May 13, 2026 • 38 mins
The global oil system is running out of room, and the consequences could start accelerating later this year.
Chuck Zodda and Marc Fandetti break down the rapidly shrinking margin for error in global energy markets as continued disruptions in the Strait of Hormuz drain inventories and push oil prices above $100 per barrel again.
Also covered:
Chuck Zodda and Marc Fandetti break down the rapidly shrinking margin for error in global energy markets as continued disruptions in the Strait of Hormuz drain inventories and push oil prices above $100 per barrel again.
Also covered:
- Why U.S. oil inventories are falling at one of the fastest rates on record
- The growing risk of supply shortages by late summer or early fall
- Why gas tax holidays could actually make the problem worse
- How rising fuel prices are reshaping consumer behavior and inflation expectations
- What President Trump hopes to accomplish during his summit with Xi Jinping
- Why NVIDIA CEO Jensen Huang unexpectedly joined the Beijing delegation
- The latest warning signs from inflation and bond markets
- Why Walmart is cutting or relocating corporate employees
- How tomato prices became the latest inflation headache for consumers and restaurants
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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(00:20):
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(00:43):
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(01:06):
and Mark Vandebti.
Speaker 2 (01:11):
It's Chuck, Mark and Tucker with you here, and we're
gonna kick things off.
Speaker 3 (01:15):
Taking a look at the markets.
Speaker 2 (01:20):
And we got the S and P five hundred up
ten points right now about zero point one five percent.
The Dow is off three hundred points about half a percent.
Now's that can posite up two thirds of percent about
one hundred and sixty seven points, so mixed markets thus far,
Russell two thousand joining the Dow in negative territory as well.
Ten year Treasury continuing its recent sell off, up another
(01:40):
one point seven basis points to four point four to
eight eight percent. Thirty year Treasury, by the way, continuing
to stay above five percent now at five point oh
four to seven, so long bonds continuing to get hit
over the last few days with some higher inflation numbers.
We did get producer price index data this morning that was,
you know, just it was it was a little warm
(02:03):
to put some of this in perspective again, like this
is all. Don't get too sucked into any one particular
month because it's one piece of data.
Speaker 3 (02:13):
From one month. And I understand that.
Speaker 2 (02:16):
But the point that I will make is the expectation
was that we were going to see PPI come in
at zero point five percent. Instead it came in at
one point four percent for the month. And that is
when when you look back over like the last twelve
thirteen years of data, it's by far the biggest miss
(02:38):
to the top side that we've seen relative to expectations.
And so that directionally says something and I think it's
worth paying attention to, especially since because in now seven
of the last eight months the miss on PPI has
been top side, not downside. So just something worth paying
attention to there. Taking a look at other markets, the
(03:01):
dollar is up point twenty four percent to ninety eight
four point fifteen, gold up three forty and outs to
forty six ninety and ten cents, and we've got crude
oil West Text Intermediate up another sixty five cents per
barrel to one oh two and eighty three cents, triple
a national average for gas prices also rising again, up
another seven tenths of a cent to four fifty one
(03:23):
and one tenth and so no real major movement there,
but continuing to see elevated pricing as one would expect
given the fact that's this is your daily reminder that
the straight of horn moves remains closed. In twelve to
thirteen million barrels of production in the region remain shut
in and not being produced. We also did get the
EIA's crude inventory report about maybe half hour ago. We're
(03:48):
gonna go through that later in the show, and so
don't worry, we will get there. But top story, we're
gonna talk a little bit about US China summit that
is going on now. President Trump is has landed in Beijing.
Either of you see the videos of the landing, getting
off the plane with Gi walking them down. They got,
(04:09):
you know, the red carpet rolled out, they got a
bunch of people waving Chinese American flags, all the fanfare.
Speaker 3 (04:14):
And never very welcoming. Yeah, like a lot of fanfare.
Speaker 2 (04:18):
And ultimately, I'm still not really sure that too much
comes out of this because I think there are just
too many cross currents with the Middle East situation to
be able to hammer anything large out as far as
any kind of deal, because anything big that President Trump
is going to ask for on you know, China helping
(04:40):
with you know, getting Iran to loosen up, China's gonna
come back and say, okay, but here's the thing that
I want from you, and I just don't think the
Trump administration necessarily wants to give a ton in exchange
for maybe help with the Iran situation. So this is
kind of where we are right now, is you know,
(05:01):
we'll see what comes out of the next couple of days.
I think you probably get some you know, Chinese purchases
of airplanes, maybe some Chinese purchases a farm, you know,
this and that.
Speaker 3 (05:10):
But I'm just not.
Speaker 2 (05:12):
Sure that there's going to be any huge deal that
is reachable because there's too much.
Speaker 3 (05:17):
Other stuff going on right now.
Speaker 2 (05:19):
Beans and Boeing kind feel kind of what it feels like,
kind of what it feels like.
Speaker 4 (05:24):
And it works for the president. He likes to play salesman.
It's it's it's fine, he can announce a couple of deals.
Speaker 2 (05:29):
Yeah, it's look, it's it's some purchase orders coming in, like,
there's nothing bad about that. But I think for anyone
who's expecting a larger deal or something transformative, I would
be kind of surprised if this is the time and
and context from which that ends up coming.
Speaker 3 (05:44):
I just I don't think so.
Speaker 4 (05:45):
China would like cheaper energy, but they also like the
fact that we're bogged down, right, So is there an
argument that they don't want this Iran situation resolved?
Speaker 3 (05:55):
No.
Speaker 2 (05:55):
I think ultimately the way I view it is China
can deal with this for a time. But I don't
think there's anything to me that would suggest that they
want to maintain the current state of the Middle East
because it's not sustainable for them long term. Okay, it's
(06:18):
you know, again, no one knows exactly what's going on
with Chinese oil inventories and production in this and that
anyone who has studied it will tell you it's like
studying anything else in China. You look at it, some
of the numbers make sense, some of them don't. You
try to glean what's going on from reading between the lines,
(06:40):
but you can't get an accurate picture of it. So
I would I do not have any unique insight into
you know, how China is operating from an energy perspective
internally right now, And most of the people that I
trust on these things don't have any unique insight either.
Speaker 3 (06:57):
They just don't know it. It's too opaque.
Speaker 2 (07:00):
So this is something where again, over the next couple
of days, we'll see what happens. What is interesting is
on Monday. Originally it was reported the Jensen Huang CEO
of Nvidia was going to be going to Beijing. Then
about halfway through our show on Monday, it was reported
that he was not going to be going, And finally
(07:24):
late last night, turns out that Jensen hopped on a
flight to Alaska to go and meet Air Force one
as they refueled there before you know, continuing on to Beijing.
And so he did end up on the plane after
a last minute invitation from President Trump.
Speaker 3 (07:43):
Is what the reporting is now.
Speaker 2 (07:46):
So I gotta tell you, like, what do we think
this means that they had to like pick him up
in Alaska because of a last minute addition to the
to the delegation instead of having him a really scheduled
to go. What are the possibilities there? Possibility number one,
(08:06):
in my opinion, there's nothing related to American semiconductors that's
going to be discussed, because if it really were something substantive,
he would have been on the guest list to begin with.
That's possibility number one. Possibility number two, something is you know,
coming together late in the process, and maybe there is
(08:28):
something chip related that's going to come out of this.
Does that really feel like how these things are normally orchestrated.
Speaker 4 (08:38):
Maybe maybe now it is I'm gonna go with no
at normally this is these are not normal times.
Speaker 2 (08:45):
No, it's true, but I'm gonna go with that that
that's kind of a reach for me. Number three, maybe
he just decided to show up in Alaska being like, hey,
put me on the plane.
Speaker 3 (08:57):
I don't think so. That doesn't really seem like Jensen's
you know, his stick.
Speaker 2 (09:02):
So I think the most likely thing is it's probably
you know, something symbolic. But I again, if there was
something meaningful that had already been you know, eighty percent
agreed to that was going to get pushed across the
finish line between the meeting of the two leaders, he
would have been scheduled to be on the plane originally
not meeting them in Alaska as a last minute invie.
