Why the Price of Oil, Beef, Electricity, and Everything Else Makes No Sense

Summary

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Odd Lots (Bloomberg)

Episode: Why the Price of Oil, Beef, Electricity, and Everything Else Makes No Sense

Date: May 18, 2026 | Recorded: Live in London, May 7, 2026
Hosts: Joe Weisenthal & Tracy Alloway
Guests:

• Javier Blas (Bloomberg Opinion columnist, author of "The World For Sale")
• Lorcan Roche Kelly (Business editor at the Irish Farmer's Journal, former Bloomberg, and former Irish farmer)

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Episode Overview

This live Odd Lots episode delves into why key prices in the global economy—from oil to beef, electricity, and fertilizer—currently "make no sense." Hosts Joe Weisenthal and Tracy Alloway are joined by commodities experts Javier Blas and Lorcan Roche Kelly, who share front-line perspectives on the interplay of markets, policy, energy crises, and food supply. The conversation addresses geopolitical shocks, fragile supply chains, the hidden impact of policy interventions, and what’s driving demand destruction and price distortions.

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Key Discussion Points

1. Jet Fuel and Oil Markets: The Strait of Hormuz Factor

• [03:09] Will Europe run out of jet fuel this summer?
  • Javier Blas explains that Europe is okay for jet fuel "until certainly the end of June," but things could get tight if the Strait of Hormuz remains closed due to ongoing conflict. Refiners globally are pushing out as much jet fuel as possible.
  • "It all depends whether the Strait of Hormuz reopens or not and when." — Javier Blas [03:36]
• [04:51] When will the Strait reopen?
  • Blas notes neither side feels enough pain to force a deal; Iran faces economic trouble, but the regime can absorb it. The U.S. public is annoyed by higher fuel prices, but so far, the economy is resilient.
  • “You are hoping for a reopening that is painful, but not yet really painful enough that everyone is forced to compromise.” — Javier Blas [05:33]

2. Food Supply: Plenty Amid Price Anxiety

• [06:27] Why are food prices rising if supply is strong?
  • Lorcan Roche Kelly points out that, globally, "the world is drowning in wheat" and "swimming in milk," with only beef in real shortage. Despite abundant food, increased transport costs are feeding food inflation.
  • “The real problem is the cost of transporting food from the farm to the factory to the shop that's driving up the price right now.” — Lorcan Roche Kelly [06:45]
• [07:44] Forward-looking food production issues:
  • Farmers are planting less wheat than at any point since 1919 in the US; decisions made today will affect food supply and prices in 6-12 months.

3. Farming Economics and Demand Destruction

• [08:39] The realities of tight margins:
  • Farm commodity prices (like wheat) are low, while production and input costs are high, especially outside the U.S. and Europe, where subsidies are less available.
  • “If I'm a farmer in sub-Saharan Africa... they're really going to struggle in the next 6-12 months because where's the bailout coming from?” — Lorcan Roche Kelly [08:20]

4. Why Aren’t Oil Prices at $200?

• [09:11] The disconnect between expectations and reality:
  • The market feared $200 oil, not the sub-$110 seen. Strategic reserves, inventory drawdowns, bypass pipelines, and demand destruction (sometimes geographically unequal) have cushioned the blow so far.
  • “Somehow we have managed to reduce demand by probably about 5 million barrels a day... without really creating a lot of economic pain.” — Javier Blas [10:23]
• [11:32] Difference between oil shocks and energy shocks:
  • Electricity, not oil, caused the most consumer/business pain in 2022 (e.g., a French bakery’s bill rising from €700 to €7,000 per month).
  • “Electricity is what really makes the world tick... Particularly in the service industry, which is what drives economic growth these days.” — Javier Blas [13:12]

5. Fertilizer, Policy, and Delayed Crises

• [18:11] Why Europe is awash in fertilizer (for now):
  • Lorcan Roche Kelly details how farmers stockpiled fertilizer ahead of a new EU import tax (CBAM/“seabam”), buying up to 80% more than usual before 2026.
  • “So, much of the planting season has been taken care of. But... this is a crisis that's delayed, not solved.” — Lorcan Roche Kelly [19:27]
• [20:49] U.S. farmers’ struggle for affordable inputs:
  • Tight global fertilizer supply means high prices; U.S. farmers operate on thin margins and the spread between crop and input costs is negative.

