00:00Christina has a host of questions about the strait. We're going to get into all of that in a minute,
00:03but I want to go to your most recent note.
00:05You talk about the superabundance trends in the Western Hemisphere and the major reversion that perhaps we were looking at
00:12in the second half of the year here.
00:14You're forecasting or expecting we might get to $40 a barrel on WTI. Explain how we could get there.
00:20Yes. Well, hello. The key way we get there is by pumping prices up too much, and it accelerates the
00:25process of superabundance in the Western Hemisphere, most notably U.S.
00:29As of right now, the U.S. and Canada are running a surplus of supply versus demand in crude oil
00:35and liquid fuels around 7 million barrels a day.
00:37If prices don't go lower and shut that off, we're probably going to head towards 10 million barrels a day
00:43by 2028.
00:44It's not just crude oil. We have to export our corn, soybeans, and wheat. It's a wonderful thing of superabundance.
00:50It's just bad for prices. What I think we just did is we re-accelerated that process with prices going
00:55up, and it has inklings very much of 2008.
00:58Crude oil peaked at 147, and by the end of the year, it was around 40. We are doing that
01:03right now, and I'll just give you one example.
01:05At the beginning of the year, we had pumps and then dumps and just Bitcoin and natural gas, and now
01:11that list includes gold, silver, platinum, platinum, iron ore, corn, and potentially U.S. treasury bond yields.
01:18So the key theme is right now for the second half of the year, I think all those prices are
01:22going to continue to go lower.
01:24Okay, but this is where, as a foreign policy nerd versus a finance nerd, I get annoyed because the traffic
01:31in the strait is hardly back to pre-war levels.
01:33So why are we seeing this confidence in the oil markets that these prices are going down?
01:38Why is it dropping so shortly when the reality on the ground isn't really reflecting that yet?
01:42Because we're finding out one of the most significant bull markets in commodities is increasing elasticity.
01:49When prices go up, markets find ways around it.
01:52We're finding out that OPEC is becoming increasingly redundant.
01:56Now, the UAE has left, so they're going to be drilling at will.
01:59Iraq has threatened to leave.
02:01They want to drill at will.
02:02So what's happened is it accelerated Mr. Trump's mantra of drill at will on a global basis.
02:08Now that includes Venezuela, U.S., Canada, UAE, Iraq potentially.
02:13So it's what's happening in this space and what was before the problem was the key thing.
02:17Remember, technology is bad for prices in crude oil on both sides of supply and demand.
02:23It's creating more supply and reducing demand.
02:25And this event, just like it did in 2022 when Russia invaded Ukraine, just adds fuel to those trends.
02:32So I look at it as, yes, we might bounce.
02:34There might be something really bad that happened in the Gulf.
02:37Maybe crude oil gets in there at 80.
02:39But on a normal cycle, it goes back to 40.
02:42And one key thing to remember is almost every time you have swoons in crude oil, it happens with the
02:46stock market going down.
02:48And we have volatility picking up everywhere in the stock market.
02:50Just prices are still hovering at those levels.
02:53So if we get a little dip for a normal midterm year, that means everything goes down.
02:58Crude oil and copper are kind of next on the list in commodities.
03:01It's adding fuel to those trends, David.
03:03Did you hear what he did there?
03:04It's adding a little bit of an oil pun there.
03:06It's an oil pun, energy pun.
03:07I want to ask you about the president's comments on gasoline prices in specific.
03:11So this week he raised the prospect of us getting $2.50 a gallon gasoline once again.
03:16He's also had a very strong message to the gas companies, the gasoline companies, the energy companies themselves.
03:21Let's play a little bit of what the president has said, the anger that he's directing at those gas companies.
03:26We are not seeing anything at the pump by comparison to what it should be.
03:30We should be, in my opinion, at $2.25.
03:35Exxon Mobil, it's Chevron, it's Shell, it's BP.
03:42They're not reducing the prices commensurate with what's happening.
03:47We are doing a big investigation on it.
03:50Mike, I'm going to go out on a limb here and guess you would say we don't have to do
03:54a big investigation on this.
03:55Why aren't gas prices lower as we see oil prices dropping?
03:59Well, if he wants to do investigations, you should start with futures traders because those retail prices are spot on
04:05with the wholesale gasoline price.
04:07They're all going lower.
04:08He's right.
04:09But there's much more of a lag.
04:10Remember, that's retail.
04:11It's on the street what you pay.
04:13And then what we deal with crude oil, that's wholesale.
04:15The key thing, though, is I think he's right.
04:18Prices will go back down to where they were before the war.
04:21But now we're in summer driving season.
04:23That's when prices are typically high.
04:25So by the time we get to midterms, before the invasion, before the war in Iran, prices, the average price
04:33in the U.S.
04:33is running around $2.90 a gallon.
04:36Right now, it's $3.90.
04:38I think we go back down to $2.90.
04:40The key thing to remember, though, is every single time we've made those lows below $2 have coincided with a
04:46little bit of a problem in the stock market.
04:48And that's what I'm really worried about for the second half of the year.
04:50I think he's going to get those lower prices.
04:52But if it comes on the back of the stock market, that is a potential thing he's not going to
04:56want for the midterms.
04:58Mike, I also want to ask you about my favorite subject, which is gold.
05:01I feel like it's had an interesting six-month run.
05:04And earlier this week, it dipped below 4,000 an ounce for the first time since last November after gaining
05:09for quite a few months in a row.
05:11Silver's also dropping.
05:12Do we know why and what happens if interest rates go up this year?
05:16How is that going to impact the prices?
05:18Well, that's part of the reason gold's starting to go back down.
05:20It was very precedent for the war.
05:22It peaked right before the war.
05:24But the problem with gold, silver, most known as precious metals, is they just went up too much.
05:30At the beginning of the year, gold was reached its highest ever versus a Bloomberg commodity index.
05:35It was a 40-year high versus a 60-month moving average.
05:38And most significantly, versus a treasury market, the treasury bond market, it's right now the lowest.
05:45Our treasuries are about the lowest since 1980s, early 80s, versus gold.
05:49So to me, gold put in a pretty significant high back in Q1, and it's probably going to be stuck
05:56in a range for years.
05:57That's usually how it works.
05:58The significance is, though, it just went up too much.
06:01And number thing to remember about precious gold and certainly silver is you're supposed to be selling when they're yelling.
06:09Should I hawks my jewelry when I had a chance?
06:11Sorry, David, go ahead.
06:12No, Mike, very quickly here, our boss has said Mike McGlone can talk about anything.
06:15He's an expert on so many things.
06:17You raised a rhetorical question in your piece, which is, what does the president of the United States want when
06:21it comes to energy prices?
06:23And I'm going to give you 30, 45 seconds to answer that.
06:26If you kind of try to analyze the psychology of him vis-a-vis the energy market, what's the answer?
06:30Well, that's been my key theme all along, why prices will not stay up.
06:34They will go down because he is the leader of the world's largest energy producer and next exporter, and he
06:39needs prices to go down,
06:40partly because inflation is the number one issue and affordability is the number one issue in elections.
06:47The independent government will go down because it's a number one issue in the United States, which is small and
06:48charlaters.
06:48Everyone is going to give us a greatao.
06:48I'm going to give you a greatao.
06:48And the signifying to improve the economy, being 70,1000,000 couldn't affordability is the number one issue in elections.
06:49And theểuulary, saying, there's no reason for this series!
06:49Thank you to many people!
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