Speaker 4 (09:24):
What is the agenda for this summit?
Speaker 3 (09:26):
By the way, what's that is?
Speaker 4 (09:27):
What is the main topic? Is it just trade?
Speaker 3 (09:31):
Yeah? Okay, Yeah, there's some AI topics that might be
discussed as well.
Speaker 2 (09:35):
Potential like cross border regulatory framework for AI is something
that I've seen as well. I'm sure Iran will come up,
But I don't think either side really wants to ask
the other one for anything just because they don't want
to appear to need help from the other on the issue.
Speaker 3 (09:50):
Yeah, so I think it's it's.
Speaker 2 (09:52):
Some small stuff relatively in the broader context of you know,
Everything's take a quick break. When we return, Ted Rossman
from bank Rate joins us. We're gonna talk to him
about yesterday's release of the New York Fed's Household Debt
and Credit Report.
Speaker 1 (10:11):
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Speaker 2 (10:56):
Already has promised for Join now by Ted Rossman bank
Rate here to talk about the New York Fed Household
Debt and Credit Report that came out yesterday.
Speaker 3 (11:06):
Ted, how you doing I'm doing well, thanks for having
me ted.
Speaker 2 (11:10):
Overall, just kind of sixty thousand foot view what we
learn from this report.
Speaker 5 (11:17):
Americans have a record level of debt, so it's more
than eighteen trillion dollars in total.
Speaker 3 (11:23):
I know that sounds alarming.
Speaker 5 (11:25):
I would note, though, that the growth rate has been
fairly modest of late, and I actually view this as
kind of a goldilocks report. If you will, it's not
too hot, it's not too cold. We have to remember
that while debt may feel like a nasty word, some
of this is a proxy for economic activity like consumer spending.
Speaker 3 (11:45):
And sometimes it takes.
Speaker 5 (11:47):
Credit to get ahead to buy a home, for instance,
that's something that not only provides you with a nice
place to live but will hopefully gain value over time.
Or student loan debt. I know it's a real drag
on consumption for a lot of Gen Z years and millennials,
but it also furthers your earning power and lessens your
chances of unemployment. Even something like credit card debt. We
(12:09):
don't want you paying those twenty or thirty percent interest rates,
but this report doesn't distinguish between what's paid in full
and what's not. Half of these cardholders are using cards
for rewards convenience, they're paying them off right away. I
would actually view modest debt growth as reflective of a
pretty healthy economy.
Speaker 2 (12:28):
It seems like for the last few years we've been
hearing about a couple things. Number one is, you know,
more and more Americans are struggling to make ends meet
and delinquencies arising. But despite that, consumer spending continues to
hum along, and we haven't seen any changes there Is
there anything in this report that suggests either of those
(12:50):
maybe changing, not.
Speaker 5 (12:52):
Really, which is notable in its own right now, Maybe
we just don't know yet with respect to the higher
gas prices that have come about in recent months, because
this report covered Q one, so it was really just
the final month of that quarter where we saw the
spike in gas prices. Credit card debt actually went down
in Q one. A lot of that had to do
with higher tax refunds and New Year's resolutions to pay
(13:15):
off debt. The gas price issue is so interesting because
I realize it's a burden on households, Like I don't
enjoy it when I fill up my family SUV and
it's seventy five dollars now and it used to be
forty five. I mean, you notice that it's having an
outside psychological impact. It's not as of yet affecting overall
(13:35):
spending as much, because we do have to remember that
the average household prior to the spike was spending about
twenty four hundred dollars a year on gas. Now maybe
that goes up to thirty six hundred if you have
a fifty percent rise. I don't want to minimize that,
like I'd like to have the extra twelve hundred bucks,
but it does only work out two one hundred dollars
a month, and a lot of people are absorbing that
(13:56):
through wage growth, through higher tax refunds, maybe a little
bit of cutting back elsewhere. But honestly, we're not seeing
a lot of that as of yet. What we're hearing
from banks, credit card companies, travel providers, restaurants. For the
most part, people are kind of spending as they were.
Speaker 3 (14:13):
So it's one of.
Speaker 5 (14:14):
These don't underestimate the resiliency of the consumer. I mean, again,
I don't want to minimize the pain at the POMD.
It's felt most acutely among lower income households, but Amex
and Chase and a lot of other companies are saying
people are still spending pretty robustly despite this.
Speaker 2 (14:33):
Bike ted I've got a theory that I've been, you know,
kind of on for the last couple of years, which
is it kind of pulls that thought together, which is
that the level of wealth and income disparity has gotten
to a point where the people that are in trouble
just it doesn't really even print in the broader statistics
(14:54):
because of how skewed things are. Is that possibly a
way to square that circle?
Speaker 5 (15:00):
It could be, Well, there was that Moody's report not
long ago that said that the top ten percent of
earners are accounting for fifty percent of all spending, which
is an all time high. That gets back to that
K shaped economy idea that we've talked about, that the
rich are getting richer, the poor are getting poorer, the
gap is widening. American Express is an interesting lens on this.
They reported earnings recently. They were very positive. They were
(15:22):
talking about how much people are spending on travel and restaurants,
and their CEO had a quote to the effect of,
our customers don't care about higher gas prices. Now, maybe
that seems a little flippant, but it's true that this
is a higher income audience. There are a good number
of credit card holders, about half overall, that are paying
in fall every month. I mean, these are the kind
(15:42):
of people that are are traveling. They're going out to eat,
they're going to concerts and sporting events, and I know
that gap is widening, but it does feel like there's
an awful lot of discretionary spending going on. Travel is
another interesting one. We've just seen record after record the
past few years, and even this travel bookings are holding
up remarkably well. I know it's alarming when you hear
(16:05):
airlines going out of business like Spirit because of higher
jet fuel costs, but then you hear a lot of
other airlines saying that summer travel demand is still quite hot.
So a lot of this does track back to economic inequality.
Speaker 2 (16:18):
Ted, appreciate you joining us today. Thanks so much for
the time, no problem, Thank you. That is Ted Rossman
from bank Rate talking about the New York FEDS household
debt and credit report.
Speaker 6 (16:30):
All right, time for trivia here on the Financial Exchange,
and today is Stevie Wonder's seventy six birthday. Wonder was
a child prodigy and was the youngest artist to receive
a record contract with Motown Records. Wonder would go on
to win more Grammy Awards than any solo mail artist
in history. So our trivia question today, how old was
(16:54):
Stevie Wonder when he signed his first record contract with
Motown Record Words?
Speaker 3 (17:00):
Once again?
Speaker 6 (17:01):
How old was Stevie Wonder when he signed his first
contract or his first record contract with Modetown Records. Be
the seventh person to text us at six one seven
three six two thirteen eighty five with the correct answer
along with keyword trivia and win a Financial Exchange Show
T shirt. Once again, the seventh correct response to text
(17:23):
us to the number six one seven three six two
thirteen eighty five with the correct answer along with keyword trivia,
We'll win that T shirt. See complete contest rules at
Financial Exchange Show dot com.
Speaker 2 (17:35):
Another just interesting, uh Stevie Wonder fact as long as
we're talking about him, because again, just get pretty pretty remarkable, dude.
Speaker 3 (17:45):
Uh, do you know that Stevie Wonder was not born blind? Uh? No,
I thought he was. Oh, okay, he was not born blind.
Speaker 2 (17:52):
He was born early, though, six weeks early, and because
of the extra oxygen in the incubator, he ended up
with some condition that basically typically leads to detached retinas
after birth, and that's actually what ended up causing his blindness.
Speaker 1 (18:14):
God.
Speaker 2 (18:15):
So again, I think, just a remarkable human being. And
I'm not going to spoil the trivia answer because I
do know this one.
Speaker 3 (18:23):
But I was stunned when I saw the answer. It's
it's remark.
Speaker 2 (18:27):
I mean, the word genius gets thrown around a lot,
like Stevie Wonder is actually a genius. Walmart is going
to be laying off or relocating about a thousand corporate workers.
