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Why the Oil Crisis Could Get Much Worse by Fall · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
1:06
Speaker 1: and Mark Vandebti.
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Speaker 2: It's Chuck, Mark and Tucker with you here, and we're
1:14
Speaker 2: gonna kick things off.
1:15
Speaker 3: Taking a look at the markets.
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Speaker 2: And we got the S and P five hundred up
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Speaker 2: ten points right now about zero point one five percent.
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Speaker 2: The Dow is off three hundred points about half a percent.
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Speaker 2: Now's that can posite up two thirds of percent about
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Speaker 2: one hundred and sixty seven points, so mixed markets thus far,
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Speaker 2: Russell two thousand joining the Dow in negative territory as well.
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Speaker 2: Ten year Treasury continuing its recent sell off, up another
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Speaker 2: one point seven basis points to four point four to
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Speaker 2: eight eight percent. Thirty year Treasury, by the way, continuing
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Speaker 2: to stay above five percent now at five point oh
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Speaker 2: four to seven, so long bonds continuing to get hit
1:51
Speaker 2: over the last few days with some higher inflation numbers.
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Speaker 2: We did get producer price index data this morning that was,
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Speaker 2: you know, just it was it was a little warm
2:03
Speaker 2: to put some of this in perspective again, like this
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Speaker 2: is all. Don't get too sucked into any one particular
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Speaker 2: month because it's one piece of data.
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Speaker 3: From one month. And I understand that.
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Speaker 2: But the point that I will make is the expectation
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Speaker 2: was that we were going to see PPI come in
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Speaker 2: at zero point five percent. Instead it came in at
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Speaker 2: one point four percent for the month. And that is
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Speaker 2: when when you look back over like the last twelve
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Speaker 2: thirteen years of data, it's by far the biggest miss
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Speaker 2: to the top side that we've seen relative to expectations.
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Speaker 2: And so that directionally says something and I think it's
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Speaker 2: worth paying attention to, especially since because in now seven
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Speaker 2: of the last eight months the miss on PPI has
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Speaker 2: been top side, not downside. So just something worth paying
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Speaker 2: attention to there. Taking a look at other markets, the
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Speaker 2: dollar is up point twenty four percent to ninety eight
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Speaker 2: four point fifteen, gold up three forty and outs to
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Speaker 2: forty six ninety and ten cents, and we've got crude
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Speaker 2: oil West Text Intermediate up another sixty five cents per
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Speaker 2: barrel to one oh two and eighty three cents, triple
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Speaker 2: a national average for gas prices also rising again, up
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Speaker 2: another seven tenths of a cent to four fifty one
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Speaker 2: and one tenth and so no real major movement there,
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Speaker 2: but continuing to see elevated pricing as one would expect
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Speaker 2: given the fact that's this is your daily reminder that
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Speaker 2: the straight of horn moves remains closed. In twelve to
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Speaker 2: thirteen million barrels of production in the region remain shut
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Speaker 2: in and not being produced. We also did get the
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Speaker 2: EIA's crude inventory report about maybe half hour ago. We're
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Speaker 2: gonna go through that later in the show, and so
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Speaker 2: don't worry, we will get there. But top story, we're
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Speaker 2: gonna talk a little bit about US China summit that
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Speaker 2: is going on now. President Trump is has landed in Beijing.
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Speaker 2: Either of you see the videos of the landing, getting
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Speaker 2: off the plane with Gi walking them down. They got,
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Speaker 2: you know, the red carpet rolled out, they got a
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Speaker 2: bunch of people waving Chinese American flags, all the fanfare.
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Speaker 3: And never very welcoming. Yeah, like a lot of fanfare.
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Speaker 2: And ultimately, I'm still not really sure that too much
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Speaker 2: comes out of this because I think there are just
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Speaker 2: too many cross currents with the Middle East situation to
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Speaker 2: be able to hammer anything large out as far as
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Speaker 2: any kind of deal, because anything big that President Trump
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Speaker 2: is going to ask for on you know, China helping
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Speaker 2: with you know, getting Iran to loosen up, China's gonna
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Speaker 2: come back and say, okay, but here's the thing that
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Speaker 2: I want from you, and I just don't think the
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Speaker 2: Trump administration necessarily wants to give a ton in exchange
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Speaker 2: for maybe help with the Iran situation. So this is
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Speaker 2: kind of where we are right now, is you know,
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Speaker 2: we'll see what comes out of the next couple of days.
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Speaker 2: I think you probably get some you know, Chinese purchases
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Speaker 2: of airplanes, maybe some Chinese purchases a farm, you know,
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Speaker 2: this and that.
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Speaker 3: But I'm just not.
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Speaker 2: Sure that there's going to be any huge deal that
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Speaker 2: is reachable because there's too much.
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Speaker 3: Other stuff going on right now.
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Speaker 2: Beans and Boeing kind feel kind of what it feels like,
5:22
Speaker 2: kind of what it feels like.
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Speaker 4: And it works for the president. He likes to play salesman.
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Speaker 4: It's it's it's fine, he can announce a couple of deals.
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Speaker 2: Yeah, it's look, it's it's some purchase orders coming in, like,
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Speaker 2: there's nothing bad about that. But I think for anyone
5:34
Speaker 2: who's expecting a larger deal or something transformative, I would
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Speaker 2: be kind of surprised if this is the time and
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Speaker 2: and context from which that ends up coming.
