here, or anywhere that matters, america is watching on c-span. powered by cable. >> washington journal. every day we take your calls live on the air on the news of the day and discussed policy issues that impact you. wednesday morning, how nancy pelosi's trip to taiwan has the effect on u.s.-china relations. then the deputy executive director of priorities, usa will talk about her group's efforts in the 2022 midterm elections. watch live at 7:00 eastern on wednesday morning on c-span or c-span out. join the conversation with your calls, texts, and tweets. is in burkhart, here to talk about gas and oil prices in the market.

you are the head of research for oil markets and energy mobility at s&p global commodity insights , the vice president there. what is going on right here today with oil and gas markets and the gas prices? guest: it is a precarious state paid we had covid and then -- it is a precarious state. we had covid and then the invasion of ukraine. the mobile market that we nuisance the 1990's are now coming apart -- that we knew since the 1990's are now coming apart. between those who bother -- who buy oil from russia and those who do not pay because of higher prices, demand has started to ease. we had a strong demand surge late 2020, 20201 -- host: post-covid -- guest: post-covid.

that demand has eased in response to high prices. another key factor in the recent easing of prices is the economic slowdown in china, which typically has been the biggest source of oil demand. that has had a big impact on easing prices as well. host: explained that, what is happening in china that impacts us going to the pump in the united states. guest: it is a global market. everyone pays the same price for crude oil, essentially. china, the second-biggest oil market in the world and the most important in terms of oil demand growth in the past decade -- china has had this zero covid policy. i think they now call it dynamic covid policy. but it led to shutdowns of import parts of the economy in china, particularly in march, april, and may, in shanghai and in other parts as well, and that slowed the recovery in china. china was the first to recover after covid. but then this year, the return

of bouts of covid in key cities slowed china's economy. the property market in china, a key engine of growth in china, also slowed. this year, oil demand in china is likely to decline from what it was a year ago -- not by much but by a little. that is a very significant development, given china's role as the main source of oil demand growth over the last decade. host: so if the chinese are not demanding as much gas, that means we, in the united states of america, get to pay less? guest: not necessarily. what happens -- oil is a reflection of the world. what happens in china, in the u.s., europe, the middle east, it all comes together to shape the price of oil. so the demand equation is one part of it. then you have supply. supply, because of the oil

supply collapsed during covid, investment in new supply fell dramatically in 2020. some countries still are unable to produce as much as they did before covid, including the united states. so while demand growth has slowed and eased, supply is still struggling to keep pace, even with lesser demand growth. host: the white house said yesterday gas prices have come down 17 days straight. is that true and why? guest: yes. the u.s. national average in june broke $5 per gallon. that was the highest nominal price ever. they have eased since then, largely because of slowing demand growth around the world, particularly in china but also in the u.s. that is a key factor in the easing of prices. there have been some additional supply -- saudi arabia and the

uae have put more supply on the market. u.s. oil production is generally growing. so there has been more supply. and russian oil exports, despite the war, despite the sanctions, have been remarkably resilient. russian crude oil exports really have not fallen since the invasion began. host: who is buying their oil? guest: china, india. european countries are still buying russian oil, much less than before the war, but they are still buying it. there are still many buyers of russian oil. we have seen a big switch towards more asian buyers of russian oil since the invasion began, particularly from india. host: let's talk about supply and what happened after this country went into the pandemic stage of covid-19. all cities across the country were shut down.

there was demand gone. what was our supply situation like then and how did former president trump respond to that supply? where did he put it? guest: it was a remarkable chain of events in 2020. as we all know, the economy largely shut down. mobile oil demand fell 20% in april of 2020. we had never seen anything like that before. massive decline in demand. oil prices fell negative, briefly -- can you imagine, if you are a producer of oil, you have to pay someone to take it. right on the eve of covid, u.s. oil production was at an all-time high, almost 13 million barrels per day. as covid hit, oil prices collapsed, oil production started to fall. in april of 2020, march april -- march and april of 2020,

president trump helped to essentially broker a deal between saudi arabia and russia and other members of opec and that countries that work with them that lead to a 10 million barrel per day cut in oil production in 2020. fast-forward forward to today, this month, that 10 million per barrel a day cut -- oil demand before covid was 100 million barrels per day it it was a very substantial cut on the part of saudi arabia, russia, and their partners. that cut has now been made up, for the most part, for those who can. but again, some countries who cut back in 2020 -- angola, nigeria -- they cannot produce as much as they can before because of a decline in investment. host: after the president did this, was there still a glut of supply? guest: absolutely. the amount of oil put into storage skyrocketed in april and

may of 2020. the fastest pace of growth in inventory we have ever seen. host: what happened to that oil? guest: a lot of that, as demand recovered -- demand really started to recover in june of 2020, and it recovered at a pretty fast lip. -- clip. that build up in inventory we saw the first few months of covid has largely been drained over the last year and a half to meet rising demand. host: and it was not enough, is that correct? what happened over the last year and a half? once that glut was gone, then what? guest: there is not much production capacity left. what we call spare production capacity -- oil production capacity that is not currently utilized is very thin right now. back in 2020, when these cuts were first made, you had spare

