00:00:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
00:00:25
Speaker 2: People are looking forward turn around in Nike, particularly in China, on stocks trading up slightly here today, So let's break down the numbers with pud And Boyle, senior US e commerce and retail anels for Bloomberg Intelligence. You've been highlighting that you know, Nike's in the middle of this turnaround here, talk to us about what you learned on there from their earnings in a conference call.
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Speaker 3: So there were a few things. You know, the turnaround is still very much underway, and it's not a full recovery yet or anywhere close to it, as if they've cut their forecast or I guess that sales are going to deteriorate further in the first half of their fiscal year, down by low to miit single digits in the first quarter and then down further in the second fiscal quarter. So that was a clear negative, but it was due to tougher comparisons from a year ago when they re entered wholesale in a more meaningful way and had higher digital promotions in Amia. That's said on the quarter, And to answer the first part of your question, Paul, China was better than expected, but still down seventeen percent. So what I would say is, you know, still a lot of work to be done in China, and it's not going to be an overnight fix. It will take twelve to eighteen months.
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Speaker 4: Twelve to eighteen months sounds like a long time. Is there anything that Nike can do or Elliott Hill can do to kind of change a narrative more dramatically.
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Speaker 3: I think there's a lot of things that need to be done. If you think about the US turnaround and what happened in the US. The first thing is to write size inventorI and that takes time. It takes twelve months sometimes longer, just to make sure that you can exit out of old inventory and bring.
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Speaker 5: In new product.
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Speaker 3: The other thing is in China, they need to bring Nike back to being a premium brand and work with the local endorsers the local market to really create exclusive product for the China marketplace.
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Speaker 5: So there is a lot of work to be done.
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Speaker 3: I think at their analyst meeting in mid November, they'll highlight a path to profitable growth in China. But once again, it's not going to be in the very near future that we see that happen.
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Speaker 2: So from your perspective, you've covered the company for a while. Have they kind of lost their feel for the market. Have they lost kind of their magic a little bit? Or is just just blocking and tackling.
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Speaker 3: It's just blocking and tackling. They definitely haven't lost their magic. I think they're doing all the right things. I think it's a big ship to turn and it just needs time. And I know investors are getting impatient, but I do think that they've worked down North America it's working. China is next, and I do think they'll right size China to It's just a matter of time and things will start to move as long as they continue to push out innovation, which they're working on. So I think we just need to give them a little more time.
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Speaker 5: Still, how about the rest of the world.
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Speaker 4: I mean, I see Nike, Nike's brand and you know, discussion of Nike pickup now that it's the World Cup in North America, and I wonder if that is providing a bit of a tailwind for the brand around the rest of the world, given that the World Cup is such a global enterprise.
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Speaker 3: Absolutely, you know, Nike is premiumly positioned in the World Cup, and I think it will get tailwinds from the World Cup. I also think that sports is an important moment for not just Nike, but for all ath leisure brands. So their presence in the sports world at sporting events, not just for kit sales, but really going even beyond kit sales, really earns them the right to magnify sales and other verticals. So I do think the World Cup is a big opportunity for.
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Speaker 2: Night And you know, Nike's like it's like Coca Cola. I mean, you find Nike and their branding and their logo in every single corner of the world. I don't care where you are. It's just amazing. Is there a way do you think do they think about ways to continue to broaden the monetization of their brand?
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Speaker 3: Yeah, Look, Nike is the largest sports for a brand in the world, and it has the large lead over most other peers. So I think you will continue to see Nike throughout the world. I think women's is a big opportunity for them. I think it's one area where you probably don't see Nike in as much of a lead as it has been for men's. So I do think that there's more opportunity to even make Nike bigger across the globe.
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Speaker 4: So when you look ahead, how much can a company like under Armor or these other brands that are trying to become global sports behemoths in the same way that Nike has and perhaps you know is trying to regain can learn from the journey that Nike's been on. I mean, it's been up, it's been down, and now it's kind of trying to climb its way back up again.
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Speaker 3: I think the biggest learning and learning that any company could have from Nike is you can't get too comfortable, right. You have to keep the pedal moving on innovation because the consumer is responding and they're able to discover more today than they ever were with the Internet, with social media, et cetera. So to lead and to continue to lead, you have to remain on top of your game at all times, and innovation is key there.
00:05:38
Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.
