Chapter 1: How is the current geopolitical situation affecting crude oil supply?
There's a lot going on right now. Mounting economic inequality, threats to democracy, environmental disaster, the sour stench of chaos in the air. I'm Brooke Gladstone, host of WNYC's On the Media. Want to understand the reasons and the meanings of the narratives that led us here and maybe how to head them off at the pass? That's On the Media's specialty.
Take a listen wherever you get your podcasts. navigating the pipelines of the global oil economy. Plus, let's squeeze in some winter sports before the season is done. From American Public Media, this is Marketplace. From Minnesota Public Radio in St. Paul, I'm Kimberly Adams in for Kai Risdahl. It's Thursday, March 12th. Good to have you along.
We're going to start today's program by looking at oil and the global economy right now. The president's war in the Middle East is restricting the supply of crude to the rest of the world. And Iran said today that it will keep the Strait of Hormuz closed, so oil prices jumped. And Brent crude, which is the specific kind of oil that's no longer flowing out of the Mideast, topped $100 a barrel.
Even with more than 170 million barrels of oil being released from the Strategic Petroleum Reserve, some of the refineries that convert crude oil into the energy we consume just don't have access to the raw material they need. And as Marketplace's Justin Ho reports, the war could end up causing many refineries to shut down production.
The kind of oil that's getting cut off by this conflict mostly goes to Asia. A lot of that crude goes to China. Malaysia, Singapore, India is very important also. That's Anna Mikulska, head of analytics at CGCN Group. She says some Middle Eastern crude also heads to refineries in California. So California has imported a lot of its crude from Iraq, for example.
This is a lot of barrels that California will have a problem replacing. Refineries there can't just switch to the heavier sulfur-rich oil that comes from Western Canada because they aren't set up to handle it. You have to build the infrastructure. You need the desulfurization infrastructure there. And that takes a long time. And more importantly, it takes a lot of capital investment.
Hugh Daigle is a professor of petroleum engineering at the University of Texas. He says even though the U.S. produces a lot of its own oil around the Gulf of Mexico, California isn't connected to that supply. The easiest way to move crude oil around domestically, obviously, is in pipelines. There's not a lot of pipeline infrastructure to get from Texas to California, believe it or not.
There's none, in fact. Refineries in California and Asia still have oil they can refine in the meantime. But Mark Broadbent with Wood McKenzie says there is a point when that will start to dry up. You need to keep a certain amount circulating through your units in order to keep them online.
At that point, you'll be looking at refineries that are going to shut units down because there's simply not enough material to keep them running. Bradbent says even if the war were to suddenly end and oil started flowing through the Strait of Hormuz again, it could take a while for those refineries to come back online. He says if they partially shut down, it could be one or two weeks.
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Chapter 2: What challenges do California refineries face without Middle Eastern crude?
So...
try to capitalize as much as we can out of the market but also we don't want to pay too much for our cattle and the markets fall out of it so been a lot of uncertainty in the market so that's kind of been slowing us down right now currently fertilizers skyrocketed diesel fuel has skyrocketed so when we go into the summer our contracts will be up and we're going to pay a little bit more money for amount of feed and already our markets are starting to fall off due to the
you know, due to war right now. So, you know, we've been over, which is also affecting, you know, what we're giving for the price of fuel, and it's created a whole other heck of a situation in our commodity markets. So prices of our cattle has been pretty good. You know, demand for this beef is high.
You know, it goes back to we are at the lowest number in history with cattle numbers for producers in the United States. So it does help stabilize these markets. But you have to really be on your P's and Q's when it comes to selling points because if you try to decide to go to a sale one day, you may short yourself $200 to $300 a head. That's how ball to it. It can be at times.
You know, being a small family farm or ranch, it feels good, you know, but I'll say it has its challenges because we all have to manage and maintain a decent living. And as... As it costs everything, inflation, land prices, equipment have went up so much over the years. It's making it really challenging for a person to have a next generation to get in this business.
You know, this year, we just want to focus on making the best out of everything we have. We don't want to spend no more money than we have to. And hopefully by doing that, we can create other opportunities with our money and invest it in and try to expand things like our deer processing facility. Nate Bradford of G-Line Ranch in Bowley, Oklahoma.
Despite a week of false spring weather in many parts of this country, over in Italy, the Winter Paralympic Games are in full swing, and an average of 1.4 million viewers watched the primetime coverage this past Saturday on NBC and Peacock. Viewership for opening weekend was up 27 percent from the 2022 Beijing Paralympics, and more fans are following the Games and the athletes than ever.
Here to talk all things Winter Paralympics is Amy Purdy, a three-time Paralympic medalist in snowboarding. Her book, Bounce Forward, comes out later this month. Welcome to the show, Amy. Thank you so much for having me. So the Winter Paralympic Games started just about a week ago in Italy. You've competed in two rounds. You kind of wish you were there this time? Yeah. You know what?
