Tracy Aloway: Hello and welcome to another episode of the Odd Thoughts podcast. I'm Tracy Aloway

Joe Weisenthal: and I'm Joe Weisenthal.

Tracy Aloway: Joe, one of the weirdnesses of our current market moment

Joe Weisenthal: Yeah. is that you have all these oil analysts who keep talking about how the Straight of horm closure is like the theoretical exercise that the entire market used to have nightmares about. This was like the big risk in the entire oil market. And yet and yet if you look at the actual price of oil and where it's traded,

Tracy Aloway: I mean it's gone up.

Joe Weisenthal: It's gone up a lot,

Tracy Aloway: but it's not it doesn't strike me as panic levels.

Joe Weisenthal: Yeah. I mean it's gone up a lot and you know it started the year I'm just looking at Brent uh it started the year around 60 it had climbed to around 70 before the uh war started now 115 so it's a huge move in some sense but it's not even at 2022 levels which were very high and that all that's true and yet there's this disconnect I to don't understand like why isn't it at 200 yet or whatever because straight of hormones is closed etc why isn't it even higher but then the other thing is okay like prices are up a But then you look at like what governments around the world are doing and it's like hair on fire panic particularly in East Asia. So you get stories about you know Korean government workers being told to drive on every drive to work depending uh whether their license plate number ends in even and odd like extreme rationing. Yeah. And so I'm trying to like it still feels like there are some puzzle pieces here that I'm trying to fit together.

Tracy Aloway: Absolutely. The other thing I would say is it feels also like there's this disconnect between what's going on in the financial world and what's going on in the physical world, which

Joe Weisenthal: I don't get.

Tracy Aloway: Yeah. And there was this really interesting note. This wasn't purely related to oil, but you could kind of extrapolate from it, but it was from Bloomberg Green Markets the other day and they were talking about URA coming out of the Middle East and the pricing that they've been seeing from it. And one of the analysts says the real issue on pricing is that while sellers and buyers can quote almost any price, nothing is actually getting out of the gulf, that reality makes most discussion academic rather than representative of actual business. So I wonder how much of that is happening in the oil market as well where you have all these quotes that are flashing across the screen, but like for barrels that are essentially not going anywhere for a while.

Joe Weisenthal: Yeah. And I still don't totally get it because right like these things do have to settle at some point and I don't know I'm confused. And then there were those headlines early on about how physical oil quoted in Oman were $50 a barrel above the front month. Many things I don't understand. So we have to talk to someone who can answer all these questions for us.

Tracy Aloway: The great thing about an oil crisis, Joe, is that we will learn about all the oil benchmarks throughout the entire world. Okay. Well, we really do have the perfect guest. someone who's been on the show before who a lot of people have requested us to bring back to talk about this particular moment in time. So without further ado, we have of course Javier Blass. He is the energy and commodities columnist over at Bloomberg. Been writing about this stuff for a very long time. Javier, thank you so much for coming back on Odd Thoughts.

Javier Blass: Uh my pleasure. Seems that every time that um you come back is because of a crisis. Y

Tracy Aloway: that's right. Okay. Well, let's just jump into it. How bad is this one? It's

Javier Blass: bad and it could get really bad. But in any energy crisis, there are two elements that they are very important. One is the size of the disruption and the size is huge and then is the length of that disruption, how long it goes. And so far the disruption is relatively short left. We have been a month. So that's one of the reasons why we are not at crazy high oil prices yet. It's just because it's a bit too early. Give it a few more weeks and certainly we will get there. But so far the crisis is relatively shortlived. How how short live? Well, look at 2022 with Russia. We are still ahead four years later. Or look at how long it took for the resolution of uh the invasion of Kub in 1990. That was about 8 months. So at times we forget how long other crisis were and and they were a lot longer than this one.

Joe Weisenthal: Okay. So now connect that to what we're seeing with governments around the world like already going into rationing mode almost everywhere you look particularly you see it a lot in Africa already a lot in East Asia. If the story is okay, the price hikes haven't exploded to crazy high levels because this is still short-lived, maybe there's some buffer stocks, why this uh rationing reality?

