Javier Blas on China's Rare Earths Dominance

Every time there is tension between the US and China, there are stories about China threatening to withhold exports of rare earth metals, which are supposedly crucial for all kinds of advanced technologies. In this episode, recorded in Bloomberg's London studio, Bloomberg Opinion columnist Javier Blas helps us clear up some misconceptions about them. For one thing, rare earths aren't actually that rare. Furthermore, the amount of global trade of these minerals is fairly minuscule. The US only imports $170 million worth in a year. And then beyond that, the most common usage of them is in vacuum cleaners. Still, their economics are interesting and they do have some important applications. In addition, we talk about what the trade war means for the domestic US energy agenda, and the Trump administration's desire to expand total output. Read more:Chinese Rare Earth Shipments Held Up as Trade War Upends ExportsJavier Blas: $50-a-Barrel Oil Is a Problem for US Trade Deficit Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Finance is increasingly being built on digital rails. But as the adoption of virtual assets, tokenization and stable coins grows, can regulation not only keep pace but help accelerate it? Find out more later in the podcast.

• 0:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 0:58Speaker 01

  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:41Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 1:57Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:01Tracy Alloway?

  And I'm Tracy Alloway.

• 2:02Joe Weisenthal?

  Tracy, we're in London.

• 2:04Tracy Alloway?

  Yes. How do you like it?

• 2:05Joe Weisenthal?

  I love it so far. I'm having a great time.

• 2:07Tracy Alloway?

  You know what I've realized? I always make the mistake. So I lived in London for a long time. I went to university here. I met my husband here and I stayed here for like over a decade. But I realized whenever I go back, I always make the mistake of doing it on that one glorious spring day where the temperature is like 75 Fahrenheit, like 21 Celsius, and everything's blooming in central London and it's sunny and it's beautiful. And I think, wait, why did I leave?

• 2:34Joe Weisenthal?

  But then the next day, it's gray.

• 2:37Tracy Alloway?

  Yeah, okay. There is that. But I really, I need to come back in like January when it's dark at 3 or 4 p.m. and remind myself that there are in fact some downsides of living here. But it is very nice to be back for a visit.

• 2:49Joe Weisenthal?

  This is actually my first time being in the city, right? Because I haven't really stayed in this part of the city before. It's really nice. All the history and everything. Despite being here, we have no choice but to continue covering various repercussions, fallouts, updates, ongoing developments in the trade war, or whatever we're calling it, the tariff, whatever.

• 3:11Tracy Alloway?

  You would rather be thinking of actual war history and going to the Imperial War Museum or something like that.

• 3:16Joe Weisenthal?

  So on my, on my one free day here, I did the Boomer thing and I went to the Imperial War Museum and I saw a lot of things that I've only read about, referenced in books. Anyway, all kinds of dimensions in the trade tensions and everything. But one thing that's going on is big impact on commodity markets. We've seen the price of oil plunge as recession fears get priced in. And there was this headline in the New York Times about China halting export of rare earth metals as a retaliation. And I just have to say, I've been reading about China halting exports of rare earth metals in retaliation for my entire life. It never seems to matter. It never really seems to be a thing. But it always is a really scary headline.

• 3:58Joe Weisenthal?

  But I've never actually, nothing as far as I recall, ever gets shut down or grinds to a halt as from these supposed export restrictions.

• 4:06Tracy Alloway?

  This is one of the greatest branding exercises of all time. It's because it has the word rare in the title. Everyone can really easily, apparently, make the case that these are rare and you really need to snap them up, get the exposure before China starts limiting exports and we all have to pay through the nose for these things. But yeah, it's never happened and the rare, as I don't know if we've ever discussed on this show, but certainly other people have discussed it at various points in time, the rare actually isn't that rare. It turns out, there's a lot of them out there. It's just no one really likes getting them out of the ground that much.

• 4:39Joe Weisenthal?

  So, since we're here in London, we can never talk to him enough about commodity things and because there are commodity things going on, I'm thrilled to be in person with our colleague Bloomberg Opinion scribe Javier Blas and knows everything about all things commodities. Javier, can you just rant for a couple of minutes about rare earths? I'm not even going to ask you a question, just go on a rant about headlines about China limiting rare earth exports.

