but he had been accused of supporting anti government demonstrations. these arrested last week after he went to the prosecutor's office to inquire about 2 other filmmakers. he'd been detained by the russell off, and that was the emmet. well rested after they use social media to condemn the government's response to protests. israel's parks and nature authority has released stunning footage of a swarm of jelly fish off the coast of haifa. the country is currently experiencing its annual jellyfish migration. but this year the population is exploded. experts say pollution and climate change are behind the massive numbers of jellyfish. and the study taking a deep dive into penguins says that the flightless birds evolution is directly linked to climate change. research has analyzed the dna extinct and living, penguins, and sound that they call signatures in their g names. these suggests that not need to penguins, adapt during unfavourable conditions for the populations increase when conditions improve

ah, watching on their knees, he'll run the reminder of all stories richie sooner colace trust will be britain's next prime minister. the full with chancellor and foreign secretary of the now says the final 2 candidates and the you case, conservative party leadership contest, trade minister penny molded was eliminated in a vote by m p. 's and being barbara as more from london the bookmakers for what it's worth are actually suggesting at least trust is the favorite. she the next leader rather than hence the next prime minister will be chosen by september. the 5th by a maximum of 200000 conservative party members. now, 5 years ago that membership was 70 percent male and their average age was 57 years old. so not representative of the great to electorate, but hugely important. and that will be a series of nationwide hustings now, which will be live streamed for the public in which both c and trusts will be

making that case. the ongoing heat wave in europe has ceiling while vas and stretching emergency services in greece, firefighters struggling to contain a huge wafa betting just north of the capital. the people have had to flee their homes. now the extreme temperatures of also sparked blazes and parts of the u. k. france, portugal and spain. philippine commission has unveiled an emergency plan to scale about gas consumption in case russia cuts off supply the u. s. u members to reduce that gases by 15 percent until next year. so long because parliament has elected ronnie luke from a singular as a new president. he was serving as interim leader up to protest 7 economic crisis for got the biologic boxer of office protests to say he's partly responsible. ukraine's 1st lady has addressed the u. s. congress. alina zalinski, spoke about the reality on the ground for her country. she emphasized the importance of their support in financial and military aid and ukrainian forces of

damage, unimportant bridge, and the southern cash shown region that russia had been using to supply its troops . despite the damage, the crossing over the to the pro river, it's still life. they had on the back with a nice i just and a half time. next it's inside story with the stars here to stay with us. ah, the world has enough oil, but not enough with finery is to process it. that's the assessment from the biggest crude export a saudi arabia. so is this to blame for record high fuel prices and one of the solutions this is inside school. ah.

hello there and welcome to the program. i'm this darcy, hey, no, global oil prices have hit record highs for months. the rise has been blamed on the war in ukraine and surging demand as economy is recover from this pandemic. another reason there is a lack of refineries to turn crude oil, but dug up from the ground into useful products such as petrol, diesel, and jet fuel. well, the price of brent crude, the international benchmark started this year and just below $80.00 a barrel. it went about $100.00 on february the 28th. as you can see that 4 days after russia invaded ukraine and then reached a $128.00 a week. later on march the 8th. the price has stayed above a $100.00 a barrel since then, with the exception of just a few days. now for many of us, this leads to high prices and petrol pumps. oil producing countries have promised

to increase production to meet demand, but the world's biggest oil exporter, saudi arabia, says the focus should rather be on boosting refining capacity. today, we don't see a lack of oil in the market. there is a lack of refining capacity, which is also an issue. so we need to invest more in the refining capacity. and that's, that's a policy decision that the countries, especially consuming countries need to make to ensure that there is enough capacity to find the oil that is available. while speaking of capacity, the international energy agency says the world has a capacity to refine about a 100000000 barrels of oil a day. but 20 percent is not usable. that's due to a lack of investment and refineries in some countries, particularly in latin america. global output has fallen by 3300000 barrels a day since 2020. when the pandemic then flashed demands for fuel. the u. s. has the world's largest refining capacity, but activity that has flowed to 17900000 barrels

