- 4 days ago
Category
đ
NewsTranscript
00:00Lisa is, of course, the co-anchor of Bloomberg Surveillance on Bloomberg Television.
00:03Veer Abu Omar also joins us.
00:05She's a Middle East correspondent for Bloomberg based in Dubai, keeping an eye on that OPEC Plus meeting.
00:10Lisa, let me go to you first.
00:11So you have all of these executives kind of flying in from around the world.
00:15As we said at the top of the show, front of mind is this conflict in the Middle East,
00:18how long it's going to last and the fallout from it.
00:21Give us a vibe check first, if you could, on the beaches of Rio.
00:25What are these executives saying about the state of their industry today and the prospects for it here in the
00:29months ahead?
00:32Honestly, surprised that it hasn't been actually worse.
00:35They've seen demand really holding in, accelerating into the summer.
00:38Summer is expected to be incredibly busy.
00:40They talk about how there's been resilience in terms of demand, even as they've increased prices to offset higher fuel
00:45costs.
00:46It's been almost surprising resilience.
00:48And this, to me, is sort of the heart of the issue.
00:50And, David, we've experienced this across the board economically.
00:53Why hasn't it been as painful as people said it would, right?
00:56People said if it dragged on this long, it would be a real problem.
00:59We talk about the potential for people to pull back because costs are getting higher.
01:02They're not doing that.
01:03In fact, you're seeing people just invest even more in premium travel because that is where a lot of the
01:08demand is coming.
01:08I want to ask people, is it just coming from the well-heeled travelers, the K-shaped economy?
01:13They say no, it's throughout the entire cabin.
01:15So here's my question.
01:16Ultimately, is this a structural change post-pandemic?
01:19We all just want to travel more, experience more.
01:21And we're willing to pay more for that than, say, investing in our homes or physical things?
01:26Or is this really indicating the resilience of the overall economy, and not just in the U.S., but globally,
01:31regardless of what some of the naysayers have been talking about,
01:33and speaks to potentially the other side of the coin, which is the inflationary input and the reason why it
01:39can be so sticky?
01:40I also want to ask you, you alluded to this a little bit, but at the start of the conflict,
01:43we were warned, in Europe especially, that they were running out of jet fuel, right?
01:48This was an impending, really bad situation.
01:50And then it kind of didn't happen.
01:52This week, Air Canada and Lufthansa said, essentially, we're good, book your vacation, don't worry about it.
01:57What happened there?
02:00You know, this, to me, was one of the big discussion points at the beginning of the conflict, was we
02:05would run out of oil, that jet fuel was going to dry up,
02:08and suddenly a transatlantic fight was going to be stranded over in Britain, unable to get back to the United
02:12States.
02:13And none of that has happened.
02:14In fact, when you talk to so many different executives, they all say, that's not going to happen.
02:18We're not close to running out of jet fuel.
02:20When you say what happened, I mean, there was a great story this morning on the Bloomberg, talking about how
02:23a lot of the supply coming from the U.S. has just really plugged the gap.
02:28And you've also seen a real pullback in demand, or at least in usage, when it comes to certain Asian
02:33economies.
02:34And that has offset some of the depletion that we've seen in terms of the total supplies.
02:39Either way, it doesn't seem to be that kind of top of mind moment.
02:42When I ask different executives here, are we close to that moment?
02:45Do you just have to wait a couple of months?
02:47They kind of shoo me off.
02:48They're like, stop it with that.
02:49We're not going to run out of jet fuel.
02:51It really is an issue.
02:52It is just really an issue of financial management at this point.
02:55Stop it with that.
02:56All right.
02:56You know, if we rise the undulations of all of this, the volatility in oil prices and fuel prices and
03:01gas prices, we have the president weighing in on this as well.
03:04Of course, he's faced a lot of blowback here domestically because prices have continued to rise higher and higher as
03:09this conflict has continued.
03:10Let's take a listen to what he had to say on Friday about the cost of fuel.
03:13But I will say, people thought it was going to be a lot worse.
03:16As you know, today I looked at $96 a barrel.
03:19People thought that was going to be $300 a barrel.
03:22And in the meantime, we're having great success with Iran.
03:25Great success with Iran there at the end.