00:05:45
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
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Speaker 2: Talking about the global energy markets, we do that with Ellen Walld, Senior fellow at the Atlanta Council and President Transversal Consulting. Now, what Tom Keane likes to do is see somebody says, oh, you went to Princeton. Did you study under so and so and so and so? I have no idea When I see somebody who went to Princeton, I say, Ellen, what was your go to sandwich at HOGI Haven?
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Speaker 5: Well, since I generally vegetarian kills up, so you didn't let sandwich?
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Speaker 2: Yeah exactly, let us.
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Speaker 5: But some people are disappoint.
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Speaker 2: On that hill about their favorite sandwich there.
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Speaker 5: What are we talking about?
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Speaker 1: Oil?
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Speaker 6: Here?
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Speaker 2: Is all the risk out of oil at this point, I'm looking at WTI crew to oil. Ellen at you know, blow sixty nine dollars at a power. We're kind of kind of getting back to where we were.
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Speaker 5: We're kind of getting back to where we were, but the market doesn't actually look like that it's just the futures prices. If you look at what's going on in not just in the United States, but around the world, we're not seeing anywhere near normal tank or volume. Yes, some oil is getting out of the straight and form moves, but it's nowhere near normal. We're also seeing a lot of gaps in US products. We've been doing a huge amount of exporting during this time, and so now we're seeing, yes, futures prices are down, but refineries are running out at full tilt. Our inventories are extraordinarily low.
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Speaker 6: There was a.
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Speaker 5: Slight build in the Cushing inventories in Oklahoma, but overall our world inventories are way, way, way down, and that really eliminates the kind of cushion that we've had in the event of, say, any kind of outage. So we're really kind of, i would say, running on the edge here. But it also doesn't look good for US crude oil drillers because they put in more grigs. Mean we have production has actually grown, and yet prices are now down, so they've brought more brigs online only to find that the price is now dropped. So we're in kind of a very odd situation where we're trying to normalize, and yet we can't. And so some things have normalized, like futures prices, but everything else is still way out of out of whack.
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Speaker 4: Okay, So the point remains, though that the President is pushing gasoline retailers to do more to bring down gas prices. For John Tucker when he does drive into the city, what does what can the White House really do at this point?
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Speaker 5: Essentially unless they want institute price controls, nothing, and they definitely shouldn't institute price controls. The point is this happens every time we have some kind of a price. Bike prices immediately go up a gasoline and they're slower to come down. And part of this has to do with just the way things work, and part of it also has to do with the fact that we while futures prices have come down, that's not necessarily reflective of the price that all of the people that make the gasoline are paying for the components and what they have to do to get them to your car, and so it's not The price of a barrel of oil does not automatically translate to the price of a gallon of gasoline, and so there's a lag between that, Yes, we should expect it to come down, assuming that our refineries continue to run unobstructed. We may have outages. It's extraordinarily it's going to be extraordinarily hot in some parts of the country, and that can also put pressure on refineries. They may not be able to operate at full capacity. So prices will come down, but it's going to be a slower process.
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Speaker 2: So President Trump took to social media to kind of put some blame on the gasoline retailers for not charging, you know, not dropping their prices with the price of oil here. But my Phillip sixty sixth station that I go to in rout thirty five, is that retailer a price setter or a price taker?
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Speaker 4: Good question, that's.
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Speaker 5: A good question. So some you know, some retailers are you know, components of a larger oil organization and some are more independent, and so it really it really varies. And I would say that that right now, it's just that there is a very there's just a large gap in terms of what retailers might be paying for a barrel of oil and then what they can hint for gasoline. And so that will normalize. It's just a little bit higher now. However, it might not normalize if we go back to war with the Ron for example, which is something that they have been discussing. At least we've heard from Vice President Jadvans that there's definitely it seems like there's a mindset of let's kind of take this breather and refill, but this conflict is not over. And that certainly sends a message to refineries, It sends a messages to producers. It says match to everyone along that supply chain of you know, the danger is not over. You need to continue to prepare for outages shortages, and we're definitely not in that position. So it could cause some higher prices to remain. It could cause some stickiness simply because you know, if you tailers want to be sure, hey we want to make sure we can get those barrels, we're going to store them instead of putting them on the market.
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Speaker 4: For example, Ellen, when it comes to the Strait of Hormuz, is is that waterway open or not? Aron set of foreign container ship ran aground while sailing through the street through a so called unauthorized route. Are there unauthorized routes and authorized routes? I'm confused as to whether this thing is open or not.