Javier Blass: Well, you are absolutely right that what is really cautioning the market right now is a number of buffers that we are going through. One is uh regular inventories that every country, every refinery has to normal functioning. Then uh is also the strategic inventories that some countries own particularly industrialized countries like the United States, Europe, Japan and also China. Uh those have been mobilized in in most in most places have been released. And also we enter the crisis with a market that was over supply. There was even floating storage. that is uh when an oil tanker has been loaded is on the high seas but it cannot find a buyer and just basically sits on the high seas looking for someone who will take the oil and we have quite a lot of that just going into the crisis. So there was quite an element of buffer uh through the system and probably a larger buffer than in in normal circumstances because the market was over supply that is uh helping to cushion or to mitigate the crisis.

Javier Blass: Where we are seeing some actions by government is where countries are closer to the crisis which is the straight of hormus. So the closer that you are to that location, the more action you need to take because you typically depend more of that flow of oil coming from the Middle East and also because you are impacted earlier. If you are moving um oil from say Saudi Arabia into India, that's only a few days at most a week of sailing time. If you are moving that to say the Philippines, that's about 15 days. It's longer if you are moving that oil into Europe, probably around three weeks. And it's even longer if you are moving that oil into say the United States where Saudi oil takes about 40 days. So all of that means that the crisis is felt in some places quicker than in other places.

Javier Blass: Also is how the global oil market works. And to put it in in quite simple terms, and I'm afraid that I have to go with colonial vocabulary, but the oil market is divided in two large chunks. East of SW and west of Sith. This is like you know the British Empire was still around and everything was east or west of of the S canal. Countries that they are east of SW mostly Asia rely a lot in on Middle East oil these days and therefore they are impacted earlier on the crisis. West of SW Europe, Western Europe and the whole American continent is a bit detached from that market and therefore the crisis will hit them much later. So, I know a bunch of um EMH bros are going to get mad at me for even asking this, but like could you get a situation where you can't get oil at any price in certain countries?

Javier Blass: Uh I mean in in in a absolutely fullblown crisis where we have the state of Hormus closed for many months, we may have a land war in Iran. Yes, I think that we can get into a situation that no matter what you are offering for a barrel of oil, no one is willing to sell because that will be a wall of um export bans where every country is trying to keep the oil for themselves etc. And I think that yes, I can see an scenario in which no matter how much you are paying for a barrel of oil, you may not find a buyer or you may find enough barrels for whatever you are offering. But that will be in a really extreme extreme situation.

Joe Weisenthal: I have a very rudimentary oil 101 class. Actually, I found a free book on my sidewalk called Oil 101 yesterday and I picked it up. I should have read it.

Tracy Aloway: Why would anyone throw that out?

Joe Weisenthal: I don't know. It seems crazy. No, it's it's really it's a it's like a full-on book. Do you know this book, Morgan Downey? It's a very thick book, Oil 101. Someone just put it on my sidewalk. Anyway, I have an oil 101.

Tracy Aloway: Wait, are you sure someone's not like laying a trap for you or something? They're trying to lure you out of your house. But I'm going to ask you an oil one to1 question because it when we see okay Brent crude 11525 is at the time. How is the Brent benchmark formed?

Javier Blass: Oh gosh. Okay. Sorry. No is uh it's a simple question and a complicated one. Effectively we are talking about a bunch of crude oil from the North Sea.

Tracy Aloway: Okay. Okay. Uh so mostly UK and Norway but also crude oil from Texas that comes across the Atlantic and through effectively buyers and sellers on the physical market we get a price that then cascade into the financial market. But here is a very important I guess the reason I'm asking is because I associate Brent with the North Sea and that's west of the Suez. And so when we're talking about east of the Suez oil, why is this the price and how connected is that price to the oil moving that actually affects these markets? I guess that's sort of why the question was on my mind.

Javier Blass: No, that that's a a crucial question. There are about 250 different grades of crude oil that we track on a given time and brand is just effectively a shorthand for the average barrel in the world. And it's not really the average barrel and certainly not the average barrel that comes from the Middle East. So you will have to look at benchmarks like Oman Dubai that they are closer to the quality of the Middle East oil and those benchmarks are a bit higher that what brand is trading today. But if I may suggest forget about the price of a barrel of oil.

Tracy Aloway: Okay,

Javier Blass: no one cares about the price of oil unless you are someone producing oil in Texas or Saudi Arabia or you are someone who owns a refinery. Those are the people that care about the price of a barrel of crude. The rest of us, you and I, we care about the price of a refined product because that's what we consume. We consume gasoline, we consume diesel or we consume other refined products that they embed into a service that we are buying. Think about an airfare ticket where inside that ticket there's a a big proportion of it that is jet fuel or you are buying I don't know a cup made of plastic well that is you you are buying effectively some kind of transformed NAFTA and obviously you know the transformation and the retail margin and so on but what matters really is the price of refined products and there actually we are beginning to see particularly in the east uh uh in the southeast is Asian markets some very extreme prices.

