Richard Quest: CNN Anchor and host of Quest Means Business on the state of the world, AI, oil prices
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What is the main topic discussed in this episode?
Time to try and put the world into a little perspective. The war is over, sort of. Oil is returning to what it was.
What is the current state of oil prices and their global impact?
Against that backdrop, we've seen global markets explode with a heady mix of AI, chip, space-type exuberance, so much so that the Bank of International Settlements the other day said this can't end well. Perspective with one of our favourite people and best brains, Richard Quest of CNN is back with us. Good morning.
And a very good morning or good afternoon, I should say, where I am sweltering in the heat of southern Spain, but delightful it is.
I mean, you've been around a long time. We live in the most interesting of times where literally anything could happen on any day. Do you feel that?
I do. And I think that one of the aspects of that interesting times is that the underlying economics are not that bad. It is when they are overlaid by geopolitics and strategic issues in the U.S. and, yes, the Trump administration there, I've said it, and the Trump policies. You know, once you put them into the mix, suddenly things become much more complicated. And a very good example is, of course, the war on Iran. and the consequent closure of the Straits of Hormuz and the rise in oil prices, and the consequent inflation that's hitting everybody around the world. Now, all of this happened at a reasonably good time for economics. Consumers were okay. Things weren't gangbusters, but they were okay. The scenario changed dramatically.
Inflation has changed the outlook. Will it come down fast? You know, Donald Trump said that the price of oil will come down and fall like a stone. We've not really fully seen that. And certainly, as indeed the Reserve Bank in Australia and in New Zealand both know on interest rates, the next moves could well be hikes. So inflation is still a very serious problem.
Do you think there's a premium on oil for the foreseeable because of what's happened?
Yes. Yes, absolutely. No question. That's a very shrewd way of putting it. I think that the premium is the disruption, A, that has already been seen, but also, B, the power that's now been handed to Iran through the Straits of Hormuz, through the question about what will Oman do about this fee. We know we're going to need fossil fuels for the foreseeable future, however undesirable that is for some people. And what Donald Trump did was both give and confirm. to iran that they have a strategic weapon that they can deploy now he's held them at bay we've got this agreement we've got but we've now got this question of whether there's going to be a thing what sort of arrangement will it be um it's this level of uncertainty so yes a premium on oil and gas for that matter is being baked in
What about the secondary pipelines and the alternative markets and all of those opportunities that present themselves long term, not to mention the UAE out of OPEC and the IEA said the other day that, you know, we're going to have 110 million barrels a day produced, but a demand of 105 million. I mean, at some point, the price has got to come down materially, doesn't it?
It comes down when there's a glut. It comes down when not only does supply dramatically overwhelm demand, but also uncertainty abates. Remember, let's not forget, we had a glut of oil when this crisis began. So it's not as if we were starved of oil then. We had a glut of energy then. The events raise the price. As a famous British politician, Prime Minister Harold Macmillan said when asked what he was worried about, events, dear boy, events, he famously said. And that's what it is. You talk about the oil price, it's events.
How are geopolitical factors influencing the economy?
So yes, the UAE, I mean, let's look at the UAE coming out of OPEC. They did it for their strategic reasons because they want to pump more. So that's a positive in terms of bringing down the price. But are they able to do so? It's a very, very murky picture at the moment where I know because I've been talking to them, traders and brokers are watching, literally counting, Mike, Nine tankers went through the strait yesterday. Seven went through overnight.
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