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Speaker 5: I think everyone has a bit confused. I guess I would say the answer to that question depends on what open is and what your definition of open is. If you're talking about open as in the way things were before the war, the answer is absolutely not. Apparently that that waterway which is actually has a defined traffic separation scheme, it apparently has potentially a high number of mines in it, and so ships really need to avoid that. So there's the upper route, the northern route, which goes basically through Iranian waters. That's the so called authorized route that the IRGC is policing and and all that. And then there's a lower route, which goes through Omani waters, which seems to be a route that the US military is using to escort ships out of the Strait of hor Moves. It's unclear how many have come back in that route. Maybe some, but the Iranians do not want that lower route to be used. The Omanis have been giving a lot of conflicting information. They say, yes, it's open, we're not going to charge holes, and then they go and they say that Ridians, Yes, we're working with the Iranians to set up this system to charge. It's really, I think, a very fluid situation. It depends on who's got the ships, who's got the fire, you know, the air cover. We don't really know. It's kind of the wild West out there.
00:12:40
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
00:12:47
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live toe.
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Speaker 2: Looking at gasoline here three dollars and eighty five cents. It is a daily national average gasoline prices for regular, which is what I use. Matt Miller's a very upset with me. I'm just using like the really good stuff.
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Speaker 4: What the premium? Yeah, only only car heads like Matt Miller paid premium, I know, But anyone else that's the cheapest unloaded.
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Speaker 2: Yeah it does.
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Speaker 4: I don't know.
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Speaker 2: But then if you go to electric, maybe it just doesn't even matter anymore.
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Speaker 4: Or hybrid where you don't have to fill up as often.
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Speaker 2: Yes, And that's what we have for offspring number four, who goes to school in California. And they pay like a gazillion dollars a gallon there, so it made sense. It's checking with Andrew Grant Bloomberg and EF, head of Intelligent Mobility and get his thoughts on what's going on there with the electric vehicle business going.
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Speaker 5: Forward, Andrew electric Vehicles. I think it's safe.
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Speaker 2: From my perspective at least, the narrative has been the industry maybe got a little bit too far out over its skis and trying to convert from ice to EV. Where are we now? Do you think it as an industry right?
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Speaker 6: Thank you? I have a good time that question. Just two weeks ago, we've published our annual flagship Electric Vehicle Outlook, so lots of data to share on that front. The OUTDOO this year is less exuberant than previous years, as you were kind of alluding to there, but generally speaking the charts still go up into the right. This is the second year that we've had to cut both our near term and long term outlook for EV adoption, but that really varies by market as you go from different geography to geography. The biggest negative is in the US, where there's been lots of regulatory setbacks weaker fel economy rules, California losing its ability to sedatony equality standards, and subsequently, auto makers have pushed back a lot of their launch plans for electric vehicles, but global electric vehicle stales are still expected in at least in our outlook, to reach over twenty three point three million vehicles this year. That's eleven percent up from last year, slower growth, but still prey strong growth and represents about twenty seven percent of global passenger vehicle sales by the end of the year.
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Speaker 4: Okay, so the US might be turning away from evs, but the rest of the world that most certainly is not. I've been trying. I've been in the market for a used hybrid, not a plug in, but a regular hybrid.
00:15:14
Speaker 5: For my parents.
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Speaker 4: I want something with low mileage, and I've been going to different car lots and it's been really hard to find hybrids for whatever reason, maybe because everyone's looking for it with the recent spike up in gas prices, and so I guess my question to you, Andrew, is if it's so hard to find hybrids, is that because a lot of the automakers are not offering them. I know that Toyota and Honda are kind of the leaders when it comes to hybrids, but you know, have the big US automakers kind of caught up with this at all.
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Speaker 6: I mean, hybrid cerve is something we cover in the report. We focus primarily on vehicles with the plug, but hybrids are a big part of the story. They can reduce submissions by anywhere from ten to thirty percent, depending on the type of technology that you're talking about, and it has proved particularly popular in certain markets the US, Japan as well. A lot of the vehicles are the hyper vehicles are coming from Japan. But really is probably something that was considering in addition to the fuel price and the fuel savings, there is just how well some of these vehicles hold up in the used vehicle markets. We've seen residual prices for hybrids hold up quite a lot better than some of the battery electric vehicles. That is improving over time, but you're getting more return when you come to sell your vehicle in most markets, so that's certainly pushing things up in that market. It will take kind of another decade or so in our outlook before battery electric vehicles start out selling hybrid vehicles in the United States, but in markets like China and Europe, battery electric vehicles are already out selling those hybrid vehicles.