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Speaker 3: I just I don't think so.
5:45
Speaker 4: China would like cheaper energy, but they also like the
5:48
Speaker 4: fact that we're bogged down, right, So is there an
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Speaker 4: argument that they don't want this Iran situation resolved?
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Speaker 3: No.
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Speaker 2: I think ultimately the way I view it is China
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Speaker 2: can deal with this for a time. But I don't
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Speaker 2: think there's anything to me that would suggest that they
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Speaker 2: want to maintain the current state of the Middle East
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Speaker 2: because it's not sustainable for them long term. Okay, it's
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Speaker 2: you know, again, no one knows exactly what's going on
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Speaker 2: with Chinese oil inventories and production in this and that
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Speaker 2: anyone who has studied it will tell you it's like
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Speaker 2: studying anything else in China. You look at it, some
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Speaker 2: of the numbers make sense, some of them don't. You
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Speaker 2: try to glean what's going on from reading between the lines,
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Speaker 2: but you can't get an accurate picture of it. So
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Speaker 2: I would I do not have any unique insight into
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Speaker 2: you know, how China is operating from an energy perspective
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Speaker 2: internally right now, And most of the people that I
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Speaker 2: trust on these things don't have any unique insight either.
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Speaker 3: They just don't know it. It's too opaque.
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Speaker 2: So this is something where again, over the next couple
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Speaker 2: of days, we'll see what happens. What is interesting is
7:06
Speaker 2: on Monday. Originally it was reported the Jensen Huang CEO
7:09
Speaker 2: of Nvidia was going to be going to Beijing. Then
7:15
Speaker 2: about halfway through our show on Monday, it was reported
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Speaker 2: that he was not going to be going, And finally
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Speaker 2: late last night, turns out that Jensen hopped on a
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Speaker 2: flight to Alaska to go and meet Air Force one
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Speaker 2: as they refueled there before you know, continuing on to Beijing.
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Speaker 2: And so he did end up on the plane after
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Speaker 2: a last minute invitation from President Trump.
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Speaker 3: Is what the reporting is now.
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Speaker 2: So I gotta tell you, like, what do we think
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Speaker 2: this means that they had to like pick him up
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Speaker 2: in Alaska because of a last minute addition to the
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Speaker 2: to the delegation instead of having him a really scheduled
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Speaker 2: to go. What are the possibilities there? Possibility number one,
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Speaker 2: in my opinion, there's nothing related to American semiconductors that's
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Speaker 2: going to be discussed, because if it really were something substantive,
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Speaker 2: he would have been on the guest list to begin with.
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Speaker 2: That's possibility number one. Possibility number two, something is you know,
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Speaker 2: coming together late in the process, and maybe there is
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Speaker 2: something chip related that's going to come out of this.
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Speaker 2: Does that really feel like how these things are normally orchestrated.
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Speaker 4: Maybe maybe now it is I'm gonna go with no
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Speaker 4: at normally this is these are not normal times.
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Speaker 2: No, it's true, but I'm gonna go with that that
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Speaker 2: that's kind of a reach for me. Number three, maybe
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Speaker 2: he just decided to show up in Alaska being like, hey,
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Speaker 2: put me on the plane.
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Speaker 3: I don't think so. That doesn't really seem like Jensen's
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Speaker 3: you know, his stick.
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Speaker 2: So I think the most likely thing is it's probably
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Speaker 2: you know, something symbolic. But I again, if there was
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Speaker 2: something meaningful that had already been you know, eighty percent
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Speaker 2: agreed to that was going to get pushed across the
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Speaker 2: finish line between the meeting of the two leaders, he
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Speaker 2: would have been scheduled to be on the plane originally
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Speaker 2: not meeting them in Alaska as a last minute invie.
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Speaker 4: What is the agenda for this summit?
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Speaker 3: By the way, what's that is?
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Speaker 4: What is the main topic? Is it just trade?
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Speaker 3: Yeah? Okay, Yeah, there's some AI topics that might be
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Speaker 3: discussed as well.
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Speaker 2: Potential like cross border regulatory framework for AI is something
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Speaker 2: that I've seen as well. I'm sure Iran will come up,
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Speaker 2: But I don't think either side really wants to ask
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Speaker 2: the other one for anything just because they don't want
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Speaker 2: to appear to need help from the other on the issue.
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Speaker 3: Yeah, so I think it's it's.
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Speaker 2: Some small stuff relatively in the broader context of you know,
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Speaker 2: Everything's take a quick break. When we return, Ted Rossman
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Speaker 2: from bank Rate joins us. We're gonna talk to him
10:06
Speaker 2: about yesterday's release of the New York Fed's Household Debt
10:10
Speaker 2: and Credit Report.
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10:56
Speaker 2: Already has promised for Join now by Ted Rossman bank
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Speaker 2: Rate here to talk about the New York Fed Household
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Speaker 2: Debt and Credit Report that came out yesterday.
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Speaker 3: Ted, how you doing I'm doing well, thanks for having
11:09
Speaker 3: me ted.
11:10
Speaker 2: Overall, just kind of sixty thousand foot view what we
11:15
Speaker 2: learn from this report.
11:17
Speaker 5: Americans have a record level of debt, so it's more
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Speaker 5: than eighteen trillion dollars in total.