a day. that's the lowest since 2014 output is also down and other major refining countries, such as china, russia, and india. the. well, let's not bring an out gas in houston. we have bob cabinet, uses energy and oil analyst, and an industry veteran. in berlin. we have thomas o'donnell, he is an energy and geopolitical analyst and also a consultant on global energy systems. and also in houston is josh young. he's the chief investment officer of bison interest. that's an investment firm focused on publicly traded oil and gas companies. a warm welcome to you all gentlemen, thank you for joining us today on inside story. there's obviously a big difference between crude oil, which we've been discussing at the price of and what you're actually paying at the pump in terms of price is what is actually to blame for the high prices that we're seeing. thomas, is it about refining or supply or both? it seems to me potentially both. well, i yeah,

i think you hit the nail on the head and it also depends week to week, month to month. united states is running in a very high capacity with the refineries. as your story pointed out, the refining capacity is down, but the utilization is basically messed out. 9497 percent recently. but china, on the other hand, recently has been running the refineries. you know, something like a 3rd below max capacity. so there is a shortage of refinery in the world for what we have to do and when some are offline like now in china or for example, the venezuela has a couple of the world's largest refiners, but they've been offline for a long time. what about iran similarly, so that is a problem, but the supply of crude is sort of the baseline problem here. that's going to continue into the future. and that's wrong to ignore that if the united states was reaching a 1000000 barrels a day now for the strategic reserve,

we'd certainly have problem calling a few mention the strategic petroleum reserve that the u. s. and their allies have released these to try to cap the huge rise seen in fuel prices. just let me ask, do you think that's made much of a difference? especially because we're mostly talking about crude here. yes. so the, the as pure release has made a big difference in the sense that the market is very tight. and, you know, i agree that there is this sort of combination of the short term of a refining crunch, as well as we'll supply crunch or. and so what we've seen with china and having reduce their refine product exports as well as russia, having temporarily reduced substantially their exports. and now they're starting to export more of what we, what we saw was a, we saw a tight, a tight market for refining, but oil would have been, i mean, with where demand is right now. even with the refining french oil prices might have

been much, much higher if the s p r wasn't being released right now. well, at this point i, i want to take a look at a graph because u. s. president joe biden has accused, refinery is of breaking in huge prophets during a time of war as we've referred to. now the price difference between a barrel of crude and petroleum products refined from that is called a crack spread. so looking at this graph, that's the refining margin, railey. now usually it's just over what? $10.00 a barrel, but it's jumped to over at $55.00 a barrel. and i was looking at some numbers from b p there. refining mark a margin is up from 7.7 dollars a barrel to $35.00 over the past year. let me ask you, then bob, what do you think has driven that huge margin increase? is this just down to refining capacity? is like, are other guess is that said, it's really just a complete global market upset. that is, is going on right now where you've got increasing demand after the panoramic,

the us, the other or oil industry recovering after the ball during the band to make. and then all of the transportation issue in the u. s. we have huge transportation issues. one of the reasons is the refineries on the gulf coast. a lot of those can only process only refine heavy crews. and since we're not importing heavy crews from like been as well, or, or bunker fuel or gasoline from russia, it causes all kinds of upsets, keeps that crack spread very, very wide. and then it will eventually come down. and the thing, the thing that most people don't really realize about the gas industry is that it is very competitive. and so someone is price gouging, so to speak. somebody is going to step into that space at a lower price if they can. so it's a, it's a market upset, it'll eventually stabilize. but right now there's so much going on with refinery capacity with the supply upset. and the board kotch was mentioned earlier out of iran and that as well,

