00:00We heard from Jameson Greer earlier today, the U.S. trade representative.
00:03He said the U.S. is generally insulated from a lot of the supply chain effects when it comes to
00:07direct commodities and things like that.
00:10We have domestic sourcing. We have sourcing from our partners to the north of the U.S. and other places.
00:16I'm wondering how we can say that with seeing WTI above $100 a barrel, because it doesn't seem like we're
00:23insulated if the U.S. benchmark is that high.
00:25Well, we're generally insulated in terms of supply shortages, for example.
00:29So there's plenty of gasoline, there's plenty of crude oil, but we're not insulated from things like rising prices due
00:37to global prices going up.
00:40Other countries are experiencing much more severe impacts.
00:44And we've got countries where they are rationing electricity, they're rationing gasoline, they're rationing other petroleum products.
00:51They don't have enough natural gas, for example, for their power plants.
00:54So they've either got to switch to coal or, you know, just shut them off and have intermittent electricity.
01:00So in that sense, yes, we are insulated.
01:04But that's not what Americans really want to hear when they go to the gasoline station to fill up.
01:09And suddenly, you know, the price is $4.50 a gallon or $5 or $6 or probably approaching $7 in
01:16California.
01:17It doesn't feel like we're insulated.
01:20Yeah, I also think about, you know, is it different?
01:23I mean, even, you know, the Russian invasion of Ukraine, right?
01:26There was the breadbasket.
01:27We, like, all felt the impact of that.
01:29And we felt, Europe certainly felt the impact of energy.
01:32But I mean, whether we are seeing the pushback on globalization, Ellen, we're still kind of connected as a global
01:38economy, right?
01:38And so eventually, even if we feel like we're insulated now, if what Europe is going through a tough time,
01:46they buy U.S.
01:47Like, you know what I mean?
01:48There's, we'll feel it, right?
01:50We're absolutely, I mean, we're absolutely feeling it.
01:52We're going to feel it.
01:53I mean, everyone, you know, like you said, we have a very global economy.
01:57Just the fact that we participate in, you know, global marketplace.
02:01Oil is a global commodity.
02:02So if there's a supply shortage somewhere, it means our prices will rise.
02:06That's why our prices are rising right now, not because we're worried about having enough of a supply, but because
02:13other people are worried about it, rightfully so.
02:16And so because it's, you know, an international commodity and that's how prices work.
02:22And the truth is, it's better to be a part of the international trade and the global economy than it's
02:28not.
02:28But, of course, we are feeling these effects and it's going to show in all parts of the economy.
02:34Fuel prices grow up.
02:35That means what you're paying at the grocery store goes up.
02:39People are hurting for agricultural products like fertilizers and things like that that are also made from petroleum.
02:46We're going to feel that in our food prices.
02:48So, yes, while technically we are fairly well insulated, we're still going to feel the effects.
02:56We're still going to feel higher prices of things and essentially like inflation.
03:00It's almost like we're paying for this war, maybe not as badly as other people are right now, but we
03:06will feel that and we are feeling it.
03:08And it's going to have an effect even after the war ends, even after prices return to a lower state.
03:16I'm not sure they're going to go back as low as they have been.
03:18Ellen, I want to get back to that in a second, but first I want to talk about the divergence
03:23and then convergence of WTI and Brent, the U.S. and global benchmarks.
03:27Why did we see for a couple of weeks these two really detach in terms of price and now just
03:34in the last day or so come back very close together?
03:36For example, WTI, 102 a barrel.
03:39Brent, just 104.50 a barrel.
03:41There was a big divergence in the last few weeks.
03:44Why was that?
03:45Well, I think, you know, I think there's there's generally a big divergence.
03:49I think that the price of Brent is really kind of it's not really being reflected in what's going on.
03:57I think the price of Brent really should be higher.
03:59The price of Brent came down because of this sentiment that there may be a de-escalation.
04:04But if you look at the way things are functioning, the amount of oil going out, the amount of what
04:11the prices people are actually paying for oil internationally, the price of Brent should probably be higher.
04:19That's saying, you know, I think that that's why we're seeing much more of a convergence right now, because the
04:24price of Brent is reflecting this kind of traders kind of hope for the future that there might be a
04:30de-escalation and therefore more oil might start to come out.
04:34Whereas that's not being reflected in the price of WTI.
04:38So how does this change things longer term, Ellen?
04:41I keep thinking about I was talking with our Joe Doe, who follows statecraft and, you know, aluminum and rare
04:48earths and all that good stuff.
04:49But it's just this thinking that, yes, we are a global economy, but increasingly nations are thinking about their own
04:57national security and what they need to make sure that their supply chains are really strong and they've got backup.
05:06So I just wonder, like, how does how does that impact that maybe the energy markets going forward?
05:10Does that mean U.S.?
05:11Yep.
05:11Get ready to drill, baby, drill, because we're going to have to.
05:14That's a fantastic question.
05:16And I think what it means is not just I think we need to really excise this term independence.
05:21What we need to focus on is our interdependence and our supply chains.
05:25And so I think one of the reasons that we have fared fairly well in this, you know, in this
05:30crisis is that we have developed an incredible interdependence with Canada and also to some extent Mexico.
05:39I think with Mexico, it could be improved.
05:41But most of our oil is imported from Canada.
05:44And because of our incredible interdependence with Canada, I like to say we have north.
05:50We should look at it as North American energy security.
05:53Don't look at it as American energy security or U.S.
05:56energy security, but North American.
05:58Look at it as continent, because that gives you so much more flexibility, so many more ways to look at
06:05supply chains.
06:05I mean, we could even, you know, expand that out if we're thinking about rare earths and critical minerals as,
06:11you know, hemispheric security.
06:14So there are countries, you know, in the southern hemisphere that have really great supplies of lithium and other rare
06:21earths.
06:21We need to look at developing those supply chains and securing them, because what if this war was with China,
06:28for example?
06:29Well, then we've seen a really different situation in different commodities.
06:34Right.
06:34Just take us back to COVID, right?
06:35And all the things all of a sudden, like, what?
06:36We don't have this?
06:37We don't have this?
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