Chapter 1: What is the main topic discussed in this episode?
On the program today, oil for a bit, tariffs for a bit, and then some economic odds and ends from American public media. This is Marketplace. In Los Angeles, I'm Kai Risdahl. It is Thursday. Today, this one is the 2nd of April. Good as always to have you along, everybody.
Well, among the many, many words the president spoke in his 19 minute speech last night were words that indicated this war is going to go on for another two to three weeks. So mid to late April, before we see some semblance of a resolution, whatever that might look like. What it definitely is not going to look like is the global oil market rubber banding back to normal overnight.
So we asked Marketplace's Elizabeth Troval to play out our short-term economic future.
Imagine it's mid-April. Military actions against Iran have stopped. Now?
The bigger question facing the global economy is what will the status of the strait be?
Gregory Brew with Eurasia Group says the next milestone is opening up the Strait of Hormuz, which Iran now controls. And there's a lot TBD on how and when that might happen.
Will volumes recover to such an extent that goods can come and go the way that they were before? What kinds of risks will still exist?
The future of the Strait looks messy, says Joe DeLauro with Rabobank.
The strait will still take months to clear if Iran even wants it to be open. And then on top of that, you have refinery damage, pipeline damage and production shut-ins.
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Chapter 2: What factors will influence the stabilization of oil supply?
The timing it takes to get back to normal and to rebuild those drawn-down inventories and to get all the oil where it needs to be is really challenging. So we're going to be dealing with this through the summer driving season into the fall.
For Americans, he expects gas prices will be well above $3 a gallon through the rest of the year. I'm Elizabeth Troval for Marketplace.
Wall Street today. Honestly, I don't know what to tell you. The major indices opened deep in the red after the president's speech last night and then finished within either side of spitting distance of even. We will have the details when we do the numbers. Oil traders do seem to have a more firm grip on the risk environment now than stock traders do.
Crude prices, that is both benchmarks, solidly back over $100 a barrel today. And yet, producers in the Permian Basin, the pumping heart, if you will, of the American oil sector, They seem disinterested.
According to a survey by the Federal Reserve Bank of Dallas that was fielded in mid-March, just 21 percent of oil executives in Texas and surrounding states say they are planning to significantly increase the number of wells they're going to drill this year. Half of them say they're not planning to drill more at all. Daniel Ackerman made some calls out to West Texas to see what's going on.
Usually, rising oil prices have a predictable impact on oil producers.
To incentivize a greater level of supply. That's Econ 101 right there.
But Carr Ingham, president of the Texas Alliance of Energy Producers, says drillers in the Permian Basin don't seem to be ramping up production right now. One reason is they simply haven't had enough time. The war has been going on for just over a month.
It's just virtually impossible to have any kind of meaningful... increase in production or supply in that period of time. The system just doesn't work that way. There's not a spigot. There's not a valve.
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Chapter 3: How long will gas prices remain elevated after military actions?
Natasha Sarin is a professor of law at the Yale Law School, as I just said. Also, for our purposes, the president and one of the co-founders of the Yale Budget Lab. Natasha, thanks a lot for your time. I really appreciate it.
Thanks so much for having me.
According to the U.S. Drought Monitor, that's a map and a data resource run by the University of Nebraska-Lincoln, 83% of the American West is in some form of drought, a spectrum that runs from abnormally dry to exceptional drought, which is a step beyond extreme drought. One of the clearest manifestations of that is that the Colorado River is drying up.
So across parts of this country, cities, farms and tribes are of necessity cutting back on how much water they use. Doing that, though, gets expensive. But as Alex Hager from KJZZ in Phoenix reports, there is some new money helping to pay for that conservation. It's a cool morning in the desert and water is rushing through a canal next to a field of crops.
This water is used by the Gila River Indian community, south of Phoenix. David DeYoung manages irrigation here, and he's watching the water spill out onto a field of alfalfa through a system of high-tech motorized gates. So as the water advances, that sensor is picking up where the water is at. DeYoung says they used to run water across this field for 8 to 12 hours to get it fully soaked.
But with the new tech, it only takes about one. The key here is to get the water across the field as quickly as possible. The Gila River Indian community has spent the past few years accepting big checks from the federal government to make its water systems more efficient, leaving the water it's not using in Lake Mead, the nation's largest reservoir.
But now it's not just the feds helping foot the bill. Shannon Quinn leads water conservation at Procter & Gamble.
Water is essential to our business. We need it to make our product, and everyone needs it to use our product.
P&G, along with Google, paid for more than half of this new irrigation system, which cost a little more than $1.5 million.
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Chapter 4: Why are Permian Basin rigs not increasing production despite high oil prices?
Our last gasp on President Trump and what his tariffs have done to this economy over the past year. Last gasp, of course, until something else happens. Comes to us from Wesley Rule. He and his wife own Knoxville Fine Violins. They are in Knoxville, Tennessee. I guess it's been predictably unpredictable because tariffs seem to, you know, they'll go away and then they come back.
You know, it's really hard to keep up with. And as a small business, we just kind of have to keep extra money in the account to make sure that we can pay for any tariffs that may or may not occur. One of my distributors was doing a kind of a tariff add-on fee so that the additional charges were reflected in whatever the tariff was that they had to pay for it.
And so that distributor has been really nice about it and the prices are fluctuating. But all of my other distributors, you know, prices rose. I don't think they're ever going to go back down. We're having to sort of prepare for gas prices going up, which is going to affect shipping.
One of my distributors actually recently lost money shipping me cellos from California because they quoted me the normal price for shipping. And then it turns out all of the shipping prices have changed dramatically and their shipping went up by 300%.
And so fortunately, they didn't charge me that extra cost, but they had to warn me that next time we ordered, it would be potentially, you know, almost as much as one of the cellos. I've been slowly preparing my customers for price hikes. Lauren and I have both been hesitant to raise prices unless we have to.
We're trying to be thoughtful about that, but I've been telling customers about, hey, you know, just expect small price hikes in the future because they're unavoidable. We're just going to try and introduce them slowly and gradually. Wesley Rule, he owns Knoxville Fine Violins with his wife, Lauren. They are in Knoxville, Tennessee.
This final note on the way out today in which astronauts, they're just like us.
And I also see that I have two Microsoft Outlooks and neither one of those are working. If you want to remote in and check Optimus on those two Outlooks, that would be awesome.
All right, we will join in on your PCV and we'll let you know when we're done.
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