Latest / The Fourcast / Trump Iran war has unleashed worst ever energy shock, oil and gas expert says

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Trump Iran war has unleashed worst ever energy shock, oil and gas expert says · The Fourcast

• 0:00
  It's been described as potentially the worst energy
• 0:02
  shock ever. Well, I think you can drop the
• 0:04
  potential. It is unquestionably, and the
• 0:06
  only thing that means it isn't worse is because it hasn't gone
• 0:08
  on that long. We're only a month in.
• 0:10
  There could be months more more of this.
• 0:12
  When there is disruption in the supply chain, when there are
• 0:16
  cost increases, we know that eventually that gets passed
• 0:19
  through to the consumer. They're the ones that pick up
• 0:22
  the bill at the end of the day. Let's say we get to a reality
• 0:25
  whereby the Americans sign a deal with the Iranians that
• 0:28
  effectively turns us straight of Hormuz into a toll booth.
• 0:32
  Is that a possible reality that you can foresee?
• 0:35
  It's a possible one, yeah, But it's, it's a, it's a crazy
• 0:37
  outcome. I mean, you don't generally
• 0:39
  fight a war with the intention of giving you your adversary
• 0:41
  control of a strategic waterway and paying them billions of
• 0:44
  dollars a year. Hello and welcome to the
• 0:49
  forecast. Oil, oil, oil.
• 0:51
  It's all about oil and energy. Donald Trump has told the UK to
• 0:54
  go and take oil from the Strait of Hormuz, although they didn't
• 0:57
  tell us how to do it. As reports circulate that the UK
• 1:00
  is to receive the last tanker of jet fuel from the Middle East
• 1:04
  this week. As the blockade or the virtual
• 1:06
  blockade of that Strait continues, what are the real
• 1:08
  risks to our economy, our energy security, consumers?
• 1:13
  What on earth is going on? Does the government have a plan
• 1:16
  to deal with it all? We're going to speak to Robin
• 1:18
  Mills. He's the CEO of Comma Energy,
• 1:21
  and to Holly Meade, who's a money journalist.
• 1:24
  Welcome to you both. Let me start with you, Robin.
• 1:27
  It's been described as potentially the worst oil shock
• 1:30
  ever, or energy shock, I should say.
• 1:33
  Is that true? Can you put it into some kind of
• 1:34
  context? Well, I think you can drop the
• 1:36
  potentially it, it, it is unquestionably.
• 1:39
  And the only thing that means it isn't worse is because it hasn't
• 1:42
  gone on that long. We're only a month in.
• 1:44
  You know, there could be months more more of this, hopefully
• 1:47
  not, but I think that's the way things are looking.
• 1:49
  So if we look back at the previous great oil shocks, if we
• 1:52
  look back at the 1973 embargo or Saddam Hussein's invasion of
• 1:57
  Kuwait, things like this, we lost maybe between 3 to 5
• 2:00
  million barrels per day. And in this current crisis, even
• 2:03
  allowing for all of the the offsets and bypasses, we've lost
• 2:07
  12 to 13 million. So it's it's at least twice,
• 2:10
  possibly three times as bad. And that's just oil, not to
• 2:13
  mention gas and a bunch of other commodities.
• 2:15
  Just briefly on the oil price, I mean it correct me if I'm wrong,
• 2:18
  but in the 73 oil shock, the price of all, you know, triple
• 2:22
  or quadrupled. That's not the case here, is it?
• 2:24
  I mean, it's gone up a lot, but it's not going up that much.
• 2:26
  So why is it so much worse in terms of, you know, the
• 2:29
  financial repercussions of this? Well, we're talking about the
• 2:32
  quantity of, of energy, the quantity of oil and other things
• 2:35
  lost, you know, and, and what percentage that is of use that
• 2:38
  that makes this, this such a big shock.
• 2:40
  Yeah, the price shock so far in percentage terms is, is big, but
• 2:44
  crude oil prices has not quite doubled.
• 2:47
  We came into the shock with with prices already rising as as
• 2:51
  people anticipated some kind of military action.
• 2:54
  But I think prices potentially will rise significantly further.
