Booming commodity prices, particularly related to food and energy, are worsening an already inflationary environment. However, the root causes of these price pressures are arguably beyond what can be addressed by monetary policy. So to understand further what’s going on, and how these pressures will impact the Fed’s thinking, we spoke to two experts here at Bloomberg: Simon Casey, Team Leader for Energy coverage in the Americas, and Tom Orlik, the Chief Economist for Bloomberg economics. The transcript of our chat has been lightly edited for clarity.
Key moments in the discussion:
Message from the latest CPI report — 1:52
The big problem with metals — 4:17
Understanding the commodity investment dearth — 5:33
Are emerging markets in trouble? — 10:19
Global food’s slow moving car crash — 11:30
The new problem for the world’s central banks — 15:02
What to watch next — 26:10
Policy in an age of uncertainty — 29:50
Joe: (00:06)
Tracy. You know we got the CPI report this week, and I think it speaks to a little bit of brewing tension here for the Fed, because there might be some signs of softening for goods and other core components, but commodity inflation really continues to push at least the headline number higher.
Tracy: (00:23)
And this is something that we've been hearing a lot, which is that central banks really don't have that much control over commodities. So yes, they can raise rates. They can maybe take a bite out of demand, but do they really want to be doing that in order to fight price increases in things like food and energy?
Joe: (00:41)
Right. Also you can take a bite out of demand and not solve the problem. So you can take a bite out of demand and maybe oil prices go down. Maybe some other commodity prices go down. But you know if Jeff Currie at Goldman Sachs, we recently spoke to him, if he's right, that the core problem is really a decade of underinvestment in resource extraction, then a slowdown doesn't to get you anywhere.
Tracy: (01:02)
And actually you might be raising the cost of funding at exactly the right the wrong time.
Joe: (01:06)
Exactly. Well, let's talk more about this relationship between the commodity pressure that we're seeing and also what it means for the macro environment, with the Fed and just broader growth. We're gonna be speaking to two great folks here at Bloomberg. Simon Casey is the deputy managing editor for energy and commodities in the Americas. And Tom Orlik is our chief economist here. So Simon and Tom, thank you both very much.
Tom Orlik: (01:32)
Great to be here.
Joe: (01:32)
Tom, let's start with you. Just real big picture. Did the recent CPI report change anything?
Tom: (01:40)
First of all, I want to say that I'm a bit concerned about this discussion because I had some talking points in my mind. And you two just used all of them in your introduction.
Joe: (01:48)
Well, that's it, it was great chatting with great chatting with both of you. I'm glad we've got everything settled.
Tom: (01:52)
But I think the CPI report as you mentioned, had some bad news and some good news, the bad news is inflation is hitting a fresh high, bad news for the Fed. They need to do more to bring it back under control. Good news — signs that goods prices are starting to turn over. So perhaps inflation wasn't as transitory, as everyone said back at the in the middle of 2021, but perhaps it is fundamentally transitory. And some of that pressure's gonna start ebbing.
Tracy: (02:20)
Simon, what are you seeing in the commodity space? Because prices have come down a little bit since the big spike in March, but is that basically, I mean, is that a head fake? Should we be worried about the longer-term trend?
Simon Casey: (02:31)
Yeah, it's a head fake, a pause if you will. I mean, yeah. Oil prices came down a little bit, but they're still high. They're still around a hundred dollars a barrel. And pretty much every commodity out there is high, you know, so worked to a lesser degree or greater degree. Some of them haven't even paused really since March and are sort of hitting fresh highs as we speak or are close to them. So there's really been sort of minimal amount of change. I mean, good to go to oil. If you look at like a broad index of commodities and that's always the biggest sort of component really. It has come off a little bit since in the last three or four weeks. At one stage it looked like Russia was going to be out of the global market.
