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But first, I really want to talk about what's happening in energy markets today.
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I don't have to tell anyone listening or watching their volatile oil is still about
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above $100. And given, I think some of the sea-solving statements from President Trump and U.S.
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and responses from the Iranians, it's very unclear what's going to happen next.
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How is this impacting the energy markets in Europe versus the U.S., which I believe is a little more
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self-reliant? And what are some of the big changes or how is this impacting your business?
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Yeah, a great, very obviously topical question. The kind of differences between the UK and Europe
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and the U.S. are pretty stark, which you can kind of see and manifest itself on the charts right now.
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And I think one of the big things that we look at broadly is if you think about oil and gas prices,
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obviously they're incredibly, you know, the price of oil and gas on markets is incredibly
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ready to supply. And you know, most of that comes through the Gulf for Europe especially.
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In the U.S., naturally, you know, with the kind of recent sale revolution, the U.S. is
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somewhat self-sufficient, especially when it comes to gas. But I think, you know, one of the
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big things that we look at is when we're looking at and how it's kind of affecting our business,
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is that the price of oil actually doesn't really affect into the price that ultimately people
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pay for their energy, that homes, businesses, data centers, etc. pay for their energy. And, you
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know, obviously it affects what people pay at the pump, but it's more through secondary effects
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that oil has these knock on effects and the kind of energy economy. And you know, it's loosely
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correlated with gas and that's typically due to, you know, it's kind of a replacement in some
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industrial applications and obviously oil and gas are sourced, near one another, but the main
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effect of oil on kind of power markets and energy markets in general is secondary due to,
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you know, inflationary effects on logistics. And obviously that's been hugely impacted
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with the recent developments in the Middle East and the kind of more kind of pertinent thing
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around energy markets, you know, for us in our business is the price of gas. And it's a totally
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different story because gas directly influences the price of electricity that people pay.
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It's the kind of primary fuel that goes into your combine gas turbines, which makes up a third of
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the fuel mix in both the UK and the US. And the way that energy markets are structured and the
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kind of crisis recovery mechanism on energy markets is very heavily indexed towards the gas price.
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So what that means is when there's supply disruptions to and the LNG around the world,
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what you see is a direct impact immediately almost on the price of on power markets.
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And in terms of the kind of US versus Europe, UK comparison, the Europe is a heavy
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importer of gas. And typically what happens is that you have seasons where there's injections
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into gas storage facilities that typically happens over the summer. And then you've got seasons
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of withdrawal from those storage facilities. And obviously naturally during the injection season,
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which is now coming off, the price kind of worldwide of gas and heavily influences,
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you know, ultimately the costs that Europe is paying. On the flip side, US is with the recent
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shale revolution fairly insulated as we've kind of seen a little bit on the gas side of things.
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And that is going to be something to watch over the next few years, though.
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And the reason for that is when you look at there, there's a certain decoupling between
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the Henry hub price, which is the price, the kind of standard price of gas in the US and the kind
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of the price of GCF, which is the kind of European UK index. Those are somewhat decoupled because
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the US, because it's such a recent market, is slowly still ramping up its export capacity,
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which means that right now there's this decoupling, but we do expect that decoupling to actually
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decrease over time. And the kind of consequence that that is right now there's quite a
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quite a lot of insulation for the US market. But not at all for the UK market, but that decoupling,
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as I said, will look to compare it over time. But ultimately, when it comes down to our business,
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it's the price of gas and the flows and the kind of status of the storage facilities around Europe,
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because that's where we're operating right now, is what really influences what we're paying,
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and then ultimately what customers are paying the other one.
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Gotcha. And maybe just to bring the picture for everyone watching and listening,
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$100 barrel for oil sounds moderately scary. $150 is very worrisome. $200 is downright terrifying,
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and that could lead to synthesization territory. Could you sort of put natural gas prices in
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in those terms? And I know, I mean, just I'm not an energy expert, but it's easy to remember,
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especially during the Russian invasion of Ukraine from 2020 to on sanctions put on
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on Russian energy exports. And nowadays, people are talking about the closure of the
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Strait of Kormuz, and while some oil processing plants have been shut down, it might take months
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for them to start up, if and when this conflict ends, the Strait could reopen immediately,
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theoretically. Whereas Iran's attack on guitars, like big processing and export facility,
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I believe knocked off 20% of its total capacity, and Qatar is a huge LNG exporter,
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that could have much more permanent effects from what I could tell. So how does that like, again,
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put a pick kind of a long question, but like, what are the prices right now, and how is that
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actually directly impacting customers? And and then again, like, because of this like big attack
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on the infrastructure, what challenges will that present like moving into the future?
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Yeah, so I mean, right now the price of gas are basically about and 50% above 50 to 70% above
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the kind of usual price that was kind of we would expect and around this kind of here. And
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you know, ultimately that is down to, you know, obviously the disruption to the Strait of Kormuz.
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And, you know, when we kind of look at it, like, beyond just crude and LNG, you've got like
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disruption further to, you know, not just gas prices, but a bunch of other prices as well,
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right? So, for instance, 30%, 34% of global fertilizers come through the Strait, right?
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There's also effects. So that's how it ultimately affects food. And then also, you know,
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kerosene is mostly sourced out of guitar and straight as well. So that obviously influences
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the price we pay for, yet fuel. And further effects on that is like, there's about a quarter
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of the world's sulfuric acid comes through the gulf. That is needed for things like explosives,
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which is obviously very hot and topical right now. And also, you know, we're finding things like
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copper, which is essential to many things, including a lot of inputs in the energy industry.
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So as a consequence, essentially right now, what we're looking at is gas prices are, you know,
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quite like fairly elevated, probably not as aggressively elevated as what we've seen with oil.
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And not quite as aggressively elevated as what we've seen through the Russia Ukraine crisis.
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And that is in part because, you know, especially in Europe, there's been a lot of measures taken
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since the 2021 crisis to kind of, you know, obviously mitigate the serious effects that
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that crisis had and causing, you know, the disruption to the energy markets back in 2021.
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And so that said, like, essentially what we're seeing is right now, we've seen an increase.
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But not as aggressive as what we've seen in the past. But however, one of the big issues that,
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you know, that probably a lot of our listeners have seen is that, you know, this,
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this disruption and its attack on the facilities themselves, these are multi-billion dollar
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facilities that take decades to build at a very long time to repair. So the long term disruption
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is something that I feel like isn't fully being factored in right now. And people, you know,
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view that, okay, look, this is a short-term thing. We'll see a taco and then, you know,
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prices will return to normal. But in fact, you know, what we, what we're not really recognizing,
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and I kind of think that, you know, a lot of markets aren't really recognizing is that do these
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really severe long-term effects on global support, you know, that they're growing to
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percolate in the last for quite a few years.