00:00And let me go straight to Dallas from where Dr. Anas Alhaji, who is a world-renowned energy markets expert,
00:08is joining us.
00:09Dr. Alhaji, appreciate your time here on India Today.
00:12U.S. President Donald Trump told the United Nations more oil is flowing through Hormuz than at any point in
00:19this war.
00:20And that the U.S. Navy has escorted a billion barrels out from the tanker and the satellite data you
00:28watch.
00:30Is the strait actually opened or is the market still pricing a blockade that never fully lifted?
00:42The issue here is how much is going through the Hormuz strait?
00:46And is it crude? Is it petroleum products? It is natural gas liquids, etc.
00:54We don't have that information. They did not provide any of that.
00:57But whatever we heard before, it seems like whatever happened in one night, they are extrapolating that to the rest
01:06of the week or to the rest of the month.
01:08And it is very clear sometimes they are double counting.
01:11So there is some exaggeration on those numbers.
01:14This is a U.S. President who has delivered an open threat from the world stage when he says that
01:23he could unhighlight Iran.
01:28What happens next in the oil market if that is not just rhetoric?
01:37Well, this has been going on for a very long time.
01:40The market is going to discount all of that.
01:42The whole issue here is what's going to happen really on the ground and what kind of meetings are going
01:47to take place in the coming two days with which,
01:52who are the leaders who are going to meet Trump and what negotiations are going to take place.
01:57Otherwise, I mean, Trump is repeating what he's been saying for a long time.
02:01So I don't think the market is going to react to that.
02:03Okay.
02:04So, Dr. Elahi, do you look at what has been said repeatedly with regards to economic isolation of Iran?
02:14If that actually happens, Iranian barrels, Asian refining margins or diesels and fertilizer prices, particularly in the context of India,
02:21how do you think it will all change?
02:27Generally speaking, India does not import any oil from Iran.
02:31India did import some NGLs or LPG from Iran, but that can be substituted from other places.
02:38This is not a big deal.
02:40The issue here is what's going to happen to Iranian oil.
02:44Iranian oil is sold to China.
02:46China basically has the capability to replace Iranian oil.
02:50If it's not buying it from somewhere else, it is using their inventories.
02:54And China has massive inventories.
02:57It can use it, and it will take like more than a year of replacement.
03:03So they have a lot of it.
03:05And we have not seen that much Iranian oil going through the Hermit Strait anyway.
03:10So the world is already dealing with it anyway.
03:13The issue here is when we look at the oil market, we do have a crisis.
03:20But where the crisis is, the crisis is not in crude.
03:24We do have plenty of crude right now.
03:26The crisis is in petroleum products.
03:28Yes.
03:29The crisis is in diesel.
03:31That's where the crisis is.
03:33So whatever happened in the United Nations and whatever negotiations, whatever deals are
03:38going to be made, that's going to affect the future and probably even the distant future.
03:42Not now.
03:44We have a diesel crisis, and there is no solution for that diesel crisis, whether in the United
03:48States or anywhere in the world.
03:50So if there is no solution in sight and the uncertainty is continuing, how do you look
03:57at the risk here?
03:59If the Navy is at the bottom of the sea and the oil is flowing, as Donald Trump is claiming,
04:05why are diesel prices still behaving as if the strait can shut tomorrow?
04:14There are several reasons for that.
04:16The first reason is we lost a massive amount of diesel from the Gulf itself.
04:21We have several refineries there.
04:22They are not able until now to go back to full capacity.
04:26And on the other side, we ended up with a situation where many countries panicked and
04:32they restricted exports.
04:33India did that at the beginning of the crisis.
04:36South Korea, China, et cetera.
04:38And then we have ships, basically, or tankers carrying diesel that's been changing direction
04:44based on who is buying them.
04:46So we have more diesel and water than reaching their destinations.
04:51And then whatever left in the world, in terms of countries allowing exports, the refineries
04:56are maxed out.
04:57Whether you look at the United States or India, they maxed out.
05:00And they are making a lot of money right now because the cracks from diesel, the margins
05:06they make from diesel is higher than the price of oil itself.
05:10So they are making a lot of money out of it.
05:12But that's not enough.
05:13So even if you have accrued, you cannot make diesel out of it because refineries are maxed
05:19out.
05:20And that is a big problem.
05:22We lost several refineries in the United States and Europe.
05:25So that is part of the problem.
05:27China has a serious problem because they mandate or they control domestic prices.
05:33So Chinese refiners are losing money and they cannot export much because the government imposes
05:38quota on them.
05:39So from where the diesel is going to come, all the available refinery in the world basically
05:44are maxed out.
05:45You have called this the worst energy shock since World War II.
05:49And you have said that India's real problem is not just crude, but diesel, LPG and fertilizer,
05:56something that we have seen.