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Speaker 3: I know that sounds alarming.
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Speaker 5: I would note, though, that the growth rate has been
11:28
Speaker 5: fairly modest of late, and I actually view this as
11:31
Speaker 5: kind of a goldilocks report. If you will, it's not
11:35
Speaker 5: too hot, it's not too cold. We have to remember
11:37
Speaker 5: that while debt may feel like a nasty word, some
11:41
Speaker 5: of this is a proxy for economic activity like consumer spending.
11:45
Speaker 3: And sometimes it takes.
11:47
Speaker 5: Credit to get ahead to buy a home, for instance,
11:50
Speaker 5: that's something that not only provides you with a nice
11:53
Speaker 5: place to live but will hopefully gain value over time.
11:56
Speaker 5: Or student loan debt. I know it's a real drag
11:59
Speaker 5: on consumption for a lot of Gen Z years and millennials,
12:02
Speaker 5: but it also furthers your earning power and lessens your
12:06
Speaker 5: chances of unemployment. Even something like credit card debt. We
12:09
Speaker 5: don't want you paying those twenty or thirty percent interest rates,
12:12
Speaker 5: but this report doesn't distinguish between what's paid in full
12:15
Speaker 5: and what's not. Half of these cardholders are using cards
12:18
Speaker 5: for rewards convenience, they're paying them off right away. I
12:22
Speaker 5: would actually view modest debt growth as reflective of a
12:26
Speaker 5: pretty healthy economy.
12:28
Speaker 2: It seems like for the last few years we've been
12:32
Speaker 2: hearing about a couple things. Number one is, you know,
12:35
Speaker 2: more and more Americans are struggling to make ends meet
12:39
Speaker 2: and delinquencies arising. But despite that, consumer spending continues to
12:44
Speaker 2: hum along, and we haven't seen any changes there Is
12:47
Speaker 2: there anything in this report that suggests either of those
12:50
Speaker 2: maybe changing, not.
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Speaker 5: Really, which is notable in its own right now, Maybe
12:55
Speaker 5: we just don't know yet with respect to the higher
12:57
Speaker 5: gas prices that have come about in recent months, because
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Speaker 5: this report covered Q one, so it was really just
13:03
Speaker 5: the final month of that quarter where we saw the
13:06
Speaker 5: spike in gas prices. Credit card debt actually went down
13:09
Speaker 5: in Q one. A lot of that had to do
13:11
Speaker 5: with higher tax refunds and New Year's resolutions to pay
13:15
Speaker 5: off debt. The gas price issue is so interesting because
13:18
Speaker 5: I realize it's a burden on households, Like I don't
13:21
Speaker 5: enjoy it when I fill up my family SUV and
13:24
Speaker 5: it's seventy five dollars now and it used to be
13:27
Speaker 5: forty five. I mean, you notice that it's having an
13:30
Speaker 5: outside psychological impact. It's not as of yet affecting overall
13:35
Speaker 5: spending as much, because we do have to remember that
13:38
Speaker 5: the average household prior to the spike was spending about
13:41
Speaker 5: twenty four hundred dollars a year on gas. Now maybe
13:44
Speaker 5: that goes up to thirty six hundred if you have
13:46
Speaker 5: a fifty percent rise. I don't want to minimize that,
13:49
Speaker 5: like I'd like to have the extra twelve hundred bucks,
13:51
Speaker 5: but it does only work out two one hundred dollars
13:53
Speaker 5: a month, and a lot of people are absorbing that
13:56
Speaker 5: through wage growth, through higher tax refunds, maybe a little
14:00
Speaker 5: bit of cutting back elsewhere. But honestly, we're not seeing
14:03
Speaker 5: a lot of that as of yet. What we're hearing
14:05
Speaker 5: from banks, credit card companies, travel providers, restaurants. For the
14:10
Speaker 5: most part, people are kind of spending as they were.
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Speaker 3: So it's one of.
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Speaker 5: These don't underestimate the resiliency of the consumer. I mean, again,
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Speaker 5: I don't want to minimize the pain at the POMD.
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Speaker 5: It's felt most acutely among lower income households, but Amex
14:27
Speaker 5: and Chase and a lot of other companies are saying
14:30
Speaker 5: people are still spending pretty robustly despite this.
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Speaker 2: Bike ted I've got a theory that I've been, you know,
14:36
Speaker 2: kind of on for the last couple of years, which
14:38
Speaker 2: is it kind of pulls that thought together, which is
14:42
Speaker 2: that the level of wealth and income disparity has gotten
14:47
Speaker 2: to a point where the people that are in trouble
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Speaker 2: just it doesn't really even print in the broader statistics
14:54
Speaker 2: because of how skewed things are. Is that possibly a
14:57
Speaker 2: way to square that circle?
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Speaker 5: It could be, Well, there was that Moody's report not
15:02
Speaker 5: long ago that said that the top ten percent of
15:04
Speaker 5: earners are accounting for fifty percent of all spending, which
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Speaker 5: is an all time high. That gets back to that
15:09
Speaker 5: K shaped economy idea that we've talked about, that the
15:12
Speaker 5: rich are getting richer, the poor are getting poorer, the
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Speaker 5: gap is widening. American Express is an interesting lens on this.
