Returning to pre-Iran war gas prices could take awhile, energy analyst says

[0:00] of Clearview Energy Partners and Amos Hochstein, a former Biden White House senior energy advisor [0:04] and Middle East negotiator. Good morning to you both. This is probably one of the most central [0:10] conversations because the president made it very clear that the price of fuel was at the heart of [0:16] some of his decisions. He said he doesn't want economic catastrophe. We're running out of these [0:21] fuel inventories. So, Kevin, when do we get back to pre-war gas prices? It might be a while, [0:27] Margaret. So we've seen some downward travel rapidly in the gasoline price. We probably have [0:31] another five to ten cents per gallon coming if the oil price holds. But we have some uncertainty about [0:36] what's coming next. And so to get all the way back to where we were before the war, we would need [0:40] inventories to replenish. We've drawn them down a lot and it's going to take a while. The International [0:45] Energy Agency doesn't expect to see a surplus before the end of this year, maybe next year. [0:49] So refilling those inventories and coming back to that price might be a while. So it's not the quick [0:54] fix that perhaps the president is hoping for here. I mean, there are a lot of moving parts here. [1:00] It's confusing because the IRGC yesterday was saying they control the strait. CENTCOM says that's [1:07] not true. We see reports that there are tankers moving through the strait of Hormuz now. Does Iran [1:15] control the strait? And is there a way the U.S. can do what Senator Graham proposed, which was just [1:20] bomb our way to control of it? Well, first, yes, Iran controls the strait. And I've said this for [1:26] weeks, no matter what the agreement says, wherever the MOU says. And by the way, the MOU hints at Iran [1:31] having control of the strait in the future together with Oman. Point five there. Inside the MOU, which is [1:37] remarkable that we have essentially given that point away ahead of the negotiation. But Iran is already [1:43] saying it's not control is not just about a toll, a price for now. It's about I want 48 hours notice [1:52] before you're going to cross. Or they'll say that ship from the company that I don't like can't cross [1:58] today. You can cross tomorrow or never. Or if I don't like Saudi Arabia or I'm upset with Kuwait, [2:04] I can say your ships are not crossing. Control means a lot of different things. But effectively, [2:09] they are planning for control with eventually a toll of some kind or a fee structure of some [2:15] kind. That's the world we're going towards. But a toll is a violation of international law. [2:20] But the president is saying the U.S. will charge one if this doesn't go our way. How does that work? [2:25] Look, the president's saying if we will bomb it, we'll take it, we'll charge a toll, whatever. [2:30] I put that as some of the bravado rhetoric that nobody's paying attention to anymore. [2:34] The Iranians saying that it's against the international law to charge a toll. I mean, [2:38] the Iranians supporting terrorists in Lebanon, Iraq, and Yemen, they're doing a lot of things [2:43] against international law. Charging a toll will be the least of it. But what they're basically [2:46] telling the market is, do you want the strait fully open with a toll? Or do you want chaos where [2:52] you never know what's happening without a toll? But they'll have control. That's what is what [2:56] they're aiming for. That's the result of this war. You heard Mike Waltz, the ambassador, and other [3:03] U.S. officials claim, Vice President Vance claimed this was like a historic meeting, [3:08] just the fact that they had the meeting. For two years, the Obama administration negotiated [3:14] with Iran. I covered it. You were part of it. When you hear these claims that this is somehow [3:23] going to be better, based on the facts, what's your biggest problem with this document, the MOU? [3:29] So my biggest problem is that we've signed a document that says, Iran, you get money, control, [3:37] access to unfrozen assets. We reverse the, we give a waiver on your oil and petrochemical sanctions. [3:43] And all you have to do is open the straits and agree to talk to us about something they were [3:47] already talking to us before the war. We're giving, that entire document is giving incentives to Iran. [3:54] All they have to do is open the straits. That's it. That is my problem. And we got out of the JCPOA, [4:01] the 2015 agreement, because we said, what did Trump say at the time? You didn't address missiles. [4:07] You didn't address support for proxies. We've now said it's off the table. They have every, [4:12] more than that. We've given them the right to have a ballistic missile. This agreement made America [4:17] less safe. We should never have gone to war, but we've now essentially surrendered. [4:23] Well, Kevin, you, in your analysis, went point by point comparing the memorandum to the interim [4:32] agreement, the JPOA, as John Kerry used to call