Where are we gonna get our oil from? There's all panic out there that subsided a bit. I think it’s dawning that there are some sanctions in place. Will we see more sanctions? We don't know Russian oil is probably gonna continue to creep out. In fact, we did an analysis here at Bloomberg, where we looked at shipments, we tracked tankers. Shipments have actually from Russia have actually increased in the past two weeks. It's getting out there. Sometimes the Russians produce are having to really slash the price, um, demand, big discounts, but it's still coming out. Uh, but the, again, the oil market's still tight. There are big, broader problems before the war in Ukraine became a reality. The market was already tight. We shouldn't forget that.
Joe: (03:55)
And also, and this is something we just talked about, mentioned with Goldman's Jeff Curie, like, okay, we sort of wonder like is shale gonna pick up, but it's obviously not just an oil story. It's certainly not just a U.S. shale story. And for these other commodities, like copper and lithium and nickel, it's not like there's an equivalent of Texas shale that can just turn on.
Simon: (04:17)
No, in fact the metals in fact have a really significant deep seated problem here. And it's quite profound. Number one you've just gone through a very long cycle since, um, in the last sort of 12, 13 years where prices bottomed out investment was cut back. But then you also have very, very sort of, uh, a very profound sort of resistance growing around the world to new mine developments. Building a mine is really difficult. Not as expensive people don't want it in their own backyards. You cannot really build a new mine in this country, in the United States anymore even though there are deposits there — we've identified them. You have growing pushback even in places like Chile, where once foreign mining companies could go in there and pretty much do what they would like to do. So where is this new supply gonna come from? It it's really not clear. It's quite a concern.
Tracy: (05:20)
Can you talk a little bit more about what you see as the reason behind that structural underinvestment? Because I think that might inform our later discussion about what people can actually do to boost production at the moment.
Simon: (05:33)
I mean, commodities are inherently cyclical, of course. So you have these long term peaks and troughs and peaks are when, when prices are high, when the frothy producers are making a lot of money, typically that's always, when they're deciding to spend big, it might be on mergers, also on projects, big projects, ambitious projects, you see these mega projects in, in oil and gas in, in past cycles, you see them as well in the mining industry. And some of those projects are always, always turn out to be pretty disastrous in hindsight, you know, they go way over budget. They just, they they'd prove not to be particularly economic. They destroy a lot of value. Investors hate them. And if you look particularly at the mining industry, um, a lot of the, the mining industry around the world, specifically for something like copper, you have a lot of public companies, so they're totally beholden to their shareholders, right?
Shareholders really hate that. And you, you mentioned shale just there that's, that's a, a classic example. Again, shale has this incredible effect of turning the us from having a long term decline in oil production over many years, to being the world's largest producer. It's a real revolution. It really is. But the shale industry struggled to make any kind of long sustainable profits.
And they just getting to the point now where they're starting to actually turn it around. I mean, it's helping of obviously with higher oil prices and gas prices, but there's a real discipline there that wasn't there even, let's say three years ago. But part of that discipline is that they're not really spending anymore than they have to on capex. And they're not expanding
Joe: (07:13)
Tom, let's say these high prices of all commodities, setting aside the inflation question, because at some point, presumably, you know, you just get this sort of base effects benefit from commodities where they stop going up, but let's suppose they remain very expensive for a while. What does that mean? Like as sort of on a normalized basis for the U.S. economy in an environment in which okay, maybe they're not going up like they did from beginning of 2021 to 2022 to the same degree, but they're still very expensive. So how do you think about how that changes the economy versus say what the pre-pandemic economy looked like?
Tom: (07:53)
So when we think about commodity prices going up from a sort of macroeconomic perspective we are really thinking about a transfer that's taking place from commodity consumers to commodity producers, right? And the United States is a commodity producer, right? As Simon mentioned, the shale gas, shale oil revolution has amped up U.S. energy production, turning it from a net importer to something close to balance on its energy account. The U.S. is also a major agricultural commodity producer. So high commodity prices, they create winners and losers within the U.S. economy. Good news for the oil producers, bad news for everyone filling up their car. Good news for the agricultural producers, bad news for everyone who eats food, but for the U.S. as a whole, not a disaster who are the bigger losers. Well, I think you have to start looking at Europe, not producing much energy, not producing much of any of the commodities. And that's why the Ukraine war is much worse news for Europe. Of course also, cuz it's on their doorstep than it is for the United States.