15:18
Speaker 5: They reported earnings recently. They were very positive. They were
15:22
Speaker 5: talking about how much people are spending on travel and restaurants,
15:25
Speaker 5: and their CEO had a quote to the effect of,
15:28
Speaker 5: our customers don't care about higher gas prices. Now, maybe
15:31
Speaker 5: that seems a little flippant, but it's true that this
15:34
Speaker 5: is a higher income audience. There are a good number
15:37
Speaker 5: of credit card holders, about half overall, that are paying
15:41
Speaker 5: in fall every month. I mean, these are the kind
15:42
Speaker 5: of people that are are traveling. They're going out to eat,
15:46
Speaker 5: they're going to concerts and sporting events, and I know
15:48
Speaker 5: that gap is widening, but it does feel like there's
15:51
Speaker 5: an awful lot of discretionary spending going on. Travel is
15:55
Speaker 5: another interesting one. We've just seen record after record the
15:58
Speaker 5: past few years, and even this travel bookings are holding
16:01
Speaker 5: up remarkably well. I know it's alarming when you hear
16:05
Speaker 5: airlines going out of business like Spirit because of higher
16:08
Speaker 5: jet fuel costs, but then you hear a lot of
16:10
Speaker 5: other airlines saying that summer travel demand is still quite hot.
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Speaker 5: So a lot of this does track back to economic inequality.
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Speaker 2: Ted, appreciate you joining us today. Thanks so much for
16:20
Speaker 2: the time, no problem, Thank you. That is Ted Rossman
16:25
Speaker 2: from bank Rate talking about the New York FEDS household
16:29
Speaker 2: debt and credit report.
16:30
Speaker 6: All right, time for trivia here on the Financial Exchange,
16:33
Speaker 6: and today is Stevie Wonder's seventy six birthday. Wonder was
16:37
Speaker 6: a child prodigy and was the youngest artist to receive
16:40
Speaker 6: a record contract with Motown Records. Wonder would go on
16:45
Speaker 6: to win more Grammy Awards than any solo mail artist
16:49
Speaker 6: in history. So our trivia question today, how old was
16:54
Speaker 6: Stevie Wonder when he signed his first record contract with
16:59
Speaker 6: Motown Record Words?
17:00
Speaker 3: Once again?
17:01
Speaker 6: How old was Stevie Wonder when he signed his first
17:04
Speaker 6: contract or his first record contract with Modetown Records. Be
17:10
Speaker 6: the seventh person to text us at six one seven
17:13
Speaker 6: three six two thirteen eighty five with the correct answer
17:16
Speaker 6: along with keyword trivia and win a Financial Exchange Show
17:20
Speaker 6: T shirt. Once again, the seventh correct response to text
17:23
Speaker 6: us to the number six one seven three six two
17:26
Speaker 6: thirteen eighty five with the correct answer along with keyword trivia,
17:30
Speaker 6: We'll win that T shirt. See complete contest rules at
17:33
Speaker 6: Financial Exchange Show dot com.
17:35
Speaker 2: Another just interesting, uh Stevie Wonder fact as long as
17:39
Speaker 2: we're talking about him, because again, just get pretty pretty remarkable, dude.
17:45
Speaker 3: Uh, do you know that Stevie Wonder was not born blind? Uh? No,
17:49
Speaker 3: I thought he was. Oh, okay, he was not born blind.
17:52
Speaker 2: He was born early, though, six weeks early, and because
17:57
Speaker 2: of the extra oxygen in the incubator, he ended up
18:03
Speaker 2: with some condition that basically typically leads to detached retinas
18:09
Speaker 2: after birth, and that's actually what ended up causing his blindness.
18:14
Speaker 1: God.
18:15
Speaker 2: So again, I think, just a remarkable human being. And
18:20
Speaker 2: I'm not going to spoil the trivia answer because I
18:22
Speaker 2: do know this one.
18:23
Speaker 3: But I was stunned when I saw the answer. It's
18:25
Speaker 3: it's remark.
18:27
Speaker 2: I mean, the word genius gets thrown around a lot,
18:30
Speaker 2: like Stevie Wonder is actually a genius. Walmart is going
18:35
Speaker 2: to be laying off or relocating about a thousand corporate workers.
18:38
Speaker 2: This a Wall Street Journal exclusive, not a huge number
18:42
Speaker 2: of employees in the context of Walmart's broader workforce, but
18:48
Speaker 2: continuing to see, you know, more companies indicating some layoffs
18:54
Speaker 2: that are parcolating through the system.
18:57
Speaker 4: Mark, Yeah, nothing systemic though, No, I mean not at this.
19:02
Speaker 4: Millions of jobs turnover every month.
19:06
Speaker 3: Yea million that we read the Jolt support.
19:10
Speaker 4: When it comes in and it's all right there, it's
19:12
Speaker 4: like several million people change jobs every month. I'm not
19:15
Speaker 4: saying this isn't like of interest if you're a Walmart,
19:17
Speaker 4: yere older or something.
19:19
Speaker 3: Take a quick break here.
19:20
Speaker 2: When we return, we've got the trivia answer We've got
19:23
Speaker 2: Wall Street Watch, and then we're talking oil after this.
19:40
Speaker 1: Bringing the latest financial news straight to your radio. Every day,
19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:50
Speaker 1: T now foo whoa Street Watch tracking the stocks, theodato
19:54
Speaker 1: and the headlines driving markets so far today right here
19:57
Speaker 1: on the Financial Exchange Radio Network.