05:57After the speech of the U.S. president, does that product's crunch ease or does isolate Iran,
06:06make the middle, you know, the shortage worse?
06:15Trump's speech basically is completely irrelevant to this.
06:18Trump's speech basically is just the rhetoric he's been saying for a very long time.
06:22So it has no impact.
06:23The earlier talk about this is the largest energy crisis since World War II and the problems
06:30that India will have, et cetera, these are the same.
06:35Nothing changed.
06:36We still have problems with fertilizers.
06:39We still have problems with energy supplies.
06:41We still have problems with other materials, including helium, methanol, aluminum, et cetera.
06:49All of these issues basically still exist.
06:50We have serious problem with LPG.
06:53I mean, India, India problem is very unique when it comes to LPG.
06:57And the reason why, because India, with the help of the United Nations and the IMF,
07:04they changed over time, over years to clean cooking.
07:09And clean cooking by their standards basically is to move to propane or LPG.
07:15And that became a problem right now after they shifted to it
07:18because that type of LPG is mostly produced by Saudi Arabia on the eastern coast.
07:24And that was shut down.
07:26So the replacement from Russia and the United States is not really a replacement
07:32because the type of LPG that is imported from those countries
07:35is different from the needed LPG that used to come from Saudi Arabia.
07:39Then who fills that gap for India, according to you?
07:46Well, India, in general, India done an incredible job in doing whatever it can in the light of crisis.
07:58So if you compare, for example, this to Japan, we ended up with the following situation.
08:05Both countries basically drew from their inventories and reserves.
08:10Both of them reduced imports.
08:11But India quickly was able to restore imports and replenish inventories.
08:19India's inventories right now are the highest since COVID.
08:22Japan was not able to do that.
08:24Japan inventories basically remain very low.
08:27They used their strategic petroleum reserves, and their imports have not recovered.
08:32So what is the difference between the two countries in this case?
08:35The currency of both countries basically went down, and the yen basically collapsed.
08:40The rupee went down.
08:42So the similarities are many.
08:44But why India was able to do that and Japan was not able to do that?
08:48Well, one of the reasons why, because India imported the cheap Russian oil, the discounted oil.
08:56Japan, because it is part of the G7, they have an embargo on Russian oil.
09:02So India basically was able to manage.
09:04Japan was not able to manage.
09:06And so the policy here and the foreign policy basically played a big role.
09:11But Dr. Al-Ajee, of course, India has faced repeated threats and punitive tariffs as well.
09:18That has also gone up, you know, with the announcement which has happened recently.
09:22Given the kind of threats that India has faced, but India remained determined,
09:26the Indian government certainly said that it is prioritizing its own people
09:31rather than succumbing under the U.S. pressure.
09:36This is, in fact, it's all the above.
09:39There are many reasons here.
09:41You know that the United States imposed this new or adopted a new law
09:46that allows the president of the United States to impose up to 100 percent tariffs
09:52on any country that imports their Russian crude.
09:55But if you look at the law, the new law that President Trump signed last week,
10:01it does not change anything on the ground because it just emphasized what Trump has been saying
10:07and doing for a while.
10:09And this law basically puts everything in Trump's hand.
10:14So it's up to Trump.
10:15And that was the case before and after.
10:17So that does not change anything at all.
10:20This new law, it helps Trump in court if he was challenged in court.
10:27But that's it.
10:28It does not give him any additional powers to impose anything on India or anything else.
10:33He had the power to do it before and he still have the same power today.
10:37So this is not a big deal.
10:38Nothing changes from the past.
10:42The issue here is, if you look at the details of this law,
10:46you realize that the Indian media and other media around the world basically exaggerated the impact.
10:54And there was some panic on the part of some because of it.
10:57Here is why.
10:58First of all, if you look at the details, the law said there is a 180-day grace period,
11:04which means that we are talking about six months.
11:07So any country in the world who is importing Russian oil, they have six months to reduce or eliminate their
11:13imports from Russia.
11:15The same law basically says, well, if countries try to reduce their imports and show good intentions, that's good enough.
11:24But that's exactly what Trump was saying all along, even before the law.
11:29So nothing changes in this case any way you look at it.
11:32And then you look at further details.
11:34We've seen India doing this before.
11:37India refiners have experience with that.
11:39They can reduce their imports from Russia and show good intentions.
11:43And based on our estimates right now, India is importing about 2.3 million barrels a day.
11:49They can reduce that to 1.4, 1.5.
11:52So we're talking about 700,000 to 800,000 barrels that need to be replaced.
11:57This can be replaced easily right now.
12:00Again, the problem in the oil market is not crude.
12:02The problem is products.
12:04So I don't think there is any problem for India refiners, even if Trump decides to threaten India.
12:11Dr. Anas Alaji, always a pleasure listening to you and your perspective on the issue of energy.
12:18So thank you so much for joining us and sharing your thoughts.
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