all causing these problems. same time or given the market upset, we're seeing now why not make the most of the situation given the margins and increased. we're finding out what i see. a number of us refining company is already doing that, but others are already operating at what 90 percent potentially going up to 95 percent over the rest of the summer. josh, in your mind all day taking advantage of the situation. absolutely not. so the space that we saw on refining margins was directly correlated with the reduction in utilization, chinese and russian refiners. and in particular, when we saw almost a 1000000 barrels, a day of russian refined product exports fall off. that's where we saw these margins go up a lot so. so what is interesting is that you. busy refiners actually being good actors and they've moved up their utilization. they're taking some risks and doing this. they're moved up there utilization from 90 to 95 percent. so i think they're

actually doing the right thing. and it does show that refining capacity is tight, but the cost of it is not u. s. or european refiners price gouging. it's the opposite. they're, they're doing what they can, is that there is sort of limited refining capacity. and some of it, particularly in russia and china, has been offer at thomas. what would it take to scale up refining capacity him? well, if you're going to do it those days are going to expand existing refineries or build new ones. that's a little bit doubtful. but you know, there's a whole caribbean region. there's the issue of venezuela, and i know the administration, united states administration is working on trying to get the maduro administration to make some democratic concessions to legitimize raise, you know, lifting some sanction and getting production going on. perhaps doing something with the refineries. i mean, there's a huge potential there, and i mean,

it's not only coming off of coated and as a bob pointed out, and josh full, all the problems of adjusting. it's also this war and ukraine. so it's a very funny situation. it's a short term that's very volatile and very uncertain both in crude and fine products. but if you go out 3 years or so or more, i would say, i mean this is a g o strategic judgment. the west and their allies in asia, japan, taiwan, and so forth. are going to take, turn russia from a 1st world, sort of, i'm sorry, from sort of an energy superpower in oil and gas to sort of a 2nd rate player. that's exactly what fatty roll the head of the i. e. a said just yesterday at the meeting going forward after a few years. russia will be reduced to a minor, you know, player, a 2nd rank player. and that means there's going to be huge possibilities for developing oil, new crude development, new new fields, but also new refining capacity. russia with supply 2 and a half 1000000 barrels

a day of refined diesel to northern europe. that's all going to go away and they can't just send that to asia, that much oil, some of it they can, but there's going to be a big change. but in the meantime, who knows if there's going to be a recession, a probably, and there's other problems. so the short term, it's a little if the, it's very volatile, but longer term there's going to be growth in the industry. there has to be, well, i can talk a little bit more about the impact of the ukraine will, i believe, but you need specific russian products or to actually run some specific types of refinery isn't. as you alluded to that, you obviously need specific types of crude to then efficiently produce certain things. diesel for example. now we've mentioned venezuela, the sanctions on iran as well. and given that we've seen some bottlenecks around opec cross production. do you think that russian sanctions have really contributed to the crunch that were thing?

oh, i think i think it probably has. i mean, i don't disagree with the, with those those kind of cutting off the rushing crude to punish food for attacking your brain. but it does cause you just, you know, we were back in the ninety's late eighty's, early ninety's in the states. a lot of refineries were built or, or modified to handle heavy crews because that was primarily what was being produced in the us. after the horizontal, the unconventional drilling started back in the to 2000, 2070008. that crude is a slight sweet crude. the gulf coast refineries can't handle. so under the obama administration, we began being able to export again. so we're actually exporting lights. we us light, sweet crude, importing heavy crude. the refineries can handle. so the solution to that obviously is to build new refining capacity or to modify back to where we can handle the, the higher higher gravity cruise. but that is part of the issue of having to move,

we're moving, we're exporting and importing refined products. and we're importing and exporting crude because it's all not evil. it has to match the facilities is being shipped. well then just looking in terms of the margins of the prices that were saying, partly due to the ukraine was refined. well products have risen. what between fancy and nearly a 140 percent since russian invaded ukraine back in february, and now that's compared to less than a 15 percent increase for a barrel of crude. josh, do you think that we should expect that margin to increase even further as the war drags on? no, no, i think i think it's, it's already started to compress. so cracks spreads. i think i over 60, i think that might have even gotten over 70 very briefly, which is a $70.00 per barrel margin for refineries and refine products versus the input of crew. it's already down below 50. i think we might be getting to 40 or so

