00:00Mike Wirth of Chevron saying this when we played the sign moments ago.
00:03There are very real physical manifestations of the closure of the Strait of Hormuz that are working their way around
00:08the world and through the system that I don't think are fully priced into the futures curves.
00:12What's the difference between what's happening in physical markets right now and what you see out in the futures curve
00:17and what you make of that statement by one of the CEOs of one of the biggest companies in the
00:21energy sector in this country?
00:22Yeah, so I would agree with Mike. I think while futures pricing is broadly consistent with our base case, where
00:28you start to see recovery of flows somewhere mid-April, the skew of risks is very much towards delays and
00:36sharper physical tightness and therefore higher prices.
00:39What are higher, higher prices? What kind of numbers are you thinking about?
00:42Yeah, so we laid out two risk scenarios beyond our base case. One in the adverse risk scenario. It takes
00:4910 weeks for flows to recover rather than our base case of six.
00:52You end the year at 100 for Brent, significantly higher in the spring. And in a severely adverse scenario, you
00:59also have 10 weeks of very low flows.
01:01And you have 2 million barrels per day of persistent oil production losses from the Middle East, as happened in
01:07some of the largest prior supply shocks.
01:09Then you end the year at around 115 with significantly higher prices in the summer.
01:13We're at $397 a gallon of gas in America. How high is it going to get to in this conflict?
01:18Yeah, in our base case, you know, you probably go a bit above four, especially in the summertime when there's
01:24a premium with risk skewed to the upside.
01:27That said, diesel prices, retail diesel prices are already at five.
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