Joe: (09:00)
I kind of get the impression that if it's tough to build a new mine, in the U.S., it's probably, it's probably like way harder in Europe. Right? Like they don't, I get the impression there's no appetite there.
Simon: (09:11)
It's kind of largely mined out. Yeah. I mean all the good stuff is gone. Oh, if you're talking about things like copper and nickel, yeah.
Joe: (09:18)
And they're not into fracking...
Simon: (09:21)
Anything like that, there is shale gas and shale oil there. And the conservative government in the UK periodically floats the idea. “Well, you know, we could do some shale. It could be, it could be a great thing.” And I think at the moment there's a talk of that happening in again in the UK. But honestly, if you've been to West Texas or Pennsylvania and you've seen what it's like on the ground, I'd be very surprised if that takes off in the UK. It's just, it's too densely populated. And I think the same's true as well. They talk about doing fracking around Paris because apparently there's a lot of shale oil under Paris. I can't imagine that would happen.
Tracy: (09:53)
No, I really can't. I'm trying to think of what the French word for nimbyism is right now. But I mean, Tom brought up the point that Europe is in a relatively worse position compared to the U.S.. Can we talk a little bit about emerging markets? Because those are some very big energy importers. Also some of them are very big food importers, particularly places like Egypt, what's gonna happen there?
Tom: (10:19)
So I think you've got a couple of really serious problems for emerging markets. So many of them are significant commodity importers, as you noted Tracy, importing energy, importing agricultural commodities. Many of them also depend on capital inflows to finance their imports. And guess what, at exactly the same moment that commodity prices are going up, the cost of capital yeah. Is also gonna go up quite quickly as the Fed hikes interest rates. So we shouldn't think about all the emerging markets together, the emerging markets that are producers of energy, they're gonna be okay. But the emerging markets that are big commodity importers and dependent on foreign capital to finance that we are already seeing a bunch of them getting into serious trouble, right? Sri Lanka has already had to make a difficult decision between financing its foreign borrowing and paying for its food and energy. And of course it's chosen to pay for its food and energy and it's gonna default on its debt.
Joe: (11:19)
Simon, can you come in on food? There's so much attention obviously paid to oil and gas. The food crisis almost seems like terrifying to contemplate in terms of how bad it could get.
Simon: (11:30)
It’s kind of a slow moving car crash in a certain sense because of course, you know, the heart for many crops, the harvest hasn't even started yet. We're in, you know, depending on where you are on the agricultural calendar. So it's not like sort of oil and gas, it comes out the ground and it's kind of a bit more sort of fast paced and immediate. But it is a real worry. I mean I think here in the US, we've been so focused on gasoline prices and oil. I think that the food issue is gonna come increasingly to the forefront. Not so much from a domestic point of view. As Tom said, we can probably sort of withstand some quite a bit of food price inflation, even though it's painful for a lot of consumers and a lot of countries it's gonna spill over.
And it sense it has already into sort of, you know, social unrest, potentially political upheaval, it's a foreign policy situation. And there's no easy fix. I mean, that's the thing, you know, we have the two largest wheat exporters fighting a war. The black Sea, which is I think the biggest single route out for exports of wheat to the Middle East and Africa in particular. We talked about Egypt. It's always historically got a lot of its imports of wheat from, from the Black Sea that's that's effectively cut off right now. You have big stockpiles of crops in Ukraine. They're sitting there rotting, essentially. There's no immediate prospect they're gonna get out. And what's gonna happen to the next Ukrainian planting season? What's gonna happen to their next harvest. Is any of that crops gonna come in? What's gonna happen to Russian crops?