20:00
Speaker 6: Markets are mixed now, with text seeing a rebound from
20:03
Speaker 6: yesterday's pullback after a hotter than expected Producer Price Index
20:07
Speaker 6: was released this morning, where wholesale prices in April rows
20:10
Speaker 6: the most in three years, adding fuel to inflation anxiety.
20:15
Speaker 6: President Trump also landed in Beijing this morning with several CEOs,
20:18
Speaker 6: including Elon Musk and Jensen Wong for his summit with
20:21
Speaker 6: Chinese President Jijingping.
20:24
Speaker 3: Right now, the DOO is.
20:25
Speaker 6: Off about a half a percent, s and P five
20:28
Speaker 6: hundred up two tenths of one percent, Nasdaq up seven
20:32
Speaker 6: tenths of one percent to one hundred and eighty two points,
20:35
Speaker 6: Hire RUSS two thousand, down about a quarter percent, Tenure
20:38
Speaker 6: Treasure reeled up one basis point at four point four
20:41
Speaker 6: to nine percent, and Oil up about six tenths of
20:45
Speaker 6: a percent, rating right around one hundred and two dollars
20:47
Speaker 6: a barrel Ali Baba shares a rising eight percent after
20:51
Speaker 6: it posted an eighty four percent drop in first quarter
20:54
Speaker 6: profit and also reported heavy investments in a I. Meanwhile,
20:58
Speaker 6: according to the Wall Street Journal, Walmart plans to cut
21:01
Speaker 6: or relocate about one thousand corporate employees. Walmart stock is
21:05
Speaker 6: mostly flat. Elsewhere, Echo Star shares a climbing over four
21:08
Speaker 6: percent after the FCC approved the company's forty billion dollars
21:12
Speaker 6: sale of wireless Spectrum to AT and T and SpaceX,
21:15
Speaker 6: and Next Power shares surging twelve percent after the energy
21:21
Speaker 6: technology company raised its full year revenue guidance. I'm Tucker
21:27
Speaker 6: Silva and that is Wallstreet Watch And in the previous segment,
21:31
Speaker 6: we asked you the trivia question. How old was Stevie
21:35
Speaker 6: Wonder when he signed his first record contract with Motown Records?
21:40
Speaker 6: He was eleven years old. Steve from Amesbury, Mass is
21:44
Speaker 6: our winner today taking on the financialok Shane Show T shirt.
21:47
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21:50
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21:56
Speaker 2: I'm just trying to think of what I was doing
21:58
Speaker 2: when I was eleven, probably playing Mario Kart right.
22:03
Speaker 3: Yeah, on a good day.
22:06
Speaker 2: Yeah, there were days that probably we couldn't even get
22:08
Speaker 2: to that level. Let's talk a little bit about this
22:11
Speaker 2: piece from market Watch why the oil crisis could become
22:15
Speaker 2: a full blown catastrophe within a month, and it's talking about,
22:19
Speaker 2: you know, the draw downs that we're seeing of crude
22:22
Speaker 2: oil and or fine product stocks around the world. And look,
22:27
Speaker 2: we've been talking about this for a while. I had
22:30
Speaker 2: the Sinco Demayo date circled on my calendar since early March,
22:35
Speaker 2: and that's coming gone. And where we stand now in
22:38
Speaker 2: no uncertain terms, is that you are now at the
22:44
Speaker 2: point where pretty much all the excess oil inventory that's
22:48
Speaker 2: been on water through floating storage. Think you know tankers
22:52
Speaker 2: that have supplies that just have nowhere to drop it,
22:54
Speaker 2: because you know, we had this this glut heading into
22:57
Speaker 2: the year, that extra storage on on water has been exhausted.
23:01
Speaker 2: Now we're drawing down on on shore inventories. And to
23:05
Speaker 2: put this in perspective, a couple of weeks ago, we
23:08
Speaker 2: covered the April twenty fourth dated release from the EIA
23:14
Speaker 2: in which they announced that US crewde oil stocks declined
23:20
Speaker 2: by about thirteen point three million barrels for the course
23:23
Speaker 2: of that week between US commercial stocks and the strategic reserve.
23:29
Speaker 2: That was the sixth largest draw down of US commerce
23:33
Speaker 2: of US oil stocks on record. Today, ten thirty am,
23:40
Speaker 2: we received another weekly update. Last week's was actually, let's
23:44
Speaker 2: go through last week's. Last week, what we saw was
23:48
Speaker 2: a case where we saw a smaller draw. Instead of
23:53
Speaker 2: thirteen point three million barrels being drawn, we ended.
23:57
Speaker 3: Up seeing, hang on, I gotta pull. Here we go.
23:59
Speaker 2: It was seven point five million barrels being drawn, about
24:02
Speaker 2: half the size. You say, oh, that's great, Like, you know,
24:04
Speaker 2: things got better. The EIA release dates back about twenty two.
24:10
Speaker 2: We've got twenty two hundred items in the sample. This
24:14
Speaker 2: was the one hundred and seventeenth ranked one, so it still
24:18
Speaker 2: is a top five percent draw historically. Even though it was,
24:23
Speaker 2: you know, much smaller than the week before. It just
24:25
Speaker 2: tells you how big the one the week before was.