recently. and so i think, i think that there is this trend which is as russian refine product exports are back up. and as chinese cheaper refineries ramp back up as well. and as their export quotas are increased, i expect more sort of normalization, compressed refining margins, and potentially higher oil prices. as more oil is consumed in refining to then deliver the soil products and just to expand javier as the tea pot refineries we're talking about in china. the non state and refinery is that, that exist there. i do want to talk about china because it's currently what the world's 2nd largest refiner, but potentially going to become the largest very soon. but from the figures it really doesn't like to export its product. so last year, according to its own customs agency, it, it shipped about $1.00 point to $1000000.00 barrels a day. refined fuel, so fuel, oil, gasoline, diesel, jet fuel,

that's what 7 percent of its total refining capacity. and now it's been cutting exports even further. thomas, why is it doing that given the space of as the wild economy? well, you know, if they've got a market for their home, you know, why would you generally speaking, why would you export resign products if you have a market for it at home? and i think things are a little bit complicated right now. i in china, you know, everybody thought that they were recovering and then they went through this whole series of black downs again. so now you have a situation where, you know, everybody expects to recession. so demand is going to soften, so that should ease all this stuff out. ok, that should ease the demand out. but at the same time, china is coming off of these locked down and there's going to be some expansion there. so even though you're kind of going to a recession, you're going to have some expansion in china, and it's a complicated situation. i wouldn't expect china to export, you know what?

anything that's not surplus. what i wish they would do is use more of the refining capacity so they could have kept exploiting during this last cobra, shut down, but that isn't what they did. and you're sitting in houston. how do you think the u . s. is viewing the limit that china has put on it's on it's refined oil exports is biden keen to see that increase. what i think in the states where the industry anyway, the industry believe this is going to work through over the next couple years. for instance, i was looking at the 9 mix, w t i crew curve this morning. you know, word like $9495.00 a barrel in the near month. in december of $23.00, it's $77.00. so it's almost $20.00 less than 2 years out. so the expectation is this is going to stabilize. i think we're, we're focused,

i believe that the industry talks about any way is being able to import more crude . so it's been a while as close to be being and that's another 2 and a half 1000000 barrels today. it won't come up immediately, but that will help. and that helps our refining capacity. stay full with the, with the heavy crude that comes from venezuela. china, i think, is using the refinery capacity likely to use everything else when they're me as a weapon against countries like the u. s. and the and i think that so that's gotta be something that we consider all given the state of play. let's look at where we go from here, then given the current situation. so in order for oil refining margins to drop and for prices to come down, there needs to be more capacity. and for that, go to see need investment. should we be expecting fresh investments in oil refining, given the margins? josh, would you be encouraging people to invest in this? yes. so i think the challenge for refining in the u. s. is more related to

environmental regulations and permitting, than it is desire to expand. so x on has been expanding refineries here to better process light, sweet crude, coming from coming from shale and west texas. and you know, they've had all kinds of issues and there's just kind of this tremendous sort of regulatory and tax burden. one thing i do want to address the, the status of the forward curve. i think it, there's that there's a lot of misconceptions around it. and it being in backward ation. so oil being $100.00 right now and 70 dollars 2 years from now is actually an indication of a very tight oil market. and it does incentivizes oil to get pulled out of storage right now. and historically, when it's been in that sort of circumstance, oil prices have actually gone up over time, not down. so when you look at the incentives there, there is an incentive to invest both in upstream as well as in refining. and what

we're seeing is that there's a very tight market, there's a lot of changes in the service capacity to be able to do these expansions, but specifically for finding specifically in the u. s. there are huge regulations and taxes that get well, given that we are talking about this green transition and president biden is obviously said he wants to focus on renewables and i see a number of the refineries that have gone offline are actually switching further towards biofuels. thomas, do you see that trend continuing, or will there be some kind of a, a shift given the current state of affairs? well, i think ever since the ethanol revolution, which wasn't a revolution after all, there was never, so you lastic ethanol. i think the idea of biofuels, per se, is, you know, really not going to take off what everybody looks at is electric vehicles. now,