This a Wall Street Journal exclusive, not a huge number
of employees in the context of Walmart's broader workforce, but
(18:48):
continuing to see, you know, more companies indicating some layoffs
that are parcolating through the system.
Speaker 4 (18:57):
Mark, Yeah, nothing systemic though, No, I mean not at this.
Millions of jobs turnover every month.
Speaker 3 (19:06):
Yea million that we read the Jolt support.
Speaker 4 (19:10):
When it comes in and it's all right there, it's
like several million people change jobs every month. I'm not
saying this isn't like of interest if you're a Walmart,
yere older or something.
Speaker 3 (19:19):
Take a quick break here.
Speaker 2 (19:20):
When we return, we've got the trivia answer We've got
Wall Street Watch, and then we're talking oil after this.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day,
It's the Financial Exchange on the Financial Exchange Radio Network.
T now foo whoa Street Watch tracking the stocks, theodato
and the headlines driving markets so far today right here
on the Financial Exchange Radio Network.
Speaker 6 (20:00):
Markets are mixed now, with text seeing a rebound from
yesterday's pullback after a hotter than expected Producer Price Index
was released this morning, where wholesale prices in April rows
the most in three years, adding fuel to inflation anxiety.
President Trump also landed in Beijing this morning with several CEOs,
including Elon Musk and Jensen Wong for his summit with
(20:21):
Chinese President Jijingping.
Speaker 3 (20:24):
Right now, the DOO is.
Speaker 6 (20:25):
Off about a half a percent, s and P five
hundred up two tenths of one percent, Nasdaq up seven
tenths of one percent to one hundred and eighty two points,
Hire RUSS two thousand, down about a quarter percent, Tenure
Treasure reeled up one basis point at four point four
to nine percent, and Oil up about six tenths of
a percent, rating right around one hundred and two dollars
(20:47):
a barrel Ali Baba shares a rising eight percent after
it posted an eighty four percent drop in first quarter
profit and also reported heavy investments in a I. Meanwhile,
according to the Wall Street Journal, Walmart plans to cut
or relocate about one thousand corporate employees. Walmart stock is
mostly flat. Elsewhere, Echo Star shares a climbing over four
(21:08):
percent after the FCC approved the company's forty billion dollars
sale of wireless Spectrum to AT and T and SpaceX,
and Next Power shares surging twelve percent after the energy
technology company raised its full year revenue guidance. I'm Tucker
Silva and that is Wallstreet Watch And in the previous segment,
(21:31):
we asked you the trivia question. How old was Stevie
Wonder when he signed his first record contract with Motown Records?
He was eleven years old. Steve from Amesbury, Mass is
our winner today taking on the financialok Shane Show T shirt.
Congrats to Steve. We play trivia every day here on
the Financial Exchange. See complete contest rules at Financial Exchange
(21:54):
show dot com.
Speaker 2 (21:56):
I'm just trying to think of what I was doing
when I was eleven, probably playing Mario Kart right.
Speaker 3 (22:03):
Yeah, on a good day.
Speaker 2 (22:06):
Yeah, there were days that probably we couldn't even get
to that level. Let's talk a little bit about this
piece from market Watch why the oil crisis could become
a full blown catastrophe within a month, and it's talking about,
you know, the draw downs that we're seeing of crude
oil and or fine product stocks around the world. And look,
(22:27):
we've been talking about this for a while. I had
the Sinco Demayo date circled on my calendar since early March,
and that's coming gone. And where we stand now in
no uncertain terms, is that you are now at the
point where pretty much all the excess oil inventory that's
(22:48):
been on water through floating storage. Think you know tankers
that have supplies that just have nowhere to drop it,
because you know, we had this this glut heading into
the year, that extra storage on on water has been exhausted.
Now we're drawing down on on shore inventories. And to
put this in perspective, a couple of weeks ago, we
(23:08):
covered the April twenty fourth dated release from the EIA
in which they announced that US crewde oil stocks declined
by about thirteen point three million barrels for the course
of that week between US commercial stocks and the strategic reserve.
(23:29):
That was the sixth largest draw down of US commerce
of US oil stocks on record. Today, ten thirty am,
we received another weekly update. Last week's was actually, let's
go through last week's. Last week, what we saw was
a case where we saw a smaller draw. Instead of
(23:53):
thirteen point three million barrels being drawn, we ended.
Speaker 3 (23:57):
Up seeing, hang on, I gotta pull. Here we go.
Speaker 2 (23:59):
It was seven point five million barrels being drawn, about
half the size. You say, oh, that's great, Like, you know,
things got better. The EIA release dates back about twenty two.
We've got twenty two hundred items in the sample. This
was the one hundred and seventeenth ranked one, so it still
is a top five percent draw historically. Even though it was,
(24:23):
you know, much smaller than the week before. It just
tells you how big the one the week before was.
This week twelve point nine million barrel draw between commercial
crude and strategic reserve. Strategic reserve saw eight point six
million barrel draw. That's the biggest weekly draw on the
strategic reserve ever. We've never seen one that big. Here's
(24:44):
the deal. You look at the math and in the
United States, the commercial crude system needs somewhere in the
ballpark of three hundred and fifty to three hundred and
seventy million barrels to operate, just because you need you know, again,
there's oil flowing through pipelines that are included in there.
There's oil in tanks. Like if you get to zero,
(25:04):
like you've lost, Like you can't run the system with
no oil in it. The strategic reserve can get down
to somewhere in the range of two hundred and twenty
to two hundred and forty million barrels because you actually
need the oil in these big salt caverns to prevent
them from caving in, and some of it's also contaminated
with sediment and brine that they use in order to
(25:25):
the way that they empty these they basically pump a
bunch of water in underneath it, and that floats the
oil because oil is less dense, so it floats, And
in that process, some of the brine from these salt
caverns gets mixed in and so you can't use all
of it either. But here's the deal. At the current
rate of draw down, the strategic reserve is going to
(25:46):
hit operational minimums in September or October. You can only
maintain this pace another four to five months. The commercial
crude inventories are going to hit minimum operational capacity sometime
in late July to early September. There's a ticking clock
on this. You can only have this go so far.
(26:09):
And the problem is, let's say that Hormuz opens today,
perfect opening, like everything, like great. The problem is there's
no ships just waiting to get in. Because if you
own an oil tanker right now, you can get primo
rates to be able to go and pick up oil
anywhere you can, because Asia is desperate for crude and
(26:29):
product and so great, you can get paid a ton
of money to take your boat and instead of going
to straight at horm moves okay, you're heading to you
know southeast, you know, United States. The problem is this
puts all these boats out of position to actually pick
up the crew that could, in theory be produced in
the Persian Gulf, which means that even if Hormus opens today,
(26:50):
it's probably thirty to forty days before you start to
see any meaningful flow of boats going back to pick
up oil that's in onshore storage in the region, and
it's only once that storage is starting to drain in
meaningful levels that you can start producing oil again from
the wells that are shut in just probably another thirty
to forty days, and that has a ramp up period
(27:11):
as well, but it's probably five to six months to
get back to normal pre war production if everything goes
perfectly from today. Guys, I did the math. It's very basic.
It's addition and subtraction. You don't have to like, there's
no calculus involved, there's no algebra, it's basic math. US
(27:34):
inventories are going to hit minimum operational levels later this
summer into early fall. If Hormuz open today, you get
back to normal production somewhere mid fall. And that's a
best case scenario, because I gotta tell you Hormuz isn't
opening today.
Speaker 3 (27:52):
It's not.
Speaker 2 (27:54):
And so where you're heading on this is the US
has been the relief valve for the last few weeks.
Speaker 3 (28:00):
For the rest of the world.
Speaker 2 (28:02):
That relief valve is going to run out of room
later this summer or early fall, and in the run
up to that, prices are going to have to move
up because otherwise you can't actually deliver all the barrels
that you say you're going to if someone wants to
say they're buying at certain prices. So the math is
really simple. It's addition and subtraction. There's nothing else aside
(28:24):
from that. And this is where we're heading, and there's
nothing you can.