capacity of almost 10 million barrels per day. today, that effective scare -- spare capacity, that cushion is probably one million euros per day or less. host: i want to encourage our viewers to call in with your questions and comments about what you're seeing where you live, what is it like for you with oil and gas prices. jim burkhard is the vice president and head of research for oil markets, energy, and mobility with s&p global community insights. he is here to take your questions and comments, so start dialing in. you can also text us, (202) 748-8003. how much is a barrel of oil now, and what does that tell you? guest: there are two key prices, but they are essentially both in the upper 90's. $96 if you look at the american benchmark, $99 for crude oil if

you're looking at the international benchmark. by benchmark, those other prices that set oil all over the world. host: and the average price now? guest: in the u.s., about $4.30, which is down quite a bit from june, when it was above $5 per gallon. host: will it go lower? guest: that is the key question. there is a lot of uncertainty, as there always is. if the economy continues to slow globally, if china's economy remains on a slowed path, then we may have seen the peak in gasoline prices this year. however, we do have efforts to reduce russian oil exports, particularly by the european union, which are supposed to take effect at the end of this year. so if there are significant amounts of russian oil removed on the market, then we could see prices rise again.

but that is a big uncertainty, because so far, russian crude oil exports have been resilient. but if we did lose a couple million barrels per day of russian crude oil exports later this year and early next, that is a different story. host: you said former president trump yogurt a deal to cut reduction in april of 2020, when the demand was so low. now president biden is asking those countries to increase production. are they responding? guest: somewhat. saudi arabia and the uae are the two main countries that have the capacity to increase production. they have increased it significantly. saudi arabia production right now is at an all-time high. they have never produced more than they are now. what is not very clear is how much more they can produce. oil production and capacity is a

function of investment. so countries, companies can invest more to produce more. but that takes time, and there does appear to be a very incursion of spare capacity right now in the middle east. host: we will hear from john in iron mountain, michigan. good morning. what do you say? caller: with the price of oil, whatever it is, at $98, what we are paying now, hours dropped over a dollar since last month or so, so we are averaging $4.09 a gallon right now. across the border in wisconsin, which pays one less gas tax, they are in the $3.90's or $3.85. we get our gas and oil from green bay, wisconsin, because we have no refineries in the upper

peninsula right now. and i am up on the politics. if the republicans would sign the price gouging bill that is in the works right now, it would down another at least $.50 a gallon right now. that is my comment. i'm a math person. i remember -- at $98 a barrel back -- it was at $3.75 back a couple years ago. at $98, it should be $3.75. host: is that true? guest: gasoline prices are set by the global market. so the u.s. exports and imports gasoline. we export from the gulf coast. and on the east coast, we still need to attract gasoline imports to the u.s. east coast. so the price of gasoline that the all pay, yes, different

state taxes have an impact. how close you are to a refinery or distribution center, that has an impact. prices will be lower in texas, because that is where many refineries are, versus aces where they do not have them. but essentially, it is the global gasoline demand that is shaping the price. and there is also another story, and that is mobile refining capacity. so you produce crude oil, take it out of the ground, and then you have to refine it and turn into gasoline and diesel and jet fuel. the global refining market, the global refining industry has lost a lot of capacity in recent years, and that is another factor that is shaping the price of gasoline. host: lost capacity or shut down? guest: shut down capacity -- host: and not coming back? guest: no. a little bit could, but once you shut the refinery -- again, it

depends on the reason. it is difficult to come back. there could be some cases where it does, but essentially, a couple refineries in the u.s. have been closed and converted to produce biodiesel. they have been a couple refineries closed in the u.s. because of damage, severe damage. probably not going to come back. there are a couple refineries that have shut down for economic reasons. the backdrop to this is, if you look at the last decade, 2010 to 2020, it was not a good decade for oil investment. investors were telling oil companies, watch your spending, cut back. we want you to make more money, not less. so that backdrop is really important to understand where we are today. host: did those same investors or were investors also concerned about the boom and bust cycle of this industry and not wanting to

invest as much? guest: absolutely that is part of it. we had this great growth in u.s. oil production last decade. just stunning growth, the most growth we had ever seen from a single country in a decade. also, that strong growth from the u.s. contributed to two oil price collapses, one in 2014. it was a factor in the covid price collapse of 2020. so investors were rewarding companies earlier to grow production. but we grow production that fast, the price collapses, price volatility -- so yes, price volatility, along with many governments around the world, essentially were saying in their policies, sometime in the future, we do not do your product. we want to use less of it. if you are investing in oil,