Are they gonna be able to get outta the country? Russian fertilizer supplies are currently cut off from the world and on and on and on. And you know, if you don't apply fertilizer and fertilizer prices, they're a commodity in their own. They've gone crazy as well. So people are gonna use less of them, which means lower crop yields. So all these things are kind of snowballing together and yeah, people who pay attention, you know, agricultural economists are deeply worried. And when they're worried, then that makes me worried.
Tracy: (13:29)
What do governments do in this situation? Like what policy options are open to them?
Simon: (13:35)
Oh, that's a very good question. I think it's very limited actually. What can they do? I mean, if you, you, you play, if you try and put price controls on things like fertilizers, I guess that's possible, but only if you've got a control of the supply, but you know, to talk of fertilizers, again, things like, potash and phosphates, these are things that actually really critical to the global agricultural industry. And yet they're only really produced any meaningful quantities in a handful of countries. And for something like potash just so happens, like 40 odd percent of the market comes from Belarus and Russia. So there's no quick fix to that. You know, your reliance on other countries and the market price and governments can't really do a lot.
Joe: (14:20)
Tom speaking of policy, I feel like when we talk about what's going on, it really feels like the only game in town, at least in the US, or maybe other developed markets is the Fed. And when these days, when we're talking about policy, it's like, are they gonna turn the dial up or are they gonna turn the dial lot of the way up 25 or 50, 50 and 50, whatever it is. But obviously economic policy is a lot more than just monetary policy. Are there other policies in this environment, whether they be on the fiscal policy, whether they be on state directed investment tax policy, that could be helpful in your view, in a situation like this, to address issues that you know, the interest rate alone is not particularly equipped to solve.
Tom: (15:02)
So stepping back from the detail I think we've moved very quickly from a world where the biggest problem in economic terms was inadequate demand to a world where the biggest problem in economic terms is inadequate and uncertain supply, right? And what a central bank good at? What are they equipped to do? They are equipped to deal with the problem of inadequate demand or excess demand, right? There's not enough. We'll cut interest rates. People will borrow more. There'll be more employment. Demand will come back. Central banks do not have an instrument to address inadequate or uncertain supply. Now as you noted, Joe governments do have instruments they can use to do that. They can't immediately, they can't make more oil come out of the ground today, but if they create incentives for the oil industry, they can make more oil come out of the ground in six months, time or one year's time or two years time.
If they create incentives for the semiconductor industry, they can diversify resources of semiconductor supply. The trouble is, and it kind of feels is a bit bleak to say it, but the reason the central banks are the only game in town is because central banks over the last decade, 15 years have proved to be the only part of government which can act expeditiously and effectively. You want the U.S. Congress right now to design a long-term strategy to address supply constraints across energy and tech? The U.S. Congress can't agree about funding the U.S. government for the next year. They can't agree about climate change. They’re fundamentally in disagreements about all of these sort of philosophical issues. And that's gonna make it really hard for them to move the strategy into place, which is required to deal with the world where the basic problem is inadequate and uncertain supply.
Tracy: (17:02)
Joe, this is your Fed for driving thesis.
Joe: (17:05)
It’s what we need. Just a bunch of independent… we need a Federal Reserve to change the speed limit, we need a Federal Reserve for housing permits. We just need lots of like Feds to just turn the dial on all these things, oil permits, etc.
Tracy: (17:19)
Okay. I just wanna bring in Simon on this topic. So you must talk to a lot of energy producers, right? Like what do they say they want to see from the authorities and particularly the central bank?
Simon: (17:34)
I mean, so we're talking us oil producers here really. I mean, from the central back, they don't really talk so much about the Fed. They are fixated on the Department of Energy and the White House and what the White House can do for them. And I think they're looking for some, it's a little unclear if I'm honest, what they're looking for, they're just looking for a bit more of long term certainty.
But Joe Biden came in inauguration, he'd come in on this campaign of I'm going to, at one point, he said, I'm gonna ban fracking. And I think frankly, he misspoke and they struggled the rest of the campaign to kind of get things back on track and said, no, he was talking about fracking on federal land. And I think most, most people was like, well, what does that actually mean specifically in the White House.