• 5:06Tracy Alloway?

  Rare earths, go.

• 5:07Joe Weisenthal?

  Go.

• 5:08Speaker 04

  Joe Tracy, thank you for having me. You have been listening to these headlines and getting very scary. There's going to be a shortage of rare earths all for a long period of my professional life, which is beginning to be more than 25 years and I have some gray hair to prove it. I have to, a deal with editors will come to me and say, rival publication is saying XYZ rare earth metals panic.

• 5:36Joe Weisenthal?

  No, it's great for clicks, so I get why editors like it.

• 5:39Speaker 04

  And then my editors will say, like, should we be writing something about it? And my default answer has been, no, there is not going to be a shortage. And if there is a shortage, the consequences are not going to be nearly as material as people think that they're going to be. So, a couple of numbers.

• 5:55Joe Weisenthal?

  Okay.

• 5:56Speaker 04

  The United States imported last year in 2024, according to US government data, a grand total of, give me the theme music.

• 6:07Speaker 04

  A hundred and seventy million dollars of rare earth metals. No, no, billion, million, a hundred and seventy million. I'm pretty sure that the United States imported more olive oil from probably Spain.

• 6:21Tracy Alloway?

  I like that olive oil is your baseline for measuring value.

• 6:24Speaker 04

  And how much is that? That's the second number we are going here. How much is a hundred and seventy million if you compare that to total trade between the United States and China? That is zero point zero three percent. So it's not a lot. And the United States cool face say a ten times increase in the price of rare earth metals and it still will have no impact whatsoever on the kind of the the American economy or the global economy. And then what really drives me mad is that you are writing about rare earth metals. Look, they are important and they obviously for some very niche applications, you really

• 7:06Speaker 04

  need rare earth metals, but prices could go higher and those applications will just pay the price. But typically, a writer like myself, you want to sex up a bit of the story. You will say rare earth metals, critical for the weapons industry, for missiles and high tech application. Do you know where every one of us have some rare earth metals at home? They are used in super permanent magnets. And therefore, on that absolutely critical instrument of economic warfare, which is called the vacuum cleaner.

• 7:43Tracy Alloway?

  I will say, I sympathize with editors not wanting headlines about vacuum cleaners versus, you know, military equipment and all of those important strategic things.

• 7:53Speaker 04

  I just remind the story, the price of rare earth metals may increase and making vacuum cleaners a bit more expensive. I don't know you're gonna click.

• 8:06Tracy Alloway?

  Okay, not to get all Judy Blume on everyone, but rare earths, they're not as rare as the name would imply, but walk us through where they actually come from.

• 8:17Speaker 04

  Look, a lot of them come from China. About eighty, eighty-five percent of the world's rare earth metals come from China. It's a question of digging them out of the ground and then processing. The big, difficult part is processing because it's very polluting. And it's a reason why all the processing has moved from everywhere else in the planet into China, because no one wanted to deal with how nasty the process is. And here is also the other question. If you want to do rare earth metals processing in particular outside China, what you need is much higher prices. If anything, the problem today with rare earth metals, and if we want to develop an industry of rare earth metals outside China,

• 9:01Speaker 04

  is that prices are too low. We need much higher prices and then everyone will do rare earth metals. The other thing that will happen is that if the price goes to a level that incentivizes everyone taking a bit of care, well, a lot of engineers on the vacuum cleaning industry will find ways to do it without rare earth metals. And also, people will actually collect the vacuum cleaners and recycle the magnets for other use.

• 9:28Tracy Alloway?

  But if rare earths are, they're such a small component of something like a vacuum cleaner, I imagine the prices would have to go up absolutely astronomically for that even to be a consideration for a company making these things.

• 9:39Speaker 04

  And most of the times, the prices don't go nearly as high. Prices are beginning to rise again now, but prices stay relatively low compared to where historically prices have been. And we have had, the latest headlines are about rare earth metals and export restrictions. We have some similar headlines for other category of metals that we call critical minerals. Another Fantastic exercise of labeling. I mean, like, you want to sell something, call it critical minerals. And we have, you know, people were really concerned because China was imposing some export restrictions on tungsten, tellurium, bismuth, molybdenum and indium.