24:27
Speaker 2: This week twelve point nine million barrel draw between commercial
24:32
Speaker 2: crude and strategic reserve. Strategic reserve saw eight point six
24:36
Speaker 2: million barrel draw. That's the biggest weekly draw on the
24:39
Speaker 2: strategic reserve ever. We've never seen one that big. Here's
24:44
Speaker 2: the deal. You look at the math and in the
24:48
Speaker 2: United States, the commercial crude system needs somewhere in the
24:52
Speaker 2: ballpark of three hundred and fifty to three hundred and
24:54
Speaker 2: seventy million barrels to operate, just because you need you know, again,
24:58
Speaker 2: there's oil flowing through pipelines that are included in there.
25:01
Speaker 2: There's oil in tanks. Like if you get to zero,
25:04
Speaker 2: like you've lost, Like you can't run the system with
25:07
Speaker 2: no oil in it. The strategic reserve can get down
25:10
Speaker 2: to somewhere in the range of two hundred and twenty
25:12
Speaker 2: to two hundred and forty million barrels because you actually
25:16
Speaker 2: need the oil in these big salt caverns to prevent
25:18
Speaker 2: them from caving in, and some of it's also contaminated
25:21
Speaker 2: with sediment and brine that they use in order to
25:25
Speaker 2: the way that they empty these they basically pump a
25:27
Speaker 2: bunch of water in underneath it, and that floats the
25:30
Speaker 2: oil because oil is less dense, so it floats, And
25:34
Speaker 2: in that process, some of the brine from these salt
25:36
Speaker 2: caverns gets mixed in and so you can't use all
25:39
Speaker 2: of it either. But here's the deal. At the current
25:43
Speaker 2: rate of draw down, the strategic reserve is going to
25:46
Speaker 2: hit operational minimums in September or October. You can only
25:50
Speaker 2: maintain this pace another four to five months. The commercial
25:53
Speaker 2: crude inventories are going to hit minimum operational capacity sometime
25:59
Speaker 2: in late July to early September. There's a ticking clock
26:05
Speaker 2: on this. You can only have this go so far.
26:09
Speaker 2: And the problem is, let's say that Hormuz opens today,
26:13
Speaker 2: perfect opening, like everything, like great. The problem is there's
26:18
Speaker 2: no ships just waiting to get in. Because if you
26:20
Speaker 2: own an oil tanker right now, you can get primo
26:23
Speaker 2: rates to be able to go and pick up oil
26:26
Speaker 2: anywhere you can, because Asia is desperate for crude and
26:29
Speaker 2: product and so great, you can get paid a ton
26:32
Speaker 2: of money to take your boat and instead of going
26:34
Speaker 2: to straight at horm moves okay, you're heading to you
26:36
Speaker 2: know southeast, you know, United States. The problem is this
26:40
Speaker 2: puts all these boats out of position to actually pick
26:42
Speaker 2: up the crew that could, in theory be produced in
26:46
Speaker 2: the Persian Gulf, which means that even if Hormus opens today,
26:50
Speaker 2: it's probably thirty to forty days before you start to
26:53
Speaker 2: see any meaningful flow of boats going back to pick
26:56
Speaker 2: up oil that's in onshore storage in the region, and
27:00
Speaker 2: it's only once that storage is starting to drain in
27:03
Speaker 2: meaningful levels that you can start producing oil again from
27:06
Speaker 2: the wells that are shut in just probably another thirty
27:09
Speaker 2: to forty days, and that has a ramp up period
27:11
Speaker 2: as well, but it's probably five to six months to
27:14
Speaker 2: get back to normal pre war production if everything goes
27:18
Speaker 2: perfectly from today. Guys, I did the math. It's very basic.
27:25
Speaker 2: It's addition and subtraction. You don't have to like, there's
27:28
Speaker 2: no calculus involved, there's no algebra, it's basic math. US
27:34
Speaker 2: inventories are going to hit minimum operational levels later this
27:37
Speaker 2: summer into early fall. If Hormuz open today, you get
27:41
Speaker 2: back to normal production somewhere mid fall. And that's a
27:46
Speaker 2: best case scenario, because I gotta tell you Hormuz isn't
27:50
Speaker 2: opening today.
27:52
Speaker 3: It's not.
27:54
Speaker 2: And so where you're heading on this is the US
27:57
Speaker 2: has been the relief valve for the last few weeks.
28:00
Speaker 3: For the rest of the world.
28:02
Speaker 2: That relief valve is going to run out of room
28:06
Speaker 2: later this summer or early fall, and in the run
28:09
Speaker 2: up to that, prices are going to have to move
28:10
Speaker 2: up because otherwise you can't actually deliver all the barrels
28:14
Speaker 2: that you say you're going to if someone wants to
28:17
Speaker 2: say they're buying at certain prices. So the math is
28:20
Speaker 2: really simple. It's addition and subtraction. There's nothing else aside
28:24
Speaker 2: from that. And this is where we're heading, and there's
28:28
Speaker 2: nothing you can.
28:29
Speaker 3: Do at this point.
28:30
Speaker 2: I can't make that anymore clear, Like you can't fix
28:34
Speaker 2: this for the summer and fall. You can make it
28:39
Speaker 2: so that it's not a problem going forward beyond that,
28:42
Speaker 2: but once you like, this is just what it is
28:46
Speaker 2: and it's where we are heading. You are not going
28:49
Speaker 2: to see shortages in the United States throughout most of it.