6. Meat Markets: Beef Up, Dairy Down, Cheesy Problems

• [22:46] Why is beef so expensive?
  • U.S. cattle numbers are at 75-year lows, causing sustained high prices. Processors like Tyson are losing money, showing the squeeze isn't confined to consumers.
  • “The problem is there are not enough cattle to be killed. The retail price has moved a lot, but hasn't moved enough.” — Lorcan Roche Kelly [23:34]
• [31:08] Dairy and cheese glut:
  • Massive U.S. investment in cheese plants is set to create a glut of "soft" cheeses, but a likely shortage of aged cheeses in coming years.
  • “If you want a nice aged 1-year, 2-year-old cheese, buy them now because they’re hard to get in two years, three years time.” — Lorcan Roche Kelly [32:00]
• Dairy industry pivot: Surge in protein demand (whey), driving a shift in dairy production and potentially upending global cheese markets.

7. OPEC, Oil Policy, and Geopolitical Shakeups

• [25:07] UAE leaving OPEC: Why it matters
  • “OPEC is not dead, it’s really bleeding and bleeding badly.” — Javier Blas [25:07]
  • UAE wants to increase oil output, and its exit challenges OPEC's cohesion. Other members (e.g. Venezuela) may follow, especially if domestic politics change.

8. U.S. Energy Policy and Production

• [32:35] U.S. output rising, but don’t expect miracles:
  • $100 oil will trigger more drilling, but expected increases (~hundreds of thousands of bpd) are small relative to current market gaps.

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Notable Quotes & Memorable Moments

• On demand destruction:
  “The world is drowning in wheat, it is swimming in milk. We have so much food out there. One thing we're short of is beef.” — Lorcan Roche Kelly [06:27]
• On OPEC’s troubles:
  “OPEC is as strong as their members' ability to endure financial pain.” — Javier Blas [27:01]
• On cheese futures:
  “Everyone’s going to be making mozzarella and cream cheese and whatever they put in spray cans in America is all the cheese you’re going to get.” — Lorcan Roche Kelly [32:03]
• On farmers’ persistent discontent:
  “Farmers are always complaining about one thing or another. Like, they seem miserable. But when we talk to you, you seem okay.” — Tracy Alloway [07:53]
• On the commodity cycle:
  “Almost everything in finance is a spread... This time, corn prices have barely moved... and the price of fertilizer has gone through the roof.” — Javier Blas [21:51]

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Key Timestamps

• [03:09] Jet fuel, Strait of Hormuz & summer travel risk
• [06:27] Food supply surplus & beef shortage dynamic
• [08:39] Farm economics and the hazard of low commodity prices
• [09:11] Oil price speculation vs reality: war and supply shocks
• [11:32] Energy shock: why electricity trumps oil for economic pain
• [18:11] European fertilizer glut: how policy warped the market
• [22:46] U.S. beef and dairy sector’s divergent fortunes
• [25:07] UAE exiting OPEC: implications for oil markets
• [32:35] U.S. oil production outlook for 2026
• [31:08] Cheese, whey, and global protein market shifts

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Conclusion

This episode offers a wide-angle yet granular view into the chaotic realities driving global commodity markets. Geopolitics, policy tweaks, and subtle shifts in consumer and producer behavior are warping price signals and causing unexpected effects—from the looming aged cheese crisis, to the possibility of cheaper buns than beef patties, to the precarious near-misses in jet fuel and fertilizer.

Final Thought: Supply chains, reserves, and government interventions have delayed, rather than solved, many of the current crises. Both guests urge listeners and policymakers to look a year out—the true pain, especially in food and energy, may be yet to come.

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Transcript

[Joe Weisenthal]

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[Tracy Alloway]

Hello and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Eisenthal.

[Tracy Alloway]

This is a very special live recording of the podcast. We were over in London for our first ever UK live show.

[Joe Weisenthal]

I love going to London. It was a little anxious putting on a live show selling tickets and stuff in London. You never really know who's gonna like show up in another city. But it is a great time. We had a great turnout. We had some great conversations. It was great, great to meet some of the fans and listeners there. I really loved it. And yeah, I really enjoyed the live episodes that we record.