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Speaker 5: In those markets.
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Speaker 2: You talk about where there is successful adoption to electric vehicles, how much government subsidies, what's the role of government subjects play, how long the governments have to support these programs.
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Speaker 6: I mean, that's the question that government officials ask us quite a bit. How much do they have to provide upfront purchase incentives and then how long do they have to provide other incentives around charging, infrastructure build out. There's certainly a lot of money that is flowing into this space. By our account, there's about nine hundred and forty billion dollars that are being spent on electric vehicles this year. As far as upfront incentives, a lot of those are starting to go away in various geographies around the world, even in China, where there is significant evy uptake, that's becoming quite an expensive burden to bear. So a lot of those upfront purchase incentives are going away, and that's part of the reason we see growth flowing for just a bit in that market, which has a significant impact on our outlook. But we'll see if that kicks on from here. There's really been one hundred and fourteen billion dollars spent on charging infrastructure by our account. That needs to increase by the six hundred thirty five billion dollars between now and twenty forty two to meet the Charging Infrastructure command our appook. So a lot more needs to be It needs to be spent, a lot more incentives that come as part of that as well.
00:18:13
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
00:18:20
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch US live on YouTube.
00:18:35
Speaker 4: The US deciding against renewing its trade deal with Canada and Mexico, the US MCA choosing instead to conduct annual reviews of the pact. Let's bring in Nick Watams. He is joining us from Washington right now. Nick, this sounds incredibly disruptive, this idea that the three countries would conduct annual reviews of the pact rather than, you know, figure out what they want and kind of hold to a treaty the way that we've done in the past.
00:19:02
Speaker 7: Yeah, I mean, it's important to note that the USMCA does remain in effect for now. But what you essentially see as President Trump injecting a new way to sort of push the US negotiating position. I mean, listen, you know, USMCA was a landmark of his first administration. He called it one of the greatest deals ever made. But he found in the second term that this was really an impediment to his desire to impose sort of broad tariffs on certain sectors the economy with Canada and Mexico. The agreement essentially acted as a shield against that. So what you're going to see, I think is the USMCA remaining in effect, but the President trying to chip away at it. And indeed, automakers, there are a lot of sectors that are really going to be impacted by this and are going to feel the squeeze.
00:19:52
Speaker 2: Why is the US doing this, Nick, do you think?
00:19:55
Speaker 7: Well, I think the big thing is tariffs. Trump really likes tariffs. Tariffs have been a huge weapon in his arsenal in the second term, and the USMCA essentially means that he can't really inject or impose tariffs on certain sectors of trade having to do with two massive US trading partners, Canada and Mexico, so he wants to figure out ways to either change the terms of the deal. There will be these rolling negotiations over time, so he can get what he would potentially see as more favorable terms than the ones he negotiated, you know, six years ago. But generally it doesn't allow him to tariff sectors of the economy and get rid of those trade deficits that he so despises.
00:20:43
Speaker 2: So for some to me, it kind of feels like the USMCA has lost most, if not all, of its teeth. That one could argue there really is an agreement. Everybody's all three countries. I mean, Canada Mexico presumably can be open to trade sanctions, tariffs at any point now, right.
00:21:02
Speaker 7: I mean, your question really points to the big issue here, which is there is so much we don't know about what happens next. Because you know, what is clear is that USMCA does remain in effect for now, but that hasn't stopped the president in the past from saying, Okay, I'm going to impose these tariffs. So there are plenty of scenarios where he could basically contravene the terms of the USMCA and say I'm going to impose tariffs on certain sectors of the economy, on certain elements of trade that I don't like and that may violate the USMCA, But we can leave that for the courts to decide, and in the meantime, I'm going to impose those tariffs. So you know, even if we're still trying to get a sense for the details and what it means, it's definitely a situation that is not going to be welcomed by Canada or Mexico and is going to really have an impact on automakers all sorts of other importers into the US from these two countries who might say, Okay, hey, we're gonna hold off investment for now until we see the way things shake out.
00:22:08
Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
00:00:25
Speaker 2: People are looking forward turn around in Nike, particularly in China, on stocks trading up slightly here today, So let's break down the numbers with pud And Boyle, senior US e commerce and retail anels for Bloomberg Intelligence. You've been highlighting that you know, Nike's in the middle of this turnaround here, talk to us about what you learned on there from their earnings in a conference call.