28:52
Speaker 2: At least California might because they import a lot of
28:54
Speaker 2: stuff from Asia that was typically produced in the Middle East.
29:00
Speaker 2: California has got its own unique issues which could present
29:03
Speaker 2: some shortages. Outside of that, you're just gonna see higher
29:06
Speaker 2: prices because the US consumer can pay more than the
29:10
Speaker 2: consumer in Pakistan and Thailand and Tanzania and Kenya, and
29:17
Speaker 2: like it's just a wealthier country. We can afford to
29:20
Speaker 2: pay more than those places. Those places will see shortages,
29:24
Speaker 2: which is why Narendromodi yesterday was saying, yeah, we gotta,
29:27
Speaker 2: you know, cut our fertilizer. You know use by fifty percent.
29:31
Speaker 2: It's because India is not gonna be able to pay.
29:32
Speaker 3: For the fertilizer they need. We will, They'll just be higher.
29:35
Speaker 2: And you know, even at a certain point there farmers
29:38
Speaker 2: will say, no, I can't make money doing this.
29:40
Speaker 3: So this is where we're heading.
29:43
Speaker 2: I don't think it's gonna be a full blown catastrophe
29:45
Speaker 2: within a month, but uh again, this is where we
29:49
Speaker 2: are heading, and there's nothing we can do to change
29:53
Speaker 2: it at this point. Let's take a quick break and
29:56
Speaker 2: when we return, stack Roulette. Yeah that Tucker. This has
30:02
Speaker 2: been a quick show today. Yeah, it's fun by Yeah,
30:04
Speaker 2: it really has. Stack Roulette is next.
30:07
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31:17
Speaker 3: What do you have for me for stack roulettes.
31:19
Speaker 4: You just gave a little masterclass on oil prices and
31:24
Speaker 4: their relationship to inventories and so forth. Related to that,
31:29
Speaker 4: there are a bunch of stories about politicians who want
31:31
Speaker 4: to cut the gas tax. You made the point about
31:35
Speaker 4: high prices serving I'll put it in my words, these
31:39
Speaker 4: weren't yours. They serve a function. Prices will induce people
31:44
Speaker 4: to change their habits. They did in the nineteen seventies
31:47
Speaker 4: We ended up with more fuel efficient cars. Government played
31:50
Speaker 4: a role there too. But you want prices to rise
31:53
Speaker 4: so that people do change their behavior, and you want
31:57
Speaker 4: demand to go down for the same reason. So gimmicks
32:03
Speaker 4: like cutting the gas tab I don't you know, my
32:05
Speaker 4: favorite tax rate is zero on anything. Is sort of
32:08
Speaker 4: a libertarian type person. But at the same time, this
32:11
Speaker 4: does fund the Highway Fund, which funds critical enhancements and repairs.
32:17
Speaker 4: So this is self defeating on a number of levels.
32:22
Speaker 2: It's also one where again, like you look at this
32:27
Speaker 2: and think of it this way, the way that I
32:31
Speaker 2: also try to look at this is it's no different
32:34
Speaker 2: from any other think of this as a government subsidy,
32:39
Speaker 2: because effectively, what you are doing is saying, hey, this
32:42
Speaker 2: is what you used to pay for this, We're going
32:44
Speaker 2: to give you money to cover that. That's basically what
32:46
Speaker 2: you're doing. I know that it's not that, but I
32:50
Speaker 2: find it instructive just to think of it this way.
32:52
Speaker 2: I know that you're removing a tax, but anytime that
32:55
Speaker 2: you are giving people more money to buy something, you're
32:59
Speaker 2: not just keeping demand stable, you're actually increasing demand for it. Yeah,
33:05
Speaker 2: that's basically what you are doing. And so you again
33:09
Speaker 2: it's it's accelerating you into the brick wall of supply
33:14
Speaker 2: that is coming later this year, and it's it's just
33:21
Speaker 2: not what you need in order to actually deal with
33:24
Speaker 2: this now if you wanted. Again, the problem is the
33:28
Speaker 2: timeline that you have here, there's basically nothing that you
33:32
Speaker 2: can do in order to improve the supply picture for
33:36
Speaker 2: oil in the next three months absent opening hormons. You
33:42
Speaker 2: can't just like drill a bunch of oil in that
33:45
Speaker 2: timeline like you like, you just don't have like the
33:48
Speaker 2: crews to be able to do so. It's not going
33:51
Speaker 2: to make long term economic sense. Even if you know,
33:54
Speaker 2: you could say, okay, like we'll guarantee you know, a
33:56
Speaker 2: flour for this, because hey, if you overproduce, we'll buy
33:59
Speaker 2: that oil in order to refill the SPR. How much
34:03
Speaker 2: production are you actually going to encourage in such a
34:06
Speaker 2: short period of time is pretty small in the broad
34:10
Speaker 2: scheme of things. It's just get what the last three weeks,
34:14
Speaker 2: we're averaging an eleven million barrel per week draw from
34:19
Speaker 2: the United States. You're talking one and a half million
34:23
Speaker 2: barrels a day. There's nothing you can do to increase
34:27
Speaker 2: oil production by twelve percent in the next three months
34:31
Speaker 2: to balance that.