They were gonna limit some fracking was the message. They haven't actually done that in the end for various reasons. And now they've kind of gone through this almost 180 degree turn in the last sort of what 14 months or so since inauguration where they're almost like publicly begging the producer, we need you to drill. We're still on board with climate change and you know, the, the energy transition that's really important, but right now we need you to drill and it's and the producers just sitting back and like, well, you know, they're making money, they're making a lot of cash at the moment. So they're in a fairly strong position on that point of view. And they're just saying, well, look, you know, if it's really in our interest to produce, we need some sort of assurance that in, you know, two, three years down the line, you're not gonna come back and like really ban fracking and really turn the screw.
But I think they're just sitting pretty right now. I mean, we talked earlier about this sort of discipline that you've got going, it's really working out quite nicely for them. Investors are slowly, the mainstream investors aren't getting completely back on board. There's still this sort of skepticism. Like you guys lost this money for so long. You know, it was a really bad bet, but I think they're winning back. They're some much bigger share of the S&P 500 now than it has been for a while. You know? So it's almost coming back to sort of mainstream acceptance. They don't have to do anything more. And you know, this all gets caught up in the sort of the culture wars here, which we won't get into. I know but, yeah, they're, I think they're looking for the White House to be nice to them.
Joe: (20:01)
And promise to be nice five years from now.
Simon: (20:04)
Exactly. Yeah,
Joe: (20:05)
Tom, you know, you brought up something really important, which is that the only entity, the only policy making entity in the U.S. that seems like it can move with any agility is the Fed. Even if they're not equipped to handle the tasks now. Elsewhere policy can move faster outside of monetary policy and I'm thinking of China, where for better or worse, the government can set out some new five year initiative and it doesn't have to like have this big debate that's gonna last for years. But right now China seems to be, frankly, it seems to be kind of a mess. The real estate industry is obviously a mess. There are these extremely intense lockdowns that taken a lot of demand for particularly oil out of the market. And from the global perspective, these lockdowns have the potential to really throw supply chains in disarray, right at the moment where it seemed like they might be easing. So how are you thinking about like the impact of what you're seeing right now, uh, on the global picture and the picture for inflation?
Tom: (21:05)
Say, first of all, I don't think we should be too enamored with the idea of independent autonomous technocrats as a solution to all of our problems, right?
Joe: (21:14)
Clearly...
Tom: (21:14)
The Fed had one job: controlling inflation. They've not done it. The Chinese government is not covering itself in glory right now in terms of its ability to manage the Covid outbreak in Shanghai. So I think, you know, the kind of the independent technocratic expert clearly has a space. I'm not sure we want to expand it too much more at the expense of eroding democratic accountability. But to come back to your question on the impact of the China, on China of the world on the world, I think it's interesting because I think there's gonna be two contradictory impulses. On the one hand we've got Shanghai, one of the world's busiest ports at the center of one of the world's busiest industrial manufacturing centers in lockdown. And that can only mean a further blow to global supply chains, right?
We've heard about the ships lined up outside Shanghai port, and that's an additional inflationary impulse for the world, which I think we're gonna start seeing in the numbers in the months ahead. On the other hand, if China locks down, not just in Shanghai, but more broadly, well, that's a serious shock to global demand, right? Immediate negative impact on commodity prices. I suspect coming back to assignments earlier point that the reason we've seen some of the heat coming out of oil prices is because of the concern about China lockdowns and weaker China growth also means less exports from everybody else, right? And that slows down the global economy. So I think we're gonna see these two rival impulses playing out, inflation from supply chain shocks [and] deflation from a China slowdown. One interesting thing to see in the weeks ahead is gonna be what's the relative magnitude, right? What is in the end? Is this an inflationary or a deflationary shock?