00:00:47
Speaker 3: So there were a few things. You know, the turnaround is still very much underway, and it's not a full recovery yet or anywhere close to it, as if they've cut their forecast or I guess that sales are going to deteriorate further in the first half of their fiscal year, down by low to miit single digits in the first quarter and then down further in the second fiscal quarter. So that was a clear negative, but it was due to tougher comparisons from a year ago when they re entered wholesale in a more meaningful way and had higher digital promotions in Amia. That's said on the quarter, And to answer the first part of your question, Paul, China was better than expected, but still down seventeen percent. So what I would say is, you know, still a lot of work to be done in China, and it's not going to be an overnight fix. It will take twelve to eighteen months.
00:01:38
Speaker 4: Twelve to eighteen months sounds like a long time. Is there anything that Nike can do or Elliott Hill can do to kind of change a narrative more dramatically.
00:01:48
Speaker 3: I think there's a lot of things that need to be done. If you think about the US turnaround and what happened in the US. The first thing is to write size inventorI and that takes time. It takes twelve months sometimes longer, just to make sure that you can exit out of old inventory and bring.
00:02:03
Speaker 5: In new product.
00:02:04
Speaker 3: The other thing is in China, they need to bring Nike back to being a premium brand and work with the local endorsers the local market to really create exclusive product for the China marketplace.
00:02:16
Speaker 5: So there is a lot of work to be done.
00:02:18
Speaker 3: I think at their analyst meeting in mid November, they'll highlight a path to profitable growth in China. But once again, it's not going to be in the very near future that we see that happen.
00:02:30
Speaker 2: So from your perspective, you've covered the company for a while. Have they kind of lost their feel for the market. Have they lost kind of their magic a little bit? Or is just just blocking and tackling.
00:02:43
Speaker 3: It's just blocking and tackling. They definitely haven't lost their magic. I think they're doing all the right things. I think it's a big ship to turn and it just needs time. And I know investors are getting impatient, but I do think that they've worked down North America it's working. China is next, and I do think they'll right size China to It's just a matter of time and things will start to move as long as they continue to push out innovation, which they're working on. So I think we just need to give them a little more time.
00:03:13
Speaker 5: Still, how about the rest of the world.
00:03:14
Speaker 4: I mean, I see Nike, Nike's brand and you know, discussion of Nike pickup now that it's the World Cup in North America, and I wonder if that is providing a bit of a tailwind for the brand around the rest of the world, given that the World Cup is such a global enterprise.
00:03:32
Speaker 3: Absolutely, you know, Nike is premiumly positioned in the World Cup, and I think it will get tailwinds from the World Cup. I also think that sports is an important moment for not just Nike, but for all ath leisure brands. So their presence in the sports world at sporting events, not just for kit sales, but really going even beyond kit sales, really earns them the right to magnify sales and other verticals. So I do think the World Cup is a big opportunity for.
00:03:59
Speaker 2: Night And you know, Nike's like it's like Coca Cola. I mean, you find Nike and their branding and their logo in every single corner of the world. I don't care where you are. It's just amazing. Is there a way do you think do they think about ways to continue to broaden the monetization of their brand?
00:04:21
Speaker 3: Yeah, Look, Nike is the largest sports for a brand in the world, and it has the large lead over most other peers. So I think you will continue to see Nike throughout the world. I think women's is a big opportunity for them. I think it's one area where you probably don't see Nike in as much of a lead as it has been for men's. So I do think that there's more opportunity to even make Nike bigger across the globe.
00:04:48
Speaker 4: So when you look ahead, how much can a company like under Armor or these other brands that are trying to become global sports behemoths in the same way that Nike has and perhaps you know is trying to regain can learn from the journey that Nike's been on. I mean, it's been up, it's been down, and now it's kind of trying to climb its way back up again.
00:05:11
Speaker 3: I think the biggest learning and learning that any company could have from Nike is you can't get too comfortable, right. You have to keep the pedal moving on innovation because the consumer is responding and they're able to discover more today than they ever were with the Internet, with social media, et cetera. So to lead and to continue to lead, you have to remain on top of your game at all times, and innovation is key there.
00:05:38
Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.
00:05:45
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
00:06:00
Speaker 2: Talking about the global energy markets, we do that with Ellen Walld, Senior fellow at the Atlanta Council and President Transversal Consulting. Now, what Tom Keane likes to do is see somebody says, oh, you went to Princeton. Did you study under so and so and so and so? I have no idea When I see somebody who went to Princeton, I say, Ellen, what was your go to sandwich at HOGI Haven?