34:32
Speaker 4: That's there for real emergencies, right, I know the SPR
34:35
Speaker 4: was created.
34:36
Speaker 3: In response this is a real emergency, and in.
34:39
Speaker 4: Theory, yeah, it's well self created, but yes, I suppose.
34:43
Speaker 2: It is a really like it's created specifically for Hey,
34:46
Speaker 2: if there's a global disruption to energy flows, this allows
34:50
Speaker 2: us to you know, keep things moving.
34:52
Speaker 4: I guess I think of emergency is something that didn't
34:55
Speaker 4: originate with a US action, but it okay, it.
34:57
Speaker 3: Doesn't matter where it does or doesn't originate. It it
35:00
Speaker 3: still is policy. It's still causing a problem.
35:06
Speaker 2: So ultimately, it's one where there's just nothing that you
35:12
Speaker 2: can do in that time span. Remember the US producers
35:14
Speaker 2: around thirteen million barrels a day of oil right now,
35:17
Speaker 2: and that's with you know, all of the years of
35:21
Speaker 2: work to get to that point. You can't suddenly just
35:25
Speaker 2: spool up another one and a half million barrels a
35:27
Speaker 2: day of production. It just it's it's not possible in
35:32
Speaker 2: that time span. If you wanted to say, hey, we've
35:34
Speaker 2: got like two to three years to do that, great,
35:37
Speaker 2: like you can do that. There's there's nothing you can
35:40
Speaker 2: do that's gonna start production you know, increases in the
35:44
Speaker 2: next month or two. Like, it's not possible. So that's
35:48
Speaker 2: kind of where we stand.
35:49
Speaker 4: So let prices do their thing here though they will
35:52
Speaker 4: help to reduce to Now you may not like that option,
35:58
Speaker 4: but it's it's critical that that you let the price
36:03
Speaker 4: mechanism function. Otherwise you're just exacerbating an already bad problem.
36:09
Speaker 4: I'll just leave it at that.
36:10
Speaker 3: Mark, we got another problem that we got to talk
36:12
Speaker 3: about here.
36:13
Speaker 4: No, hopefully it's not employment related.
36:15
Speaker 3: We got a tomato shortage. Oh yeah, there's a tomato shortage.
36:19
Speaker 3: I know. Yeah. Here's here's the deal we know.
36:21
Speaker 2: I'm going to quote here from the Wall Street Journal.
36:23
Speaker 2: The price of tomatoes top burst, the flavor in salads
36:26
Speaker 2: and sandwiches, searched by nearly forty percent in April from
36:29
Speaker 2: a year earlier on a combination of bad weather, high tariffs,
36:33
Speaker 2: and climbing transportation costs. Now I happen to be what's
36:37
Speaker 2: your favorite kind of tomato?
36:38
Speaker 4: Mark the free kind? You like, free tomata kind from
36:42
Speaker 4: anybody's garden that they're gonna give.
36:44
Speaker 2: Let me tell you I learned something back in the day.
36:45
Speaker 2: There's no such thing as a free tomato. It's an
36:49
Speaker 2: old lesson that my father taught me. Yeah, there's no
36:51
Speaker 2: such thing as a free tomato. But we got a
36:53
Speaker 2: tomato problem here that the tomato prices are too damn high.
36:56
Speaker 2: And here's the problem is that you got all kinds
37:00
Speaker 2: of tomatoes that are coming from Mexico. Seventy percent of
37:03
Speaker 2: them are estimated to come from Mexico, where he had
37:06
Speaker 2: a bunch of wet weather and disease, resulting in below
37:10
Speaker 2: normal yields.
37:12
Speaker 3: I don't know how we're gonna do this.
37:14
Speaker 2: We can't make the gravy without the right amount of tomatoes,
37:18
Speaker 2: and the tomatoes are two them high.
37:20
Speaker 1: In all serious, is no.
37:21
Speaker 6: I learned about this over the weekend my father in
37:24
Speaker 6: law's runs of restaurant. He was like, have you seen
37:26
Speaker 6: the price of tomatoes? By the way, They're insane, Like
37:29
Speaker 6: I can't believe this. Yeah, So I mean for him
37:33
Speaker 6: to say that.
37:34
Speaker 4: Yeah, there's no real subjectle to either. I mean, if
37:37
Speaker 4: you think about it, you know some things you could
37:38
Speaker 4: swap out a reasonable facsimile the tomato for a lot
37:43
Speaker 4: of resting.
37:45
Speaker 6: A burger, putting on a salad, yeah, sort of pizza
37:48
Speaker 6: places and sauces.
37:49
Speaker 4: There's no such thing as like synthetic ketchup right.
37:51
Speaker 2: You know that tomatoes are very closely related to eggplants.
37:57
Speaker 2: All members that surprised the members of the Nightshade family. Yeah,
38:02
Speaker 2: they're very closely related.
38:04
Speaker 4: Actually, that's trae because one is like packed with vitamins,
38:07
Speaker 4: and the other is useless, like eggplant is not.
38:10
Speaker 3: If you've never had a good eggplant palm.
38:13
Speaker 4: My mom sometimes listens, don't say that.
38:15
Speaker 3: Yeah, your secret's safe with me. Let's take a quick
38:18
Speaker 3: break here.
38:19
Speaker 2: We'll come back tomorrow and hopefully we got lower tomato
38:21
Speaker 2: prices