if you look at, i think we need a dose of reality here and there was a big problem. let's see the last decade, but also even during corona, of sort of official optimism or something, you know, 94 percent of everything that moves here in germany. jerry is supposed to one of the green countries around if you listen to the government, but 94 percent of everything that moves, moves and oil, the storage. and you know, it's about the same in the united states, everywhere in the world. you can look at how many electric car plans have been built in the world and how many they're producing. i mean, i haven't looked at it really close in the, in the year or 2, but if you look at the rate of increase that you expect just from the expansion of population and well, in china and india and africa, you see how many more cars, how many were vehicle to be on the road. you'll be lucky if electric car can take up those new cars, much less the whole base of the continuing bases. oil fuel cars that are still out there. so all companies are under

a lot of pressure to look like they're doing everything to transform to some new world. but the vehicle simply aren't there, the electric vehicles out there, there's major problems with batteries in those supply chain. and somehow this has to be balance that people can work on that without carrying, gearing the width out of the companies and shaming the companies into not investing . and that's what happened the last few years by not investing. i mean there is also corona but by not investing. now we're stuck and you'll see opec, it's been raising their quarter bite and ask them to raise their court well, certain sense. it doesn't do any good. they can't make meet the court. is there a couple 1000000 barrels behind what they're supposed to have produced over the last several months? so a lot of investments are needed and a stable situation, a more realistic, pragmatic policy here. well, in terms of pragmatic policy, we're talking also about very specific kinds of distillate and demand for those right. bob, let me ask you about the trade off that exists for refiners. by my understanding,

let's say there is a shortage of diesel, like we're seeing now. you reject things to produce more diesel, that means you end up producing potentially less jet fuel. and then ed travels also rebounding post pandemic. so trying to then produce birth reduces the output of petrol. what should be the focus here in your mind? well, i think with what you said, it is correct. also the challenge that we have in space is getting different fuels to different parts of the country. for instance, we, we import gasoline in california because it, because it's, it's easier to import it. and rather than shipping it from the gulf coast because of the transportation issues. and so there's all these different different issues that we have to, to deal with in terms of getting the right fuel in the right place. and i agree with thomas on the whole electric vehicle issue. i don't think we can replace the, the, the actual power,

the vehicles with like electric vehicles. fast enough, especially with manufacturing battery issues, the recycling of those batteries in. and we haven't talked about our grid, the powered readers of that are gigantic challenge, especially right now in texas. and so with all those different things floating around, the most important thing is to keep commerce moving, which is primarily jet fuel diesel gasoline. well, if oil refineries in the u. s. aren't necessarily coming back on the line. we're not necessarily saying the investments that's required to do that. i say more refineries are being built in the middle east and asia just very briefly. how soon do you think that can make a difference? yes. so there are, there are projects or ongoing. i think the bigger thing is just the ramp up in the independent refineries. in china, the teapots as well as ramp up in russian refine product exports. and so between the 2 of those, it does look like refining the refining market is coming into balance in the short

term. i'm not sure there's going to be a balance over the next few years. i think there's probably insufficient refining capacity right now. that's reliable relative to the likely demand increase. i agree with the other panelists that i don't see. the electric vehicle transition coming on. austin asked to be able to address this shortage of oil and refined capacity. so i think it makes sense to be considering expanding additional refining capacity even though this short term sort of super squeeze and refining margins is starting to speak clearly or something that isn't going to be resolved anytime soon. well, thank you to all of our guests. bob, have not thomas or donnell and josh young and thank you to for watching. you can see this program again any time by visiting our website that's out there a dot com. and for further discussion, do go to our facebook page. that's facebook dot com, forward slash ha and fight story. you can also join the conversation on twitter.

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