00:06:21
Speaker 5: Well, since I generally vegetarian kills up, so you didn't let sandwich?
00:06:28
Speaker 2: Yeah exactly, let us.
00:06:30
Speaker 5: But some people are disappoint.
00:06:32
Speaker 2: On that hill about their favorite sandwich there.
00:06:34
Speaker 5: What are we talking about?
00:06:35
Speaker 1: Oil?
00:06:35
Speaker 6: Here?
00:06:35
Speaker 2: Is all the risk out of oil at this point, I'm looking at WTI crew to oil. Ellen at you know, blow sixty nine dollars at a power. We're kind of kind of getting back to where we were.
00:06:45
Speaker 5: We're kind of getting back to where we were, but the market doesn't actually look like that it's just the futures prices. If you look at what's going on in not just in the United States, but around the world, we're not seeing anywhere near normal tank or volume. Yes, some oil is getting out of the straight and form moves, but it's nowhere near normal. We're also seeing a lot of gaps in US products. We've been doing a huge amount of exporting during this time, and so now we're seeing, yes, futures prices are down, but refineries are running out at full tilt. Our inventories are extraordinarily low.
00:07:21
Speaker 6: There was a.
00:07:21
Speaker 5: Slight build in the Cushing inventories in Oklahoma, but overall our world inventories are way, way, way down, and that really eliminates the kind of cushion that we've had in the event of, say, any kind of outage. So we're really kind of, i would say, running on the edge here. But it also doesn't look good for US crude oil drillers because they put in more grigs. Mean we have production has actually grown, and yet prices are now down, so they've brought more brigs online only to find that the price is now dropped. So we're in kind of a very odd situation where we're trying to normalize, and yet we can't. And so some things have normalized, like futures prices, but everything else is still way out of out of whack.
00:08:09
Speaker 4: Okay, So the point remains, though that the President is pushing gasoline retailers to do more to bring down gas prices. For John Tucker when he does drive into the city, what does what can the White House really do at this point?
00:08:23
Speaker 5: Essentially unless they want institute price controls, nothing, and they definitely shouldn't institute price controls. The point is this happens every time we have some kind of a price. Bike prices immediately go up a gasoline and they're slower to come down. And part of this has to do with just the way things work, and part of it also has to do with the fact that we while futures prices have come down, that's not necessarily reflective of the price that all of the people that make the gasoline are paying for the components and what they have to do to get them to your car, and so it's not The price of a barrel of oil does not automatically translate to the price of a gallon of gasoline, and so there's a lag between that, Yes, we should expect it to come down, assuming that our refineries continue to run unobstructed. We may have outages. It's extraordinarily it's going to be extraordinarily hot in some parts of the country, and that can also put pressure on refineries. They may not be able to operate at full capacity. So prices will come down, but it's going to be a slower process.
00:09:29
Speaker 2: So President Trump took to social media to kind of put some blame on the gasoline retailers for not charging, you know, not dropping their prices with the price of oil here. But my Phillip sixty sixth station that I go to in rout thirty five, is that retailer a price setter or a price taker?
00:09:47
Speaker 4: Good question, that's.
00:09:48
Speaker 5: A good question. So some you know, some retailers are you know, components of a larger oil organization and some are more independent, and so it really it really varies. And I would say that that right now, it's just that there is a very there's just a large gap in terms of what retailers might be paying for a barrel of oil and then what they can hint for gasoline. And so that will normalize. It's just a little bit higher now. However, it might not normalize if we go back to war with the Ron for example, which is something that they have been discussing. At least we've heard from Vice President Jadvans that there's definitely it seems like there's a mindset of let's kind of take this breather and refill, but this conflict is not over. And that certainly sends a message to refineries, It sends a messages to producers. It says match to everyone along that supply chain of you know, the danger is not over. You need to continue to prepare for outages shortages, and we're definitely not in that position. So it could cause some higher prices to remain. It could cause some stickiness simply because you know, if you tailers want to be sure, hey we want to make sure we can get those barrels, we're going to store them instead of putting them on the market.
00:11:05
Speaker 4: For example, Ellen, when it comes to the Strait of Hormuz, is is that waterway open or not? Aron set of foreign container ship ran aground while sailing through the street through a so called unauthorized route. Are there unauthorized routes and authorized routes? I'm confused as to whether this thing is open or not.