• 10:23Speaker 04

  This sounds to me like high school chemistry. And you would think, oh, my God, what is happening with the price of all of this? I mean, this, this was not announced yesterday. This was announced a couple of months ago and prices moved. And yes, the price of, say, indium moved to $345 per kilogram. And you would say, well, is that a lot? It's look, yeah, it's 20% increase from where we were at the end of last year. But about 10 years ago, that is cost today 345 was worth $800 per kilogram. And did you notice 10 years ago that it was a crisis on the indium market? And everyone was a bit worried about it because I didn't.

• 11:06Joe Weisenthal?

  I didn't notice, you know, you know, we're still going to give this a provocative headline, even though, you know, then people will listen to the episode and reveal that there's.

• 11:14Tracy Alloway?

  Why, why everyone's talking about the rare earth shortage?

• 11:17Joe Weisenthal?

  Javier Blas on the truth about the rare earth. You know, we'll, we'll still make it exciting.

• 11:21Speaker 04

  You know, what I want to say also is, look, yes, it's a serious issue.

• 11:25Joe Weisenthal?

  Yeah.

• 11:25Speaker 04

  And yes, I mean, depending by 80% of a single country is never a good idea. But there is an element of panic that every time. And look, a lot of this panic comes from the handful of miners and processor of rare earth metals outside China. And you as a consultant on the rare earth metals industry, is this something that we should be caring about? Well, the answer is going to be, yeah, hell, yes.

• 11:55Joe Weisenthal?

  Yeah, right.

• 11:55Tracy Alloway?

  Timoth by the way, says he has access to rare earth minerals. He's invested in some companies, so we're fine.

• 12:00Joe Weisenthal?

  That fits so perfectly with this entire thing.

• 12:19Speaker 00

  What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors, and in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 12:35Speaker 05

  We're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high-frequency traders and that sort of thing, and folks who service institutional clients.

• 12:44Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Rees-Merrick of Ripple says.

• 12:52Speaker 06

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 13:11Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 13:21Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 14:03Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 14:44Joe Weisenthal?

  You did an amazing video the other day. I really, I think it was true art, actually. Whether we're talking about rare earth metals or quote, "critical minerals," unquote. What are the economics of getting them in Greenland?

• 15:00Speaker 04

  Okay, let me just put my polar outfit and so on. No, there are not natural resources in Greenland, period, unless we are just mining ice. Yes, there are some small concentrations of rare earths in the south. There is a bit of uranium here and there. There is this and that, but the concentrations are very low. And the cost of mining in Greenland is prohibitively expensive. And you are not going to develop anything of even medium-sized mining operation in Greenland.

• 15:39Speaker 04

  I think that, here is the exaggeration, but you have better chance of finding some minerals on the, on my back garden in West London that you have in Greenland. Now I'm fearing that I'm going to become the 55th estate.

• 15:55Tracy Alloway?

  That's fun. Joe's embraced his middle-aged man destiny of becoming a military historian expert. So there's that. That's why he's at the Imperial War Museum. So no shame, no shame. But since we're talking strategy approaches and maybe acquiring Greenland could be one of them, the thing I don't understand is if we agree that rare earths, rare minerals, are of some strategic importance for the US and they are something you would want access to, but on the other hand, we actually have plenty of them. It's just we don't necessarily historically want to get them out of the ground. Would the better approach not have been to just build massive inventories of these things? Just get them on the cheap from China? Let China tear up its countryside and we could buy those things from China?

• 16:40Tracy Alloway?

  And then, once supply starts running out, or if relations really start to deteriorate, Then we could start our own industry. Or is that, is that difficult? What's the startup process like for something like that?