which has long-lived assets, and hear the european union, the biden administration, china saying look, we are not sure we want much of your stuff at some point in the church -- future, that is part of the investment background as well. host: dave in florida, good morning. caller: good morning. thanks for taking my call. i was calling to speak about refineries in the united states, and he just addressed it pretty well. one thing is some people have a conspiracy theory that oil prices are going down because it is the third quarter of cpi that determines the quota for social security recipients and other federal workers. i guess we will have two wait to see if oil prices jump back in the fourth quarter. as far as refining, i have a hard time buying that a lot of these refineries are shut down and we cannot reopen them for the reasons are said. if so, if it is hard to do, we

have done a lot of hard things in this country. i just keep thinking -- reaegan -- reagan shut down air traffic controllers. we had the defense production act for baby formula. why can't we defense production act and reopen one or two of these refineries, get them repaired and fixed and up and running? if it takes a year, it does not matter, because it will lower the price of oil. the oil companies seem to have less incentive for refining higher product, because the price will go down. host: let's get an answer from jim burkhard. guest: the united states has the biggest, most flexible, sophisticated refining system in the world. it is also very responsive to changes in market conditions, far more so than most other stasis, which have state run companies. so the question implies could be

there -- could there be some type of state intervention. i will not comment on that directly, but u.s., to open up a refinery -- say you had a refinery run the last 10 years, and you had poor returns. he did not make a whole lot of money -- it not make a whole lot of money. then you have a year like 2022, and the margins -- the difference between where a refiner purchases crude oil and the gasoline price it sells. that is the margin, the gross profit margin of refiner's. yes, has been attractive this year, no question about it. but to open up a refinery, you're making a bet, of sorts, on the long-term market environment wart refinery margins. refinery margins were very high earlier this year. they have already come down. next year, two years, three years, are they going to remain high enough to support the

reopening of a refinery? the last decade would say probably not. so companies do not make decisions based on we had a good order, let's spend a few billion dollars opening up a new refinery when they shut it down for economic reasons or other reasons -- could be strategic reasons. to lower emissions, for example. so it is not as simple as the government ordering refineries to open. it is much more complex. and keep in mind u.s. system has been very reliable, very complex, and it has been in private hands. host: the senate is nearing a vote this week on the so-called inflation reduction act. jim burkhard, i want to get your reaction to senator joe manchin touting this agreement he made with senator chuck schumer and the energy provisions that are in it. take a listen. [video clip] >> first of all, we have the highest gas prices right now.

inflation is killing, hurting everyone in west virginia right now. it is hurting all working people across america. if you want to get the gasoline prices down, you have to produce your way out of it. we have to bring more manufacturing back to america. let me tell you what the bill does. it gives us a strong fossil energy produce the cleanest arms of fossil energy in the world. that is carbon reduction, when you are replacing the dirtiest carbon. host: jim burkhard? guest: senator manchin makes a good point. and that is yes, the biden administration and many other governments around the world want to reduce the use of fossil fuels. what to do that, you need to have readily available replacements. so if you want to negatively impact supply or discourage investing in new supply before demand can adjust, then you're

going to have high prices. the energy transition is not something done in a day, a year, or even a decade. it will be a number of decades. so there does need to be adequate fossil fuel supply for many years into the future, if we want prices to remain more affordable. host: this is the washington post headline -- manchin-schumer deal would -- as part of the broader deal would overhaul the nation's process for approving new energy products, including by expediting a gas pipeline proposed or west virginia. can you talk about this, and what with this do? not part of the reconciliation package, so it will take 60 votes. what will it do to the industry? guest: i think there are a lot of concerns all around about the permitting process in this country, whether for oil and gas or something else.

it does take a long time. doing a review of that process, perhaps to make it more efficient, to look at the national interest or something like that could be the right thing to do. host: what about the pipeline in west virginia? guest: the u.s. has a lot of natural gas. a lot of it is in the northeast and pennsylvania right now. getting into the rest of the country is a challenge. for example, one anecdote is not too long ago, russian gas went into boston harbor. when there is enormous amounts of gas not far away, but the lack of interstate pipelines meant the gas had to come from russia to massachusetts. instead of getting gas from pennsylvania.

that is one example, one anecdote, but i think it is an example of how pipeline politics in this country have really impacted how efficiently we have oil and gas >> sees things washington journal. every day we take your calls on the news of the day and discuss policy issues that impact you. wednesday morning, we discussed how speak your for lucy's trip to taiwan and the effect on china relations. then deputy executive director of priorities usa will talk about her group's efforts in the 2022 midterm elections. watch washington journal live on c-span or c-span now. join the discussion with your calls, comments, texts, and tweets. now available to c-span shop,

c-span's 2022 congressional directory. go there to order a copy. it is your guide to your federal government with contact information for every member of congress and contact information for state governors and the cabinet. order on c-span shop.org. every purchase helps support our nonprofit operation. >> next, a democratic primary debate for new york's 12th congressional district with carolyn maloney and jerry nadler and surgeon patel. -- surge patel.