03:27We can talk about that later in the show, the degree which that's true.
03:30But Abir, let me turn to you as we see this meeting getting underway, these OPEC plus nations meeting, thinking
03:34about the cost of oil, thinking about their production targets.
03:37Of course, oil, a global market here.
03:39The president, I think, rightfully soared over the fact that, you know, the U.S. produces so much and yet
03:44is certainly has to deal with the fact this is a global price.
03:48What can we expect out of this meeting today?
03:50Often these meetings are short, virtual.
03:53We want more than we get out of them.
03:54What are you expecting to see today?
03:56Good morning.
03:57So, look, I mean, we don't hear on the details until at least a few hours after the meetings take
04:02place.
04:03But this one is particularly special because it's the first one that is happening with the UAE not being a
04:09part of it.
04:09Now, the United Arab Emirates did leave the OPEC plus alliance in a surprise move last month because it wanted
04:15to achieve its own supply goals.
04:18What we know about the UAE is that it was producing about 3.8 million barrels in 2018.
04:24It wants to take up those goals to about 5 million barrels.
04:27So what the OPEC alliance or what the OPEC plus alliance has to answer for this time is not necessarily
04:33whether it could supply or not, because they do have the capacity to supply.
04:38The big question this time and because of the war in the Middle East and the closure of the Strait
04:42of Hormuz is whether they can deliver those oil barrels across the world.
04:47Right. So what we've seen for countries like Saudi Arabia, which is the biggest producer in the region, is it
04:52was successful in sort of diverting away the oil barrels that it produces through the Red Sea and not the
04:59Strait of Hormuz.
05:00And so it's been successful at sort of getting those delivered.
05:04But again, the big question for the alliance this time around and what really makes it different, aside from the
05:09fact that the UAE is not a part of it,
05:12is it's not as much a supply question and whether that can be achieved.
05:16It's more of how can we deliver those oil barrels physically.
05:20And so that is what we're waiting for. That is what we are expecting out of the meeting.
05:25Some delegates have told us over the past week that there is some positive news that they're expecting,
05:30especially in terms of the supply and increasing that production and production levels across the seven members that are part
05:38of the alliance.
05:39Abir, you addressed the price impact of UAE and how it's going to impact the market.
05:45But UAE was one of the members of OPEC that could actually scale up.
05:48That's not the case. Some of them are already producing pretty much at capacity.
05:52But I'm wondering what the kind of a psychological impact of UAE leaving this alliance is.
05:57If you think it could have a knock on effect for other nations and how the Saudis are trying to
06:02hold this together.
06:05That's a very good question, right, because we reported as well when the UAE left that the reason for the
06:10UAE leaving was motivated by some political reasons as well.
06:15We have been hearing about the UAE wanting to leave the alliance for a few years now,
06:19but it took this time, this opportunity when there are massive disruptions in the region to leave it.
06:25So there could very well be a psychological sort of effect in the alliance and during this meeting that is
06:31going to take place in the next hour or so.
06:34But I guess the main thing that those countries are looking at is making sure that oil prices stay reined
06:41in.
06:41We're seeing Brent at about $90 a barrel.
06:44Now, I've been speaking to a lot of oil analysts over the past week or over the past six months
06:48or so.
06:48But the main thing that they're pointing out is, yes, on paper, oil prices are at around $90 a barrel.
06:55That is the paper price.
06:57But the actual price of those barrels could be at around $150, $160 in the market.
07:04So that is something that they're keeping an eye on.
07:06That is something that they're trying to rein in.
07:07And that is what Saudi Arabia has said it chooses to look at, also respecting the fact that the UAE
07:14will do what the UAE wants to do for its own sovereign interests.
07:19Christina, one of the perils of working here is colleagues go to these places like Rio.
07:23Some are going to go to Evian in France in a few weeks.
07:25We're not upset about it at all.
07:27I'm going to see that.
07:27I'm going to be envious.
07:28It's going to make me think about my own personal travel needing to book trips.
07:31I'm at that point.
07:33Lisa, I turn to you on this, yes, to express my envy that you are there on the beaches of
07:38Brazil, but also to say I think there are a lot of consumers trying to do what I'm talking about,
07:42figure out their plans for the summer, worried about prices.