[Tracy Alloway]

Absolutely. And we had some great guests as well. And what you are about to listen to. Two of the perfect guests really I think for this topic. Obviously commodities is still making all the headlines really. So we decided to get two of our favorite commodities specialists. Both of them have been on the podcast before. We spoke with Javier Blass, he is, of course, our colleague over here at Bloomberg. He's a Bloomberg opinion columnist, author of the World For Sale. And we also spoke with one of our former colleagues, Lorcan Roche Kelly, who not only is a business editor at the Irish Farmer's Journal, but actually an erstwhile Irish farmer himself.

[Joe Weisenthal]

That's right. Formerly one of our colleagues, just to note, of course, because things change all the time. This was recorded on May 7 at Wilton's Music hall in London. Take a listen. All right. So, Javier, the big question that we have to get out of the way, I'm sure it's on the minds of everyone in the room here, is is Europe going to run out of jet fuel? And will there be like, should people take that into account when planning their summer holidays to Spain or wherever else?

[Javier Blas]

I think that you are making a great impersonation of my father who is asking that question. And also when it's okay to refuel the car. I'm kind of halfway it's okay now for gasoline and so on. I said that. 7:30 in the morning, please. I mean, it all depends whether the Strait of Hormuz reopens or not and when, because it has to be a question of when we are okay with jet fuel for the next few weeks until certainly the end of June. Then it gets significantly tighter because demand goes up quite a lot during the summer. But the market is working. Every refinery in the planet is maximizing jet fuel production right now. And we are beginning to see that working and more companies coming on the record saying that they are okay for the summer.

[Tracy Alloway]

I mean, I will say that some of my friends from university and Joe makes fun of me whenever I say uni friends, but my friends from uni were talking about changing their summer holidays to ferries and trains. So there's real life demand destruction happening already. You mentioned all of this depends on when the Strait actually reopens. Why don't we just ask you that basic question? When do you think the Strait will reopen?

[Javier Blas]

I mean, typically you have a deal when it's painful for everyone in the negotiation and it's not really painful for either side or not painful enough for either side to make the compromises needed. Iran is feeling the economic pain for sure. There's unemployment, there's inflation. But the regime can impose a lot of penalies over the population. And you know, it's the ayatollahs don't face any imminent election. President Trump does face an election later this year, but the price of gasoline is going up it's undeniable. Four and a half dollars a gallon. It's more expensive. But still, if you look at the American economy, it's still performing well. Earnings are good. The s and P500 is near a record high. It doesn't feel for the US that really the President is suffering a massive economic crisis that is going to force his hand to concede to Iran. So we are in a really kind of bad situation. You are hoping for a reopening that is painful, but not yet really painful enough that everyone is forced to compromise. And that's what I'm worried that it's not getting painful enough. What I will almost want is that Iran was suffering a massive economic crisis problem and that the president was facing $150 or higher. And then everyone has to agree we are not there yet. So it may take longer.

[Joe Weisenthal]

Lorcan. So again, for those who don't know Lorcan, not only a journalist, but actually long practicing farmer, someone who actually, you know, in the base, do we how are we doing on food here?

[Lorcan Roche Kelly]

I suppose a lot of people look at this crisis right now and they say, oh, we're back in 2022 again. And I think we're in a completely different situation. And one of the big reasons we're in a different situation is the world's food supply 2025 into early 26 has been really strong. Like the world is a lot of it. There is a lot of food. The world is drowning wheat. It is swimming in milk. We have so much food out there, one thing we're short of is beef. We notice that US beef prices are going up, beef prices are going up around the world. But we've loads of chicken, loads of poultry. So there is loads of food out there. The real problem with having loads of food, this is very like what Javier said. There's no pressure when food price, we see some food price go up driven by transport costs more than the cost of producing food. It's the cost of transporting food from the farm to the factory to the shop that's driving up the price right now. The problem's going to arise in 6 months and 12 months time when the decisions be made today about do I plant that field of wheat or do I breed more cattle for next year? And farmers are going to say, no, we're not going to do that. If you look at the US at the moment, forecasts are we have the lowest wheat plantation in the US total acreage ever. This is going back to data in 1919. So there's a real squeeze on food. Not now, but in 12 months. And maybe this time next year, you'll be looking at a burger and the price of the bun is going to cost as much as the price of the meat is going to be. And that's kind of what we're looking at. And that's the real squeeze. But the pressure isn't there at the moment on that.