• 2:57
  Unfortunately, if the Strait remains closed, if this quantity
• 3:01
  of oil is not getting out, then as refiners and, and other users
• 3:06
  empty, empty their tanks need to refill, then the price will,
• 3:09
  will go higher and higher. And we're looking at a financial
• 3:12
  market price here when we talk about the oil price.
• 3:14
  But if you look at what people are willing to pay for a cargo
• 3:17
  of physical oil, real oil in a tanker today, you know,
• 3:20
  delivered today when they need it desperately, that is already
• 3:22
  $130.00 plus. Wow.
• 3:25
  That's quite a difference, isn't it?
• 3:27
  I mean, and I guess the other problem is that you've got
• 3:29
  production facilities shutting down in the Middle East and the
• 3:32
  Gulf because they've got nowhere to store the stuff if it can't
• 3:35
  be put on tankers and then sent into the export market.
• 3:38
  So there's one problem there. And you know, when it comes to
• 3:42
  gas, for instance, when I talked to the Qataris last week,
• 3:45
  they're desperate because the biggest gas field in the world
• 3:47
  was was blown up by an Iranian drone and it would take them
• 3:50
  years to fix that. So there's real damage here,
• 3:53
  physical damage and and physical problems to the infrastructure
• 3:56
  that didn't exist in the 73 shock.
• 3:58
  Yeah, that's right. And look, so far this crisis,
• 4:01
  it's mostly about the oil and the gas being stuck in the in
• 4:04
  the Gulf, not able to get out, you know, the physical damage.
• 4:07
  Fortunately, so far not so much with the exception as you, as
• 4:10
  you said, the Qatari gas facilities and even there it
• 4:13
  wasn't their whole plant that was blown up.
• 4:15
  It's it's probably cut their their output by 17%.
• 4:19
  You know, once, once they're up and running again, most it will
• 4:22
  be up and running within three to four months.
• 4:24
  It's just that that 17% that will take years to repair.
• 4:27
  But yeah, you're right. Of course in 73 there wasn't
• 4:29
  physical damage. But in 1990, of course, the
• 4:32
  Iraqi invasion of Kuwait, there was huge physical damage to the
• 4:35
  Kuwait oil fields that took years to fix.
• 4:37
  Holly watching this as either as a journalist or as a as a
• 4:42
  consumer or someone who just goes to the local petrol station
• 4:45
  to fill up the car, you're kind of seeing the real world effects
• 4:49
  of this day by day as the price of petrol goes up, presumably
• 4:53
  the price of lots of other things will go up as well the.
• 4:56
  Outbreak of the Ukraine Russia war only in 2022 is so fresh in
• 5:01
  people's minds and what that brought with it was that 40 year
• 5:04
  high inflation of above 11% and we saw everything go up and
• 5:08
  particularly back then the price of groceries at the supermarket.
• 5:12
  So I think that is fresh in in people's minds and it's
• 5:15
  worrying. We don't like uncertainty.
• 5:17
  A lot of people are already feeling the squeeze and we want
• 5:21
  to be able to budget and plan for the future.
• 5:23
  And likely for any road commuter, probably every day at
• 5:26
  the moment on on the petrol forecourt that they pass,
• 5:29
  they're noticing the pennies that are creeping up.
• 5:32
  Quite substantially actually. I mean increase of what, 10
• 5:34
  percent, 12%? And that makes quite a
• 5:36
  difference. Yeah, we're an average today of
• 5:39
  about 150 P for a litre of petrol and getting on for 180 P
• 5:44
  for diesel. You know, for any Dr. commuter
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  that is a huge cost hike. And for anyone who commutes, you
• 5:52
  know, to work, if they're factoring that into their
• 5:54
  profits, it all starts to to chip away a bit.
• 5:57
  And then you read headlines that are quite panic inducing about
• 6:01
  we're not getting any more oil in and 4 quarts will run dry and
• 6:04
  that all starts to become self fulfilling and we see the queues
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  and that's worrying. So I think it's just trying to
• 6:11
  not panic, trying not to do the stockpile thing and the turn up
• 6:14
  with the Jerry can thing. Because I mean, all over the
• 6:17
  world you're seeing countries enact special measures.