Speaker 3 (28:29):
Do at this point.
Speaker 2 (28:30):
I can't make that anymore clear, Like you can't fix
this for the summer and fall. You can make it
so that it's not a problem going forward beyond that,
but once you like, this is just what it is
and it's where we are heading. You are not going
to see shortages in the United States throughout most of it.
(28:52):
At least California might because they import a lot of
stuff from Asia that was typically produced in the Middle East.
California has got its own unique issues which could present
some shortages. Outside of that, you're just gonna see higher
prices because the US consumer can pay more than the
consumer in Pakistan and Thailand and Tanzania and Kenya, and
(29:17):
like it's just a wealthier country. We can afford to
pay more than those places. Those places will see shortages,
which is why Narendromodi yesterday was saying, yeah, we gotta,
you know, cut our fertilizer. You know use by fifty percent.
It's because India is not gonna be able to pay.
Speaker 3 (29:32):
For the fertilizer they need. We will, They'll just be higher.
Speaker 2 (29:35):
And you know, even at a certain point there farmers
will say, no, I can't make money doing this.
Speaker 3 (29:40):
So this is where we're heading.
Speaker 2 (29:43):
I don't think it's gonna be a full blown catastrophe
within a month, but uh again, this is where we
are heading, and there's nothing we can do to change
it at this point. Let's take a quick break and
when we return, stack Roulette. Yeah that Tucker. This has
been a quick show today. Yeah, it's fun by Yeah,
(30:04):
it really has. Stack Roulette is next.
Speaker 1 (30:07):
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Speaker 6 (30:40):
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Speaker 3 (31:17):
What do you have for me for stack roulettes.
Speaker 4 (31:19):
You just gave a little masterclass on oil prices and
their relationship to inventories and so forth. Related to that,
there are a bunch of stories about politicians who want
to cut the gas tax. You made the point about
high prices serving I'll put it in my words, these
weren't yours. They serve a function. Prices will induce people
(31:44):
to change their habits. They did in the nineteen seventies
We ended up with more fuel efficient cars. Government played
a role there too. But you want prices to rise
so that people do change their behavior, and you want
demand to go down for the same reason. So gimmicks
like cutting the gas tab I don't you know, my
(32:05):
favorite tax rate is zero on anything. Is sort of
a libertarian type person. But at the same time, this
does fund the Highway Fund, which funds critical enhancements and repairs.
So this is self defeating on a number of levels.
Speaker 2 (32:22):
It's also one where again, like you look at this
and think of it this way, the way that I
also try to look at this is it's no different
from any other think of this as a government subsidy,
because effectively, what you are doing is saying, hey, this
is what you used to pay for this, We're going
(32:44):
to give you money to cover that. That's basically what
you're doing. I know that it's not that, but I
find it instructive just to think of it this way.
I know that you're removing a tax, but anytime that
you are giving people more money to buy something, you're
not just keeping demand stable, you're actually increasing demand for it. Yeah,
(33:05):
that's basically what you are doing. And so you again
it's it's accelerating you into the brick wall of supply
that is coming later this year, and it's it's just
not what you need in order to actually deal with
this now if you wanted. Again, the problem is the
(33:28):
timeline that you have here, there's basically nothing that you
can do in order to improve the supply picture for
oil in the next three months absent opening hormons. You
can't just like drill a bunch of oil in that
timeline like you like, you just don't have like the
(33:48):
crews to be able to do so. It's not going
to make long term economic sense. Even if you know,
you could say, okay, like we'll guarantee you know, a
flour for this, because hey, if you overproduce, we'll buy
that oil in order to refill the SPR. How much
production are you actually going to encourage in such a
short period of time is pretty small in the broad
(34:10):
scheme of things. It's just get what the last three weeks,
we're averaging an eleven million barrel per week draw from
the United States. You're talking one and a half million
barrels a day. There's nothing you can do to increase
oil production by twelve percent in the next three months
(34:31):
to balance that.
Speaker 4 (34:32):
That's there for real emergencies, right, I know the SPR
was created.
Speaker 3 (34:36):
In response this is a real emergency, and in.
Speaker 4 (34:39):
Theory, yeah, it's well self created, but yes, I suppose.
Speaker 2 (34:43):
It is a really like it's created specifically for Hey,
if there's a global disruption to energy flows, this allows
us to you know, keep things moving.
Speaker 4 (34:52):
I guess I think of emergency is something that didn't
originate with a US action, but it okay, it.
Speaker 3 (34:57):
Doesn't matter where it does or doesn't originate. It it
still is policy. It's still causing a problem.
Speaker 2 (35:06):
So ultimately, it's one where there's just nothing that you
can do in that time span. Remember the US producers
around thirteen million barrels a day of oil right now,
and that's with you know, all of the years of
work to get to that point. You can't suddenly just
spool up another one and a half million barrels a
(35:27):
day of production. It just it's it's not possible in
that time span. If you wanted to say, hey, we've
got like two to three years to do that, great,
like you can do that. There's there's nothing you can
do that's gonna start production you know, increases in the
next month or two. Like, it's not possible. So that's
(35:48):
kind of where we stand.
Speaker 4 (35:49):
So let prices do their thing here though they will
help to reduce to Now you may not like that option,
but it's it's critical that that you let the price
mechanism function. Otherwise you're just exacerbating an already bad problem.
I'll just leave it at that.
Speaker 3 (36:10):
Mark, we got another problem that we got to talk
about here.
Speaker 4 (36:13):
No, hopefully it's not employment related.
Speaker 3 (36:15):
We got a tomato shortage. Oh yeah, there's a tomato shortage.
I know. Yeah. Here's here's the deal we know.
Speaker 2 (36:21):
I'm going to quote here from the Wall Street Journal.
The price of tomatoes top burst, the flavor in salads
and sandwiches, searched by nearly forty percent in April from
a year earlier on a combination of bad weather, high tariffs,
and climbing transportation costs. Now I happen to be what's
your favorite kind of tomato?
Speaker 4 (36:38):
Mark the free kind? You like, free tomata kind from
anybody's garden that they're gonna give.
Speaker 2 (36:44):
Let me tell you I learned something back in the day.
There's no such thing as a free tomato. It's an
old lesson that my father taught me. Yeah, there's no
such thing as a free tomato. But we got a
tomato problem here that the tomato prices are too damn high.
And here's the problem is that you got all kinds
of tomatoes that are coming from Mexico. Seventy percent of
them are estimated to come from Mexico, where he had
(37:06):
a bunch of wet weather and disease, resulting in below
normal yields.
Speaker 3 (37:12):
I don't know how we're gonna do this.
Speaker 2 (37:14):
We can't make the gravy without the right amount of tomatoes,
and the tomatoes are two them high.
Speaker 1 (37:20):
In all serious, is no.
Speaker 6 (37:21):
I learned about this over the weekend my father in
law's runs of restaurant. He was like, have you seen
the price of tomatoes? By the way, They're insane, Like
I can't believe this. Yeah, So I mean for him
to say that.
Speaker 4 (37:34):
Yeah, there's no real subjectle to either. I mean, if
you think about it, you know some things you could
swap out a reasonable facsimile the tomato for a lot
of resting.
Speaker 6 (37:45):
A burger, putting on a salad, yeah, sort of pizza
places and sauces.
Speaker 4 (37:49):
There's no such thing as like synthetic ketchup right.
Speaker 2 (37:51):
You know that tomatoes are very closely related to eggplants.
All members that surprised the members of the Nightshade family. Yeah,
they're very closely related.
Speaker 4 (38:04):
Actually, that's trae because one is like packed with vitamins,
and the other is useless, like eggplant is not.
Speaker 3 (38:10):
If you've never had a good eggplant palm.
Speaker 4 (38:13):
My mom sometimes listens, don't say that.
Speaker 3 (38:15):
Yeah, your secret's safe with me. Let's take a quick
break here.