00:11:25
Speaker 5: I think everyone has a bit confused. I guess I would say the answer to that question depends on what open is and what your definition of open is. If you're talking about open as in the way things were before the war, the answer is absolutely not. Apparently that that waterway which is actually has a defined traffic separation scheme, it apparently has potentially a high number of mines in it, and so ships really need to avoid that. So there's the upper route, the northern route, which goes basically through Iranian waters. That's the so called authorized route that the IRGC is policing and and all that. And then there's a lower route, which goes through Omani waters, which seems to be a route that the US military is using to escort ships out of the Strait of hor Moves. It's unclear how many have come back in that route. Maybe some, but the Iranians do not want that lower route to be used. The Omanis have been giving a lot of conflicting information. They say, yes, it's open, we're not going to charge holes, and then they go and they say that Ridians, Yes, we're working with the Iranians to set up this system to charge. It's really, I think, a very fluid situation. It depends on who's got the ships, who's got the fire, you know, the air cover. We don't really know. It's kind of the wild West out there.
00:12:40
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
00:12:47
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live toe.
00:13:02
Speaker 2: Looking at gasoline here three dollars and eighty five cents. It is a daily national average gasoline prices for regular, which is what I use. Matt Miller's a very upset with me. I'm just using like the really good stuff.
00:13:12
Speaker 4: What the premium? Yeah, only only car heads like Matt Miller paid premium, I know, But anyone else that's the cheapest unloaded.
00:13:18
Speaker 2: Yeah it does.
00:13:19
Speaker 4: I don't know.
00:13:19
Speaker 2: But then if you go to electric, maybe it just doesn't even matter anymore.
00:13:22
Speaker 4: Or hybrid where you don't have to fill up as often.
00:13:25
Speaker 2: Yes, And that's what we have for offspring number four, who goes to school in California. And they pay like a gazillion dollars a gallon there, so it made sense. It's checking with Andrew Grant Bloomberg and EF, head of Intelligent Mobility and get his thoughts on what's going on there with the electric vehicle business going.
00:13:40
Speaker 5: Forward, Andrew electric Vehicles. I think it's safe.
00:13:44
Speaker 2: From my perspective at least, the narrative has been the industry maybe got a little bit too far out over its skis and trying to convert from ice to EV. Where are we now? Do you think it as an industry right?
00:13:58
Speaker 6: Thank you? I have a good time that question. Just two weeks ago, we've published our annual flagship Electric Vehicle Outlook, so lots of data to share on that front. The OUTDOO this year is less exuberant than previous years, as you were kind of alluding to there, but generally speaking the charts still go up into the right. This is the second year that we've had to cut both our near term and long term outlook for EV adoption, but that really varies by market as you go from different geography to geography. The biggest negative is in the US, where there's been lots of regulatory setbacks weaker fel economy rules, California losing its ability to sedatony equality standards, and subsequently, auto makers have pushed back a lot of their launch plans for electric vehicles, but global electric vehicle stales are still expected in at least in our outlook, to reach over twenty three point three million vehicles this year. That's eleven percent up from last year, slower growth, but still prey strong growth and represents about twenty seven percent of global passenger vehicle sales by the end of the year.
00:15:04
Speaker 4: Okay, so the US might be turning away from evs, but the rest of the world that most certainly is not. I've been trying. I've been in the market for a used hybrid, not a plug in, but a regular hybrid.
00:15:14
Speaker 5: For my parents.
00:15:15
Speaker 4: I want something with low mileage, and I've been going to different car lots and it's been really hard to find hybrids for whatever reason, maybe because everyone's looking for it with the recent spike up in gas prices, and so I guess my question to you, Andrew, is if it's so hard to find hybrids, is that because a lot of the automakers are not offering them. I know that Toyota and Honda are kind of the leaders when it comes to hybrids, but you know, have the big US automakers kind of caught up with this at all.
00:15:43
Speaker 6: I mean, hybrid cerve is something we cover in the report. We focus primarily on vehicles with the plug, but hybrids are a big part of the story. They can reduce submissions by anywhere from ten to thirty percent, depending on the type of technology that you're talking about, and it has proved particularly popular in certain markets the US, Japan as well. A lot of the vehicles are the hyper vehicles are coming from Japan. But really is probably something that was considering in addition to the fuel price and the fuel savings, there is just how well some of these vehicles hold up in the used vehicle markets. We've seen residual prices for hybrids hold up quite a lot better than some of the battery electric vehicles. That is improving over time, but you're getting more return when you come to sell your vehicle in most markets, so that's certainly pushing things up in that market. It will take kind of another decade or so in our outlook before battery electric vehicles start out selling hybrid vehicles in the United States, but in markets like China and Europe, battery electric vehicles are already out selling those hybrid vehicles.
