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And Why Are Gas Prices High? · Conversations: Special Guests with Preston Scott

• 0:04
  Speaker 1: Let's Go third hour radio program affectionately known as common
• 0:12
  Speaker 1: Sense Amplified. It's the Morning Show with Preston Scott. He
• 0:16
  Speaker 1: is Jose I am Preston, and joining me on the
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  Speaker 1: program is Gifford Briggs. Gifford is the executive director of
• 0:23
  Speaker 1: the Gulf Coast Region for the American Petroleum Institute, effectually
• 0:28
  Speaker 1: known as API. Gifford, how are you good?
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  Speaker 2: Good morning. I hope you're bringing the common sense today.
• 0:35
  Speaker 2: I can bring the amplified.
• 0:38
  Speaker 1: I think it's got to be the other way around
• 0:40
  Speaker 1: for this topic. My friend, Hey, before we get into
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  Speaker 1: the nuts and bolts of this, what's it like being
• 0:47
  Speaker 1: you or working in that industry at a time like
• 0:52
  Speaker 1: we have been in since the end of February, when
• 0:55
  Speaker 1: gas prices are elevated so high.
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  Speaker 2: There's a lot of questions from anyone and everyone. So
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  Speaker 2: whether it's the soccer field or seeing people at church,
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  Speaker 2: I think people have a lot of the same questions
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  Speaker 2: on their mind. But I've been in this industry now
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  Speaker 2: for twenty years and there's been ups and downs, and
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  Speaker 2: so it's just part part of the job.
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  Speaker 1: If you're sitting down with somebody and maybe you're at
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  Speaker 1: a table with a group of folks and everyone's kind
• 1:29
  Speaker 1: of just trade and chit chat, and it gets around to, oh, well,
• 1:32
  Speaker 1: what do you do? Well, what do you do? And
• 1:34
  Speaker 1: they find out what you do? How quickly in the
• 1:39
  Speaker 1: last few months has it turned to so what can
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  Speaker 1: you tell me about gas praises? How soon does that happen?
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  Speaker 2: Almost immediately? And oftentimes, you know, that's been part of
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  Speaker 2: the conversation before we even get around to the question
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  Speaker 2: of what you do. Obviously, it's something that impacts people
• 1:58
  Speaker 2: in their daily lives. You know, obviously the impact for
• 2:03
  Speaker 2: food prices and other goods is real. But what people
• 2:08
  Speaker 2: experience the most is going to the gas station and
• 2:11
  Speaker 2: filling up their car. And you know, I got I
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  Speaker 2: got a son at child's high school right now, so
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  Speaker 2: I'm even hearing it from his friends because they're big
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  Speaker 2: old drucks or are taking way more gas than their
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  Speaker 2: little job can afford right now.
• 2:26
  Speaker 1: Yeah, And I think a lot of people by default
• 2:29
  Speaker 1: don't fully understand the impact of fuel prices on everything else.
• 2:36
  Speaker 1: The trips to the store. Yeah, you're filling up your
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  Speaker 1: gas tank and it costs more, But the things at
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  Speaker 1: the store, I mean, you know, the fuel price, the
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  Speaker 1: cost of transit for goods and products is a major
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  Speaker 1: cost to the consumer.
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  Speaker 2: Well, it just builds in everything, right, So I mean
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  Speaker 2: you taking your grocery store example, you go to the
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  Speaker 2: prow section and the produce got to the to the
• 3:02
  Speaker 2: grocery store, you know, and and by by by transportation
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  Speaker 2: generally by truck. Obviously that cost is higher for them.
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  Speaker 2: But then you go back to the actual farming costs,
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  Speaker 2: right and how the how the how the fruit was made,
• 3:16
  Speaker 2: and increase cost there because fuel costs more, and then
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  Speaker 2: the fertilizer that goes into helping to farm the product
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  Speaker 2: has additional cost. So it is it carries throughout the
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  Speaker 2: economy from top to bottom.
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  Speaker 1: How big? Because I want to wait till the next
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  Speaker 1: segment to get into the nuts and bolts of prices
• 3:37
  Speaker 1: up and down. But was the transition that we find
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  Speaker 1: in parts of the country from winter to spring and
• 3:44
  Speaker 1: summer fuel mixes did that factor in at all to
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  Speaker 1: just sort of bad timing for this entire conflict in Iran?
