The Truth with Lisa Boothe: Dan Brouillette: Why Gas Prices Aren’t Coming Down Anytime Soon

0:00This is an I Heart Podcast. Guaranteed Human. Welcome to the Truth with Lisa Booth, where we get to the heart of the issues that matter to you. Today we're talking about energy, particularly gas prices as we head into the midterm elections. Obviously there's been a lot of disruption in the Middle East with the war against Iran. So we are going to ask President Trump's former energy secretary, Dan Brioet, about that. Plus, I'm not sure if you've seen the news about this deal that President Trump announced. He's calling it the biggest oil deal in world history. What it states is that US will have access to more than 65 billion barrels of Venezuelan reserves that oil through a private partnership that potentially can be pushing out Chinese and Russian operators out, which is good for the country. What does it mean? What should you know about that? Also we're seeing the global energy chest forward change.

1:00There's a lot of pipelines that are coming back online in the Middle East, Andrew being created to try to bypass the straight up removes. So what does this mean for the country, for the global energy market and for you, most importantly? So stay tuned for all of that and more with Dan Brioet, the former energy secretary under President Trump. Well, Dan, it's great to have you back on the show. I've got a bunch of questions on the energy front. So I thought who better than a former secretary of energy? So I appreciate you coming on the show and making time for us. But thanks for having me back. Lisa, I look forward to the conversation. Yeah, I learned so much from our last conversation. So no pressure, you know? But there's no worries. Why, why did you get kind of just like big picture? We'll start off on and then I've got questions about Venezuela. What's going on straight up for me is all of it. But sort of big picture, energy wise globally. Obviously, there's been a lot of disruption with the war in Iran.

2:01We're going on months now. I guess big picture, like where do the things stand today? How would you sort of assess the global energy landscape? Well, I think it's a very exciting time, Lisa, in a certain sense and that we're seeing what is being developed as well as my good friend Dan Yervin refers to as a new energy map. He wrote the book actually entitled The New Map and it speaks specifically to this point. And for the listeners who are not familiar with Dan Yervin, he wrote perhaps the most important book on energy policy in the world that was written back in the 80s. It's called The Prize and it explains the old markets around the world in such an accessible way. You're a layman, you've never been in the business. If you read that book, you'll have a very clear picture of what's going on today. And what I mean by that is that we've lived through a period of time where a handful of countries in the world really controlled the entirety of the oil market, over back in particular Saudi Arabia, Venezuela, which I'm sure we're going to talk about.

3:04These are countries that control the oil around the world, not just in the straight of oil, but literally around the world and more important to control the price of oil around the world through their cartel. And we're seeing that beginning to fade, I think. And that's what I met earlier about an exciting time because as these cartels become less powerful, it really frees up the market for countries like ours. Countries who are founded in democracy and capitalism creates an enormous opportunity for American producers, as well as American refiners in the entire industry that surrounds the production of energy. And then when you look at this new global map that you're talking about, how much of that has changed since President Trump first took office, how much of that is a result of obviously the war with Iran and the straight up remuse sort of being a chokehold has created, you know, as forced other countries to sort of reorient around it. So like how much, I guess how much of this shifting map is due to, you know, what we've

4:09seen under President Trump and more modern era. Sure. Well, I think, you know, the biggest difference is that we have a president who is actually willing to use the strength of our production here in the United States to achieve not only economic goals but for all the goals. And that's something that I think is fundamentally different than, you know, previous presidencies. And this is not a criticism of any previous president, but, you know, I served under President Bush as well at the Department of Energy as an Assistant Secretary. And I saw, you know, the situation he faced, we were an important nation at the time. So when we had catastrophic events like 9-11 and we were dealing with certain countries in the Middle East, you know, his position was not nearly as strong as President Trump's was during the demand crisis that we faced as a result of COVID. And there's fundamentally different. I can, I can, I can speak to the COVID one because I was in the local office and watched this firsthand. You know, as we recognize the impact of the pandemic and the falling demand for refined

5:13products like gasoline diesel, we had a situation in which Saudi Arabia decided to take advantage of that situation and not only raise their production, but lower their prices even further. And the purpose of that we thought was to really push out our Texas producers, our shale producers. So they're trying to gain market share. And because of the strength of our production here in the United States and because of the simple fact that we were no longer an energy employer, we were an energy exporter, the President could look at the, you know, the King of Saudi Arabia and the eye and say, you're going to cut your production. I'm not going to let you do that. And within 45 minutes to an hour, we had reached an agreement with not only the Saudi Arabians, but the Russians as well, that they were going to cut their production and that really had a stabilizing impact on the market. You might recall oil prices had dropped to negative $37 a barrel at that point in time. So it really did stabilize the market. But it was the President's use of energy and our production and our strength, you know,