it, instead of the JCPOA. And you, as an analyst, [4:39] not as anyone with political ties here, say that the Trump deal is more lenient than the Obama deal [4:46] in several respects. Can you break this down? Sure. The most obvious is that the old deal that [4:52] preceded the JCPOA, the Joint Plan of Action, JPOA, limited Iran's exports to 1.1 million barrels per [4:59] day. There is no obvious limit in this deal. So the MOU, to the extent that it corresponds to the [5:05] JPOA, is essentially saying that Iran can resume exports probably at the 1.6, 1.7 million barrels per [5:11] day level it was exporting at before the war. Now, would it return all the way to 2.5 million? [5:17] Probably not, because importing countries, we're going to have to have some confidence in the [5:21] durability of this. And so I think in that respect, it's probably the biggest give relative to its [5:26] predecessor. Well, on this point, Vice President Vance was asked about Iran being able to sell [5:32] its own oil again. And I want to read it to you, Amos. He said, by lifting the sanctions, letting them [5:38] sell their own oil, we're going to be able to see a little bit where their financial system actually [5:43] sends money and receives money. And that's a real benefit to the American people. [5:49] What do you make of that agreement? I have no idea what he's doing. I don't have no idea what it [5:52] means. At the end, they sell oil by giving waivers. It means two things. One, it expands the number of [5:59] customers they'll have from just China, essentially. And number two, they won't be a, they won't get a [6:05] dis, forced to sell their oil at a discount. They'll get the full amount because there's no discount [6:10] when there's no sanctions. So instead of selling before the war, meaning in December, discount to $60, [6:16] so 50-something dollars a barrel, they'll be selling it at about $75 to $80 a barrel. That means a billion a [6:22] week in revenue. We've had years of them selling oil. We know how their financial system works. Treasury knows how [6:28] their financial system works. The intelligence community does. Why we're giving, as Kevin just said, why we're [6:33] allowing them to get all the money up front and then expect them to make concessions. And the same [6:40] concessions we could not get them to do during battle, during war, that somehow they'll do while [6:46] they're making enormous amounts of money. And God only knows what they're going to be spending this [6:50] money on. Again, I wasn't for this war. I was against this war. I'm glad the war is over. But how wars [6:56] and matters. And this makes America less safe and the region. So, Kevin, you hear from the [7:02] administration, though, oh, but we're energy independent. Why doesn't that argument work? [7:07] Well, we both import and export oil, Margaret. We're connected to the global market. And so it [7:11] matters what the price is for petroleum everywhere in the world. And when it's short, it affects us. [7:16] It affects us not just because of the oil that we produce a lot of. And frankly, U.S. exports have been [7:21] a very big part of keeping the price down for everybody in the world. No, it's also that because the [7:26] products that are made from oil have been short. The gasoline and diesel fuel that we use on American [7:31] roads depend on import flows as well. And so for optimizing the efficiency of our system, we have both [7:37] imports and exports. We would not want to live on an energy island. It would be a very expensive place. [7:42] Amos, I want to get to your expertise having handled Lebanon. Point one in this deal says that there will [7:49] be an immediate and permanent termination of military operations, including in Lebanon. Lebanon, Hezbollah, [7:55] Hezbollah and Israel are not part of these negotiations. This seems to be a concession to [8:01] Iran. Well, it is, but it's a very big one because it's more than what it just says. [8:07] What we have tried in successive administrations has been to say Iran is not in control of Lebanon. [8:14] Any decisions on Lebanon, you know I negotiated there for a long time, will be decided between [8:20] Israel, the United States and Lebanon, not Iran. This essentially gives authority to Iran over what [8:27] happens in Lebanon. And that is a huge concession to Iran and a big blow to the government of Lebanon. [8:34] And it now, what's happening is it's extending Hezbollah's support among the political support [8:40] in Lebanon when it was reeling. The vast majority of Lebanese wanted Hezbollah out. They wanted this [8:45] water over. And the two things that have made Hezbollah popular is one, Israel sort of overplaying [8:50] its hand and occupying large parts and saying they'll never withdraw from what it's called now [8:55] the yellow line. And the United States saying that Iran is now in control of the fate of Lebanon. [9:01] And those talks here in D.C. is scheduled still to take place this week. Gentlemen, thank you. [9:08] We'll be right back. Opening day, just like we used to.