Javier Blass: So well if you look at the price of crude or uh brand or WTI or Oman things look relatively contained. You know we are trading around $110 a barrel that is well below the all-time high. If you look at the cost of diesel in uh Singapore, which is a benchmark for the Saudis Asian market, the price there is approaching $200 a barrel, which is something that we have never seen. So the refined product is where really we are seeing the real tension.

Joe Weisenthal: This is exactly what I wanted to ask you. So if you look at the benchmark prices for for crude oil, we've seen higher prices before, right? And relatively recently in 2022. But if you look at the refined products, we're getting to places again that we that we haven't seen. What explains that disconnect? Like back in 2022, why didn't we see the higher cost of crude feed into refined products the way that we seem to be seeing now?

Javier Blass: For two reasons. One is because we have lost not only a lot of crude oil production, but we have lost a significant chunk of refined production. The Middle East also has a lot of refineries which are export refineries. They they are just devoted to to the export market and the global trade of refined products is a lot smaller than the global trade of crude oil. So even a small reduction on supply could have a much larger impact.

Javier Blass: You think about the market for the global market for crude oil which is 100 million barrels around 60 million are traded globally. But if you look at the market for say jet fuel, that market is a lot smaller and we have lost a significant proportion of the refineries who are serving that international market for jet fuel and therefore prices are reacting much more stronger that we saw in previous crisis. There's also the way that the wall of refining works. uh some refineries are slowing down intake of crude oil because there is not enough crude oil in the market but we have not really seen yet the consumers reacting the same way. So what is happening is the refining wall is acting as a buffer in between crude oil that is not there and consumers that they have not yet realized that the crude oil is not there. So the refined market is trying to basically get that two together. And the way that it can only do it is by extreme pricing and indicating to the consumers, hey, I don't have enough crew to make these refined products, so please can you stop demanding the refined products and the please is basically $200 a barrel diesel.

Tracy Aloway: Um, I should just say we're recording this on March 31st and a headline just hit related to this. Uh Trump tells allies to buy US jet fuel or take it from Hormuz. So

Joe Weisenthal: I have no idea if we have spare jet fuel. I do know that speaking of refined products though in East Asia, one of the charts that's probably gone the most viral is that Singapore jet fuel chart and that more than any other chart probably shows that gap that Javier is talking about between the underlying quoted prices of barrels which is high but that jet fuel price is way above now the 2022 highs. So that speaks to it. Javier, you were just down in Houston. Are any Americans, from your perspective, are we going to pick up this slack? Do you see American oil entrepreneurs doing more drilling and exploration to take advantage of these high prices?

Javier Blass: I mean, for sure at the $100 oil, everyone is going to try to do more. It just make basically because it makes a lot of money. I mean, a a US shale producer in Texas was looking to sell his oil uh about six weeks ago for $60 a barrel, and he can sell the oil at 100 today. So everyone who can increase production a bit is going to try but do I see a massive amount of extra drilling coming in the US over the next three months which is what really we needed. No that's not going to happen over the next three months and also we are losing so much oil that you know it doesn't matter what the US shale producers do. I mean it will help on the margins but the gap is big.

Javier Blass: And I you know I have been discussing with some of the colleagues on the newsroom and with analysts and traders how big is the gap is it 8 million is it 9 million is it 10 is it 12 I mean at the end of the day it almost doesn't matter because we we are talking about they're about 10% of the global oil supply I mean whether is 8% or 11% it really doesn't really matter we we are losing so much oil that either the conflict ends soon or prices need to move much much higher.

Javier Blass: I mean I am surprised that we are not much higher and in some ways it really speaks at how good the white house has been at jao boning the market made verbal intervention make threats made promises a lot of them false but it has worked in preventing a lot of the panic buying that we have seen in previous crisis

Joe Weisenthal: What's going on with US natural gas? Because if you look there, I mean, we're talking about like muted market moves in the oil market, even though those have risen. If you look at Nat Gas, Nat Gas has actually come down.