• 16:51Speaker 04

  No, and that's what some companies, I mean, governments have not done the stockpiling, but some companies have done their stockpiling themselves. There are Japanese high-tech companies that they are running more than a year worth of their demand for rare earth as a stockpile. And again, this in certain ways makes sense because if you think about Japan, a country that probably imports fifty to seventy-five million dollars a year of rare earth metals, importing and stockpiling, say, a year or a couple of years' worth of the stuff is not that expensive. I mean, for Japanese companies, this is gonna be like completely random error on their, on their huge balance sheet. So we have seen a bit of a stockpiling and companies that they really require some particular

• 17:34Speaker 04

  rare earth metals for a very particular application, they will have done it. And then governments, what they can do is, look, this is critical. We are gonna support our domestic industry. The United States has rare earth accumulations. There is a mine called Montai Pass. We can develop that. The government can get into the business on developing that. The price is gonna be that we need higher prices. So you are gonna have to protect either you effectively, I mean, here is the irony. The best way to develop an industry in the United States and develop the local mining supply of rare earth will be to impose some huge tariffs on rare earth from China. So the Chinese don't, don't dump their rare earths into the market. You need protectionism.

• 18:20Joe Weisenthal?

  I mean, this might be the vision, more or less across a range of industries, which is sort of like take a wrecking ball to a lot of, you know, elite things or comfortable jobs in government and finance and media, et cetera, and send, you know, free up that workforce to mine molybdenum, right?

• 18:40Tracy Alloway?

  We're all gonna be working in the mines?

• 18:41Joe Weisenthal?

  I mean, this is kinda, kinda the vision. All right, let's talk about something that may actually be real and substantive now that you've convinced me not to worry too much. And also, like, if there were ever a crisis, government could just come door to door and demand your vacuum cleaner, right?

• 18:57Speaker 04

  Absolutely.

• 18:58Joe Weisenthal?

  Like for the missiles and whatever, like, at the end, they're like, all right, we're gonna confiscate your vacuum cleaner if it's really that.

• 19:03Speaker 04

  How you call the manual, the broom? So the government comes, knocks at your door, you return your fancy Dyson vacuum cleaner, and they give you a broom.

• 19:13Tracy Alloway?

  The government will pry my Dyson out of my cold, dead hands. Saying that right now.

• 19:18Joe Weisenthal?

  Let's talk about a commodity that really actually has real significance. Part of, we've mentioned this a couple of times on the show. Secretary of the Treasury Scott Besant had in the run up to the election or post-election, talked about his 333 plan, three, get the budget deficit down to 3%, grow GDP by 3% and increase 3 million more barrels of US oil per year. It seems like we're going in the opposite direction of that.

• 19:44Speaker 04

  Yeah, at current prices, certainly, we are likely to see lower American oil production than higher. I mean, Secretary Besant was quite clever on the way that he expressed it. He talked about growing 3 million barrels a day of energy.

• 19:59Joe Weisenthal?

  Oh.

• 19:59Speaker 04

  He didn't say specifically oil. I mean, when you talk about barrels, you think that he's talking about oil, but he means-

• 20:05Joe Weisenthal?

  Barrel equivalent.

• 20:06Speaker 04

  Barrel equivalent. So you could put anything there. At the moment, the administration is already including natural gas and that three. I have been hearing some officials in the administration saying, look, energy is energy. So we are growing electricity. We are growing uranium. We are growing coal. You put it on a basis of oil equivalent and there you go. I would not be surprised if we are also growing more Californian olive oil and we are adding it into the barrel. But look, West Texas Intermediate, the US oil benchmark is trading close to $60 a barrel. You are there borderline where it's economical for shale, on average for shale companies to drill new wells.

• 20:48Speaker 04

  So we should start to see a significant slowdown in the growth rate of the US oil industry. And if prices to continue at this level or lower, that slowdown soon will be turning into a contraction and we will see lower American oil production.

• 21:04Tracy Alloway?

  Yeah, I mean, even if we think the administration was talking about energy units rather than just oil per se, it does seem clear that there are a lot of people in the energy patch itself, which seem to have had a different idea, right? They thought the administration was going to be very, very friendly to the shale industry. And instead, Joe and I have mentioned this a few times before, but we've seen- Anecdotally, some, you know, some statements from the Dallas Fed's energy survey where people are going like, this is not what we signed up for. At $50 per barrel oil prices, this is not only bad for increased investment in the industry, but could potentially be a sort of existential threat.