00:16:50
Speaker 5: In those markets.
00:16:51
Speaker 2: You talk about where there is successful adoption to electric vehicles, how much government subsidies, what's the role of government subjects play, how long the governments have to support these programs.
00:17:02
Speaker 6: I mean, that's the question that government officials ask us quite a bit. How much do they have to provide upfront purchase incentives and then how long do they have to provide other incentives around charging, infrastructure build out. There's certainly a lot of money that is flowing into this space. By our account, there's about nine hundred and forty billion dollars that are being spent on electric vehicles this year. As far as upfront incentives, a lot of those are starting to go away in various geographies around the world, even in China, where there is significant evy uptake, that's becoming quite an expensive burden to bear. So a lot of those upfront purchase incentives are going away, and that's part of the reason we see growth flowing for just a bit in that market, which has a significant impact on our outlook. But we'll see if that kicks on from here. There's really been one hundred and fourteen billion dollars spent on charging infrastructure by our account. That needs to increase by the six hundred thirty five billion dollars between now and twenty forty two to meet the Charging Infrastructure command our appook. So a lot more needs to be It needs to be spent, a lot more incentives that come as part of that as well.
00:18:13
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
00:18:20
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch US live on YouTube.
00:18:35
Speaker 4: The US deciding against renewing its trade deal with Canada and Mexico, the US MCA choosing instead to conduct annual reviews of the pact. Let's bring in Nick Watams. He is joining us from Washington right now. Nick, this sounds incredibly disruptive, this idea that the three countries would conduct annual reviews of the pact rather than, you know, figure out what they want and kind of hold to a treaty the way that we've done in the past.
00:19:02
Speaker 7: Yeah, I mean, it's important to note that the USMCA does remain in effect for now. But what you essentially see as President Trump injecting a new way to sort of push the US negotiating position. I mean, listen, you know, USMCA was a landmark of his first administration. He called it one of the greatest deals ever made. But he found in the second term that this was really an impediment to his desire to impose sort of broad tariffs on certain sectors the economy with Canada and Mexico. The agreement essentially acted as a shield against that. So what you're going to see, I think is the USMCA remaining in effect, but the President trying to chip away at it. And indeed, automakers, there are a lot of sectors that are really going to be impacted by this and are going to feel the squeeze.
00:19:52
Speaker 2: Why is the US doing this, Nick, do you think?
00:19:55
Speaker 7: Well, I think the big thing is tariffs. Trump really likes tariffs. Tariffs have been a huge weapon in his arsenal in the second term, and the USMCA essentially means that he can't really inject or impose tariffs on certain sectors of trade having to do with two massive US trading partners, Canada and Mexico, so he wants to figure out ways to either change the terms of the deal. There will be these rolling negotiations over time, so he can get what he would potentially see as more favorable terms than the ones he negotiated, you know, six years ago. But generally it doesn't allow him to tariff sectors of the economy and get rid of those trade deficits that he so despises.
00:20:43
Speaker 2: So for some to me, it kind of feels like the USMCA has lost most, if not all, of its teeth. That one could argue there really is an agreement. Everybody's all three countries. I mean, Canada Mexico presumably can be open to trade sanctions, tariffs at any point now, right.
00:21:02
Speaker 7: I mean, your question really points to the big issue here, which is there is so much we don't know about what happens next. Because you know, what is clear is that USMCA does remain in effect for now, but that hasn't stopped the president in the past from saying, Okay, I'm going to impose these tariffs. So there are plenty of scenarios where he could basically contravene the terms of the USMCA and say I'm going to impose tariffs on certain sectors of the economy, on certain elements of trade that I don't like and that may violate the USMCA, But we can leave that for the courts to decide, and in the meantime, I'm going to impose those tariffs. So you know, even if we're still trying to get a sense for the details and what it means, it's definitely a situation that is not going to be welcomed by Canada or Mexico and is going to really have an impact on automakers all sorts of other importers into the US from these two countries who might say, Okay, hey, we're gonna hold off investment for now until we see the way things shake out.
00:22:08
Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal