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  Speaker 2: I mean it's baked into sort of our psyching now
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  Speaker 2: a little bit that we have the summer blends and
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  Speaker 2: they're a little bit more expensive. But given the volatility
• 4:03
  Speaker 2: that we have been seeing in pricing. You know, I'm
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  Speaker 2: not sure that it was as noticeable that has been
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  Speaker 2: in previous years, where you know, if we're at two
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  Speaker 2: seventy five consistently and all of a sudden it jumps
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  Speaker 2: up to you know, three h five as the summer
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  Speaker 2: blends come, it makes sense. But you know, as we've
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  Speaker 2: seen today, we've seen prices rising and falling, you know,
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  Speaker 2: fairly quickly, and so it's a little bit harder to
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  Speaker 2: pinpoint and say this is when the summer blends, you know,
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  Speaker 2: have started to have the impact.
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  Speaker 1: You said as prices rise and fall quickly, I think
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  Speaker 1: some people might take a little issue with that. Uh,
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  Speaker 1: prices jumped pretty quickly, and they're not falling as quickly
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  Speaker 1: as they jumped. Talk to me about why when fuel
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  Speaker 1: is because this is what I've heard at nauseum, and
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  Speaker 1: I know you've heard this, but people have written me
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  Speaker 1: and said, look, the fuel jumped overnight, and they didn't
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  Speaker 1: pay that for the price. They didn't pay a new
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  Speaker 1: price for what was already in the ground that was
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  Speaker 1: going to be pumped through the pumps. They got that
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  Speaker 1: in the last shipment that was at the lower price.
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  Speaker 1: Why did the price jump up on the front end
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  Speaker 1: before the new shipments came to them at the higher price.
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  Speaker 2: It's just it's just a function of way the way
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  Speaker 2: the markets work, and it always seems that they that
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  Speaker 2: they jump up higher than they go down. And reality
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  Speaker 2: is I think that in the data that we've looked at,
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  Speaker 2: they track very similar. And we're seeing prices falling below
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  Speaker 2: four dollars a gallon right now just now seeing you know,
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  Speaker 2: obviously there's a there's a deal in place, and I'm
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  Speaker 2: trying to use air quotes on that right now, because
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  Speaker 2: it's not the first time that a deal has been
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  Speaker 2: in place during the time of this conflict. And so
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  Speaker 2: we've seen, you know, the price of oil, you know,
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  Speaker 2: go from one hundred dollars down to eighty and so
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  Speaker 2: now we'll see those prices start coming down. At the
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  Speaker 2: same time, it's also summer driving season, so as people
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  Speaker 2: go up and demand goes up, you know, it may
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  Speaker 2: keep them from going down as low as they were
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  Speaker 2: back in February. And if you're looking at that as
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  Speaker 2: sort of your anchor point, it may it may not
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  Speaker 2: seem like they're coming down as much. But we're in
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  Speaker 2: the summer driving season demand is going to be peeking,
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  Speaker 2: and so as it may not come down quite as
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  Speaker 2: much as people might like to. Some of it has
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  Speaker 2: to do with summer blends, others just the demand from
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  Speaker 2: a driving season.
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  Speaker 1: I gotta tell you, I'm not sure I'm in agreement
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  Speaker 1: with you on coming down about as fast as they
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  Speaker 1: went up, because I'm looking at the West Texas price
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  Speaker 1: right now, the Brent price on crude, and then I'm
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  Speaker 1: looking at the correlating gas prices and where they were
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  Speaker 1: on February twenty six and twenty seventh and where they
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  Speaker 1: are now. And the prices do come down a lot slower, Gifford,
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  Speaker 1: They just do. And I guess what I'm trying to understand,
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  Speaker 1: And I think what my listeners want to know is
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  Speaker 1: is this a supplier issue or is this a retailer issue?
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  Speaker 2: You know, I don't know that my expertise in the
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  Speaker 2: area on the retailer side is there to be able
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  Speaker 2: to say. And I don't want to point fingers and
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  Speaker 2: say what the what's going on with the commercial retail
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  Speaker 2: side because we don't represent those retailers. So for for API,
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  Speaker 2: we represent the people that refine the product, and for
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  Speaker 2: the refiners. You know, crude oil is input and it's
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  Speaker 2: exported and then transported you know, to a terminal. So
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  Speaker 2: for Tallahassee, that fuel comes in through the Colonial Pipeline
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  Speaker 2: which goes from Louisiana all the way up to the northeast.
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  Speaker 2: And then our fuel is actually brought in the Tallahassee
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  Speaker 2: from Bainbridge, and so our refiners take the product whatever
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  Speaker 2: they're paying for it, which you know, again could be
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  Speaker 2: extremely high priced still right now, put it in the lines,
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  Speaker 2: and then it goes to the terminal and then it's
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  Speaker 2: brought from the terminal to Tallahassee. And at that point
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  Speaker 2: in time, the retailers are the ones that are setting
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  Speaker 2: the prices. It's impacted by the costs of the transportation,
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  Speaker 2: the transportation to get it there as well as whatever
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  Speaker 2: market drivers the individual retailer has for their cost basis.