• 21:47Speaker 04

  So absolutely. I mean, Chris Wright, the Secretary of Energy, is an oil person. He founded and ran his own oil company, service company called Liberty Energy. And a lot of people in the industry thought that, you know, to quote an executive I spoke recently in Houston, he thought, or the industry thought that Chris Wright was our guy. He was one of ours, one of us. And this executive said, like, what we have came to realize is that he's not one of us. He is Trump's guy. And that is a big difference. And, uh, yes, the comments in this anonymous Dallas Fed survey were quite shocking.

• 22:32Speaker 04

  And if you talk in private to executives in the oil industry, I almost have to pinch myself at times. It's like, hold on a second. Is Biden still on the White House? Because you guys seem to really dislike everything.

• 22:46Tracy Alloway?

  Yeah, you could replace Trump with the word Biden, and it would make sense.

• 22:50Speaker 04

  Yeah, it's like, when I was reading that series of comments from the Dallas Fed, I joke that if you have been sleeping for six months and wake up, you will think that the Democrats are still running the White House and Congress and etc. I mean, this was a dream for the oil industry. It is a Republican at the White House. The Secretary of the Treasury is a Wall Street hedge fund manager. And the Secretary of Energy is the founder of an oil company. And here we are, everyone in the oil pot, perhaps because of this, is absolutely mad with the administration.

• 23:45Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 24:27Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 25:08Joe Weisenthal?

  I have a really dumb question, and I'm going to ask a real question. Why do we call it the oil patch?

• 25:14Tracy Alloway?

  I don't know.

• 25:15Joe Weisenthal?

  Oh, sorry, I didn't mean to stump you. No, this is, can I use Google? Oh, sorry, we can cut this. Can we keep this in? I stumped Javier. Can we keep this in? Yeah, absolutely. Okay, we're going to keep this in. I don't know why it's called a patch.

• 25:29Tracy Alloway?

  Poetic license?

• 25:30Joe Weisenthal?

  I've, wow, I thought for sure, okay.

• 25:32Tracy Alloway?

  Oil patch, it kind of sounds, speaking of gardening, it kind of sounds like, you know, you're growing vegetables on your oil patch, except it's like liquid carbon.

• 25:39Joe Weisenthal?

  There are some certain things on the oil patch, like...

• 25:41Speaker 04

  The pipe that you use to drill.

• 25:43Joe Weisenthal?

  Yeah.

• 25:44Speaker 04

  Is called OCTG, Oil County Tubular Good.

• 25:49Joe Weisenthal?

  Oh, yeah, yeah.

• 25:50Speaker 04

  I have no idea why.

• 25:51Joe Weisenthal?

  I'm proud of myself.

• 25:52Speaker 04

  Oil County, but it's it's oil patch, oil county, this, you know, it's it's the oil place.

• 25:57Joe Weisenthal?

  All right, I have a real question. The oil place. What the oil place? I'm gonna start calling. We're all gonna go down to the oil place. Let's go down to the oil. See what people are talking about. From the oil place. Okay, I have a real question, substantive one, which is, one of these sort of like booming export industries for the US was natural gas. And this sort of LNG terminals, and I think Biden put a pause on them, and that pause, I don't know if it's been lifted, but it will be lifted almost certainly. Construction of new ones. With the trade war, have the economics of LNG export changed at all with the decline in oil prices? Like, has anything, have any dials moved down that front?

• 26:34Speaker 04

  Not yet, and potentially yes, because one big buyer of American LNG was China, and China has not bought any LNG from America in a long while. And also, if oil production start to decline, when you drill for oil, you usually get a mix of hydrocarbons out of the ground. You will get oil, you will get gas.

• 26:54Joe Weisenthal?

  So I'm wondering, so if you like, if fewer wells, yeah.

• 26:56Speaker 04

  So you have fewer oil wells, you're gonna have fewer gas wells. So the input cost of gas is gonna go higher.

• 27:05Joe Weisenthal?

  Right.