6:14in such a way to affect foreign policy that I thought was fascinating. He's the first President that I've seen that's been able to use that. You know, we're seeing some of these pipelines come online in the Middle East and response to, you know, the disruption of the Strait of Ramos. Goldman Sachs estimated that regional pipeline expansion could push effective or could bypass capacity of above 14 million barrels a day by the end of 2028, essentially insulating more than 60% of pre-war golf oil exports from future Ramos' disruptions. Now, obviously, you know, that's in 2028. We're not quite there yet. But I just talk about that. How do you see that front and some of these pipelines coming back on and expansion happening with that? Well, I guess, how does that shift away the power that Iran has over the Strait of Ramos? Well, I think it shifts it tremendously. Again, speaking to that new map that's being created with all of these events, those

7:18investments are absolutely essential. So we're looking at U.S. companies as well, participating in those projects. I'm aware of the reason and announcements by Chevron. These were all public announcements by Chevron and others to help develop a pipeline from Iraq, to Syria, to the Mediterranean to completely avoid the Strait of Ramos. And I think we're going to see more and more of that type of infrastructure being developed to avoid these choke points, not only in the Middle East, but perhaps in Asia as well. There are other choke points around the world that, you know, while not as prominent in today's news, they're equally important. And what I think about this is, you know, sort of taking that stuff back. It's also important that we develop infrastructure here in the United States, so you and I have talked about that, I think, in the past. You know, we have our old choke point here in the United States, which keeps our refined products a little bit, they're priced higher than perhaps they should be. And the choke point I'm talking about is our refining capacity. Right now in the United States, our refiners are running at roughly 98% utilization rates,

8:25which is enormously high. They run typically in the high 80s, maybe in the low 90s, but to run flat out at 98, or sometimes 99% is enormous. And what it speaks to is that, you know, we're really pushing our limits on how much fuel we can actually refine and make it available to the consumer public here in the United States. And as you well know, when you restrict supply and demand continues to grow, and it is continuing to grow, then you're going to have a lot of pressure on prices. And I think as a country, as a policy makers around the world, but certainly here in the United States as well, we need to focus on the infrastructure development. Yeah, the Iraq thing is interesting too, because you had the new prime minister have a, he recently had a bilateral meeting with President Trump and like wrote this op-ed in the Washington Post about how he invites US investment. So I think that, you know, those partnerships will be really interesting to watch considering the changes with the Iraqi government and also with things such as source of conflict

9:26in the past, if that changes, and how long lasting are those changes as well. You know, I guess we're doing stand right now in the straight up removes and energy making its way through it. Yeah, I think there's been some debate about the numbers. You know, when I looked at it, I look at the industry numbers. I speak to the world companies who are shipping the products through the straight almost every day. You know, those numbers, they tend to go back and forth like last week, the Secretary of Energy Secretary Wright announced that we had reached a new high point of about 17 million barrels per day coming through the straight. Previous to the war, that number was about 20 million barrels per day. So if we can maintain 17 million barrels a day, that's fantastic. I don't think it's quite that high, Reddit to mallet. And if it was 17 million barrels, I think it's important to remember that, you know, those ships were escorted by the US Navy. So the question then becomes, are they going to escort these ships forever?

10:29How long can they do it? What's the cost of that? There's lots of questions around that. I think the real number today, as we sit here, is probably closer to about eight to nine million barrels a day moving through, ship the ship transfers, ships moving, you know, in the dark, if you will, without their transmitters on that sort of thing. We're probably at about nine million average per week. So a per day, I should say. So that's not a bad number. We're getting close to being back, close to halfway, you know, to where we were pre-war. But I suspect that once this war comes to an end, that traffic will pick up pretty quickly to meet the worldwide demand. You know, so for this, I think Trump announced this major US Venezuelan oil deal that gives us direct stake in developing 17 fields. Talk about how, like, what should people know about this? How significant is this? And I guess what impact does this have on our energy supply moving forward?

11:33Well, I think for the long term, it has a pretty significant impact in that it gives us access to reserves. That way might need in the future, which again, speaking to the conflicts in Ukraine, Russia, the conflict obviously in the Middle East, that buffer will protect us or at least give us some additional protection from those types of externalities or world events. I think it's important for us to know, however, that this will not have a near-term impact on gas prices. It will not have a near-term impact on diesel prices. It simply cannot. And the reasoning for that is really simple. I mean, Petrovesa is the national oil company in Venezuela. Once once a very good company, 30 years ago, pre-Shalves, pre-Moduro, Petrovesa was actually not a bad company, produced very efficiently. That is not the case today. Their infrastructure is pretty weak. It needs significant upgrades, not only the oil and gas infrastructure, but the electricity infrastructure that powers that industry as well needs significant upgrades.