[Joe Weisenthal]

There's our headline. The price of the bun is not just the price of the burger.

[Tracy Alloway]

I have a farming question, a bit of a.

[Lorcan Roche Kelly]

If this is about your Japanese knotweed, I have no answer for you.

[Tracy Alloway]

Yeah, well, I need advice on that. But setting that aside, farmers are always complaining about one thing or another. Like, they seem miserable. But when we talk to you, you seem okay.

[Lorcan Roche Kelly]

That's because I stopped farming, at least my farmer to somebody else. I gave it up as farming's tough. I think one of the big problems we see at the moment, and this is going to come back to my earlier point, the price the farmers are getting at the moment they're looking at wheat is very low. The price they're looking at for milk is very low. And they're saying, what's the sigma going to make? Like, I can't turn around and say, like US farmers or Irish farmers, European farmers will go and say we need more money from the government. And they might get a bailiff from government. If I'm a farmer in somewhere else, sub Saharan Africa or in East Asia, they're really going to struggle in the next 612 months because where's the bailout come from? Because they really are so subsidized with fertilizer and stuff like that.

[Joe Weisenthal]

Going back to the question, you know, it all comes down to the strait. So the war is over two months old right now. And I think, like, you know, again, when we first started having conversations about the closure of the Strait of Hormuz, people were talking about $200 barrel oil in fairly short order. And it's not. It's not there yet. Explain this gap, how we have the nightmare scenario for the oil market and it's obviously up a lot, but it's not at 200. It's still in the low. I don't know what it is right now. Somewhere in the low hundreds, depending on what benchmark you're looking at, it's about

[Javier Blas]

$100 a barrel for oil. I mean, again, when I was listening recently, Fati Birol, the head of the International Energy Agency, saying this crisis is worse than 1973, 79 and 2022 all put together. Then you look at the price of oil and say, well, no, really. And then you look at the price of natural gas, the price of electricity, the price of coal, because we have this obsession with oil. First I raise my hand. I'm obsessed.

[Tracy Alloway]

It's your fault, Javier.

[Javier Blas]

It is my fault. It's oil, crude oil and olive oil, those are my obsessions, just don't get them mixed up. But the energy wall is much larger than oil. And for many right now, most of the energy that we are using is electricity. And electricity prices in Europe are on average about what they were on average 2025. So there is not a problem there. But you are right, people were expecting much higher prices. If you have asked me a year ago, Javier, we have 60 plus days of the Strait of Hormuz close and this is all what has happened and the war and the missiles and so on, probably will have said, well, oil starts with a two handle and we are at 200 and something. Why we are not there? I mean, bypass pipelines have done a lot of work. We have used strategic petroleum reserves of everywhere other than China. We are drawing down inventories at a very fast pace. And I do think that perhaps what I underestimated is the amount of demand destruction that we have seen already. Somehow we have managed to reduce demand by probably about 5 million barrels a day. It's about 5% of the market without really creating a lot of economic pain. And it's a bit unkind to put it this way, but for the global economy, for the stock market, it does matter where the demand destruction is happening. It's not the same that it happens say in Pakistan or Bangladesh, that it happens in Germany, as it was the case in 2022. So I think that those factors are. But we are creating a flow of supply using a stockpile that cannot go forever, that is at some point comes to an end, but it's lasting longer than I would have thought.

[Tracy Alloway]

You mentioned electricity prices not being as high as you might have expected, given everything that's going on. It's become a cliche, I think, to talk about Europe always facing one shock or another or Europe being the loser from whatever the latest crisis is. I'm sorry to our Europe based audience, but is there a difference between an oil shock versus an energy shock in Europe?

[Javier Blas]

There is, because I mean, I think that we, in some ways we have forgotten how bad 2022 was in terms of energy shock. Take electricity and let's look at just a wholesale market and let's use the German contract as an average of Europe pre2022 price Seder was 50 to €75 per megawatt hour. That went to €1,000 per megawatt hour. Now it's around 80. So not far away to really the normal level. Unless you just kind of take a step back. Because I thought that to me the defining kind of picture of 2022 crisis, you cannot really picture electricity other than the pylons or a nuclear power reactor and so on. But to me was the electricity bills that people will post on social media or some small and medium enterprises will email to me. And I do remember French Baker sending me his corner shop in the outskirts of Paris. Typically his electricity bill came around 7 to €800amonth. And it just went from that to about €7,000amonth.