• 27:05Speaker 04

  And you may have a bit of lack of demand on the other side from China. So far, all is good because the European Union and the UK still need a lot of natural gas from the United States. The big expansion of Qatar is still about 12 to 18 months away. And Russia is fighting with Ukraine and it's not exporting what they used to. But in a year's time, that could be a big deal. The other, to me, very important topic in in trade and oil is that oil used to be almost the largest component of the American trade deficit in goods.

• 27:42Joe Weisenthal?

  Yeah.

• 27:43Speaker 04

  You go to 2008, the US trade deficit was around, running around $800 billion a year. Of that, nearly 400 billion was oil. Today, we are in a surplus for oil.

• 27:55Tracy Alloway?

  How times have changed. I have one more question just on oil specifically, but one of the hallmarks of the Trump administration is they tend to promise everything to all people. And arguably, that's been a big component of their success. And I think when it comes to energy policies specifically, one of the promises was we're going to be good for the energy industry, for oil specifically, and at the same time, we're going to be good for inflation. We're going to bring down prices. You're not going to have to pay, you know, these exorbitant dollar amounts at the pump. Is there any way, you know, let's assume that the tariffs start working, maybe growth expectations start to pick up. Is there any way that the Trump administration can

• 28:36Tracy Alloway?

  end up fulfilling its various policies when it comes to energy to everyone involved here? Is there a way where eventually maybe they, you know, make up with the oil industry, the shale industry, and maybe somehow they, I don't know, encourage energy from other sources and inflation still, you know, comes down? What's the best case scenario here?

• 28:59Speaker 04

  I think the best case scenario, you're putting me here on the spot, but I think probably something like, let's call it, I mean, let's call it the Goldilocks, the middle ground, what, you know, the oil patch will love and a mainstream will be happy. Say $75 a barrel.

• 29:19Tracy Alloway?

  Okay.

• 29:19Speaker 04

  $75 a barrel is not breaking the budget of any middle-class family or working-class family when it comes to gasoline in the United States. And $75 a barrel, the American oil industry is making money, no problem whatsoever. Whoever is complaining at 75 probably doesn't have a very, very good business case. The main problem is to make it, everything work at 75. And just for the sake of the argument, let's say that the magic number is 75. You cannot get that running unless you get OPEC on board.

• 29:53Tracy Alloway?

  Ah.

• 29:53Speaker 04

  And they keep restraining production and losing market share. Because $75 a barrel means that the consumers are happy and they continue to consume, but also that the US shale industry continues to grow. And at some point, someone needs to produce less. So you can, even if that magic number existed, and I think that 75 probably is about right. You need OPEC to play ball and accept that they're gonna lose market share forever and ever, and I don't think that they're on that business.

• 30:23Joe Weisenthal?

  Yeah, so last question for me, but how has Trump, maybe his tariffs and his provocative actions towards literally or virtually every country in the world, how is it interacting with OPEC specifically?

• 30:36Speaker 04

  Ah, I think on one side, the Trump administration is putting quite a lot of diplomatic pressure on OPEC countries to increase production, and we saw Saudi Arabia increasing production. Secretary of Energy is in Saudi Arabia right now and is discussing mostly nuclear affairs about the Saudis want American technology for nuclear civilian, or at least civilian, quote unquote, nuclear technology. So there are a lot of things that the Saudis may want from the United States, and the United States want the Saudis to increase production to put prices down. But just by large, if I can summarize what is the feeling of my OPEC sources right now, I think it's very similar to what, you know, the bankers and traders that you guys are

• 31:20Speaker 04

  talking every day probably are saying, it's like, what on earth is going on here? Because no one really knows. I mean, how do you plan, you are an OPEC country and you are trying to decide oil production policy for the next three months? How do you plan that, where you don't really know what tomorrow morning, or maybe tonight, brings?

• 31:42Tracy Alloway?

  Yeah, and even if we assume that this, you know, this was it, nothing else was going to change now, that uncertainty premium is in the markets, and regardless of what Trump actually changes from now on, we know that it looks like global growth is going to slow, right? So you're asking OPEC to basically boost production into a slowing global economy.