Javier Blass: Yeah, Nadas in the United States is trading almost as a six-month low which considering what is happening on the global um energy market almost incredible. I mean the reason there is US shale and the reason is that you cannot export gas easily. For exporting gas you first need to cool it down liquefy. Uh that basically means having an enormous fridge uh that cools gas from you know room temperature to minus 160 Celsius then it liquefies and then you can put it on a tanker and send it to the rest of the market because we have limited liquefaction capacity and it does increasing quite quickly that creates a bottleneck that means that the US and Canadian gas effectively trap inside North America and that's keeping prices completely detached. much from the global market. And that is a huge difference from previous episodes of high energy prices. Even in 2022, the price of US natural gas went from around $35, $4 to almost 10 uh dollars per British thermal unit. This time it's staying at around three, actually below $3 an MBTU. And that is incredible because it means that the heavy US industry, electricity generators, chemical companies, fertilizer companies, it's like there is no crisis while everyone else in the world is suffering. The US is completely insulated.

Joe Weisenthal: There is something odd and perverse about some of the disperate impacts here in terms of who is behind and who has catalyzed this war and which side of the Suez you're on there and who is feeling the brunt of it. But that actually, you know, you mentioned fertilizer. We've talked about fertilizer on the podcast. These are the type of things, you know, food insecurity that create serious political instability potentially around the world. How worried are you? you we we all know you as the oil and the oil guy, but you've written a lot about food over the years and I remember you wrote a great piece about in 2022 about how rice is going to come to the rescue and people couldn't get as much wheat. So, I know you know the food world, too. How concerned are you about food and uh yeah, the the sort of fallout from from that

Javier Blass: today? I'm not very concerned that this could all change if the war just goes on for months and if me if President Trump decides that he wants to invade Iran with ground troops, etc., etc. But now I'm not very concerned for for a number of reasons. 2022 was a huge shock to the global food market because it affected a bread basket region of the world. If you look at Russia and Ukraine at the time combined, they accounted for around a quarter of global exports of wheat and barley, around 15% of global exports of corn, and even much higher uh percentage for some vegetable oil like rape seed and sunflower.

Javier Blass: The Russian invasion of Ukraine, the battleground was some of the most some of the richest fertile farmland in the planet. The battleground of the crisis in uh the Middle East is deserts and a piece of sea that we call the straight of hormus. It doesn't have the same impact in terms of global supply. It does have an impact on fertilizer prices. So it did also the 2022 war between Russia and Ukraine which is still ongoing. But fertilizer prices require time to have an impact on food production.

Javier Blass: And also while yes the numbers are very scary and you you look at the global fertilizer market just focusing on ura you you look at that market and say oh boy it's going up a lot we are approaching the 2022 record high but that is a problem in many markets it's a problem that is not a food problem it will be a fiscal problem and the reason is that ura fertilizer in particular is massively subsidized in the developing world particularly in places like India and Pakistan. So the problem there is going to be for the Indian government can it afford and spend billions of dollars extra subsidizing fertilizer less so is it going to be a food crisis in India because the the the fertilizer I think is going to be there is used that you are the finance minister in India you you have a big problem there that's that's how I'm seeing the problem and also the global food market is in a better position that almost anytime time in the last two or three decades. Inventories of wheat are very high, inventories of rice in particular at an all-time high. And while you mentioned rice, while we are worried about fertilizer prices, etc., etc., if you look at the most important benchmark for rice prices in Asia, is about to hit at 19year low. Good.

Joe Weisenthal: Well, not if you're a farmer in

Javier Blass: No, not if you're the vast majority of people who need to eat. Most people aren't farmers, right?

Joe Weisenthal: Sure. But

Javier Blass: but but look, as I said, this this all depends on how long it stays because, you know, you have fertilizer prices for for several months high, diesel prices very high.

Javier Blass: Uh then you start eroding the flexibility on the on the system and you don't want to go the weather can be very funny and it just we get bad weather when we just really need good weather. So my main concern right now will be what I'm going to be looking at. If this lasts a couple of more months, then my main focus is going to be how good is the monsoon. Are we going to have a good monsoon season in India or is it going to be a bad one? Because if we have a bad one, then we have a problem.

Joe Weisenthal: Yeah, I've been reading about the um fertilizer ura tenders that the Indian government does periodically. Yeah, it's just really interesting like you know this big exercise to purchase subsidized ura and so far from what I understand they've been putting it off because of the uncertainty in prices. So who knows what's going to happen but okay um Ukraine and Russia have come up a couple times in this conversation.