[Tracy Alloway]

Wow.

[Javier Blas]

And we have not seen that. But electricity is what really makes the world tick and particularly in the service industry, which is really what drives economic growth these days. And that's why the 2022 crisis was so destructive, particularly from an inflationary point of view, because a lot of businesses were receiving electricity bills that they were bankruptcy events. I mean either they increased prices and a lot or they will be out of business. And we don't have that today. And that's a difference. I'm not. Oil is very important because it permeates everywhere. I mean, as Lorca was saying, if we have a food price in the next few months, it's going to be more because everything is more expensive to transport. So you know, your groceries go on a truck to the supermarket. They may be on a, on a plastic tray on the supermarket and that's going to be also more expensive. So inflation will permeate. But electricity is a big deal and it doesn't really get the attention that it deserves.

[Joe Weisenthal]

By the way, we should mention that because we don't know exactly when this episode is going to come out on the feeds that this is all occurring. What's the date? May 77 14. British summertime.

[Tracy Alloway]

We had a request from someone specifically to say British summertime.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

So here it is.

[Joe Weisenthal]

Whoever made that request, that was what Summer.

[Tracy Alloway]

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[Joe Weisenthal]

mentioned okay, maybe one reason that oil isn't as high as it was because they're stockpiles. One of the episodes that we did sometime in early March that got a lot of people's attention was about fertilizer. I understand, because I heard from someone that there is actually a fair amount of excess fertilizer right now that's cushioning the blow. Can you explain this to me?

[Lorcan Roche Kelly]

In Europe particularly, there is a nice bit of fertilizer right now. And this is you. This is such a Joe story. It's brilliant because it's got European environmental.

[Joe Weisenthal]

Morgan is the one who told me the story earlier. So I'm sitting in my office.

[Lorcan Roche Kelly]

There may have been a production meeting outside, but. Yeah, so what we have in New York, they brought in legislation a few years ago to support what's called the domestic fertiliser industry. European producers. European producers are very high cost producers and one of their biggest costs is they have to buy carbon credits for the energy that they use because it's hugely energy intensive to make fertilizer, as we all found out in 2022 with the gas crisis. So those carbon credits have to be bought by Europe. It means that external producers outside of Europe having a competitive advantage because they don't have to buy carbon credits. So they're brought in this piece of legislation that's called the Carbon Border Adjustment Mechanism. Lovely acronym is SEABAM, because it hits you really hard. But we knew the 1st of January 2026, this sea ban tax was coming and it was going to put up to €120 per ton on urea coming in. Urea's nitrogen fertilizer. So like all the farmers in Europe said, well, we're going to buy fertilizer in November and December when we'd never normally buy fertilizer, that is like the middle of winter, you're not going to spend money on fertilizer.

[Joe Weisenthal]

There was a big boom in purchases in Europe of fertilizer in November and December of 20, up 60 to 80%

[Lorcan Roche Kelly]

of what they normally would be. So when we came into January, farmers had the fertilizer or merchants had the fertilizer up till about May or June of this year sitting in the yard. So much of the planting season has been taken care of. The UK being outside the eu, didn't have seabam. It has its own thing, but it's not coming into 1st January 2027. So the UK are a bit late to the party there, I'm very sorry to say, but not in most of Europe like that. So you see the import Numbers December was the biggest number, 60 or 80% higher than normally would be. So it's been a hugely beneficial tax in the very short term, in the long term. Now, once we get to those stocks, we'll see that imported fertilizer coming in and it's going to be more price because seaban will be there. But also if we look at countries that rely on Australia for most further nitrogen supply, they are now shopping in North Africa, Algeria, Morocco and Egypt, where a lot of the European imports come from. And those countries like India particularly are buying, put in huge contracts to buy that supply. So not only will there be seabam on the imports, there will also be more expensive fertiliser as well. So again, as Javier said, and I'm saying this is not a crisis that's going away, this is a crisis that's delayed. And that's what we're seeing all the way through it.