Speaker 2 (38:19):
We'll come back tomorrow and hopefully we got lower tomato
prices
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(01:06):
and Mark Vandebti.
Speaker 2 (01:11):
It's Chuck, Mark and Tucker with you here, and we're
gonna kick things off.
Speaker 3 (01:15):
Taking a look at the markets.
Speaker 2 (01:20):
And we got the S and P five hundred up
ten points right now about zero point one five percent.
The Dow is off three hundred points about half a percent.
Now's that can posite up two thirds of percent about
one hundred and sixty seven points, so mixed markets thus far,
Russell two thousand joining the Dow in negative territory as well.
Ten year Treasury continuing its recent sell off, up another
(01:40):
one point seven basis points to four point four to
eight eight percent. Thirty year Treasury, by the way, continuing
to stay above five percent now at five point oh
four to seven, so long bonds continuing to get hit
over the last few days with some higher inflation numbers.
We did get producer price index data this morning that was,
you know, just it was it was a little warm
(02:03):
to put some of this in perspective again, like this
is all. Don't get too sucked into any one particular
month because it's one piece of data.
Speaker 3 (02:13):
From one month. And I understand that.
Speaker 2 (02:16):
But the point that I will make is the expectation
was that we were going to see PPI come in
at zero point five percent. Instead it came in at
one point four percent for the month. And that is
when when you look back over like the last twelve
thirteen years of data, it's by far the biggest miss
(02:38):
to the top side that we've seen relative to expectations.
And so that directionally says something and I think it's
worth paying attention to, especially since because in now seven
of the last eight months the miss on PPI has
been top side, not downside. So just something worth paying
attention to there. Taking a look at other markets, the
(03:01):
dollar is up point twenty four percent to ninety eight
four point fifteen, gold up three forty and outs to
forty six ninety and ten cents, and we've got crude
oil West Text Intermediate up another sixty five cents per
barrel to one oh two and eighty three cents, triple
a national average for gas prices also rising again, up
another seven tenths of a cent to four fifty one
(03:23):
and one tenth and so no real major movement there,
but continuing to see elevated pricing as one would expect
given the fact that's this is your daily reminder that
the straight of horn moves remains closed. In twelve to
thirteen million barrels of production in the region remain shut
in and not being produced. We also did get the
EIA's crude inventory report about maybe half hour ago. We're
(03:48):
gonna go through that later in the show, and so
don't worry, we will get there. But top story, we're
gonna talk a little bit about US China summit that
is going on now. President Trump is has landed in Beijing.
Either of you see the videos of the landing, getting
off the plane with Gi walking them down. They got,
(04:09):
you know, the red carpet rolled out, they got a
bunch of people waving Chinese American flags, all the fanfare.
Speaker 3 (04:14):
And never very welcoming. Yeah, like a lot of fanfare.
Speaker 2 (04:18):
And ultimately, I'm still not really sure that too much
comes out of this because I think there are just
too many cross currents with the Middle East situation to
be able to hammer anything large out as far as
any kind of deal, because anything big that President Trump
is going to ask for on you know, China helping
(04:40):
with you know, getting Iran to loosen up, China's gonna
come back and say, okay, but here's the thing that
I want from you, and I just don't think the
Trump administration necessarily wants to give a ton in exchange
for maybe help with the Iran situation. So this is
kind of where we are right now, is you know,
(05:01):
we'll see what comes out of the next couple of days.
I think you probably get some you know, Chinese purchases
of airplanes, maybe some Chinese purchases a farm, you know,
this and that.
Speaker 3 (05:10):
But I'm just not.
Speaker 2 (05:12):
Sure that there's going to be any huge deal that
is reachable because there's too much.
Speaker 3 (05:17):
Other stuff going on right now.
Speaker 2 (05:19):
Beans and Boeing kind feel kind of what it feels like,
kind of what it feels like.
Speaker 4 (05:24):
And it works for the president. He likes to play salesman.
It's it's it's fine, he can announce a couple of deals.
Speaker 2 (05:29):
Yeah, it's look, it's it's some purchase orders coming in, like,
there's nothing bad about that. But I think for anyone
who's expecting a larger deal or something transformative, I would
be kind of surprised if this is the time and
and context from which that ends up coming.
Speaker 3 (05:44):
I just I don't think so.
Speaker 4 (05:45):
China would like cheaper energy, but they also like the
fact that we're bogged down, right, So is there an
argument that they don't want this Iran situation resolved?
Speaker 3 (05:55):
No.
Speaker 2 (05:55):
I think ultimately the way I view it is China
can deal with this for a time. But I don't
think there's anything to me that would suggest that they
want to maintain the current state of the Middle East
because it's not sustainable for them long term. Okay, it's
(06:18):
you know, again, no one knows exactly what's going on
with Chinese oil inventories and production in this and that
anyone who has studied it will tell you it's like
studying anything else in China. You look at it, some
of the numbers make sense, some of them don't. You
try to glean what's going on from reading between the lines,
(06:40):
but you can't get an accurate picture of it. So
I would I do not have any unique insight into
you know, how China is operating from an energy perspective
internally right now, And most of the people that I
trust on these things don't have any unique insight either.
Speaker 3 (06:57):
They just don't know it. It's too opaque.
Speaker 2 (07:00):
So this is something where again, over the next couple
of days, we'll see what happens. What is interesting is
on Monday. Originally it was reported the Jensen Huang CEO
of Nvidia was going to be going to Beijing. Then
about halfway through our show on Monday, it was reported
that he was not going to be going, And finally
(07:24):
late last night, turns out that Jensen hopped on a
flight to Alaska to go and meet Air Force one
as they refueled there before you know, continuing on to Beijing.
And so he did end up on the plane after
a last minute invitation from President Trump.
Speaker 3 (07:43):
Is what the reporting is now.
Speaker 2 (07:46):
So I gotta tell you, like, what do we think
this means that they had to like pick him up
in Alaska because of a last minute addition to the
to the delegation instead of having him a really scheduled
to go. What are the possibilities there? Possibility number one,
(08:06):
in my opinion, there's nothing related to American semiconductors that's
going to be discussed, because if it really were something substantive,
he would have been on the guest list to begin with.
That's possibility number one. Possibility number two, something is you know,
coming together late in the process, and maybe there is
(08:28):
something chip related that's going to come out of this.
Does that really feel like how these things are normally orchestrated.
Speaker 4 (08:38):
Maybe maybe now it is I'm gonna go with no
at normally this is these are not normal times.
Speaker 2 (08:45):
No, it's true, but I'm gonna go with that that
that's kind of a reach for me. Number three, maybe
he just decided to show up in Alaska being like, hey,
put me on the plane.
Speaker 3 (08:57):
I don't think so. That doesn't really seem like Jensen's
you know, his stick.
Speaker 2 (09:02):
So I think the most likely thing is it's probably
you know, something symbolic. But I again, if there was
something meaningful that had already been you know, eighty percent
agreed to that was going to get pushed across the
finish line between the meeting of the two leaders, he
would have been scheduled to be on the plane originally
not meeting them in Alaska as a last minute invie.
Speaker 4 (09:24):
What is the agenda for this summit?
Speaker 3 (09:26):
By the way, what's that is?
Speaker 4 (09:27):
What is the main topic? Is it just trade?
Speaker 3 (09:31):
Yeah? Okay, Yeah, there's some AI topics that might be
discussed as well.
Speaker 2 (09:35):
Potential like cross border regulatory framework for AI is something
that I've seen as well. I'm sure Iran will come up,
But I don't think either side really wants to ask
the other one for anything just because they don't want
to appear to need help from the other on the issue.
Speaker 3 (09:50):
Yeah, so I think it's it's.
Speaker 2 (09:52):
Some small stuff relatively in the broader context of you know,
Everything's take a quick break. When we return, Ted Rossman
from bank Rate joins us. We're gonna talk to him
about yesterday's release of the New York Fed's Household Debt
and Credit Report.
