Ten31 Timestamp: When Donald Met Kimi

**Marty Bent** (0:00)
John, this is your first experience of me recording from the back porch of my father-in-law's shore house.

**John Arnold** (0:05)
First time caller, long time listener for something like this. It's always a key part of the summer for me is when Marty transitions to the shore house and does all the pots on the back porch. It's a real vibe for it too.

**Marty Bent** (0:17)
It's a great vibe. So we got birds chirping in the background. There's not a cloud in the sky. It's about 74 degrees, very comfortable, not sweating.
And after the heat and the smoke that hit the area last week, this is a much need of reprieve from the weird weather. Yeah.

**John Arnold** (0:36)
I'm glad you made it through that rough period there.

**Marty Bent** (0:40)
Did the smoke make it down your way at all?

**John Arnold** (0:42)
No. No.
We're insulated from all of Canada's shenanigans down in the lower half of the country.

**Marty Bent** (0:50)
It turns out forest management control burns kind of important. We've left them for a decade.
Bad things happened. Then it gets blamed on climate change, and you're forced to move around your whole life and your portfolio to make sure that we're investing in clean climate tech.

**John Arnold** (1:05)
I think the narrative was a little less powerful this time, for one reason or another. Fortunately, we're past the ESG days of early 2020s, but never say never. Investment cycles always come back around.

**Marty Bent** (1:16)
Well, I mean, they may come back around, but as you said, it's out of favor now because war is not good for the environment. War is back on the table, Iran, Strait of Hormuz, back on the table, boys.

**John Arnold** (1:27)
Yeah, here we are again. All this has happened before, all this will happen again, as they say. We don't have to hit these too hard. I'm sure anyone who is a professional doom scroller or a professional situation monitor is well aware that where we're sitting right now is definitively less encouraging than it was perhaps a couple months ago, perhaps not totally surprising that we would see re-escalation. Maybe you might have thought that it would have waited till after midterms, but I think anyone probably would have assumed that the MOU that was put across the table a couple months ago was not super well defined on a variety of terms, which we talked about a couple months back. But here we are again, straights open, straights closed, Michael Scott, Snip, Snap, GIF, Schrodinger's Cat type of situation. But either way, the punchline here is WTI, Brent up back into the 80s. But I think even more notably, you've got European NatGas benchmarks, all the getting back into the highs of the early chaos we were seeing earlier this year. So that'll be, I think, the biggest constrain on, you know, the biggest pain point, I guess, we would say is the countries, Europe, Southeast Asia, that are maybe less well-supplied on a variety of key energy inputs really getting squeezed here again. So that'll be the main vulnerability to watch.

**Marty Bent** (2:48)
On the state side, we have the Strategic Petroleum Reserve falling to 43 days of reserves left, the lowest, I think.

**John Arnold** (2:54)
83, lowest since 83?

**Marty Bent** (2:55)
Lowest since 83, yeah. So, got done to 46 days in 2023
So, I guess we replenished it a little bit and we drained it down to its lowest level in over 40 years. So, not great, Bob.

**John Arnold** (3:09)
No, well, it might have been a good idea to deal with that before kicking the hornet's nest here, but yeah, here we are. But I think everyone knows the war is on, if we can call it that now. I think maybe the more incremental or like interesting pieces out of the last week were some headlines just on basically the accelerated urgency to route around Strait of Hormuz by various GCC countries. We've talked about these a little bit in the past on the pod, but some measuring analysis out of Goldman this week, kind of suggesting that a variety of these projects could get up to say 60% of pre-war levels of oil exports in the next two years being essentially straight proof.
And definitely looks like there's a significant appetite as you would expect to ramp up both investment in these and also the pace at which they get completed. Now, this isn't going to help you if you end up with the Huthys over in the Red Sea causing a lot more trouble and they're a raw and a line. So you're not necessarily out of the woods just because you build some of these pipeline projects. And of course, they're not going to materialize tomorrow. It's going to take one or two years to really get meaningful benefit. But the world really moving kind of in a direction, it seems of minimizing dependence on and ability to this particular maritime choke point, which interestingly was specifically called out, as we mentioned before, in the National Security Strategy document last year as a key priority of the administration, minimizing the disruptive impacts of the Strait of Hormuz as a choke point.