[Tracy Alloway]

So we see stories now that, especially in the U.S. i guess maybe not so much here for reasons that you just outlined, but you see stories saying farmers can't buy all the fertilizer they want at the. The price they want.

[Lorcan Roche Kelly]

Well, yes.

[Tracy Alloway]

What does that actually mean?

[Lorcan Roche Kelly]

There is a global price for. I suppose if we step back to say pre2026, the fertilizer supply for particular fertilizer, like for nitrogen was bit tight. So we see prices were creeping up, we go, okay, it's a bit tight. We'll get through next year. We need to get some more supply online. The fact you take 30% of it out straight away means there's a fight on for what's there. And US farmers generally, like, farming is an incredibly tight margin business. We're looking at net margins of like less than 1% generally year to year. So if you get price to go up by 10%, you're kind of going, is it worth planting this year? So when the farmers are giving out, sorry, complaining, as you say, like, they're never happy. They have good reason not to be happy because they look at. No, no, no. But they have good reason to be unhappy. So I look at the farmers in the U.S. they're saying they can't get the fertilizer they want to the price they want. Well, the price they want is free and all of it is free. But they have a cost benefit analysis built into their system. They can pay $450 for nitrogen, they can't pay $700 for nitrogen. And as simple as that.

[Javier Blas]

And almost everything in finance is a spread.

[Joe Weisenthal]

Sure.

[Javier Blas]

You have the price of Corn, you have the price of fertilizer, and you need to look at the ratio. What is different in 2022 is that the fertilizer price increased a lot of. But the price of corn also increased a lot. So you're a farmer. You were taking a hit on the cost, but you were benefiting from a high price. Fertilizers were more or less what Lorcan was describing, say, for 400 to $800 a ton. But corn prices went from $4 to $8 a bushel this time. Corn prices have barely moved. They're at$4.5 a bushel, and the price of fertilizer has gone through the roof. So that spread is effectively negative to the farmer. That's what for American farmers, this crisis feels very different to 2022 because their cost is up, but their potential profit is just down.

[Lorcan Roche Kelly]

And I think it's worth just to bring back to my topic, the farmers again, because I love talking about farmers. The other products the farmers make, like dairy farmers, are in real trouble because we've seen global milk supply up. I think it was 5% last year. We've seen some European countries up 7% so far this year as well. So the price of milk has gone below the price of production. In the beef side, we have huge beef prices, which are great, but farmers don't have cattle to sell. The reason the price has gone up so much, because particularly in the U.S. the cattle in the U.S. is the lowest it's been in 75 years, actually.

[Joe Weisenthal]

Can you explain it? This is a source of a lot of controversy. The cattle specifically, because some people want to blame the processors or whatever. Give us your diagnosis of beef prices.

[Lorcan Roche Kelly]

There are too few cattle and too much demand.

[Joe Weisenthal]

Okay, classic.

[Tracy Alloway]

Thank you, Lorcan, for that insight.

[Joe Weisenthal]

The lines on the chart.

[Javier Blas]

Cattle, red meat.

[Lorcan Roche Kelly]

Yes.

[Javier Blas]

No.

[Lorcan Roche Kelly]

I think the first of all, I don't want to ever defend one of the big four meat processors, but they are losing money hand over fist processing beef at the moment. You saw Tyson results were out there the other day. They lost $150 million in three months processing beef. So it's very hard to see how they're making a killing doing that, because clearly there was money. But the problem is there are not enough cattle to be killed. The retail price hasn't gone, so everyone's competing for the cattle that are there to go to slaughter. The retail price has moved a lot, but hasn't moved enough. And we're getting to a place now in a lot of markets where we're starting to See demand destruction happen. So I suppose the time between you're buying the animal and your. The animal goes to market, you're going to be caught a little bit in that. But also I think it's very important for people outside the industry understand if you kill a steer, you don't have one customer for that. You've got 25 different customers. Like, the US is one of the largest importers of beef in the world and one of the world's largest exporters. So you go, how's that work? Because the US people love to eat minced or ground beef you call it. That's what you eat, ground beef. The rest of the world likes steaks and stuff. So you're importing, exporting different bits of meat. So the steak business is at a different price to the ground meat business. So you have all different kind of things happening. But the fundamental problem is there are not enough cattle.