Tracy: (23:01)
Yeah. Which is sort of the question we were all asking at the start of Covid, we're sort of back to that situation, but can you talk a little bit more about policy divergence between the U.S. and China right now, in terms of monetary policy? Because going into this year, everyone was expecting China to ease and the Fed to hike. The question was just the degree of them doing that. Is that still the case? Like is China still in a position to ease when prices seem to be rising and a lot of the troubles are logistical or supply chain in nature.
Tom: (23:35)
So one of the sort of foundational ideas in international macroeconomics is the idea of the Impossible Trinity, right? I'm sure it's something which is familiar to Odd Lots listeners. It's the idea that countries can't have a fixed exchange rate, an independent monetary policy and be open to cross border capital flows, right? And the reason for that is because if you are open to cross border capital flows and you an interest rate, which is different to the Fed so much capital is gonna go across your border, that it will prevent you from managing your exchange rate. And 20 years ago, China picked a spot in that impossible Trinity and they said, we're gonna control cross border capital flows. We're gonna fix the exchange rate over the last 20 years driven largely by this guy called Zhou Xiaochuan, who was the head of the PBOC.
For most of that period, they've changed their position within the Impossible Trinity. And they said, okay, we're gonna open not fully, but open substantially to cross border capital flows. And we're gonna have a flexible market based extra change rate. And what that means following 20 years of, you know, patient and ultimately successful reform is that the PBOC now has a new freedom of maneuver, right? In the past, if the Fed had hiked, the PBOC would have to hike as well and the yuan would be fixed. Now the Fed is hiking. The PBOC can move in the other direction and there can be some yuan depreciation. Now, is that gonna be enough to offset all of the downward pressure on China from Covid from the real estate crisis, from the tech regulation crisis? Probably not, but it's certainly an incremental positive because at a moment when they really need it, the PBOC is gonna be able to deliver some more stimulus, both by cutting interest rates and the reserve requirement ratio, but also by allowing that yuan depreciation.
Joe: (25:42)
So we just have a couple minutes left, you know, Simon, I wanna ask you, we're looking for like this sign of the production response, whether we're talking about the short cycle production in the U.S., that being shale or longer projects, whether new copper mines or new potash mines somewhere, what are you watching for next? Because at some point you think, okay, prices stay high and you start to break the discipline a little bit. So what would you be watching going forward to see if that investment impulse is coming?
Simon: (26:10)
I mean shale is a preoccupation, especially for the team here in the U.S. And look, you know, there are signs that is happening at the margins. You have certain private producers in the U.S. who are pretty big and they're able to deploy drills, drill rigs and they're spending more already. So that's already happening. And I think oil prices, if they continue to be a hundred barrels or more, you'll see more of that. And I think, you know, Goldman and others are all forecasting a certain supply response by the end of the year. And that could accelerate. Beyond that we're looking, you know, again in oil and gas, there are these sort of mega projects to really sort of, you know, move the needle for crude oil and for gas and for, for LNG as well.
You know, Europe now is increasingly committing to tying itself into some long-term supplies of LNG from from Qatar to kind of replace Russian supplies to do that. We're looking for some very big projects on the Gulf Coast that have been in, you know, in planning for years now. And they've just needed to kind of get over to what they call a final investment decision where they really secure the investment that's needed. In many cases, if you wanna build an LNG export plant, you're talking a price tag of like $10 billion in many cases or more, these are big ticket items. So you can imagine that's quite an event when somebody actually goes ahead with one of those. There are other oil projects as well. Guyana is an emerging oil producer and it wasn't on the radar, you know, several years ago. Now, Exxon last week just committed to the latest stage in one of its offshore projects there.
So I think we're looking for, you know, more commitments from the major international oil companies to, you know, drill offshore in places and, and, you know, secure longer-term supply. But they're still very cautious about fossil, I mean, particularly on oil, we talk about peak demand. You know, when Covid was at its height, there was this thought maybe we've already hit peak global oil demand. I think everybody realizes that's not true, it's still very strong, but once we get through this current sort of global economic cycle, what does it then look like? Will we see peak demand by 2030? So there's a good argument for saying we might be looking at that. In which case do you really want to commit to a $10 billion offshore oil project?
