00:00As the war drag on drags on, the strait is still shut.
00:04Have we reached a ceiling? Are we nearing a ceiling?
00:06Do we see a ceiling or do we think these prices are going to continue to rise?
00:13It's a very good question. I mean, it keeps getting it keeps getting worse.
00:16I mean, the the Brent settled at one hundred nine dollars a barrel this week is up 10 percent.
00:22And really, there wasn't really much progress at all.
00:25I mean, Trump's Trump's meeting with Xi Jinping, there was some hope in the market that that was going to
00:30bring some kind of tangible results to negotiation.
00:35China being the the largest buyer of Iranian crude, but but nothing.
00:40There was no real meaningful progress on that front whatsoever.
00:45Trump said actually the truce with Iran was a massive life support.
00:49So it was it was a it was a pretty tough week for the for the oil market.
00:54And especially actually when you start looking at futures, the back end of the curve have been steadily creeping creeping
01:01higher.
01:02And so crude for delivery now at the end of the year is now up to $80 a barrel compared
01:08with around 70 or so a month ago.
01:10And that and that that that really sort of says that the market is starting to price this in now.
01:15I was, you know, it's starting to discount the the the hope for a short term solution here.
01:23Kevin, as politicians in particular look for some way of providing relief to their constituents, there's talk of removing this
01:29federal tax on on gasoline.
01:31And I'm curious sort of how you see that being effective or not going forward.
01:35Does that provide some sort of temporary relief?
01:37Does it provide any relief at all?
01:39Give it give us kind of the policy perspective on what has become this kind of political artifact.
01:42In fact, we've seen both parties talking about.
01:44Well, yeah, that's right.
01:45Yeah.
01:46I mean, all politicians know the political dangers of of high gas prices.
01:51I mean, Trump more than anyone.
01:52And so they want to provide some some some kind of some kind of relief.
01:57It's it's it's it's very difficult to do and very, very expensive.
02:01So the thing's been been been talked about the last last week or so is removing the federal tax on
02:08gasoline.
02:08I mean, that that's only 18 cents off of average price of about 450.
02:14So definitely it would provide some some form of relief.
02:19You know, but we've seen we've seen gas prices jump one dollar 15 since the war began.
02:24So it's it's it's it's really a fraction and some some policies around around the world are starting to think
02:30about more serious things like, you know,
02:32we've seen proposals for windfall profits taxes on oil companies and and then other policies such as export controls or
02:44price caps.
02:45And those those would be more of the extreme policies.
02:48And that's that's really what the oil industry is desperately scared of because that would that would that would that
02:54would really that would stop them making the all time profits that they're making.
02:57But it would also they argue with curtail supply and make things worse in the in the long run.
03:02So there is there is certainly starting to be some concern in the industry about whether the longer term kind
03:07of policy impacts the longer this this crisis goes on.
03:12So it does seem like some producers and exporters are looking at longer term alternatives because we've been talking to
03:19our colleague Javier Blas and some others about how at the moment there just really is no alternative for the
03:24strait in terms of capacity and pricing to get that oil through.
03:28Of course, Saudi does have that West East pipeline.
03:30And now we've got the UAE is fast tracking another East West pipeline.
03:35But that's not expected to be operational by 2027.
03:38Obviously, these are expensive projects.
03:41They're ones that the threshold hasn't really met until now.
03:44But do you expect to see more of them as the concern is even if this this blockade is is
03:50remedied in the near term, it could bubble up again at any time.
03:53And people need another way to get this oil out.
03:56Exactly. Exactly.
03:58I mean, it's I mean, it's if you think about it, I mean, 20 percent of the world's oil and
04:02gas production is is is is being held back by a effectively a 21 mile waterway.
04:09I mean, I think the shipping chain channels are even smaller, four miles in the of 20 percent of the
04:15world's oil and gas production is is is is stuck in this tiny little choke point.
04:20So and now we we've known this has always been a fear.
04:24The CIA has talked about this going back to the 1970s as as a as a as a fear.
04:29So and now it's actually now it's actually happened.