[Joe Weisenthal]

Supply and demand, Supply and demand.

[Tracy Alloway]

Javier, I want to segue to a big recent headline in the energy world, which is the UAE leaving opec. And it's been a habit on the podcast to describe relations between the UAE and Saudi Arabia as frenemies for many, many years. However, I think we might be dropping like the FR part fairly quickly. What does this all mean?

[Javier Blas]

I mean, this is the biggest challenge that I think OPEC has faced. I mean, typically he said that the foremost dangerous wars in global finances, this time is different. I think that the three most dangerous wars in analyzing the oil market are OPEC is dead. And I will say that it is not dead, really bleeding and bleeding badly. Many countries have left OPEC before. See if I can remember all of them. It was Indonesia, Qatar, Ecuador. And I'm missing, I mean the uae and I'm missing one. I know that I'm missing one. I will come back to me, Angola.

[Lorcan Roche Kelly]

Sorry, I was going to guess that.

[Joe Weisenthal]

I wish I had said that they

[Javier Blas]

were different for two, three important reasons. The UAE have the ambition to produce a lot more oil. And I have been very clear that they're about, with a capacity of four and a half million barrels a day, they want to go to five million barrels a day and potentially higher. They have the geological endowment to produce that extra oil. And they have also the money to back the dreams that they have on producing more with money to build the facilities so they will produce a lot more oil. And I think that that really brings a big challenge to Saudi Arabia. And if and when the Strait of Hormuz reopens, we can have a situation in which For a while there's going to be demand for the store oil because global inventories are going to be, are going to need to be replenished because a lot of countries are going to build larger inventories. But at some point you're going to see a raise for market share. And if we have a race for market share, then everyone wants to produce more oil, then the price of oil has to come down. OPEC is as strong as their members ability to endure financial pain. But withholding barrels from the market, barrels that they can produce, that they decide we are not going to put them on the market. And if you look through that lens, opec, the two most powerful members were Saudi Arabia and the United Arab Emirates. Those were the members that they were withholding the most barrels from the market and in a percentage basis comparing how much spare capacity they were leaving aside to their production. Even the UAE was taking more pain than the Saudis. That's why the UAE leaving is so important and also because you could have others. If we do have elections in Venezuela at some point, and I hope that we see that towards the end of the year or the beginning of next year and the opposition wins. The opposition has been historically very hostile to opec. So we can have another. And Venezuela is another country that wants to produce more oil, that has the geological endowment to produce more oil. Question is, does Venezuela have either the money to do it themselves? Probably not. Can it put the financial incentives for big oil to go there? At the moment they are not there, but over time perhaps they are.

[Joe Weisenthal]

Speaking of big sort of policy, earthquakes, whatever. Tracy and I were here just about a year ago in London, right in the wake of a liberation day. How are the farmers feeling about American trade policy these days?

[Tracy Alloway]

Morgan, you can't swear on this podcast.

[Lorcan Roche Kelly]

Well, we can bleep it out. Yeah, yeah, no, I think American trade policy has been not as bad as American foreign exchange policy. Okay, that's like if we look at like for European exports to us, it's generally higher value stuff like wine, butter, stuff like that. We don't trade much meat with the US because you fill your meat full of hormones. We don't want that and you don't want our nice healthy meat. So it's like butter and wine is the two things we export over and they're higher end products. They can be sure you're filled with Kerrygold, not to mention a brand and you beat that up as well. But it's like three times the price of US butter and it sells in US retail and Wine is French wine, French brandy is kind of the same. So it's the FX rate that's done more damage, I think, because it has led to uneven demand. Like US prices are going to do something. So people will buy stock for three months and then they'll have the stock burn stock down and they'll buy three months of stock again. So it's kind of led to difference in trade flows. But market shares in general market hasn't changed as much as the headlines here suggest, but it has. The thing that's left the mark is the fact the dollar is 20% weaker than it was a year and a bit ago and yesterday. The bigger problem, I think one of the biggest changes we're seeing is more on the consumer side than the policy side. Like, we talk a lot about GLP1. So people are eating a lot less. They're eating a lot less. And also eating a lot less. In what we call QSR's Quick Serve Restaurants, people aren't buying pizza so much because pizza is a food, but what they are doing is they're tanking up on protein. Everything you see, I'm sure you've seen it advertised everywhere. Protein here, protein there. A lot of dairy companies in the US particularly, and in Europe as well, we see the. They're making dairy products. Whey protein, it's called. In order to get whey, you produce cheese. Thirty years ago, we produced loads of cheese and the whey was what we fed to the pigs because, like, who'd want to drink whey? Now we produce whey and the cheese is what. We don't know what to do with this, but it still makes. The best thing to do is a liter of milk or, sorry, a pint of milk for the US audience. If you have a pint where you want to make money on it, you split it into cheese and whey. You get the whey, you turn it into wpi, which is high protein whey, and then you sell that to anyone making any food in the world because they want to put 20 grams or 30 grams or 40 grams of whey on their product, because they can sell it for 25, 30% more. And that's where the market is at the moment. And right now in the us, I think there's maybe four or five absolutely massive cheese plants being built. So you're going to be swimming in cheese in the us. Doesn't sound that bad, but it's American cheese. Let's be clear on what you swim with it. Yeah, but that is.