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  Speaker 1: So and I appreciate you don't want to roll retailers
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  Speaker 1: under the bus. But when going back to the kind
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  Speaker 1: of the original issue that my listeners emailed me at,
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  Speaker 1: you know, I mean, in large volumes about is getting
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  Speaker 1: their mind around why the gas that was in the
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  Speaker 1: holding tank waiting to be pumped, that was purchased at
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  Speaker 1: the low price suddenly jumps up when they did not
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  Speaker 1: pay any higher. That fuel was already there, It was
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  Speaker 1: sitting there, it was waiting to be pumped. And and
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  Speaker 1: people are struggling with that, and that splashes onto your industry,
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  Speaker 1: whether you like it or not. I know you know that.
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  Speaker 1: But but you know, where is a consumer supposed to
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  Speaker 1: go with this? If there's because what this comes out
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  Speaker 1: as is it comes out as price gouging. It does.
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  Speaker 2: Well and and and you know, price price gouging, you know,
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  Speaker 2: typically is focused around you know, people taking advantage of
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  Speaker 2: a supply issue, around a around a hurricane, where exactly
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  Speaker 2: they're they're jumping the price up in an emergency situation.
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  Speaker 2: You know, I would say that if we look at
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  Speaker 2: take your same argument, now, maybe the prices aren't coming
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  Speaker 2: down as much. But if we if we say that
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  Speaker 2: that it's only the price based off of what's in
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  Speaker 2: the tank, then in theory, prices shouldn't be coming down
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  Speaker 2: at all right now because a lot of the fuel
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  Speaker 2: that's in the tank was purchased when crude was over
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  Speaker 2: one hundred dollars, and so you know, the market is
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  Speaker 2: while some of it is going to be the cost
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  Speaker 2: the price is going to be. Some of it is
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  Speaker 2: the cost of the product that's coming into the station.
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  Speaker 2: Other parts are just the overall you know, market price
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  Speaker 2: and global economics of fuel, and so it's a it's
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  Speaker 2: a combination of both and how each individual retailer sets
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  Speaker 2: the price, you know, and what every gas station is different. Right,
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  Speaker 2: you can go to one corner and you've got circu
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  Speaker 2: k at one price, and you've got the Wildlie at
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  Speaker 2: one price, and you know, buckets in another if that
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  Speaker 2: happens to be the corner that you're at. And again
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  Speaker 2: it's so it's the global market price might be the same,
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  Speaker 2: but the individual product, the additives that go into it,
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  Speaker 2: and then whatever market price that the gas station is
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  Speaker 2: putting in all go in to building out the actual price.
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  Speaker 1: Gifford, Let's let's first talk about the agreement. If this
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  Speaker 1: deal gets signed on Friday, how long before the markets stabilize?
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  Speaker 2: So, I mean, I think if we're if we're talking
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  Speaker 2: to stabilize a return to pre war condition, the the
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  Speaker 2: answer is really months. If we if we think about
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  Speaker 2: for a second, if we assume that the you know,
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  Speaker 2: the deal moves forward, that doesn't mean that all of
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  Speaker 2: a sudden, the you know, the hundreds of tankers that
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  Speaker 2: are sitting in the gulf over there are going to
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  Speaker 2: start flowing through the Straight of four Moves. I mean,
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  Speaker 2: you know, you have to have a captain that that
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  Speaker 2: that is willing to get on a boat and trust
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  Speaker 2: that the minds are all clear and there's not going
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  Speaker 2: to be more jone attacks. Then you have to have
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  Speaker 2: a crew that's willing to return to the boat and
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  Speaker 2: take the risk. Then you have to have the insurance
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  Speaker 2: company that's willing to ensure the boat as it tries
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  Speaker 2: to go through. That process alone is going to take,
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  Speaker 2: you know, potentially weeks for some ships to be able
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  Speaker 2: to start moving through. And then you know, from there
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  Speaker 2: those ships had a destination already. That's going to take
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  Speaker 2: three to four weeks to get those ships to where
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  Speaker 2: they need to go. And then from there they have
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  Speaker 2: to take another trip and then maybe make it back
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  Speaker 2: to the Strait. And only then and that's twelve weeks
• 12:24
  Speaker 2: down the road. Do you see, you know, maybe ship
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  Speaker 2: traffic returning to normal after they start moving through the strait.
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  Speaker 2: And then on top of that, you have tremendous amount
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  Speaker 2: of infrastructure destruction in the Middle East and whether it's
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  Speaker 2: been refineries or pipelines production that has been shut in,
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  Speaker 2: and with twenty percent of the crewed supply flowing through
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  Speaker 2: that region, it's a lot of infrastructure that needs to
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  Speaker 2: be repaired and brought back to life in order to
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  Speaker 2: restore pre war normal conditions. And so it could take
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  Speaker 2: at a minimum, you know, three months, you know, but
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  Speaker 2: potentially a year to see full restoration of of operations
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  Speaker 2: and global you know, energy flow, particularly because of the
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  Speaker 2: challenges in the Strait.
