Why the Price of Oil, Beef, Electricity, and Everything Else Makes No Sense

SPEAKER_2 (0:02)

Bloomberg Audio Studios, podcasts, radio, news.

Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:24)

This is a very special live recording of the podcast. We were over in London for our first ever UK live show.

Joe Weisenthal (0:31)

I love going to London. It was a little anxious putting on a live show, selling tickets and stuff in London. You never really know who's gonna show up in another city, but it is a great time. We had a great turnout. We had some great conversations. It was great to meet some of the fans and listeners there. I really loved it. I really enjoyed the live episodes that we recorded.

Tracy Alloway (0:52)

Absolutely. We had some great guests as well, and what you are about to listen to, two of the perfect guests really, I think, for this topic. Obviously, Commodities is still making all the headlines, really, so we decided to get two of our favorite Commodities specialists. Both of them have been on the podcast before. We spoke with Javier Blas. He is, of course, our colleague over here at Bloomberg. He's a Bloomberg Opinion columnist, author of The World for Sale. We also spoke with one of our former colleagues, Lorcan Roche Kelly, who not only is a business editor at the Irish Farmers Journal, but actually an erstwhile Irish farmer himself.

Joe Weisenthal (1:29)

That's right, formerly one of our colleagues. Just to note, of course, because things change all the time, this was recorded on May 7th at Wilton's Music Hall in London. Take a listen.

All right, so Javier, the big question that we have to get out of the way, I'm sure it's on the minds of everyone in the room here, is Europe going to run out of jet fuel, and should people take that into account when planning their summer holidays to Spain or wherever else?

Javier Blas (1:56)

I think that you are making a great impersonation of my father who is asking that question. Also, when it's okay to refuel the car, I'm halfway, it's okay now for gasoline and so on. I said that 7.3 in the morning, please.

I mean, it all depends whether the Strait of Hormuz reopens or not, and when, because it has to be a question of when. We are okay with jet fuel for the next few weeks, until certainly the end of June. Then it gets significantly tighter because demand goes up quite a lot during the summer, but the market is working. It's every refinery in the planet is maximizing jet fuel production right now, and we are beginning to see that working and more companies coming on the record saying that they are okay for the summer.

Tracy Alloway (2:44)

I mean, I will say that some of my friends from university, and Joe makes fun of me whenever I say uni friends, but my friends from uni, we're talking about changing their summer holidays to ferries and trains. So there's real life demand destruction happening already. You mentioned all of this depends on when the Strait actually reopens. Like why don't we just ask you that basic question, when do you think the Strait will reopen?

Javier Blas (3:11)

I mean, typically, you have a deal when it's painful for everyone in the negotiation.

And it's not really painful for either side or not painful enough for either side to make the compromises needed. Iran is feeling the economic pain for sure. There's unemployment, there's inflation, but the regime can impose a lot of penalties over the population and, you know, it's, the atolls don't face any imminent election.

President Trump does face an election later this year, but the price of gasoline is going up. It's undeniable, four and a half dollars a gallon. It's more expensive, but it's still, if you look at the American economy, it's still performing well. Earnings are good, the S&P 500 is near a record high. It doesn't feel for the US that really the president is suffering a massive economic crisis that is gonna force his hand to concede to Iran. So we are in a really kind of bad situation. You are hoping for a reopening that is painful, but not yet really painful enough that everyone is forced to compromise. And that's what I'm worried. That is not getting painful enough. What I will almost want is that Iran was suffering a massive economic problem and that the president was facing $150 or higher. And then everyone has to agree. We are not there yet. So it may take longer.

Joe Weisenthal (4:35)

Lorcan, so again, for those who don't know Lorcan, not only a journalist, but actually long practicing farmer, someone who actually, you know, in the biz, how are we doing on food here?