• 6:19
  So, you know, in Thailand, the news readers took off their
• 6:22
  jackets on air during a news bulletin because the air
• 6:25
  conditioning had been turned off and they wanted to send a signal
• 6:28
  to the rest of the country. But you know, the four day week
• 6:30
  or the three day week, you know, across the across the world,
• 6:34
  people are doing lots of different things.
• 6:35
  It feels a little bit like the reaction to COVID in that, you
• 6:39
  know, lots of countries are taking different measures to
• 6:43
  deal with this crisis and they're not all coordinated.
• 6:46
  Is that the way you see it, Holly?
• 6:47
  I think for most households, the the best thing to do is try and
• 6:51
  not to get swept down the rabbit hole of those bigger macro and
• 6:55
  geopolitical concerns and focus on, you know, what are the few
• 6:59
  things you can control? How can you reduce your energy
• 7:02
  usage at home? How can I perhaps use my car
• 7:05
  less? How can I make other cost
• 7:07
  savings like switching my insurer or my phone provider
• 7:10
  and, and try and free up a bit more in the household budget
• 7:13
  that way? But it's also hard because it's
• 7:15
  harder to budget when prices are rising.
• 7:18
  We know that minimum wage is going up tomorrow, so that's a
• 7:21
  small help. And any pensioners who receive
• 7:24
  the state pension, that's going up tomorrow.
• 7:26
  So hopefully that will help. And actually we've heard today
• 7:29
  that from July our energy bills will be rising, but from
• 7:33
  tomorrow for three months they will be falling.
• 7:36
  So it's not all doom and gloom and you just focus on those
• 7:40
  micro winds. OK, the micro winds, I love
• 7:43
  that. Let's go back to macro storms
• 7:45
  then, Robin. I mean, explain to me in very
• 7:48
  clear terms why even if the wars were to stop next week, the
• 7:52
  accumulation, there's an accumulator effect of what's
• 7:55
  been going on that will lead to higher prices and fuel
• 7:59
  shortages. Explain how that works.
• 8:00
  Well, you know, firstly, the Gulf countries have had to shut
• 8:03
  down a lot of their production because they can't export and
• 8:06
  those barrels are just not being produced, right.
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  So there's there's a deficit in the market.
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  Let's say it's 11,000,000 barrels per day, 330 odd million
• 8:15
  barrels per month. And we've had about one month of
• 8:16
  crisis so far. Every month is accumulating that
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  loss of of 330 million barrels. Now when the crisis ends,
• 8:24
  hopefully sooner rather than later, everybody will have to
• 8:26
  rebuild their stocks. So refiners will want to fill up
• 8:29
  again. The governments that have
• 8:30
  released their strategic stocks will want to fill those at least
• 8:34
  over time. So there'll be a for a period,
• 8:36
  they'll make a higher demand for oil to go back into storage so
• 8:39
  that, that'll keep prices higher.
• 8:41
  Then there'll be the disruption. And this is, is again, kind of
• 8:44
  the COVID experience, right? When you have a huge shock like
• 8:46
  this to the world economy and then it ends, there's a process
• 8:50
  of adjustment to which all the, all tankers that are in the
• 8:53
  wrong place get back to the right place and fill up all the,
• 8:57
  all the tanks that, that, that, that are emptied get refilled.
• 9:00
  So there's a whole logistical problem of reshuffling.
• 9:03
  It'll take time, plants that were closed down restart.
• 9:05
  Some industrial facilities could take like a year to restart, you
• 9:08
  know, so and then there's the ongoing geopolitical worries.
• 9:11
  I don't think this war is going to end cleanly with with some
• 9:14
  treaty and everyone goes away happy.
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  I think we'll be left with a legacy in the gulf of, of worry
• 9:20
  insecurity, knowing this could happen again.
• 9:22
  And that will also mean people will want prices to be higher.
• 9:25
  They'll want to keep more oil in stock if it's available in case
• 9:28
  of of a repeat. Let's say we get to a reality
• 9:32
  whereby the Americans sign a deal with the Iranians that
• 9:35
  effectively turns the Strait of Hormuz into a toll booth, and
• 9:39
  they can charge a certain amount of money for each tanker,
• 9:42
  depending whether they come from a nice country or a nasty
• 9:44
  country as far as they see it. Is it possible to get to some
• 9:48
  kind of modus Vivendi without going forward, You know, is that
• 9:52
  just then priced into the into the market and people will just
• 9:56
  have to deal with it even though it's unpleasant?