Speaker 1 (10:11):
Next, subscribe now to our YouTube page, where you'll find
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(10:34):
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Speaker 2 (10:56):
Already has promised for Join now by Ted Rossman bank
Rate here to talk about the New York Fed Household
Debt and Credit Report that came out yesterday.
Speaker 3 (11:06):
Ted, how you doing I'm doing well, thanks for having
me ted.
Speaker 2 (11:10):
Overall, just kind of sixty thousand foot view what we
learn from this report.
Speaker 5 (11:17):
Americans have a record level of debt, so it's more
than eighteen trillion dollars in total.
Speaker 3 (11:23):
I know that sounds alarming.
Speaker 5 (11:25):
I would note, though, that the growth rate has been
fairly modest of late, and I actually view this as
kind of a goldilocks report. If you will, it's not
too hot, it's not too cold. We have to remember
that while debt may feel like a nasty word, some
of this is a proxy for economic activity like consumer spending.
Speaker 3 (11:45):
And sometimes it takes.
Speaker 5 (11:47):
Credit to get ahead to buy a home, for instance,
that's something that not only provides you with a nice
place to live but will hopefully gain value over time.
Or student loan debt. I know it's a real drag
on consumption for a lot of Gen Z years and millennials,
but it also furthers your earning power and lessens your
chances of unemployment. Even something like credit card debt. We
(12:09):
don't want you paying those twenty or thirty percent interest rates,
but this report doesn't distinguish between what's paid in full
and what's not. Half of these cardholders are using cards
for rewards convenience, they're paying them off right away. I
would actually view modest debt growth as reflective of a
pretty healthy economy.
Speaker 2 (12:28):
It seems like for the last few years we've been
hearing about a couple things. Number one is, you know,
more and more Americans are struggling to make ends meet
and delinquencies arising. But despite that, consumer spending continues to
hum along, and we haven't seen any changes there Is
there anything in this report that suggests either of those
(12:50):
maybe changing, not.
Speaker 5 (12:52):
Really, which is notable in its own right now, Maybe
we just don't know yet with respect to the higher
gas prices that have come about in recent months, because
this report covered Q one, so it was really just
the final month of that quarter where we saw the
spike in gas prices. Credit card debt actually went down
in Q one. A lot of that had to do
with higher tax refunds and New Year's resolutions to pay
(13:15):
off debt. The gas price issue is so interesting because
I realize it's a burden on households, Like I don't
enjoy it when I fill up my family SUV and
it's seventy five dollars now and it used to be
forty five. I mean, you notice that it's having an
outside psychological impact. It's not as of yet affecting overall
(13:35):
spending as much, because we do have to remember that
the average household prior to the spike was spending about
twenty four hundred dollars a year on gas. Now maybe
that goes up to thirty six hundred if you have
a fifty percent rise. I don't want to minimize that,
like I'd like to have the extra twelve hundred bucks,
but it does only work out two one hundred dollars
a month, and a lot of people are absorbing that
(13:56):
through wage growth, through higher tax refunds, maybe a little
bit of cutting back elsewhere. But honestly, we're not seeing
a lot of that as of yet. What we're hearing
from banks, credit card companies, travel providers, restaurants. For the
most part, people are kind of spending as they were.
Speaker 3 (14:13):
So it's one of.
Speaker 5 (14:14):
These don't underestimate the resiliency of the consumer. I mean, again,
I don't want to minimize the pain at the POMD.
It's felt most acutely among lower income households, but Amex
and Chase and a lot of other companies are saying
people are still spending pretty robustly despite this.
Speaker 2 (14:33):
Bike ted I've got a theory that I've been, you know,
kind of on for the last couple of years, which
is it kind of pulls that thought together, which is
that the level of wealth and income disparity has gotten
to a point where the people that are in trouble
just it doesn't really even print in the broader statistics
(14:54):
because of how skewed things are. Is that possibly a
way to square that circle?
Speaker 5 (15:00):
It could be, Well, there was that Moody's report not
long ago that said that the top ten percent of
earners are accounting for fifty percent of all spending, which
is an all time high. That gets back to that
K shaped economy idea that we've talked about, that the
rich are getting richer, the poor are getting poorer, the
gap is widening. American Express is an interesting lens on this.
They reported earnings recently. They were very positive. They were
(15:22):
talking about how much people are spending on travel and restaurants,
and their CEO had a quote to the effect of,
our customers don't care about higher gas prices. Now, maybe
that seems a little flippant, but it's true that this
is a higher income audience. There are a good number
of credit card holders, about half overall, that are paying
in fall every month. I mean, these are the kind
(15:42):
of people that are are traveling. They're going out to eat,
they're going to concerts and sporting events, and I know
that gap is widening, but it does feel like there's
an awful lot of discretionary spending going on. Travel is
another interesting one. We've just seen record after record the
past few years, and even this travel bookings are holding
up remarkably well. I know it's alarming when you hear
(16:05):
airlines going out of business like Spirit because of higher
jet fuel costs, but then you hear a lot of
other airlines saying that summer travel demand is still quite hot.
So a lot of this does track back to economic inequality.
Speaker 2 (16:18):
Ted, appreciate you joining us today. Thanks so much for
the time, no problem, Thank you. That is Ted Rossman
from bank Rate talking about the New York FEDS household
debt and credit report.
Speaker 6 (16:30):
All right, time for trivia here on the Financial Exchange,
and today is Stevie Wonder's seventy six birthday. Wonder was
a child prodigy and was the youngest artist to receive
a record contract with Motown Records. Wonder would go on
to win more Grammy Awards than any solo mail artist
in history. So our trivia question today, how old was
(16:54):
Stevie Wonder when he signed his first record contract with
Motown Record Words?
Speaker 3 (17:00):
Once again?
Speaker 6 (17:01):
How old was Stevie Wonder when he signed his first
contract or his first record contract with Modetown Records. Be
the seventh person to text us at six one seven
three six two thirteen eighty five with the correct answer
along with keyword trivia and win a Financial Exchange Show
T shirt. Once again, the seventh correct response to text
(17:23):
us to the number six one seven three six two
thirteen eighty five with the correct answer along with keyword trivia,
We'll win that T shirt. See complete contest rules at
Financial Exchange Show dot com.
Speaker 2 (17:35):
Another just interesting, uh Stevie Wonder fact as long as
we're talking about him, because again, just get pretty pretty remarkable, dude.
Speaker 3 (17:45):
Uh, do you know that Stevie Wonder was not born blind? Uh? No,
I thought he was. Oh, okay, he was not born blind.
Speaker 2 (17:52):
He was born early, though, six weeks early, and because
of the extra oxygen in the incubator, he ended up
with some condition that basically typically leads to detached retinas
after birth, and that's actually what ended up causing his blindness.
Speaker 1 (18:14):
God.
Speaker 2 (18:15):
So again, I think, just a remarkable human being. And
I'm not going to spoil the trivia answer because I
do know this one.
Speaker 3 (18:23):
But I was stunned when I saw the answer. It's
it's remark.
Speaker 2 (18:27):
I mean, the word genius gets thrown around a lot,
like Stevie Wonder is actually a genius. Walmart is going
to be laying off or relocating about a thousand corporate workers.
This a Wall Street Journal exclusive, not a huge number
of employees in the context of Walmart's broader workforce, but
(18:48):
continuing to see, you know, more companies indicating some layoffs
that are parcolating through the system.
Speaker 4 (18:57):
Mark, Yeah, nothing systemic though, No, I mean not at this.
Millions of jobs turnover every month.
Speaker 3 (19:06):
Yea million that we read the Jolt support.
Speaker 4 (19:10):
When it comes in and it's all right there, it's
like several million people change jobs every month. I'm not
saying this isn't like of interest if you're a Walmart,
yere older or something.
Speaker 3 (19:19):
Take a quick break here.
Speaker 2 (19:20):
When we return, we've got the trivia answer We've got
Wall Street Watch, and then we're talking oil after this.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day,
It's the Financial Exchange on the Financial Exchange Radio Network.