• 32:03Speaker 04

  I mean, that is, to me, that was, because every other asset class was dealing effectively with one shock, and that was a demand shock. Everyone was just like, assuming, okay, we are gonna slow down. Oil was dealing simultaneously with a demand shock, and what I will call a supply surprise. I'm not gonna, I mean, the increase in OPEC production is not yet enough to call it a shock, but let's call it a supply surprise that can very quickly became a shock. So, you know, that is why oil prices went down so much, and that's also why oil equity is really absolutely tanked.

• 32:43Joe Weisenthal?

  Javier Blas, always great catching up with you. So great to do it finally here in your home court. Appreciate you coming.

• 32:49Tracy Alloway?

  On his home patch.

• 32:50Joe Weisenthal?

  Yeah, in his home patch.

• 32:52Speaker 04

  Thank you for having me, and I'm gonna be Googling now oil patch.

• 32:55Joe Weisenthal?

  Okay, great.

• 33:08Joe Weisenthal?

  That was fun. I can't believe I got to stump Javier on a energy-related question.

• 33:12Tracy Alloway?

  Yeah, okay, fair enough.

• 33:12Joe Weisenthal?

  Highlight of my week.

• 33:13Tracy Alloway?

  But I strongly suspect that's just like a literary

• 33:16Joe Weisenthal?

  Yeah.

• 33:16Tracy Alloway?

  term that someone came up with, and it sounds kind of nice. It sounds kind of down homey.

• 33:21Joe Weisenthal?

  It sounds down home, down in the oil.

• 33:23Tracy Alloway?

  And people went with it. But I do think, ah, there's so much, there's so much going on.

• 33:27Joe Weisenthal?

  Can I say?

• 33:28Tracy Alloway?

  Yeah.

• 33:28Joe Weisenthal?

  US only importing $170 million worth of, that is a very good stat, by the way. Everyone should stay listening. Hopefully, they're listening. Odd Lots listeners can now repeat this at part. Like, that is one of those good stats that, like, Odd Lots listeners can repeat at parties.

• 33:43Tracy Alloway?

  It's good party trivia for Odd Lots listeners, assuming that they're actually getting invited to parties with chat like that.

• 33:49Joe Weisenthal?

  They are, they are, they are.

• 33:50Tracy Alloway?

  Did you know?

• 33:51Joe Weisenthal?

  Did you know?

• 33:51Tracy Alloway?

  Actually, we should-

• 33:52Joe Weisenthal?

  Because we all know that they're not rare. Like, that part we knew at this point, I did not quite realize how small the scale of the import was.

• 33:59Tracy Alloway?

  No, if a guy came up to me at a party and said, "Did you know, in fact, that rare earths were not, in fact, that rare?" I would be, what's that, you know that meme of the guy, like, whispering into a girl's ear?

• 34:11Joe Weisenthal?

  Oh, yeah. Well, what if he-

• 34:11Tracy Alloway?

  That would be my face. I'd be like, whatever.

• 34:13Joe Weisenthal?

  What if you followed that up with the vacuum cleaners part, though?

• 34:16Tracy Alloway?

  Yeah, that's mildly more interesting.

• 34:17Joe Weisenthal?

  That's what I'm saying. There's a little something there.

• 34:19Tracy Alloway?

  Although, then I would be like, "Why are you talking to me about vacuum cleaners? Do you think this is something that I'm especially interested in?" Well, anyway, lots to talk about. I'm sure we will continue our spate of basically daily episodes at this point. But should we leave it there for now?

• 34:34Joe Weisenthal?

  Let's leave it there.

• 34:35Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alockway. You can follow me at Tracy Alockway.

• 34:40Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStalwart. Follow our guest Javier Blas. He's at Javier Blas. Follow our producers, Carmen Rodriguez at CarmenArmed, Dashel Bennett at Dashbot, and Cale Brooks at CaleBrooks. And thank you to our producer, Moses Andam, who is here with us in studio in London. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have all of our episodes and a daily newsletter that you should subscribe to. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 35:12Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about the oil patch on Habey's home patch, 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.

• 36:04Speaker 07

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• 36:40Speaker 08

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