• 9:58
  Is that a? Is that a possible reality that
• 10:00
  you can foresee? It's a possible one, yeah, but
• 10:02
  it's a, it's a, it's a crazy outcome.
• 10:04
  I mean, you don't generally fight a war.
• 10:07
  Fight a war with the intention of giving you, your adversary
• 10:09
  control of a strategic waterway and paying them billions of
• 10:12
  dollars a year. You know, but.
• 10:13
  It is a possibility. I mean, if Trump walks away from
• 10:15
  it, effectively that's what we're going to get unless the
• 10:18
  Gulf states get involved and is well again together.
• 10:21
  It absolutely is. And look at if the US can't do
• 10:23
  it, I don't think any other combination of countries is, is
• 10:26
  likely to be able to reopen the Strait by force either.
• 10:30
  So yeah, that is a possible outcome.
• 10:32
  Now to be honest, I don't think that makes if that were the
• 10:35
  outcome. I don't think that makes much,
• 10:36
  much difference to the Ng consumer.
• 10:38
  Imagine you're paying $2,000,000, which is a number we
• 10:41
  hear to get your tanker through typical big tanker carries 2
• 10:45
  million barrels, $1.00 a barrel on an oil price that's that's
• 10:49
  that's $100 per barrel. So, you know, the cost increase
• 10:52
  to the consumer isn't, is not much then, but the the strategic
• 10:55
  implications for the Gulf countries of, of allowing Iran
• 10:59
  to establish itself as the kind of de facto owner of the Strait,
• 11:02
  as if it's some kind of Iranian Suez Canal.
• 11:04
  I mean that that that is remarkable.
• 11:07
  And and and which country would want to be in that position?
• 11:09
  Holly, are you seeing evidence of people asking questions about
• 11:14
  electric cars, which are of course quite expensive?
• 11:17
  I mean, certainly the European variety is more expensive than
• 11:20
  the Chinese variety. Are people really seriously
• 11:22
  thinking of switching now because oil has become or petrol
• 11:26
  becomes so expensive? Plus all the other things that
• 11:28
  made people turn to electric cars in the past.
• 11:31
  For the first time electric vehicles liable for Rd. tax and
• 11:34
  that was previously a huge incentive for a lot of people.
• 11:38
  So I think the electric vehicles being brought within the scope
• 11:41
  of that is is problematic and a disincentive.
• 11:45
  A lot of the levies and grants that have disappeared have also
• 11:50
  kind of stopped that and we have this thing called the expensive
• 11:53
  car tax, which is literally the name tells you exactly that.
• 11:58
  Whereas if you where, if you buy a car above a certain value, it
• 12:02
  was 40,000 lbs, it's been put up in the budget.
• 12:07
  You pay an extra £400 a year I believe it is for the first five
• 12:11
  years of ownership and most CVS, even the cheap ones, I'm putting
• 12:16
  that in adverse e-commerce are coming in above that.
• 12:19
  So there are still extra costs. Now, if you can have a charger
• 12:23
  at home, then charging that vehicle does become quickly cost
• 12:27
  effective. But for anyone who doesn't have
• 12:30
  the ability to do that, who's relying on the network's
• 12:33
  infrastructure or on street charging, it's still cost
• 12:37
  prohibitive and there's still a lot of question marks over the
• 12:40
  reliability and availability of what is there.
• 12:43
  So I don't think this is going to encourage masses of people to
• 12:48
  suddenly go out and buy EVs, but I think it does keep the
• 12:52
  conversation moving that way for the future and perhaps next time
• 12:56
  people are replacing cars, that becomes a more viable
• 12:59
  alternative. Are you seeing signs of the
• 13:01
  government is approaching this crisis cleverly in terms of
• 13:05
  taxation, either, you know, reducing taxes here, maybe
• 13:08
  increasing some other taxes there, you know, to in order to
• 13:11
  recalibrate everything towards a new normal that involves higher
• 13:15
  energy prices, especially from oil?