[Joe Weisenthal]

That is the look on Javier's face right now at the thought of eating American cheese.

[Lorcan Roche Kelly]

I mean, it gets worse for Javier, it does get worse.

[Javier Blas]

But my question is how you guys are surviving on just California and olive oil.

[Lorcan Roche Kelly]

You never saw knife in second order with India. So we're gonna see that in the next couple years. There's gonna be loads of cheese and loads of whey. Lots of investment in that side of things. For the producers at the moment, they're trying to get their whey so milk turned into whey and cheese as quick as they can. So they stopped making harder cheeses. Everyone's making soft cheese now because you can turn soft cheese on the market very quickly. The price for cheese has collapsed and it's going to get lower, but you're not going to be able to get an aged cheese because no one's going to at scale anyway because no one's going to tie the capital up for six months or 12 months on this market where look at that market's falling down because everyone's going to produce in cheese. So if you want a nice aged 1 year, 2 year old cheese, buy them now because they're hard to get them in two years, three years time.

[Tracy Alloway]

This is actually a disaster.

[Lorcan Roche Kelly]

Everyone's going to be making mozzarella and cream cheese and whatever they put in spray cans in America is all the cheese you're going to get.

[Tracy Alloway]

Javier, just going back to oil for a second away from the cheese and curds and whey. One thing that you keep hearing from the Trump administration is there's an expectation that the US will be able to, you know, manage its own supply and that as prices go up, you're going to see that supply side response from the drillers and we're going to be awash in oil. Is that playing out at all?

[Javier Blas]

We are going to have a response from the drillers. I think that US production in 2026 will be higher than we have expected 612 months ago. I think that we are beginning to see some significant American companies talking about increasing production. I think that $100 oil, you were rising production at 80 or 85. Certainly you are going to increase production more at 100, but we are talking about a couple of hundred thousand barrels a day extra compared to a hole in the market of 10 million. It's not really going to move the needle, but yeah, I will expect to see US production by the end of the year to be higher than I had expected.

[Lorcan Roche Kelly]

A question for Americans. What is the oil price, the gas price in America that actually causes political trouble. Like, is it six, eight, ten dollars a barrel? Where does that happen?

[Tracy Alloway]

It's all relative.

[Joe Weisenthal]

I don't know. I live in Manhattan. I don't. I, I'm, I'm an out of touch New Yorker. But it, yeah, four, four. That's when you really get it, I think. Anyway, Javier and Lorcan, thank you so much for coming and joining us at Odd Lots Live.

[Lorcan Roche Kelly]

Thanks for having me. Thank you.

[Tracy Alloway]

That was our episode recorded live in London on May 7 at Wilton's Music Hall. Shall we leave it there?

[Lorcan Roche Kelly]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal. You can follow me at the stage Stalwart. Follow our producers, Carmen Rodriguez at CarmenArmen, Dashiell Bennett at Dashbot, Kale Brooks at Kale Brooks and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to bloomberg.com oddlots we have a daily newsletter and all of our episodes and you can chat about all these topics 24. 7 in our Discord, Discord, GG odd lots.

[Tracy Alloway]

And if you enjoy Odd Lots, if you like it when we do these live shows and talk about the upcoming aged cheese shortage, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

[Lorcan Roche Kelly]

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