00:00Let's talk about oil byproducts like plastics and how they've been affected by this conflict so far.
00:06You talked about polyethylene. You had a whole episode with Philip Gertz, chemical and oil analyst at Bloomberg NEF.
00:13What did he say that struck you about how the packaging supply chains could be impacted?
00:19Well, I think the thing that struck me is just how fast they seem to be affected at the moment.
00:24So we already know that there are some, they're called crackers in Asia, places that actually, you know, transmit or
00:32places that actually transform petrochemicals into plastics.
00:37They're already shutting down production. And that was when we spoke to him, that was like two weeks into the
00:42conflict, something like that.
00:44So that's an enormously fast time or impact time for these things to start taking effect.
00:52Right. Because the strait has only really been closed for, what, five, six weeks.
00:55And the difficulty with a lot of these like petrochemical operations and energy in general is once you shut them
01:02down, it's actually really hard to restart them.
01:04And it takes a very long time. So, again, even if the conflict were to get resolved in the next
01:10day or week, these problems have the potential to linger on.
01:14Again, we've already seen some closures of crackers in Asia.
01:18This is an important element, too, which is you may have seen one of the charts that's gone the most
01:25viral is the cost of jet fuel in Singapore.
01:28And this is a really important concept, or at least for me it really struck, which is because any of
01:37these operations have a high cost of shutting down and restarting.
01:41No facility wants to do that, that they will slow their intake.
01:46So a jet, a refinery that turns oil into jet fuel, they don't want to slow down.
01:51They don't want to shut down because, oh, there's no more oil.
01:54So they have this fixed amount of oil that they can get.
01:56So they start slowing down their intake.
01:58And then there's less jet fuel than you would anticipate given how much oil there is.
02:04So you have oil as compared, but then there's less jet fuel even relative to that than you would anticipate.
02:10So the price of these end products surges much more than even the price of oil surges because the refinery
02:18is already doing this rationing effect.
02:20And they're rationing because it's just so expensive to get that.
02:23And the rationing because the last thing they want to do is run out because if they run out, then
02:26they have to shut down.
02:27And then that costs a lot of money.
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