• 13:17
  We've kind of heard whisperings about already that possibly
• 13:21
  could come to fruition is whether the government will have
• 13:23
  to intervene over energy prices, which they did in the previous
• 13:27
  energy crisis. So we know that previously the
• 13:30
  government stepped in and put a cap of two and a half, £1000 a
• 13:34
  year on the average annual household bill, and without that
• 13:38
  it would have gone to above 4000 lbs, which obviously would have
• 13:42
  been awful for millions of households.
• 13:45
  I think there's a lot of conversation as well about how
• 13:48
  do we become less energy dependent?
• 13:51
  So what can we do to boost our energy production on these
• 13:54
  shores so that we are more shielded in the event of
• 13:58
  conflicts such as this? Robin, just talking about that.
• 14:02
  I mean, you know, I remember from from the Ukraine war an
• 14:05
  insufficient amount of gas that we have storage capacity for in
• 14:10
  this country, and that was one of the big problems.
• 14:12
  Is that still the case or have the government done something
• 14:14
  about it? No, there's still only a few
• 14:17
  days of gas storage in the UK. But you know, that's because the
• 14:20
  UK obviously produces its own gas to some extent.
• 14:23
  It imports from Norway next door, always been a very
• 14:25
  reliable supplier and it and it imports liquefied natural gas,
• 14:29
  so. So we don't need that storage.
• 14:30
  It doesn't been necessary. It was a different case in
• 14:32
  Germany and Seoul where they were getting gas from Russia and
• 14:34
  they needed to store gas for, for, for summer and, and, and
• 14:37
  you use it in the winter and so on.
• 14:40
  Different case for the UK. Yeah.
• 14:42
  So that, that's less a worry for me.
• 14:44
  Again, gas, gas in this case is, is more about price and, and
• 14:48
  prices will go up. Not to the level they did in
• 14:50
  2022 I think, but they they still will go up.
• 14:52
  So your big worry is still oil. Yeah, gas is.
• 14:55
  Well, gas is also a worry, but but less so than oil.
• 14:57
  Yes, oil. Oil is the big problem here.
• 14:59
  And what should the government be doing to prepare us?
• 15:01
  Because I mean, the, the message they're, they're putting out is
• 15:03
  very much, you know, keep calm and carry on.
• 15:06
  And, you know, they say keep calm and carry on.
• 15:08
  And then you watch the news like Channel 4 News.
• 15:10
  And if you're less calm and you're not quite sure how to
• 15:13
  carry on. So what should they be doing
• 15:15
  that they're not doing? Yeah.
• 15:17
  Look, I have some sympathy for them because it's for any
• 15:19
  government in this position. It's tough.
• 15:21
  You only have a limited number of levers to pull and some of
• 15:23
  them don't, don't, aren't connected to anything or or
• 15:26
  don't do much. Look, I think avoiding panic is
• 15:29
  important. When you see petrol stations run
• 15:31
  short, it's not because there's a shortage of fuel.
• 15:33
  It's because everybody's run down there and as Holly says,
• 15:36
  filled up the Jerry cans. So avoiding that is that is part
• 15:39
  of it. I think doing things like
• 15:41
  cutting taxes on fuel is just, is pointless.
• 15:43
  I mean, that's just giving, giving money to people who drive
• 15:46
  further and instead of telling people to save, yes, there are
• 15:50
  the poor in society who need some support on, on their bills.
• 15:53
  There are ways to do that rather than just handing, handing out
• 15:56
  effectively handing out money to everybody.
• 15:58
  But doing everything that can be done, you know, to safeguard
• 16:01
  vital services makes your ambulances and and and police
• 16:04
  and everybody get to get fuel. And then to to make to see what
• 16:09
  is that can be done in terms of efficiency.
• 16:10
  Use fuel more effectively. Again, as Holly says, you know,
• 16:14
  more public transport, more car sharing, work from home, all
• 16:18
  these kind of things, and then in the longer term to encourage
• 16:20
  the use of electric vehicles as much as possible.
• 16:23
  Trump, of course, has said in a in a post over that we should
• 16:25
  get our own oil from the Middle East.
• 16:28
  I think he meant or via the Strait.
• 16:30
  I mean, do you know what he meant by it?
• 16:32
  And, and, and what can we do about it?
