellow.
01:24But again, suffice to say, the headline here, Yvonne, tells you everything to know.
01:27And you are getting a lot more efforts, of course, on many sides to open up traffic there
01:32in that part of the world.
01:33Yeah, and it's interesting, if you read more from this Axios report of what President Trump
01:37wants to do when it comes to that export hub of Iran, which it did attack.
01:41So apart from just asking for a coalition of countries to reopen the Strait of Hormuz, he
01:46is also weighing a seizure of the critical oil depot on Karg Island.
01:51This would be a move that would require U.S. boots on the ground, according to Axios here,
01:57and if tankers remain bottled up in the Persian Gulf.
02:00So that's the latest on that front.
02:02Of course, we have to take a look at when it comes to the impact on China, right?
02:04And most of the economists and China watchers that we talked to have talked about, you know,
02:09China's efforts to build out its energy sources is actually getting fresh momentum from this
02:14conflict in the Middle East.
02:15And Beijing is one of the largest global investors in power grids.
02:18And China was the fastest growing LNG market before Russia's invasion of Ukraine in 2020
02:24triggered a surge in spot prices.
02:26But Bloomberg Opinion columnist David Fickling says there's a lesson to be learned in Beijing's
02:32dash for gas.
02:33He joins us now, together with our reporter, Jack Murtaugh, to talk us through this complex
02:37issue right now.
02:40David, let me start with you.
02:41Underscore the premise here for us.
02:45Yeah, I think this is looking at a very specific case, really, which is, you know, some of the
02:51things that have caused these blue skies around Beijing in recent years.
02:55You remember, like, 10 years ago, there was a lot of air pollution in northern China, especially
03:00in winter.
03:01One of the things that's really changed that is that since about 2017, there's been a lot
03:06of push for people in rural areas to stop burning coal in domestic furnaces to warm themselves
03:12in winter.
03:13And that's pushed people in several directions.
03:16One has been to electric heaters and some to heat pumps.
03:19But a lot of them have also been pushed to gas boilers.
03:23And that's actually caused real problems just in this past winter.
03:27We saw quite a lot of reports in January with some of these rural families.
03:33They were initially subsidized to install gas boilers.
03:36They were subsidized for the price of the gas.
03:38And those subsidies have gradually been removed because, of course, a lot of local governments
03:42in China, you know, are facing a lot of fiscal pressure.
03:45And that's left, you know, some of these quite shocking reports out of, you know, China of
03:492026, where you've got poor rural families who can't afford to heat their houses, who are,
03:54you know, people who are having to sort of stand outside in the midday sun to get a little
03:58bit of warmth and are just like having to rug up inside with extra layers of clothing.
04:03Now, I think that was a real mistake because the costs of heat pumps, essentially in a reverse
04:10cycle air conditioners, are not that much greater for inland of these areas, about 20%.
04:14And really, a lot of people talk about gas as this sort of bridge to electrification.
04:20I think we saw in that Hebei winter gas crisis some of the problems for that.
04:24And, of course, we're seeing spilling out of the crisis in the Middle East some of the
04:27problems for that much more broadly in the world.
04:31Yeah, David, you certainly have highlighted some of the challenges in this whole transition.
04:35Dan, maybe you can step in and talk about how, you know, what is being done now, right?
04:38This push to expand China's energy infrastructure and when it comes to capacity and the power
04:43grid, what efforts are being done now?
04:47Yeah, you know, David's exactly right.
04:49I think China has sort of realized that it was too reliant.
04:53You know, it requires about 50% of its gas coming from overseas markets, about
04:5770% of its oil coming from overseas markets.
05:00So it's really exposed to any gyrations in global prices.
05:04And now it looks at electricity, which is mostly coming from domestic sources, coal, nuclear,
05:10wind, solar, hydropower, all of which are, you know, produced in China.
05:13So it has a lot more control over the prices and supply there.
05:18And so it's been shifting its economy over the last couple of decades toward more and
05:22more electricity.
05:23Mostly you see that in EVs, but, you know, you can see it out in the countryside with these
05:28huge wind and solar farms.
05:30And that's all that is doing is requiring a much stronger grid build out.
05:35And so you have these companies like State Grid and Southern Grid that are backed by the
05:39government and are spending records amounts and selling bonds for 700 plus billion yuan
05:45last year to raise the money to build the power lines and the batteries that are needed
05:49to keep pace with all this new electricity demand that's here in China.
05:54Yeah.
05:55So Dan, just to follow up on that, you talked about financing.
05:58So clearly some of the SOEs have been tapping the markets, whether that's the banks or the
06:02debt markets.
06:03There's a lot of money that's pushing through into that.
06:05Talk to us, though, about the challenges that remain despite all that money being in place,
06:09really.
06:11Yeah, I mean, the big challenge is not building the infrastructure, right?
06:15China's got incredible power construction companies.
06:18So the long distance power lines, the battery storage plants, like they can build those things
06:22at scale.
06:23The challenge in China is really more about the underlying market that dictates how electrons
06:29are moved, where they go from, how flexible the supply can be with all these new sources
06:34of wind and solar that can be kind of anywhere geographically, but only on at certain amounts
06:40of time.
06:40And so the real challenge is going to be over the next couple of years to see if China's
06:45leaders can kind of slowly reform their market to create a more flexible system without kind
06:51of reducing any of the energy security promises they've made to their industries and people.
06:59And David, you talked about the challenges.
07:02Do you get a sense that there's policymakers are trying to fix this in any way?
07:06And what's sort of the lesson to the rest of the world right now when it comes to trying
07:11to transition and make this big transition?
07:16Yeah, I mean, I think we, I mean, Dan and I worked on a story a couple of years ago
07:20about
07:21the big solar manufacturer Tongwei, their founder, I remember the two sessions last year, was
07:28talking about, well, you know, if we keep on this electrification process, we can stop oil
07:32imports within, I think, two decades, which obviously quite a long time, there's two decades
07:36of oil imports.
07:36But for a country the size of China, an oil importer the size of China, that's the sort
07:42of scale of ambition that's being talked about.
07:45And certainly for China's export industries as well, a lot of them, you're seeing a lot of
07:50like EVs and solar panels going to emerging markets that are still very dependent on fossil
07:56fuel imports.
07:57And we're going to see in South Asia, Southeast Asia, a lot of exposure to the effects of
08:02the crisis we're seeing in the Middle East.
08:04And China's standing there with the products, the sort of alternative products to fix that
08:08problem.
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