12:36That's going to take time and a lot of money. The near-term impact on consumers here in the United States will be near zero. I think that's important to recognize. The way the deal is structured with this one company and the U.S. having warrants in this one company, I don't think there's a lot of detail, enough detail for us to apply in one way or the other. As to whether this is a good structure or not. I think it is unusual that I do think that there's going to be some significant risk associated with giving basically one company, a foreign company I might add, and literally one CEO, one person, access to 65 billion barrels of oil in Venezuela. I mean, to put that in context, there's 750 million barrels that can be stored in the strategic petroleum reserve here in the United States. Our overall reserves are nowhere near those of Venezuela. Frankly, 65 billion is probably about three to four times of what we have here in the

13:39United States. Just that sliver of Venezuela reserves is probably three to four times of what we have here in the United States. It's an enormous, enormous deal. With it, probably a lot of risk associated as well in the way that deal is, at least publicly, been announced or constructed. Interesting. In some of these moves that the president's made regarding energy, what impact does it have like with Ben? I mean, I would have to imagine that part of getting Maduro was also like an energy move with which I think it access to some of these oils and also counter enemies from being nearby. So, you know, the same thing for I and Cuba right now. So I guess, you know, what impact does all of this have in sort of isolating or trying to neutralize some of our enemies like Russia and China and Iran, obviously, but that's

14:42already sort of forgiven since we're at war with them. You know, look at it. Obviously, you have no longer in the situation room, you know, talking about these things. So I don't have access to, you know, the information that, you know, others have at the moment, but look, when you look back on it and you think about the timing of these various events, you can connect some dawn to your, I think, you know, the timing of our actions in Iran, pretty close to the timing of the actions that we took in Venezuela. We removed Maduro potentially, you know, in anticipation of an attack in Iran. I think clearly the president thought that he needed additional leverage against Russia, a major oil producer. And candidly, he did want to deny China, access to what at the time was very cheap, discounted well, coming out of Venezuela. It was a very easy way for China to obey, you know, routine sanctions that we had on the Maduro regime.

15:43As well as, you know, by discounted oil out of Iran as well, but look, I think when you look back on it, it looks like a pretty clear strategy to not only provide the United States with additional reserves and additional capacity, but to not deny countries that, you know, frankly, are adversaries to us. Do we look at gas prices right now? And we just hit a seasonal record high of 4.15 per gallon, highest gas price ever recorded for this time of year and early September or Labor Day season. What do you think that's going to, you know, obviously this is sort of putting on a different hats as we head into the midterm elections, but what do you think those prices are going to look like as we get closer to November? Is there any way to sort of forecast that? Yeah, very difficult to forecast. And most do try to get it wrong, including me. So with that caveat, stipulation, look, I'll stand by what I said earlier this year.

16:46I mean, toward the beginning of summer, you know, right around November, which is the kickoff of the summer driving season, if you will. I guess prices were starting to come down a little bit because there was an expectation that the straight was going to open up pretty quickly. And I think we said then pretty clearly that they will come down as soon as the straight opens, but in the near term prices are probably going to go up a little bit. And again, the reasoning behind that is because we could see the other choke points in the industry, the refining capacity that I talked about earlier, you can see those choke points pretty clearly. So, you know, unfortunately improvement, I think, correct about that. Price has gone up now. I think looking down the road, you know, the midterm elections, I think prices are going to moderate slightly. This assumes no other extra realities, meaning, you know, we don't take additional actions against Iran or, you know, some other things that might happen there for everything stays status quo. We'll start to see some of the price and come down, but it's only going to be moderate price decreases. I don't think you'll see a dramatic drop until you start to see stability in the supply

17:50of oil around the world, being straight opens up, you know, insurance rates for shippers start to come down. Those types of things that go along with the business of energy production, when those things come, start to come down, you start to see the price for consumers decline as well. But unfortunately, I don't think much is going to happen between now and the election. Interesting stuff. Dan Buryat, Buryat, thank you so much for breaking this all down for us. We really appreciate your time today. Thank you, Lisa. Great to be with you. That was Dan Buryat. Appreciate him for coming on the show. Appreciate you guys at home for listening every Tuesday and Thursday. You can listen throughout the week. I also want to thank my producer John Cascio for putting the show together. Until next time.