• 16:34
  I mean, can we get our own oil from there?
• 16:37
  Well, if any tanker's willing to sail in and pick up and and come
• 16:39
  out again, then yes, that's the problem isn't it?
• 16:42
  Now, look, I, I think this is about firstly trying to shift
• 16:45
  blame and secondly trying to, trying to call NATO in to, to,
• 16:49
  to help bail out the, the US from this situation, which I,
• 16:52
  I'm sure it's not going to do. Look, I think there's a role for
• 16:55
  NATO, maybe the UK, France in a post war scenario of escorting
• 16:59
  and and peacekeeping, but not in an active combat zone like this
• 17:03
  one. And of course, America is oil
• 17:05
  independent, energy independent, and it's the biggest energy
• 17:08
  exporter in the world, isn't it? Well.
• 17:10
  Biggest, you know, gross exporter of oil.
• 17:12
  Yeah, but you know, being an exporter doesn't make you energy
• 17:14
  independent. They keep saying they're energy
• 17:16
  independent. They're are they, are they
• 17:18
  fibbing? They love to say this, you know,
• 17:19
  but independence isn't only about, you know, exporting more
• 17:23
  than you import. So the US needs to import some
• 17:25
  grades of crude oil and export others.
• 17:28
  It needs to import some, some, some refined products and export
• 17:31
  others. And, and it's tied into the
• 17:34
  world world market. You know, Americans pay the
• 17:37
  same, the same wholesale prices as everybody else.
• 17:40
  They could cut themselves off and then Trump quite possibly
• 17:44
  might do that. But that will have a whole bunch
• 17:46
  of other disastrous consequences.
• 17:50
  Well, it would, it would be shoot the American oil oil
• 17:53
  industry in the foot. You know, they wouldn't be able
• 17:55
  to expand. And that that's kind of one of
• 17:56
  the key offsets to the to the loss of supply here.
• 17:59
  The industry would be furious. It would make the industry very
• 18:02
  inefficient because it wouldn't be able to, it wouldn't be able
• 18:04
  to import things that's in the deficit and wouldn't be able to
• 18:07
  export when it has a surplus. So it, it would end up making
• 18:10
  the crisis worse and it would of course, export the crisis to
• 18:13
  others. Other people then run short of
• 18:15
  fuel. And, you know, the US, whatever
• 18:17
  it might think, is actually tied into the world economy and does
• 18:19
  depend on the economic health of of other countries.
• 18:22
  Just getting back to the introduction, I mean, I said
• 18:24
  that the last tanker of jet fuel from the Middle East heading to
• 18:28
  the UK would, would, would be arriving this week.
• 18:31
  Is it the last tanker and does that mean that we don't get jet
• 18:34
  fuel, you know, for the foreseeable future and our
• 18:36
  holiday plans post Easter might be up the spout?
• 18:39
  Yeah, it's probably true. The last tanker would be
• 18:41
  arriving around now, but that's the last tanker from the Gulf.
• 18:43
  It's not the last tanker in the world.
• 18:45
  Look. And for the other tankers, yes,
• 18:47
  there's going to be a shortage of fuel globally.
• 18:50
  That'll mean they'll have to be less flying doesn't mean that
• 18:52
  anybody runs out. It means that prices will go up
• 18:54
  and airlines will have to fly less and, and some and, and
• 18:58
  people can't afford a flight or, or think it's they have better
• 19:01
  things to spend more money on. They'll, they'll have to go
• 19:03
  without. You know, somehow we have to
• 19:04
  save 10% of global oil supply overnight in, in air travel and
• 19:09
  driving and, and industries and everything else that uses oil.
• 19:13
  Holly, just as you know, Easter is upon us and people are
• 19:15
  looking forward to the summer. Maybe, you know, getting out of
• 19:18
  the kind of eternal grey of an English winter.
• 19:20
  Want to book their holidays? Is there any evidence that the
• 19:23
  airlines are either shutting down or rerouting or charging
• 19:27
  more for flights that we all thought we might be able to
• 19:29
  take? We haven't seen that yet.
• 19:33
  That doesn't mean it won't happen, and if you've paid for
• 19:38
  your summer holiday then it shouldn't really be putting
• 19:40
  prices up after the after the point of payment.