Joe Weisenthal: What's going on with Russian oil right now? Uh listeners can't see but Javier is uh is smiling. Tell us Javier.

Javier Blass: Well, it's almost like, oh boy, if we we didn't have enough with the Middle East. Here is Ukraine. And you cannot blame. Ukraine is fighting for survival. So, they are hitting Russia as hard as they can, wherever they can. And that means hitting their oil terminals. In the past, they were hitting the terminals in the south of the country. That's the Black Sea. But they have found a corridor to send drones, long-distance drones into the north, into the Baltic. And I think that the Russians were caught completely offguard. they they didn't think that that Ukraine will be able to hit the terminals in the far north of of Russian territory. So they were not very well protected or you say Ukrainians were extremely good at it, but the terminals have been damaged significantly. We we don't know for sure the extent of the damage, but looking at the satellite pictures, it looks bad enough. So we may be also losing potentially 1 million barrels a day of Russian oil. And it's not really the time again you cannot blame Ukraine but it's not really the time when you want to be losing more oil.

Joe Weisenthal: Yeah it's pretty wild right. So on in some sense there have been the stories about okay Russia benefiting because of relaxed sanctions and surging prices but on the other hand just from the global perspective here is more supply that's being taken off the market. So I mentioned or it's been Tracy mentioned we're recording this uh March 31st in the morning. Last night, we got the Wall Street Journal headline that maybe Trump will be comfortable ending this war even if the straight of Hormuz is not back to normal and Iran passed a law that codified that said Iran uh the straight of Hormuz won't go back to normal and it's going to collect a toll it says and so forth. Let's say okay the war ends. Let's say Trump decides to unilaterally end the war without resolution here and like how big of a fundamental change is this to the Middle East. If it's sort of accepted that Iran has a straight of Hormuz toll booth, could this be a tolerable situation for the region? Like what is that? What is the significance of that?

Javier Blass: I would be surprised if the region was to be happy with Iran having a toll boot on the straight. I don't think that any country should be happy that an international straight just becomes you know a toll boot for for passing ships. I mean like what stops Morocco or Gibralar or Spain to impose a similar situation in the Mediterranean or Denmark in in the Danish streets in in in in the Baltic. I mean you or Singapore on the Singaporean straight. create a a very very bad precedent for international peace and and and free shipping. I would be surprised if countries in the in the Middle East were happy to it. Will they needed to accept it? I mean, at current prices of $100, say that you you know, you are an export country and you have to pay half a dollar per barrel as a fee. I think that that's something that everyone will say, well, you know, I mean, we are still selling the oil at $100, so instead of 100, we are selling at 99 and a half. That's pretty good to me. So I suppose that some of the oil will will flow but but you let Iran basically to dictate terms and dictate terms forever and that will mean also that that Iran has a very tight grip on policy and economic decisions that his neighbors have been doing independently before. So I cannot see that on the long term. I don't see also countries like China being particularly happy with that arrangement. But if anything, over the last five years or so, we have seen things on international diplomacy and international security that I said before, now that's not going to happen. And then I have to eat my hat.

Tracy Aloway: Sorry, I just got a visual of Javier eating his uh his hat. Um, okay.

Javier Blass: With with with I sprinkle some olive oil on top of my hat and then I eat olive oil and tomatoes. Yeah.

Javier Blass: Okay. One thing that people have talked about for I'm pretty sure the duration of all of our careers are attempts to move away from pricing oil in dollars. And if you think about the current situation, there's something very perverse about seeing the dollar go up because there's a scramble for barrels of oil because of an action taken by the United States. From your context in the oil market, is anyone talking about like actual currency pricing for barrels at the moment? Is this something that is going to get renewed traction?

Javier Blass: No, I I I don't hear anyone. I mean, certainly Iran may be happy to take other currencies. Um has been relatively happy to take Chinese, Juan, and not so other currencies which has problems on on convertibility. uh everyone else will still want the dollar. And the way that it was put to me to a leading producing country in the Middle East, and I was talking to to the head of the central bank, I'm going to not name the country, but they said to me, so if I switch from the dollar to say the yuan, I move from a relatively high interest rate to a low interest rate. I moved from full convertibility to a lot of problems to convert and I move from maximum liquidity to no liquidity whatsoever. And then this central bank governor like why I would like to do that. Uh why I would like to really take a step back on my currency.

