00:00We started with Patrick asking about that $5 a gallon and if that could really happen this summer if the
00:05strait doesn't open.
00:07Well, certainly looking like that is a stronger and stronger possibility as we're now 82 days into what's happened between
00:12the U.S. and Iran.
00:14The strait has remained blocked and millions of barrels of oil every day are not traveling through the strait that
00:19normally would.
00:20And that is going to continue to be very impactful.
00:22More moving forward, especially in the summer, as demand for gasoline, diesel and jet fuel goes up.
00:28All the products derived from oil are certainly sorely needed.
00:31Global inventories are declining.
00:33And that means that the longer the strait of Hormuz continues to be closed, we could see an elevated risk
00:38of the national average reaching the $5 a gallon mark, something we've only seen for less than a week back
00:43in 2022.
00:45Patrick, I want to ask you about something that the governor of California posted, Gavin Newsom, started a bit of
00:49a kerfuffle.
00:50He posted, Californians, if you're hitting the road this holiday weekend, be sure to avoid Chevron.
00:55He told them to fill up at unbranded gas stations instead.
00:58This is because Chevron, as he put it, criticized his policies in the state and blamed them for higher prices.
01:03What do we make of this?
01:04We know that California is this crucible where prices seem to be a lot higher than other states.
01:08I think any credible analyst would say that California has played a major role in gas prices being elevated.
01:14I mean, make no mistake, when your gas is $6 a gallon, there's a heavy influence when nobody else in
01:19the country is seeing gas prices like California.
01:21So I think there's a lot to be said that politicians have steered California's gas prices up by having things
01:28like cap and trade, a low carbon fuel standard, the nation's highest gasoline taxes, and very stringent regulations when it
01:35comes to operating refineries.
01:36I mean, look at Texas.
01:37You compare the two.
01:39It's very, you know, type of gasoline is very similar.
01:41It's not like Texas is a different state where economics doesn't work.
01:47A lot of what happens in California is really impacted by political rule from the last 10, 15, even 20
01:55years.
01:56Clint, I want to ask you, despite the high prices, this is supposed to be one of the busiest Memorial
02:02Day travel weekends on record.
02:04Do you expect to see these prices change behavior when it comes to travel later in the summer?
02:09And what is the tipping point for when people just say, forget it, I'm just a staycation for me, I
02:13can't afford it?
02:15Yeah, we're getting there.
02:16I think so far the consumer has been remarkably resilient.
02:20In fact, we're seeing, as you mentioned, record-breaking demand.
02:23But I think we're close to that breaking point now.
02:26We just got new polls in the field from YouGov.
02:29I was just looking at them, and 32 percent of those we polled said if prices continue to rise, they
02:36may scale back their summer plan.
02:37So I think we're right at the edge there.
02:39But, look, the airlines have been raising baggage fees.
02:42They've raised ticket prices over and over again.
02:45We're looking at summer airfare up between 20 and 30 percent.
02:51So far, it's not impacting bookings, but I have a feeling that's going to change if this continues.
02:55It's impacting my bookings.
02:56You guys keep nagging.
02:57It's becoming a running joke.
02:58You guys keep nagging on me to take a break.
03:00And every time I Google prices, I go, nope.
03:02Sorry, go ahead.
03:02Let me tease a bit more out of that, Clint, because I think since the last time we spoke,
03:05we saw Spirit Airlines go out of business, and that kind of made us newly aware of the pressure a
03:11lot of these airlines are under.
03:12Through the polling that you've seen, through what you've heard from airlines, how acute is the pain that they're facing,
03:17and how much has that been compounded by the energy crisis we've seen as a result of the war in
03:20the Middle East?
03:22Yeah.
03:22I mean, the truth is that the U.S. carriers are at least a little more insulated.
03:27You know, Delta has a refinery, but also they've raised prices substantially to take care of some of that hit
03:35they're taking on jet fuel prices.
03:37But, look, that's a huge part of their costs every day.
03:40And so, yes, fares are going up.
03:42They're raising bag fees across the board.
03:44Even Frontier, low-cost carrier, has said that it's raised fares five times since the war started,
03:49and they're seeing no resistance from consumers.
03:52So it's remarkable that people just want to travel.
03:56They don't seem to care.
03:57But with prices up, you know, 30 percent for Europe, we're seeing 30 up to 40 percent higher airfare.
04:04It's going to start to change behavior here before too long.
04:07Patrick, beyond just availability and supply and the straits still being closed,
04:11are there other factors that you're watching that could push gas prices to that $5 mark or potentially higher?
04:18Well, you know, we talk about things like jet fuel and gasoline, and it's all about refineries right now.
04:23You know, without refineries, we have none of these products.