T now foo whoa Street Watch tracking the stocks, theodato
and the headlines driving markets so far today right here
on the Financial Exchange Radio Network.
Speaker 6 (20:00):
Markets are mixed now, with text seeing a rebound from
yesterday's pullback after a hotter than expected Producer Price Index
was released this morning, where wholesale prices in April rows
the most in three years, adding fuel to inflation anxiety.
President Trump also landed in Beijing this morning with several CEOs,
including Elon Musk and Jensen Wong for his summit with
(20:21):
Chinese President Jijingping.
Speaker 3 (20:24):
Right now, the DOO is.
Speaker 6 (20:25):
Off about a half a percent, s and P five
hundred up two tenths of one percent, Nasdaq up seven
tenths of one percent to one hundred and eighty two points,
Hire RUSS two thousand, down about a quarter percent, Tenure
Treasure reeled up one basis point at four point four
to nine percent, and Oil up about six tenths of
a percent, rating right around one hundred and two dollars
(20:47):
a barrel Ali Baba shares a rising eight percent after
it posted an eighty four percent drop in first quarter
profit and also reported heavy investments in a I. Meanwhile,
according to the Wall Street Journal, Walmart plans to cut
or relocate about one thousand corporate employees. Walmart stock is
mostly flat. Elsewhere, Echo Star shares a climbing over four
(21:08):
percent after the FCC approved the company's forty billion dollars
sale of wireless Spectrum to AT and T and SpaceX,
and Next Power shares surging twelve percent after the energy
technology company raised its full year revenue guidance. I'm Tucker
Silva and that is Wallstreet Watch And in the previous segment,
(21:31):
we asked you the trivia question. How old was Stevie
Wonder when he signed his first record contract with Motown Records?
He was eleven years old. Steve from Amesbury, Mass is
our winner today taking on the financialok Shane Show T shirt.
Congrats to Steve. We play trivia every day here on
the Financial Exchange. See complete contest rules at Financial Exchange
(21:54):
show dot com.
Speaker 2 (21:56):
I'm just trying to think of what I was doing
when I was eleven, probably playing Mario Kart right.
Speaker 3 (22:03):
Yeah, on a good day.
Speaker 2 (22:06):
Yeah, there were days that probably we couldn't even get
to that level. Let's talk a little bit about this
piece from market Watch why the oil crisis could become
a full blown catastrophe within a month, and it's talking about,
you know, the draw downs that we're seeing of crude
oil and or fine product stocks around the world. And look,
(22:27):
we've been talking about this for a while. I had
the Sinco Demayo date circled on my calendar since early March,
and that's coming gone. And where we stand now in
no uncertain terms, is that you are now at the
point where pretty much all the excess oil inventory that's
(22:48):
been on water through floating storage. Think you know tankers
that have supplies that just have nowhere to drop it,
because you know, we had this this glut heading into
the year, that extra storage on on water has been exhausted.
Now we're drawing down on on shore inventories. And to
put this in perspective, a couple of weeks ago, we
(23:08):
covered the April twenty fourth dated release from the EIA
in which they announced that US crewde oil stocks declined
by about thirteen point three million barrels for the course
of that week between US commercial stocks and the strategic reserve.
(23:29):
That was the sixth largest draw down of US commerce
of US oil stocks on record. Today, ten thirty am,
we received another weekly update. Last week's was actually, let's
go through last week's. Last week, what we saw was
a case where we saw a smaller draw. Instead of
(23:53):
thirteen point three million barrels being drawn, we ended.
Speaker 3 (23:57):
Up seeing, hang on, I gotta pull. Here we go.
Speaker 2 (23:59):
It was seven point five million barrels being drawn, about
half the size. You say, oh, that's great, Like, you know,
things got better. The EIA release dates back about twenty two.
We've got twenty two hundred items in the sample. This
was the one hundred and seventeenth ranked one, so it still
is a top five percent draw historically. Even though it was,
(24:23):
you know, much smaller than the week before. It just
tells you how big the one the week before was.
This week twelve point nine million barrel draw between commercial
crude and strategic reserve. Strategic reserve saw eight point six
million barrel draw. That's the biggest weekly draw on the
strategic reserve ever. We've never seen one that big. Here's
(24:44):
the deal. You look at the math and in the
United States, the commercial crude system needs somewhere in the
ballpark of three hundred and fifty to three hundred and
seventy million barrels to operate, just because you need you know, again,
there's oil flowing through pipelines that are included in there.
There's oil in tanks. Like if you get to zero,
(25:04):
like you've lost, Like you can't run the system with
no oil in it. The strategic reserve can get down
to somewhere in the range of two hundred and twenty
to two hundred and forty million barrels because you actually
need the oil in these big salt caverns to prevent
them from caving in, and some of it's also contaminated
with sediment and brine that they use in order to
(25:25):
the way that they empty these they basically pump a
bunch of water in underneath it, and that floats the
oil because oil is less dense, so it floats, And
in that process, some of the brine from these salt
caverns gets mixed in and so you can't use all
of it either. But here's the deal. At the current
rate of draw down, the strategic reserve is going to
(25:46):
hit operational minimums in September or October. You can only
maintain this pace another four to five months. The commercial
crude inventories are going to hit minimum operational capacity sometime
in late July to early September. There's a ticking clock
on this. You can only have this go so far.
(26:09):
And the problem is, let's say that Hormuz opens today,
perfect opening, like everything, like great. The problem is there's
no ships just waiting to get in. Because if you
own an oil tanker right now, you can get primo
rates to be able to go and pick up oil
anywhere you can, because Asia is desperate for crude and
(26:29):
product and so great, you can get paid a ton
of money to take your boat and instead of going
to straight at horm moves okay, you're heading to you
know southeast, you know, United States. The problem is this
puts all these boats out of position to actually pick
up the crew that could, in theory be produced in
the Persian Gulf, which means that even if Hormus opens today,
(26:50):
it's probably thirty to forty days before you start to
see any meaningful flow of boats going back to pick
up oil that's in onshore storage in the region, and
it's only once that storage is starting to drain in
meaningful levels that you can start producing oil again from
the wells that are shut in just probably another thirty
to forty days, and that has a ramp up period
(27:11):
as well, but it's probably five to six months to
get back to normal pre war production if everything goes
perfectly from today. Guys, I did the math. It's very basic.
It's addition and subtraction. You don't have to like, there's
no calculus involved, there's no algebra, it's basic math. US
(27:34):
inventories are going to hit minimum operational levels later this
summer into early fall. If Hormuz open today, you get
back to normal production somewhere mid fall. And that's a
best case scenario, because I gotta tell you Hormuz isn't
opening today.
Speaker 3 (27:52):
It's not.
Speaker 2 (27:54):
And so where you're heading on this is the US
has been the relief valve for the last few weeks.
Speaker 3 (28:00):
For the rest of the world.
Speaker 2 (28:02):
That relief valve is going to run out of room
later this summer or early fall, and in the run
up to that, prices are going to have to move
up because otherwise you can't actually deliver all the barrels
that you say you're going to if someone wants to
say they're buying at certain prices. So the math is
really simple. It's addition and subtraction. There's nothing else aside
(28:24):
from that. And this is where we're heading, and there's
nothing you can.
Speaker 3 (28:29):
Do at this point.
Speaker 2 (28:30):
I can't make that anymore clear, Like you can't fix
this for the summer and fall. You can make it
so that it's not a problem going forward beyond that,
but once you like, this is just what it is
and it's where we are heading. You are not going
to see shortages in the United States throughout most of it.
(28:52):
At least California might because they import a lot of
stuff from Asia that was typically produced in the Middle East.
California has got its own unique issues which could present
some shortages. Outside of that, you're just gonna see higher
prices because the US consumer can pay more than the
consumer in Pakistan and Thailand and Tanzania and Kenya, and
(29:17):
like it's just a wealthier country. We can afford to
pay more than those places. Those places will see shortages,
which is why Narendromodi yesterday was saying, yeah, we gotta,
you know, cut our fertilizer. You know use by fifty percent.
