Chevron CEO Mike Wirth Talks Middle East Footprint

**SPEAKER_1** (0:02)
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**Jonathan Ferro** (0:07)
I get this question a lot, you're the expert, help me answer it. Why is crude at 100, at 90, and not close to the 200, given this straight's been shut for three months?

**Mike Wirth** (0:17)
You know, it's a little hard to explain. We really are seeing markets tighten, inventories draw demand for products around the world, still very strong.
I think there's this belief, and we're experiencing it again the last few days, that the end is near, the conflict is nearly resolved, and flow through the straight will resume very quickly, and that has kept the back end of the curve lower than it might otherwise have been. And I think of the psychology of the market has been, this is closer to the end rather than the beginning.

**SPEAKER_4** (0:50)
But what about the physical world? When will inventories be at the very bottom?

**Mike Wirth** (0:54)
Before long. We are steadily drawing inventories down on products, on crude, in locations around the world. I think June and July are going to be critical months, and you can see the trajectory of these inventories in the data, and it's concerning.

**SPEAKER_4** (1:12)
Do you see any physical shortages right now around the world?

**Mike Wirth** (1:15)
We do see some in some Asian markets, and we've seen some rationing, we've seen workweeks adjusted, other demand measures imposed. Some of the countries in Asia, markets are very efficient at moving products and barrels to where they're needed. And we haven't reached a crisis point yet, but the inertia in the system is very, very strong, and turning that is not easy.

**SPEAKER_4** (1:41)
One of the main sticking points the US has when it comes to negotiating with Iran is this idea of the tolling. Would Chevron consider paying a toll?

**Mike Wirth** (1:49)
No, we wouldn't.

**SPEAKER_4** (1:51)
Do you know how people are paying a toll?

**Mike Wirth** (1:54)
I've heard reports of people using cryptocurrency in various countries.
I think the Treasury has come out this week and sanctions the new authority that has been put in place to oversee transit through the strait. It went from a toll to a navigation fee to something else.

**SPEAKER_4** (2:13)
Would you pay a navigation fee?

**Mike Wirth** (2:16)
I don't know enough about any of these things to say definitively. But look, freedom of navigation through international waterways is a very well established principle. And anything like this would begin to say that countries adjacent to an international waterway can charge some sort of a transit fee. There are many other places in the world where that principle could be applied and not just to energy products, but to all freight moving through the Straits of Malacca, the Bosphorus. So pick your choke point.
And so that's not a principle, I think, that most countries in the world would find acceptable.

**SPEAKER_5** (2:52)
How far are we away from having pipelines that connect some of these countries to the mainland and their production without having to traverse the Strait at all?

**Mike Wirth** (3:01)
Well, there's a couple that exist now that you've talked about in Saudi and the UAE. The UAE sanctioned a project last year, which is about 50% complete, to get more of their production over to Fujairah outside of the Strait.
So I think you will see more of that, Lisa. The one opportunity there is, countries like Iraq and Kuwait that are deeper up in the Gulf don't have access to those pipelines. And for them, the route could be through the north and ultimately then into the Mediterranean, maybe through Turkey where we see a pipeline comes out of the Caspian Sea over into the Mediterranean in Turkey. And so I do think one of the responses to this will be infrastructure investments that will allow these energy flows to avoid the Strait of Hormuz. And that's underway now and I think you'll see that in the years that follow.

**SPEAKER_5** (3:53)
We started the conversation talking about why oil prices aren't higher and you saying that we're getting close to breaking the bottoms of some of the inventory bins. And we were speaking just a moment ago with Alex Altman at Barclays who said we actually could see a glut of oil in 6 to 12 months time if there is a resolution here based on the production levels of so many different oil companies and countries. What's your take on that? Do you think that that's a feasible interpretation?

**Mike Wirth** (4:17)
Well history says that shortages tend to be followed by gluts and high prices send a signal and markets work. Consumers consume less, producers produce more in response to a price signal.