07:44And I know that already you've spoken with some airline executives about this, the way that these rising prices, rising
07:50fuel prices are maybe impacting the way that consumers are looking at tickets.
07:53What have you heard thus far on the ground in Brazil?
07:57Yeah, and David, before you get too jealous, as you can see, the beaches of Rio behind you are.
08:01I know they're somewhere, Lisa.
08:02I'm not too excited for one second.
08:04They are somewhere, but they are not in this moment where we are currently.
08:08But you're absolutely right.
08:09We are hearing from a number of different executives that, you know, clearly they're passing prices along.
08:13And as Abir was saying, and it's a really good point, the physical jet fuel price is very different than
08:17the paper market.
08:18So what they're having to pay is considerably higher.
08:21Take a listen.
08:21I spoke to JetBlue's CEO as well as the president of Delta.
08:24Let's take a listen to what they had to say.
08:26It is very challenging.
08:28We're passing on about 40 percent of the cost of fuel right now.
08:31Within the ticket price, which isn't great.
08:33Obviously, you want customers to really see affordable air travel, but we're seeing demand strong.
08:37We're hoping it keeps up through the summer and to the end of the year.
08:39With the 40 percent increase to customers, are you seeing any pushback or are people pretty okay with it?
08:44And does demand kind of hang in there?
08:45I think everybody understands, given the current environment where fuel prices are, that airfares are going to be a bit
08:50higher.
08:51Since 2019, before the fuel crisis, airfares, you know, really hadn't kept up with the cost of inflation.
08:56And so there's a little bit of catch-up happening.
08:57And then you add the increased fuel price on top of things.
09:00And, you know, I think we've got to make sure that we're covering our costs.
09:03How much have you been able to pass along the increases in price from fuel to consumers?
09:07I mean, is it even pretty easy?
09:08Have you been surprised at how little pushback you've gotten?
09:11Our consumer is resilient.
09:13You know, we really focus on the premium customer.
09:17And, you know, roughly 40 to 50 percent of the increase in fuel costs we've been able to recapture through
09:23pricing,
09:24which really becomes about 10 to 15 percent on the price of a ticket.
09:28So flying is still affordable.
09:34That was the CEO of JetBlue as well as the Delta president.
09:38As you heard there, very much resilience because, David, just like you, everybody wants to get to the beaches of
09:43Rio
09:43or incredible far-flung places where they can vacation.
09:46They're willing to pay up for it.
09:48One notable factor to me is we've gotten all these upside surprises in economic data,
09:52particularly in the United States, the labor market report on Friday in particular.
09:55All of this resilience and strength just really feeds with that.
09:59And it continues to surprise people how much the economy just keeps chugging along.
10:03Yeah.
10:04Abir, I know you and I were just texting.
10:05You also have a very fun vacation coming up that I will not out on television because I promised I
10:10wouldn't.
10:11But before we let you go, I do want to ask you a non-OPEC question because CBS News and
10:15others are reporting
10:16that the U.S. Treasury Department is planning to use Iranian assets to help Gulf allies recover from this conflict.
10:22I'm wondering how that's likely to be received in the region and what assets are we talking about?
10:27Frozen funds, seized oil tankers, or is it all TBD?
10:31Yeah.
10:31So we still don't know for sure what assets the Treasury was referring to.
10:36But look, I guess to some varying degrees, the Gulf countries, there are six of them, they will respond differently,
10:41right?
10:41And bear in mind that these are incredibly rich countries with so much buffers in their reserves.
10:47And so there's a question of do they really need it?
10:50And again, I bring back the varying degrees.
10:51For example, Kuwait has suffered massive damages to the infrastructure of its main airport in an attack that happened earlier
10:59this week.
11:00So it'll be, I guess, a part of the equation will be that those countries are going to be thinking
11:05this is the U.S.
11:07solidifying that strategic partnership that it has with Gulf allies, especially that a lot of Gulf officials see this as
11:12a war that was started by the U.S. and Israel.
11:16But I guess the main question here is how will Iran see this?
11:19Because the $24 billion in frozen assets is a main concession for the Iranians.
11:24And so that we'll have to wait and see what we're going to have to leave it there.
Comments