Javier Blass: And I I think that the Jan is not there yet for oil producers and everyone that is using other currencies that the dollar to price their oil or to invoice their oil they are doing it because they are under American sanctions. They're not doing it because they want to do it. They're doing it because they have no other option than to do it. Just because they are on the noty corner of the US Treasury.

Joe Weisenthal: So I feel like the 2022 2023 inflation crisis, commodities crisis really delivered a near death blow to a lot of the decarbonization dreams of the 2010s and so forth. And we saw, you know, we know a bunch of companies and countries sort of quietly ditched their goals of net zero and all that. It seems like this is going to have a further effect on this, but especially because in some Asian economies, I imagine it sounds like coal is going to be ramped back up, etc. But there's an interesting dynamic, and I forget who talked about it. You know, we did this episode about how this could even further accelerate the Chinese EV exports, etc., and efforts to reduce oil consumption. Could we see this situation in which we essentially have electrification without decarbonization that basically we see this boom for electrification? Maybe you were the one who used this term. Someone was talking about it. It might have just been you. But more electric cars and more coal at the same time.

Javier Blass: I think that we can I think that that's a very good way to put it because I think that we can have a simultaneous push to try to get um to reduce your dependence on oil and to reduce your dependence on Middle East oil in particular. It's it's going to be see unsafe particularly if Iran somehow still has some control whether it's a tool booth or some kind of de facto control over the over the straight of Hormus who would like to be dependent of of of you know middle eastern oil in that situation because you think that there's going to be a crisis 6 months down the road and and the solution for that is going to be you know more generation with coal and we are seeing that just you know across the whole of Asia whether is poor countries like Pakistan or India or the most developed countries in the region like Japan all of them are going for more coal right now.

Javier Blass: but I think that we are going to see also over the medium and and longer term we're going to see a movement for more solar alongside batteries so I can see the role of LG uh liqufied natural gas squeeze out of the electricity system with a push for more coal as the immediate future and more you know down the road with more solar and more batteries uh effectively you at least for a few years means perhaps more electrification but with more carbon intensive production of that electricity which is not exactly what the doctor recommended.

Tracy Aloway: No. Um Javier, one of the reasons we wanted to talk to you other than um a bunch of our listeners have been clamoring for us to have you on, but you of course wrote an excellent book called The World for Sale: Money, Power, and the Traders Who Barter the Earth's Resources. You're very plugged in to the commodities scene. What's been the most surprising reaction or thing that you've heard from that space over the past month or so?

Javier Blass: Uh I mean I think that there are a couple of things that they are very interesting. One is how little relative the price of natural gas in Europe which was the epicenter of the 2022 crisis has moved. Yes, sure. Uh the price of natural gas, we refer to the benchmark as TTF. It's a Dutch benchmark for Europe, uh has gone up a lot, about 70% since the crisis started, but it's around the same level as it was 14 months ago. And actually today, or the last time I checked, the price this morning was lower than four weeks ago. So it went up a lot at the beginning of the war and since then has kind of flattened or or come down.

Javier Blass: that is an indication of of how much LG supply is coming into the market. A lot of it is coming from uh North America, the US and Canada. And that that really is something that a lot of traders, physical traders knew was coming, but I think it still has surprised some hedge funds. And alongside is the price of electricity because at times we we focus on on oil and we see energy crisis through the lens still of 1970 1973 1979 the first and second oil crisis but the global economy has changed a lot since then. And yes of course gasoline and diesel are very important but electricity is really what powers today the global economy.

Javier Blass: uh if you go to you know your bakery downstairs or your coffee shop that's all electricity and the price of electricity increase a lot in 2022 particularly here in Europe. We saw prices we look at German prices as a benchmark for the whole of Europe and they typically look at the one year forward because they kind of smooth out a lot of the you know month and day-to-day volatility. The one year forward for electricity prices in Germany went up to nearly a thousand euros per megawatt hour. It's now around 90. So when people talk about are we seeing an energy crisis like 2022, I say look if you look at refined products or even crude oil, yes, it's bad. If you look at gas in Europe, it's getting uncomfortable, but it's not bad. In the US, they have not even noticed that there is a crisis. If you look at the electricity market, it's like someone said the word crisis because we are a normal prices here. I mean like I I have not seen anything moving and I think that that has been quite a at the center of conversations and it's also one of the reasons when I told to central banks which they are a bit more at ease that they were in 2022 because in 2022 the four major energy commodities electricity natural gas coal and oil all of them went up simultaneously and they went to extreme prices. So far on this crisis, we have seen a movement in oil and a bit of natural gas in Europe and Asia, not everywhere else. Coal has barely moved. Electricity is just basically relaxing and and having a very Spanish siesta.