• 19:44
  If you're that organised, Holly, I don't know.
• 19:46
  I'm not that organised some. People thought this stuff very
• 19:48
  far in advance. We know Air Passion did duties
• 19:51
  going up in April with the new financial year in April anyway
• 19:54
  and it's already very depressing when you buy a cheap flight and
• 19:57
  at the end you get the breakdown and you realise your your flight
• 20:00
  cost 1 LB and then you paid £500 in taxes.
• 20:03
  So expect that column to get a bit worse.
• 20:06
  So I think across the, you know, whether it's food prices,
• 20:10
  obviously prices at the pump, airline tickets, hotels, it's
• 20:14
  all affected, isn't it by this. Yes.
• 20:16
  But it's been the case for several years.
• 20:18
  You know, we have been living through a cost of living crisis
• 20:21
  where we have had several years of sustained high inflation.
• 20:25
  And when there is disruption in the supply chain, when there are
• 20:30
  cost increases across the board, we know that eventually that
• 20:35
  gets passed through to the consumer because they're the
• 20:39
  ones that pick up the bill at the end of the day.
• 20:42
  And it's hard. It's really hard.
• 20:44
  Interest rates are not coming down.
• 20:45
  In fact, I mean, there was a report last week there might be
• 20:48
  3 hikes in interest rates this year from the Bank of England.
• 20:52
  That's what the market some, some more gloomy aspects of the
• 20:54
  markets are pricing in. I mean that you know, I know
• 20:57
  last week 500 mortgage products were already thrown out by
• 21:01
  lenders. I mean, again, if you're trying
• 21:03
  to get into the housing market and get a mortgage, this is
• 21:05
  really bad news. And it's actually really hard
• 21:08
  for anyone who's already on the housing ladder and was perhaps
• 21:12
  preparing to remortgage this year and might have been
• 21:15
  budgeting for a certain rate because of the predictions that
• 21:18
  rates were coming down and they're now got to go and redo
• 21:21
  those sums. It's really hard time for
• 21:24
  households. I think again, it's not getting
• 21:27
  too bogged down in that macro stuff and just making use of all
• 21:32
  the tools at your disposal. So, you know, if you are looking
• 21:35
  for a mortgage, get a fee free mortgage broker and find the
• 21:40
  absolute best deal that you can. If you are switching energy
• 21:45
  deal, you know, make sure you're locking in now.
• 21:47
  If you're worried that prices are going to go up further, see
• 21:50
  if you can lock in on a two or three-year deal to get that
• 21:53
  price assured so you're in control of what's going out of
• 21:56
  the household each month. So, so you know, the next few
• 21:59
  weeks are crucial, aren't they? What are the key indicators that
• 22:02
  you're looking for to gauge how bad this thing will get beyond
• 22:05
  the obvious one of timing when it'll end?
• 22:08
  We need to say, you know, is the US going to come out with a
• 22:10
  realistic strategy and military and and or diplomatic strategy
• 22:14
  to to reopen the Strait and, and come to some agreement this this
• 22:18
  war is going to, is going to end with an agreement as as wars do.
• 22:21
  And is there a plan to to get to that?
• 22:23
  What does that look like? Or is the US going to going to
• 22:26
  walk away as Donald Trump has suggested, leave everything in
• 22:28
  in a mess, which is a pretty bad outcome, but perhaps not the not
• 22:32
  the absolute worst outcome. Perhaps something we could kind
• 22:35
  of muddle through. But I'll be looking very much,
• 22:37
  of course, at where oil prices go.
• 22:40
  And I'm particularly watching the physical oil prices.
• 22:43
  You know, what are people paying for real oil today?
• 22:45
  Not what's in the financial market for oil or oil that's
• 22:47
  coming down the line in in June or whatever.
• 22:50
  But presumably if the the US Marines, which are on their way
• 22:53
  in thousands to the Gulf, if some of them try and take Khag
• 22:58
  Island, this oil terminal that's all important for Iranian oil
• 23:01
  exports, or if they're trying to fight their way through the
• 23:04
  Strait of Hormuz. I mean, this means that this hot
• 23:07
  war will come straight into that all important waterway.