04:26And we just saw a rash of refining issues in the Great Lakes that caused gasoline prices to spike
04:31and causing diesel prices also to spike to new all-time records.
04:35So this summer is going to be one where we're focused not just on oil and what's going on with
04:39the Stratif Hormuz,
04:41but without refineries, we have none of it.
04:43So, you know, look for refinery updates.
04:47A lot of refineries, by the way, very timely upgrades, including a major upgrade that produces more jet fuel down
04:54in Texas.
04:54And you're going to see refineries tinkering what they can get out of their refineries.
04:58And by the way, that's the interesting development.
05:00Jet fuel prices have actually come back a little bit as refineries are heavily incentivized
05:05to sacrifice diesel and gasoline production where they can to yield more jet fuel.
05:09So, you know, if something happens, you know, a major hurricane as we get into hurricane season as well,
05:14it could be very impactful this summer.
05:17Clint, I think the age-old calculus when you're taking a trip, when a lot of people are taking a
05:20trip,
05:20is it worth driving? Is it worth flying?
05:23That's an economic consideration. It's a time consideration.
05:26How is that calculus being shaped at this moment in time because of the rising energy prices that we're seeing?
05:31I guess you could make the case probably that it's not as, on some of these shorter trips,
05:35not as economical to drive as maybe it was in the past.
05:38Yeah, I think that's true.
05:39But the truth is the rising cost of fuel increases prices across the board for everything when it comes to
05:46travel.
05:47So whether you're taking a road trip or you're trying to stay at a roadside hotel,
05:50the costs are going up for food, for transportation, for Uber.
05:54It's across-the-board increases.
05:56So it's not like you're going to get a great deal by driving instead of flying in most cases.
06:01Either way, you're going to pay more than you were last summer.
06:04All right. You cover points and rewards every day, something I will admit to being very bad at because it
06:09requires organization.
06:10You are bad at that?
06:11Yes, I'm terrible. Are you good at points?
06:12Yes, I am.
06:13That surprises me 0%.
06:14All right. The disorganized one of us is very bad at points.
06:17If you are an adult like David Gurra and keep track of these things,
06:21is this a good way, a good summer to try to redeem those, to try to defray some of those
06:26costs?
06:26And where are the places they can be most effective?
06:29Yeah, absolutely.
06:29When cash fares are high, you're going to get the most value from your points and miles.
06:33And this is what I say to everybody.
06:35Earn them and burn them.
06:36Do not hoard points because they're getting less valuable over time.
06:39You've seen this with programs like Delta SkyMiles,
06:41where a Delta One flight may have used to cost 80,000 Delta SkyMiles,
06:47and now it's 400,000 Delta SkyMiles.
06:49And here's what's killing folks right now,
06:51that they're adding fuel surcharges on top of award redemption.
06:56So especially if you're flying in and out of London or Paris,
07:00you're going to use all your points and you're going to have to pay exorbitant cash co-pays,
07:04which sort of takes some of the value out.
07:06So avoid London if you can.
07:08That's my best advice.
07:10You still find really good deals with points and miles.
07:12They are out there.
07:13But use them because they're getting less valuable over time.
07:17Patrick, let me throw the last question to you.
07:18I just love your broader outlook here for the summer.
07:21So we're focused here on the next days and weeks.
07:23Obviously, here on the show, we're tracking the back and forth
07:25over whether the strait's going to reopen or not.
07:27But widening the aperture even further for the rest of the summer,
07:31how do you see things playing out here as we get into July and August?
07:34All's do or die.
07:35It's really on whether the strait reopens by June or July or even August.
07:39That'll set the course for gas prices this summer.
07:42And it looks to me like after 82 days, there's been very little overall movement.
07:47The U.S. seems entrenched.
07:49Iran seems entrenched.
07:51Both sides seem far apart.
07:52Though, in the last couple of days, maybe a little bit more promise.
07:55But we're still here.
07:56And if that entrenchment continues into July 4,
08:00I think we're going to see that $5 a gallon price coming out.
08:03Because overall, the longer the strait remains closed,
08:05we've already lost out on over 1.2 billion barrels of oil.
08:10If we continue to see that, the U.S. reserves and global reserves are declining rapidly.
08:15When those run out, we could see that $5 sign by July 4.
08:20And who knows?
08:21If Americans don't slow down at $5, we could see $6 by Labor Day.
08:25All of it, though, is very much contingent on something absolutely unpredictable
08:29if and when the strait of Hormuz opens and we start to see ships going back through it again.
08:34I think a lovely summer vacation walking laps around Central Park is going to sound perfect for me.
08:40I think a lot of people are going to sound perfect for me.
08:40I think a lot of people are going to sound perfect for me.
08:40I think a lot of people are going to sound perfect for me.
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