00:00Well, Kona Hack is an independent commodities analyst.
00:04Kona, thanks for joining us in the program.
00:06Just how much of an impact could shortages of these commodities have?
00:11The short answer is that prices of our everyday goods are going up
00:15because the feedstocks are going up.
00:18So, as you mentioned, a quarter of energy supplies,
00:23a quarter of fertilized supplies, 9% of aluminium,
00:27half of sulfur, the big chunk of petrochemical feedstocks,
00:32they're all reliant on this homeless trade.
00:35So, it's a massive choke point.
00:36And the fact that these supplies,
00:38we're seeing probably the most extreme supply shock ever,
00:42certainly for energy, but certainly for the other ones since the Russian war.
00:46So, this is extreme.
00:47And to the extent that this then passes through to the production supply chain,
00:52ultimately, this is going to have pretty severe consequences on everyday lives.
00:57Analysts have been saying that the oil markets won't recover quickly.
01:01Are we going to see that in the commodities market in general?
01:05So, it depends which commodity you're talking about.
01:07But yes, generally, I would say yes,
01:09because these things take time to build up again.
01:13So, for example, LNG,
01:15given the extent of the damage that was done in the Qatar SARS gas field,
01:19it could be up to five years before that production capacity gets back to where it was.
01:25Even for crude oil, really, you know,
01:28you have quite a few floating tankers in the area.
01:31That could ramp up quickly.
01:32But the refineries, you know,
01:34all of these oil fields, they've let go of their staff.
01:37It takes time for that staff to come back on stream.
01:39And even then, it needs to be,
01:40they need to be sure that it's completely safe.
01:43But other things like aluminium, fertilizers,
01:46these again, you know, fertilizers, basically nitrogen.
01:49Nitrogen is a byproduct of when you produce gas.
01:52So, these things take time, you know.
01:55When will this gas fields and those gas operations come back and become fully operational?
02:00Only then will we start seeing these production supplies coming back on stream.
02:07But to make things worse,
02:09you also have massive hikes in shipping costs.
02:12So, the freight rate and insurance costs of shipping this stuff through,
02:17even if the war were to stop today,
02:20the freight rates will take a while to come down.
02:23So, you're seeing a level increase in all the costs of just transporting this stuff,
02:29even if supply were to return back to normal levels.
02:32So, it's unfortunate we're in here for a little longer than we would like.
02:36Kona, some countries are saying this is a big opportunity
02:39to accelerate the green transition.
02:41Do you agree with that?
02:44Yes, I would, actually, because one thing that's come really clear,
02:47not just in the current Middle Eastern war,
02:50but even previously in 2022 during the Russian-Ukraine war,
02:53is that when you rely too much on fossil fuels,
02:56and on top of them,
02:58when you rely too much on specific geographical producing regions,
03:04then you actually, as a country,
03:05particularly a country that's very import dependent on energy,
03:09you find yourself quite vulnerable and exposed to supply shocks,
03:12as we've seen.
03:13So, then it basically makes sense for you to be investing in non-fossil fuels,
03:19or, as you mentioned, green renewables,
03:21to the extent that you can.
03:24Europe today arguably learnt a little bit from the lessons from the 2022 Russian war,
03:29whereby it's ramped up its capacity in both nuclear,
03:32but also a lot on wind and solar.
03:34However, this has helped them cushion the shock a little bit.
03:37I think today, if they were still 100% reliant on fossil fuels,
03:41today's impact would be considerably worse.
03:44You know, maybe the pricing bill would be several-fold compared to where we are today.
03:48So, yeah, to answer your question,
03:49the argument is massively in favour of investing in renewables.
03:54It allows you to become a little bit more self-sufficient in your energy requirements,
03:58and long-term, it's good anyway,
04:00because fossil fuels, in theory, are finite,
04:03whereas renewables are, by definition, renewable.
04:08Kona Hack, Independent Commodities Analyst.
04:10Thank you for your insights, and back over to you, Juliet.
04:13Thanks so much, Siobhan.
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