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  Speaker 1: But if the Brent price and if the I mean,
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  Speaker 1: if the crude price right now, depending on which which
• 13:24
  Speaker 1: type of oil or crude you're looking at, is within
• 13:27
  Speaker 1: six dollars of what it was before the thing even started,
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  Speaker 1: the conflict started, are you suggesting that that all of
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  Speaker 1: this that you just laid out is accounting for the
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  Speaker 1: six dollars difference, because that's a pretty dramatic, you know drop,
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  Speaker 1: and it's pretty close to where it was, and it
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  Speaker 1: wouldn't explain why gas prices are over a dollar fifty
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  Speaker 1: higher than they were.
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  Speaker 2: Well, right, so if you're looking at just you were
• 13:53
  Speaker 2: going to sell out the energy market as a whole,
• 13:54
  Speaker 2: not necessarily just particularly focusing on the prices for the
• 13:58
  Speaker 2: for a large part, the devices that are out there
• 14:01
  Speaker 2: and the energy markets have have have performed in a
• 14:05
  Speaker 2: way that most of the analysts did not predict. And
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  Speaker 2: that the resiliency to keep prices low largely because you
• 14:13
  Speaker 2: know the ability of the American energy producer to surge
• 14:17
  Speaker 2: production in areas where we were to increase our refining
• 14:21
  Speaker 2: in ways that we were the drawdowns on the strategic
• 14:24
  Speaker 2: petroleum reserves not only in our country in other places.
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  Speaker 2: That is that has allowed us to weather the storm
• 14:31
  Speaker 2: of the supply situation in the Gulf or in the
• 14:37
  Speaker 2: Strait of hor Moves in Middle East. And so you know,
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  Speaker 2: the fact that prices are down right now is a
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  Speaker 2: great sign for the global economy because we were able
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  Speaker 2: to weather a storm that if you would have asked
• 14:51
  Speaker 2: anyone in February what a three month shut down the
• 14:55
  Speaker 2: straight of hor Moves would mean for prices, people would
• 14:57
  Speaker 2: have said one hundred and fifty to two hundred barrel
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  Speaker 2: And that's what analysts were predicting. But because of how
• 15:05
  Speaker 2: America has positioned ourselves as this global energy leader now,
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  Speaker 2: we were able to weather the storm in ways that
• 15:12
  Speaker 2: nobody could have predicted. So prices being an eighty right
• 15:15
  Speaker 2: now are great. That doesn't mean that they're guaranteed to
• 15:18
  Speaker 2: stay there because it's going to take some time for
• 15:23
  Speaker 2: the markets to fully stabilize. But we have outperformed from
• 15:26
  Speaker 2: an economic standpoint because of the American energy industry, and
• 15:32
  Speaker 2: hopefully we can continue to do that while being stabilized
• 15:35
  Speaker 2: in the strait.
• 15:36
  Speaker 1: All right, I'm up against it, So I need about
• 15:38
  Speaker 1: a fifteen second answer on this. Tell our listeners because
• 15:41
  Speaker 1: we had someone call in with a question what the
• 15:43
  Speaker 1: margins are right now for the industry.
• 15:48
  Speaker 2: I'm not sure you know from a margins standpoint where
• 15:51
  Speaker 2: they are, but I will say this that when you're
• 15:53
  Speaker 2: talking about, you know, refining a barrel of oil, you
• 15:56
  Speaker 2: know you're talking about, you know, fraction of pennies that
• 16:01
  Speaker 2: are being managed. And obviously you know the larger refiners
• 16:05
  Speaker 2: are processing hundreds of thousands of barrels. But you know,
• 16:08
  Speaker 2: when you're looking at refining a barrel of oil and
• 16:11
  Speaker 2: putting into different products, you know the margins are very
• 16:14
  Speaker 2: small there. Again, and I can't comment on what's going
• 16:17
  Speaker 2: on in an individual convenience store and gas station, although
• 16:21
  Speaker 2: you know they make more money off Red Bull than
• 16:23
  Speaker 2: they do off gasoline.
• 16:25
  Speaker 1: All Right, thank you very much, Gifford. I appreciate the
• 16:27
  Speaker 1: time this morning.
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  Speaker 2: All right, have a good one. Thank you very much.
• 16:30
  Speaker 1: Thank you, Gifford Briggs with US American Petroleum Institute, Gulf
• 16:33
  Speaker 1: Coast executive Director and our guest here in the Morning
• 16:36
  Speaker 1: Show with Preston Scott.