It is true that we have seen oil prices come down.

As I mentioned, we're below $70 a barrel and once again south of $73 on Brent.

How quickly? In terms of pace and trajectory, could

we see that reaching levels that would bring gasoline down down to something

like 250 a gallon? Once again, is there any path to that

being realistic? You know, Kelly, thanks for having me

again. And it's really difficult to get to that

price, um, especially because we need all of the refineries in the Middle East

to start exporting gasoline. We drew down a significant amount of

gasoline on the water, as well as jet fuel and diesel.

And so product prices remain really high.

Uh, this statistically, the gasoline prices as a percentage of Brent are the

highest that we've ever seen them. I think that's true.

Maybe maybe around the highs. Certainly.

Certainly. Gasoline cracks relative to crude are as

high as they were in 2022 during the Russia-Ukraine war.

And what we really need to see are refineries refining capacity coming back

on line in the Middle East. Exports of products resuming.

Because it doesn't matter how much crude you have, you need to refine it to make

gasoline. And last night's upset upset of the

refinery in Pennsylvania certainly doesn't help the gasoline situation in

the northeast. And so gasoline prices are going to

continue to remain high as demand remains high and production just

continues to be lagging the demand response.

So does the president not displaying knowledge of how this

works? Knowing that there's gas already in the

ground, paid for at higher prices, knowing that integrated oil companies

don't set the price he's referring to. Retailers in this case must quickly

react to the statement and do what they know is right.

Are we going to see maybe he believes pressure is in fact potentially

effective here. Could we see retailers and refiners, uh,

cut some, uh, short term deals here to target $2.50, or is that simply not

realistic? You know, the only thing that would be

even remotely possible to get gasoline prices down would be to implement some

sort of gasoline export restrictions out of the US.

I again, I find that unlikely. I think we've talked about it before

and, um, it certainly has been a topic of conversation since the war began that

export controls out of the U.S. are very difficult to implement.

Um, they it certainly is possible. Constraining gasoline inside of the U.S.

will bring down prices, maybe in the Midwest and around Texas, but still, the

northeast is going to remain relatively high until we can get tankers moving

that gasoline to the northeast. So it is a difficult it is difficult.

Obviously, we all know that gasoline is not controlled.

Gasoline prices are not controlled by the majors, but they're it's controlled

by the market, which is the market that we have.

We of course, gasoline prices are high. You can have refiners switching from

making jet fuel and diesel to gasoline, but then you're going to have even

higher jet fuel and diesel prices, which we already have really high prices

there. What we really need are the refineries

in the Middle East, restarting their refineries and being able to export

their product out of the out of the Strait of Hormuz.

Well, so let's talk about that export, uh, capability for these Middle Eastern

countries, Michele, and whether or not they're going to be able to do so freely

without paying tolls to Iran or Oman. Iran consistently suggests that there

are going to be fees or whatever you want to call them, uh, associated with

the administration of the Strait of Hormuz.

What realistically will that mean for the global energy market if they are

able to implement it, knowing that the U.S.

says that's a non-starter? You know, the fee, the new fee structure

that has been the your previous guest that let the genie out of the bottle.

And that is exactly what has happened. And it's very, very hard to put that

genie back into the bottle. And not just with Iran and Oman.

It's going to raise prices, obviously, to get that out.

And obviously the Saudis and the Emiratis have already talked about

creating pipelines that are going to move, move product and crude away from

the Strait of Hormuz. So there is going to be some things that

are going to logistically change inside of the Gulf.

But I think the bigger question is, is what do tolls mean for other straits?

The Strait of Gibraltar. The Strait of Malacca.

Right. Like once you introduce that, you have

control over these natural straits and that it can really be a revenue stream

that's going to that takes on a whole new meaning for some of these countries,

like Morocco and Spain. For example, Morocco could receive fees

for ships going through the Strait of Gibraltar.

That changes what Europe looks like. So I think that it's it's so much more

the fee structure is so much more than just Iran and Oman.

It is applicable to many, many straits in the world that currently you can pass

through that are free. Well that's terrifying.

The idea of a new global tolling regime. In the meantime, Michel, we heard that

we were on the precipice repeatedly of physical shortages.

You mentioned jet fuel start right there in Europe, in the UK, in Asia.

Was that about to happen or did we dodged a bullet somehow?

You know, it's such a great question there.

At the very beginning of this war, I created this war endurance model.

Like how long can the world last? And what I found, of course, which

Everett, which we have found over time, is that some countries just ran out of

fuel. Right.

Like East Africa ran out of fuel. Some of the Asian countries just ran out

of fuel. Right.

And then measures started getting implemented.

So you started to look at demand in these three buckets.

Bucket number one was just demand response relative to price which is a

normal demand response. The second was a demand response

relative to policies. So countries were putting into place

these policy measures to curtail demand so that they didn't run out of product,

because running out of gasoline or diesel in a country that needs it for

emergency uses, such as emergency vehicles or hospitals, really needed to

make sure that they kept their product. And then you had a demand response for

just countries that just ran out. And so while the rich countries were

able to buy more fuel from the global market, they were able to stay

relatively balanced while the poorer countries suffered.

And that's really what we saw. So did we run out of fuels?

Yes, some countries did. But when you look at the United States

and Europe, obviously we had we had plenty.

Um hmm. So, uh, were we on the precipice?

It's possible. It's just possible that the richer

countries would have maintained. Well, we would have continued to see the

poorer countries diminish and supply of of products.

Michel, we're almost out of time. But given, uh, everything that you have

just been describing around the what has been the genie that has been out of this

bottle with the seas in the Strait of Hormuz, with the difficulty of getting

refining capacity back up and running. What's a realistic price of a gallon of

gas by November in your mind? You know, because of the Strait of

Hormuz, the traffic through the Strait of Hormuz are still been relatively

constrained. I think it's still down at least 85%

from some of the peaks, um, that we had prior to the war.

You need to get the traffic back up and moving and the refineries back up and

running. And I think we all know that there are

theoretically some mines in the strait, so those need to get cleared.

So Biden by November, gasoline prices could still be well above $3 a gallon.