04:31So, yeah, definitely countries are not going to let this happen again.
04:35There's too much at stake.
04:36There's too much money on the table.
04:37And these these countries in the Middle East, like they're like the UAE, depend on our revenue to run to
04:45run themselves.
04:46And and so they will pull every stop out to make sure this doesn't happen again.
04:50Yeah, the UAE said they were going to double export capacity outside of the Strait of Hormuz.
04:58And they reckon they can get that pipeline on by next year, which is which is very, very fast in
05:02there in pipeline terms.
05:05So these these these projects are not are not are not going to solve things in the short term, but
05:10they would certainly diminish the the geopolitical impact of of Hormuz in the in the long term.
05:17And and that's something the Iranians are aware of.
05:20And and so so they know they're not going to be able to pull this card forever.
05:25I think I'm going to start couching me doing things slowly and say, well, it's very fast in pipeline.
05:30Yes, you know, it's only a year.
05:32It's very fast.
05:32I'll get that intro written.
05:34You know, you you you cover the undulations of the market day in and day out.
05:38You got to put on your cultural historian hat for an essay that you wrote for for the weekend.
05:41And let me just ask you a bit about that.
05:42We talk about the way this might be changing, the way countries in the Middle East approach, how they get
05:46crude out of the region.
05:48I'm curious the effect it's having on the American populace, seeing this happen and prices go up so much as
05:53they may.
05:53And I'm going to read just a bit from your essay here.
05:54You write in the latter half of the 20th century, freedom was bound inextricably to the motor vehicle.
05:59Immetry of the open road became the backdrop to songs about love and loss, corruption and chaos, risk and reward.
06:04Think of the iconic albums like Bob Dylan's Highway 61 Revisited, Bruce Springsteen's Born to Run.
06:09There is something quintessentially American.
06:11I'm breaking no ground here about the about the car, about driving, about the open road.
06:15Do you think that the moment we're in, as this continues to progress, stands to change our relationship with the
06:22motor vehicle?
06:25No, I think it enhances it.
06:27I think this moment shows how important the open road is and the freedom to move is for the American
06:34spirit.
06:35As a Brit coming here nearly nine years ago now, I found it rather curious that the share of disposable
06:45income spent on gasoline has dropped massively over the decades.
06:50Even now, it's only, even after the recent price spike, it's only about 2%.
06:54And gasoline is still around the same prices as a price of milk, as a gallon of milk, which is
07:00held true for decades.
07:02You know, health care, child care, insurance, college education, all these things have gone up way more than gasoline.
07:08But they don't pack the same political punch as gasoline.
07:13I mean, Obama was, was, was, was really worried about gasoline prices.
07:17Biden was obsessed with gasoline prices.
07:19And here we are in Trump.
07:21And, and, and, and, you know, he knows the political danger of, of gasoline prices in the U.S.
07:27And it's interesting.
07:28It's like a, it's like for those things, it's like a pint of beer in the U.K.
07:31It's like a gin of pork in, in China or a bag of maize meal in Southern Africa.
07:37It's, it's, it's just one of those products that I think tells Americans about the state of the economy.
07:44And, and also, I think, I think it's, I mean, it's, it's, it's one of the most visible prices that
07:52you see around every street corner.
07:55And, you know, in, in a very divided society, it's something everyone can agree on.
07:59But I think, I think the, the deeper, the deeper thing is, is, is, is that I think, yeah, the
08:03thrill of the open road,
08:04the need to move, um, has always been a part of the, uh, the American spirit, you know, from Westwood
08:10expansion to, you know,
08:11the writings of Jack Kerouac and John Steinbeck.
08:14I think the, the, um, um, freedom is, is, is, is, is, and then the freedom to move is, is,
08:19is, is so important.
08:20So high gas prices feel like attacks, attacks on freedom.
08:25Um, and so it's, it's, it's not necessarily just the economic impacts of, of, of, uh, the price of gasoline,
08:32but it's, but it's how people feel.
08:33We're going to have to leave it there.
08:34That's why it has such a high political impact.
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