Tracy Aloway: All right, Javier, thank you so much for coming back on All Thoughts. Really appreciate it.

Javier Blass: My pleasure.

Joe Weisenthal: Joe, great to talk to Javier as always. Uh, a couple things stood out to me from that conversation. So, it seems like everything is very relative in commodities at the moment. Like the relative price moves really seem to matter and like be quite different to each other. So,

Tracy Aloway: the idea that maybe we shouldn't be focusing on the crude price so much. It's more the refined products where we're really seeing the impact which is what matters for, you know, everyday consumption and economic growth. And then secondly, the idea that

Joe Weisenthal: we still don't have that much movement in natural gas.

Tracy Aloway: Yeah.

Joe Weisenthal: Which is kind of weird but also relevant if you're worried about inflation because that would be I think like the primary channel electricity prices through which you would see higher prices ripple through the economy. Yeah. I mean, look, also I mean, gasoline prices are going to go to $5 very plausibly. Diesel prices in the US are up. So, it's going to there's going to be a strain. But I do think that is, as you say, the really key thing. It is like that that you know what really helped me understand this was just this idea of distance between the straight and where you're and consumer, right? And you have to figure too that like if the distance is fairly narrow and short and you're getting your oil from your next door neighbor, you're going to have less uh you know less reason to hold a lot of stocks and so forth. And so when you see these headlines in East Asia like they're already in rationing mode like I sort of get it. Whereas in other parts you know there's not a ton of imports west of Suez from Saudi Arabia Saudi Arabia but there is some. So in some of these areas or some of these longer distances like the Philippines etc the the sort of drop dead date or whatever maybe that's a little too extreme but the sort of the true moment the crisis hits hasn't hit yet.

Tracy Aloway: Everything's relative Joe especially geography. Well, the other thing I was thinking though is, you know, these buffer stocks have helped the market weather this crisis so far,

Joe Weisenthal: but I just like I have to imagine that if things were to get resolved in the next, I don't know, week or two or even month that everyone around the world is going to be scrambling to rebuild some of their stock piles of oil. So I just don't see like that immediate pressure on price necessarily dissipating that fast, but there still seem to be a lot of people in the oil market who think it is. So

Tracy Aloway: it's a pretty weird time. And you know, one of the things I think like at the very early days of the war, well, one thing that perhaps kept oil prices somewhat contained was like, oh, Trump is going to taco, right? He doesn't there's not much appetite for any pain. And then I think the next step which we're in right now is and this next leg up that we've seen. We have seen um Brent futures trade close yesterday at the highest prices yet in this crisis. The next leg is probably well Trump couldn't chicken it out even if he wanted to because Iran gets a say. And then the next stage maybe well maybe Trumpally decides to end the war. Iran still controls the straight of horm to some extent. How does the world live with a toll booth etc which is not great for anyone not thrilled but also perhaps I don't know maybe like the market could live with that for a while. So we seem to be maybe moving I don't know it'll be interesting to see if this latest headline how long that stays with us and if that becomes the new meta that or the new narrative that'll just be yes this is not great but this is not great is better than no movement at all. It's very seven stages of grief basically.

Joe Weisenthal: It does feel it does feel like

Tracy Aloway: we move from denial to like depression and then reconstruction and acceptance.

Joe Weisenthal: Finally, acceptance. Yeah. All right. Shall we leave it there?

Tracy Aloway: Let's leave it there.

Joe Weisenthal: This has been another episode of the All Thoughts podcast. I'm Tracy Aloway. You can follow me at Tracy Aloway.

Tracy Aloway: And I'm Joe Weisenthal. You can follow me at the stalwart. Follow our guest Javier Bloss Javier Bloss. And of course, check out all of his Bloomberg opinion columns. Follow our producers Carmen Rodriguez at Carmen Arman, Dash O Bennett at Dashbot, and Kale Brooks at Kalebrooks. And for more OddLots content, go to bloomberg.com/odlotss. We have a daily newsletter on all of our episodes, and you can chat about all these topics 24/7 in our Discord, discord.gg/odlotss.

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