It's because India is not gonna be able to pay.
Speaker 3 (29:32):
For the fertilizer they need. We will, They'll just be higher.
Speaker 2 (29:35):
And you know, even at a certain point there farmers
will say, no, I can't make money doing this.
Speaker 3 (29:40):
So this is where we're heading.
Speaker 2 (29:43):
I don't think it's gonna be a full blown catastrophe
within a month, but uh again, this is where we
are heading, and there's nothing we can do to change
it at this point. Let's take a quick break and
when we return, stack Roulette. Yeah that Tucker. This has
been a quick show today. Yeah, it's fun by Yeah,
(30:04):
it really has. Stack Roulette is next.
Speaker 1 (30:07):
Okay, Real time Financial Inksight as news breaks, The Financial
Exchange is life on x Watch the show and follow
us for the most up to date business news you
need to know. Face is the Financial Exchange, Market insight,
retirement strategies, real talk about Wall Street and economic trends,
all live every day on our YouTube channel. Go to
(30:28):
YouTube dot com slash the Financial Exchange show Face He's
the Financial Exchange.
Speaker 6 (30:40):
The Financial Exchange is a proud partner of the Disabled
American Veterans Department of Massachusett's registered today for this year's
DAV five K on Saturday, November seventh at Fort Independence
on Castle Island. If you're not able to participate, you
can still support our great American euros by visiting DAV
five K dot Boston and making a donation today. Your
(31:01):
participation helped provide vital services like free transportation to medical
appointments and safe housing for single veterans and their families.
Donate today at DAV five K Boston. That's DAV five
K Boston, Mark.
Speaker 3 (31:17):
What do you have for me for stack roulettes.
Speaker 4 (31:19):
You just gave a little masterclass on oil prices and
their relationship to inventories and so forth. Related to that,
there are a bunch of stories about politicians who want
to cut the gas tax. You made the point about
high prices serving I'll put it in my words, these
weren't yours. They serve a function. Prices will induce people
(31:44):
to change their habits. They did in the nineteen seventies
We ended up with more fuel efficient cars. Government played
a role there too. But you want prices to rise
so that people do change their behavior, and you want
demand to go down for the same reason. So gimmicks
like cutting the gas tab I don't you know, my
(32:05):
favorite tax rate is zero on anything. Is sort of
a libertarian type person. But at the same time, this
does fund the Highway Fund, which funds critical enhancements and repairs.
So this is self defeating on a number of levels.
Speaker 2 (32:22):
It's also one where again, like you look at this
and think of it this way, the way that I
also try to look at this is it's no different
from any other think of this as a government subsidy,
because effectively, what you are doing is saying, hey, this
is what you used to pay for this, We're going
(32:44):
to give you money to cover that. That's basically what
you're doing. I know that it's not that, but I
find it instructive just to think of it this way.
I know that you're removing a tax, but anytime that
you are giving people more money to buy something, you're
not just keeping demand stable, you're actually increasing demand for it. Yeah,
(33:05):
that's basically what you are doing. And so you again
it's it's accelerating you into the brick wall of supply
that is coming later this year, and it's it's just
not what you need in order to actually deal with
this now if you wanted. Again, the problem is the
(33:28):
timeline that you have here, there's basically nothing that you
can do in order to improve the supply picture for
oil in the next three months absent opening hormons. You
can't just like drill a bunch of oil in that
timeline like you like, you just don't have like the
(33:48):
crews to be able to do so. It's not going
to make long term economic sense. Even if you know,
you could say, okay, like we'll guarantee you know, a
flour for this, because hey, if you overproduce, we'll buy
that oil in order to refill the SPR. How much
production are you actually going to encourage in such a
short period of time is pretty small in the broad
(34:10):
scheme of things. It's just get what the last three weeks,
we're averaging an eleven million barrel per week draw from
the United States. You're talking one and a half million
barrels a day. There's nothing you can do to increase
oil production by twelve percent in the next three months
(34:31):
to balance that.
Speaker 4 (34:32):
That's there for real emergencies, right, I know the SPR
was created.
Speaker 3 (34:36):
In response this is a real emergency, and in.
Speaker 4 (34:39):
Theory, yeah, it's well self created, but yes, I suppose.
Speaker 2 (34:43):
It is a really like it's created specifically for Hey,
if there's a global disruption to energy flows, this allows
us to you know, keep things moving.
Speaker 4 (34:52):
I guess I think of emergency is something that didn't
originate with a US action, but it okay, it.
Speaker 3 (34:57):
Doesn't matter where it does or doesn't originate. It it
still is policy. It's still causing a problem.
Speaker 2 (35:06):
So ultimately, it's one where there's just nothing that you
can do in that time span. Remember the US producers
around thirteen million barrels a day of oil right now,
and that's with you know, all of the years of
work to get to that point. You can't suddenly just
spool up another one and a half million barrels a
(35:27):
day of production. It just it's it's not possible in
that time span. If you wanted to say, hey, we've
got like two to three years to do that, great,
like you can do that. There's there's nothing you can
do that's gonna start production you know, increases in the
next month or two. Like, it's not possible. So that's
(35:48):
kind of where we stand.
Speaker 4 (35:49):
So let prices do their thing here though they will
help to reduce to Now you may not like that option,
but it's it's critical that that you let the price
mechanism function. Otherwise you're just exacerbating an already bad problem.
I'll just leave it at that.
Speaker 3 (36:10):
Mark, we got another problem that we got to talk
about here.
Speaker 4 (36:13):
No, hopefully it's not employment related.
Speaker 3 (36:15):
We got a tomato shortage. Oh yeah, there's a tomato shortage.
I know. Yeah. Here's here's the deal we know.
Speaker 2 (36:21):
I'm going to quote here from the Wall Street Journal.
The price of tomatoes top burst, the flavor in salads
and sandwiches, searched by nearly forty percent in April from
a year earlier on a combination of bad weather, high tariffs,
and climbing transportation costs. Now I happen to be what's
your favorite kind of tomato?
Speaker 4 (36:38):
Mark the free kind? You like, free tomata kind from
anybody's garden that they're gonna give.
Speaker 2 (36:44):
Let me tell you I learned something back in the day.
There's no such thing as a free tomato. It's an
old lesson that my father taught me. Yeah, there's no
such thing as a free tomato. But we got a
tomato problem here that the tomato prices are too damn high.
And here's the problem is that you got all kinds
of tomatoes that are coming from Mexico. Seventy percent of
them are estimated to come from Mexico, where he had
(37:06):
a bunch of wet weather and disease, resulting in below
normal yields.
Speaker 3 (37:12):
I don't know how we're gonna do this.
Speaker 2 (37:14):
We can't make the gravy without the right amount of tomatoes,
and the tomatoes are two them high.
Speaker 1 (37:20):
In all serious, is no.
Speaker 6 (37:21):
I learned about this over the weekend my father in
law's runs of restaurant. He was like, have you seen
the price of tomatoes? By the way, They're insane, Like
I can't believe this. Yeah, So I mean for him
to say that.
Speaker 4 (37:34):
Yeah, there's no real subjectle to either. I mean, if
you think about it, you know some things you could
swap out a reasonable facsimile the tomato for a lot
of resting.
Speaker 6 (37:45):
A burger, putting on a salad, yeah, sort of pizza
places and sauces.
Speaker 4 (37:49):
There's no such thing as like synthetic ketchup right.
Speaker 2 (37:51):
You know that tomatoes are very closely related to eggplants.
All members that surprised the members of the Nightshade family. Yeah,
they're very closely related.
Speaker 4 (38:04):
Actually, that's trae because one is like packed with vitamins,
and the other is useless, like eggplant is not.
Speaker 3 (38:10):
If you've never had a good eggplant palm.
Speaker 4 (38:13):
My mom sometimes listens, don't say that.
Speaker 3 (38:15):
Yeah, your secret's safe with me. Let's take a quick
break here.
Speaker 2 (38:19):
We'll come back tomorrow and hopefully we got lower tomato
prices
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