I love being on this side of things. I mean, I loved competing in the Paralympic Games. I competed in Sochi, which was the very first time Paris snowboard was in the Paralympics. And then I competed in South Korea. But I thoroughly enjoy being on this side where I can just cheer everybody on.
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Chapter 3: How do refinery shutdowns impact fuel availability and prices?
When we zoom out, we can still see it's a very challenging affordability environment. And for builders on the supply side, she says things are expensive there too. You have, you know, labor issues, so skilled trade shortages and wage pressures, lots, so scarcity of lots, laws, so zoning constraints and permitting delays, lending, more about that in a second.
and lumber, but really just materials, construction materials more broadly. To cover these costs, Robert Dietz of the National Association of Home Builders says private single-family home developers typically get loans. He says builders say if they could get access to more financing at a lower cost, they could build more. And the cost of that financing, he says, is...
much more strongly connected to Federal Reserve policy and those short-term interest rates. But trying to predict what the Fed will do is complicated. Now there's the conflict in Iran and the resulting jump in oil prices to consider, too, says Stephen Bushbaum at TREP. All else equal, if prices go up, typically that means that our interest rates are going to go up to combat that inflation.
But if the economy slows... That could mean that we have to cut interest rates to combat a weakening economy. ...by trying to stimulate growth. If the Fed rates saw a cut, construction loans could too.
For his part, Robert Dietz at the National Association of Home Builders says for now, he's still expecting the Fed to cut rates twice this year, though he thinks those could happen later than initially forecast. That would be an unambiguously positive development for the housing market.
Because, he says, lower Fed rates mean lower construction loan rates, which would potentially mean more supply and lower prices for buyers. I'm Carla Javier for Marketplace. We talked earlier about the Winter Paralympics, and even though it's March now, there is still a bit of the winter snow sports season left for those of us not quite ready for our Olympic or Paralympic debut.
But as the warm weather rolls in and the snowpack disappears, it's time for ski resorts to start closing the slopes and do some accounting to see how the season went for them. But in the last few decades, that end-of-year tally has been looking different for ski resorts that accept certain ski passes.
Roberto Ferdman is a senior video correspondent with The Wall Street Journal, where he produced a piece called How Vail Changed the Economics of the Entire Ski Industry. Roberto, welcome to the program. Thank you for having me. It's nice to be here. So this piece really hinges on what's called the epic pass from Vail. What is it and how does it work?
So season passes are not novel, but what Vail did, which changed the notion of how a ski mountain can collect money and when, is they said, what if we didn't just sell a season pass, we sold a season pass that people could use across all of the mountains that we own, and we sold it at a very low price.
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Chapter 4: What are the implications of rising construction costs in the housing market?
If you're someone who skis regularly, say at like a local mountain, you like to go during the week, you might be seeing more people than you would on a Tuesday or Wednesday. The other thing that it has led to is... overcrowding on really good ski days. This is truest at mountains like Vail, Park City, Whistler, and you don't have to look very hard or far to find videos of overcrowding.
I mean, the other thing that is created is this dichotomy between those mountains which are owned by large conglomerates like Vail Resorts or participate in mega passes like Icon and those who don't at all. And you might see differences like, for instance, in the bells and whistles that are available at these independent mountains. They might have fewer amenities.
The food might not be as diverse in terms of offerings, but the skiing is certainly a lot less expensive. So even though these passes have been such a big moneymaker for Vail and similar resorts, sales for that pass have been slowing in recent years. What do you see as the future of the system? there's a sense that the reach of Epic Pass in particular has plateaued.
And I think it's worth pointing out that they sell over 2 million Epic Passes each year. So they either have to figure out how to scale internationally, and that's much more difficult because the European ski market, for instance, works very differently. Or it has to figure out how to get more people into its Epic Pass program.
And the program is quite large and it might have just reached its peak. Roberto Ferdman is a senior video correspondent with The Wall Street Journal. Thank you so much. Thank you for having me.
This final note on the way out today, if you've been wondering about whether the Supreme Court's recent ruling overturning some of President Trump's tariffs means a refund is coming your way, you're going to have to keep wondering for now. The Hill reports that Customs and Border Protection told a federal judge that it's more than 40 percent of the way there in terms of developing software.
That could help businesses start getting tariff refunds, but it needs at least a few more weeks of performance testing. For consumers, who knows? Our daily production team includes Libby Burdett, Andy Corbin, Maria Hollenhorst, Sarah Leeson, Sean McHenry, Michaela Sia, and Sofia Terenzio. Will Story is a supervising senior producer, and I'm Kimberly Adams. We'll see you tomorrow. This is APM.
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