• 23:11
  I mean, even the few tankers that are getting through right
• 23:13
  now will not be able to get through then It's going to make
• 23:15
  things much worse, isn't it, in the short term?
• 23:17
  Absolutely, yeah. And I don't find this idea of
• 23:20
  trying to capture Hard Island at all realistic or, or it would
• 23:24
  achieve anything if they do. And so yes, it would carve the
• 23:28
  Iranian oil exports. And the US has been very careful
• 23:30
  to let the Iranian oil exports continue and even to lift
• 23:33
  sanctions on Iran because they don't want to take another 2
• 23:36
  million barrels a day off the market.
• 23:38
  But if they attack Highland, that 2 million disappears.
• 23:42
  And then the Iranians, you know, I'm sure will then retaliate
• 23:45
  against other energy facilities in the region and will be left
• 23:48
  with a lot more permanent damage.
• 23:49
  So yeah, that's that's kind of going more into the direction of
• 23:52
  worst case scenarios. Talking of worst case scenarios,
• 23:55
  if the Houthis decide to continue to attack Israel and
• 23:59
  maybe resume what they did during the Gaza war, which is to
• 24:02
  try and close the Bab al Mandab Straits, which is the way that
• 24:05
  Saudi oil, some Saudi oil is now getting out because they've got
• 24:08
  this pipe down that goes across the north of the country.
• 24:12
  I mean, that would be even worse, wouldn't it?
• 24:14
  Double stranglehold on the 2 straights.
• 24:16
  Yeah, even worse indeed. What it means then I think the
• 24:20
  Saudi oil would have to head north.
• 24:21
  It would go round through the Suez Canal and it would sail
• 24:24
  around Africa to get to Asia. That adds, you know, three to
• 24:27
  four weeks sailing time. So it doesn't totally block the
• 24:30
  oil. It doesn't mean a lot of oil
• 24:31
  isn't locked upon tankers not doing anything.
• 24:34
  So it's, yeah, it certainly makes things worse.
• 24:37
  What would be really bad though, would be if the Houthis were to
• 24:39
  actually attack the loading port of Yambu, which is where this
• 24:43
  this Saudi oil is now coming out.
• 24:44
  If they could put that port out of action or even even least
• 24:48
  disrupted, then of course there's even less oil than than
• 24:51
  coming out of the Gulf than there is today.
• 24:53
  Final. Question to you Holly.
• 24:54
  I mean the government has said don't panic.
• 24:58
  We always saying keep calm and carry on.
• 25:01
  At the same time, we see all these numbers ticking up in the
• 25:03
  wrong direction, so far at least.
• 25:06
  Do you think the government should be more honest about the
• 25:08
  worst case scenarios and prepare us for, you know, the stuff that
• 25:13
  we may have to get used to in a public service campaign, public
• 25:17
  information campaign, the kind of the way they did with COVID,
• 25:20
  but arguably a little bit late in the day.
• 25:23
  I'm not sure we're at that stage yet.
• 25:24
  As Robin said, the key thing with this conflict is how bad it
• 25:30
  is, is directly related to how long it goes on for.
• 25:35
  And we're a month in at the moment.
• 25:37
  So I think perhaps we're not at that stage yet.
• 25:41
  And it's very easy to get bogged down in the data and there's a
• 25:43
  lot of worry about GDP numbers and inflation numbers and what
• 25:47
  they're all going to get to. I think it's really important to
• 25:50
  keep in mind that all of these measures are backwards looking
• 25:53
  numbers. They only tell us what has
• 25:54
  happened in the last 12 months. They do not tell us what is
• 25:57
  going to happen going forwards. I think for most households,
• 26:00
  probably the Bank of England's base rate of interest is the one
• 26:03
  to pay attention to because that influences a lot of things to do
• 26:07
  with their household finances. So I think it's keeping an eye
• 26:11
  on the household finances and the household budget and and
• 26:15
  making as many savings cutbacks where you can and considering
• 26:19
  what can you personally do for your own situation.
• 26:23
  Holly Mead and Robin Mills, thanks very much to both of you
• 26:26
  for coming on to the forecast. It's all about energy, not just
• 26:29
  oil, but all of it. And let's see how it goes in the
• 26:33
  next few weeks. Thanks for watching.