Tracy: (28:34)
Can I ask a really geeky question just on the same topic, but when you look at the oil futures curve and you think about what the industry actually needs in terms of longer-term certainty, does that need to flip back into from backwardation back into contango?
Simon: (28:49)
I think that's a great point. And I think, yeah, we've heard that as well. It's like you talk to some of the producers, the shale producers as well, and they're like, well, we're looking at it. It in, you know, it's in backwardation. So that just shows there's a lot of short-term distress. But as you say, we're looking for it to kind of revert back to that sort of structure where further-out prices are, you know, stronger. And in many cases you can actually lock that in, you know, you can go and you can sell future production. That is just a, you know, on paper, and you can actually secure future cash flow. So yeah, that would really help them.
Joe: (29:28)
So, final question to you, Tom, you know, for the Fed, it seems like the market thinks 50 basis points is basically a lock in maybe another 50 basis points, right after that in June. What to you is gonna determine the trajectory of short-term interest rates over the next year?
Tom: (29:50)
So I think the big conclusion I draw about the trajectory for the Fed from thinking about what's happened so far this year is not that they're gonna go faster or slower, but rather just that there's a huge amount of uncertainty about what they're gonna do. So we came into the year with expectations of three hikes this year. Then it went up to seven, then it came back to five. Now it's gone up to seven or eight again, does that mean it's gonna be eight? No, I think what it means is that there is limited conviction from policy makers and from the markets about the trajectory of inflation and what the Fed will have to do about it. If we see oil prices coming up, if China's problems go away. Yes. They're absolutely gonna have to do more if the Russia war comes to a swift conclusion.
So I think the big conclusion I draw about the trajectory for monetary policy from looking at what's happened so far this year is not that the Fed's gonna have to do a lot more or a lot less than what the market expects, but rather just that there's a huge amount of uncertainty. We're gonna have to see how things play out in commodities markets in Russia, in China and crucially in U.S. labor markets. And that's gonna help us understand the trajectory.
Joe: (31:33)
All right. Well, fascinating stuff. Fascinating times. Thank you both Simon and Tom appreciate you both chatting with us.
Tracy, I found that to be a very helpful conversation. It was interesting. I mean, there's obviously a lot there, the food situation in particular, I mean that wasn't the center of it, but the food situation still feels to me like it's under discussed in terms of the global ramifications relative to say gas, oil and copper.
Tracy: (32:24)
Yeah. And the situation in Sri Lanka has sort of flown a little bit under the radar, given everything else that's going on in the world at the moment. But the other thing I was thinking was sort of an amalgamation of Tom and Simon's point, which is there is a lot of uncertainty in the world at exactly the moment when people are looking for a reason to adapt and start to change things. And no one really knows if what we're seeing at the moment, disruptions in Russia and Ukraine, ongoing effects of the pandemic, the shift in spending from services to goods, if that's actually a permanent change or something temporary. And so you can't really respond to it.
Joe: (33:03)
Well, the other thing is there's this irony, which is sure the price of oil has simultaneously prompted calls for more oil investment and more acceleration off of oil at the same time, which if you're gonna do any sort of long-term project or anything, that's not very fast. You're like, wait, I'm investing in oil at the same time part of the solution is people using less oil. And so you could see how we find ourselves in this trap.
Tracy: (33:32)
And then the other tricky thing at the moment is just seeing all these supply issues work themselves out in real time. And it's really hard to yeah. That, you know, a shortage of this one. Good. Let's say like nuts and bolts is gonna end up impacting us energy production. Right. Because frackers can't start ramping up production as fast as they would like.
Joe: (33:51)
Yeah. Well, plenty to watch this year.
You can follow Simon Casey on Twitter at @sjcasey and Tom Orlik at @TomOrlik.