Title: Jeff Currie Says Situation in Energy Is 'Dire'
Show: Bloomberg Television (YouTube)
Guest: Jeff Currie — Chief Strategy Officer of Energy Pathways, Carlyle (ex-Goldman Sachs global head of commodities research)
Date: 2026-07-17
URL: https://youtu.be/DfBp8bRh94c
Length: ~8:45
Note: Fillers (um/uh/you know/like-as-tic) removed and stutters/false starts collapsed; wording otherwise verbatim. Auto-transcript garbles corrected: "sell crack spreads"→diesel crack spreads; "oil glide"→oil glut; "young diesel"→diesel (NY Harbor); "hoodies"→Houthis; "CD2"→CDU (crude distillation unit); "straight"→strait; "ceased fire"→ceasefire; "asset like"→asset-light; "the I"→the AI; "globalization theme"→deglobalization theme; "new area"→new era; "halo"→HALO (Hard Assets, Local Operations); "FID whether it fits"→FID whether it's. Every (mm:ss) cue kept in place. Interview: Bloomberg TV anchors ↔ Jeff Currie (unlabeled, as captured).

(00:00) I do want to start with what read we should take, if at all, from what is effectively one of the highest diesel crack spreads that we've seen since the mid 80s. Relative to, I guess, the relative fade that we've seen in crude oil futures themselves. Well, I think when we think about oil, it was impacted by, I could say when that MOU came out, it was like popping a pimple.
(00:25) There was oil trapped behind the strait and then it all came out suddenly, like over 120 million barrels. Some estimates put as high as 150 million barrels. That hit crude really hard as it came down. But obviously you can't refine it immediately and put it into products. But at the exact same time, Ukraine started striking deep into Russia, like 1300 kilometers inside Russia with precision drone strikes that were taking out what we call the CDU crude oil distillation unit.
(00:55) That's the primary tower. Some of these things are going to take years to rebuild. The damage was so extensive, it's taken out more than 50% of the refining capacity out of Russia. It has led to crude oil shut in. So not only have we now lost all of the Straits of Hormuz again, but we have also lost the crude oil and the refineries in Russia.
(01:20) So the situation in energy, I would argue, is pretty dire. And the other thing I want to point out is that we have exhausted all the insurance policies in round one of the Straits of Hormuz. Whether it is inventory buffers or whether it is China was flexing its economy in being able to survive the downturn.
(01:41) So it's a very different situation in this round two than when we saw in round one. Square the circle with me. Because you get this messaging coming from the minister, the Trump administration, and I understand they're going to talk their side of this story, but they talk about this oil glut and all the tankers out there that are ready to pick up the slack here.
(01:59) If and when they finally get the situation in the Strait of Hormuz taken care of here, there's no buffer, no cushion. Why is there still a lot of optimism out there, not just from the administration, but even from some of the corporate CEOs that we've heard from? I think it's they have witnessed the fact that nothing happened in round one.
(02:22) And I like to say commodities are a spot asset. They price today's fundamentals. We were burning through the inventory cushion buffer. We didn't have shortages. We had a deficit, meaning that demand was above supply. And you were drawing the inventories. We didn't run out of oil this time around. Why do we have products trading at these all time high levels? And you have diesel, I think, in New York Harbor, like 130 or $140 a barrel, because we are now witnessing the probability of running into real shortages of products. But eventually there's still enough
(02:57) refining capacity as you'll burn through a lot of this crude, particularly of China. And from what I understand, the margins are big for export. They lifted the export ban out of China. Those refineries are going to come back and start processing that. So you're going to see the rise in crude as you move closer to the product prices.
(03:19) But I think the main reason why there is a high level of confidence is it's not going to be bad. It's what I call the abundance illusion. They're looking at the inventory draws. China helped out with flexing its system. And we didn't see the shortage. So everybody's convinced round two, you won't see the shortages. The situation is that.
(03:43) And both sides have entrenched themselves. One of the facts that makes this one different: Saudi and the Saudis are at it. The Houthis control the Red Sea. They can take out Yanbu, which was the diversion export for Saudi Arabia. So the situation this time around is just far different and far more dangerous.
(04:01) Jeff, do you think that demand destruction can offset supply shortages? Or do you think we're entering a new era in which oil prices are just structurally higher? And that's the new normal? I was arguing before this ever happened, we were going to enter a new era where all commodity prices, whether it's oil, metals, agriculture, and the rest of them are going to be structurally higher.
(04:22) In fact, everything was going that direction until the ceasefire in April. Whether it is metals prices. And part of that is what we call the revenge of the old economy, that you need to have investment in these old economy, asset heavy industries that were starved of capital in favor of asset-light technology.
(04:42) So the underlying fundamentals are very different. And yeah, I completely agree. We're in a period where hard assets, the HALO trade. I like to define HALO as Hard Assets, Local Operations, meaning we rebuild our supply chains, energy security. All of these, defense, all play into this, which are going to lead to higher prices.
(05:06) So I think that this is just part of a sequence — whether it was the first invasion of Ukraine with Russia back in 2022 or the Straits of Hormuz or the next round of Iran, Russia, all of this is the deglobalization theme in process, which just leads to higher commodity prices. So markets seem comfortable with oil in the 70 to $80 range.
(05:29) At what price do you think that this will economically slow growth and maybe change central bank thinking? The question around slowing growth is it's not so much the price of the commodities. That's a relative pricing. The question on inflation is do you end up with higher overall price level.
(05:51) So the commodities in oil are a relative price move. But the inflation question and the rate hike question is does this lead to broader inflationary pressures. I'm not a big believer in the cost push relationship. But I think the question around growth is a very interesting and important one, because if we end up with shortages, that's how you end up with impact on growth.
(06:12) Everybody likes to tell me, oh, well, Europe survived 2022. It survived, but it lost 25% of its energy intensive industrial output. That's the growth problem. And when we think about what happened in Europe and how this thing extends on, you don't have the products, you don't have the oil, it will hit growth.
(06:34) There's no other option and the insurance policies are gone. I also want to point out there is no strategic petroleum reserve for products. So the ability to find ways to get out of this starts to become extraordinarily difficult. Hey, Jeff, before I let you go, I do want to get your thoughts on what's going on in the energy sector outside of the geopolitics.
(06:54) And this has more to do with the energy intensity, the need for this AI build-out and boom, coming out that PJM disclosure yesterday and everything we know about this build-out. Do you have any sense here that we will find some equilibrium anytime soon with regards to supply and demand? No. I think we need to start spending money.
(07:15) You've got to see FID — whether it's upstream in oil and gas, downstream in refining, and metals in mining. All of these sectors are severely underinvested. You look at metals and mining. CapEx is down 35% from its peak. You need a lot of metal in those data centers, and any metal for the grid you need metal. For transformers, you need metal for turbines.
(07:38) We need oil and gas to burn in them. We've got to get to a point where commodity prices are high enough to attract capital back to the sector. You need higher return on investment to compete with the asset-light group. And the asset-light group, their returns are coming down. You look at the hyperscalers. These guys are commodity guys.
(07:56) They're in a cyclical business. It is cyclical. They need to be rerated and we need to see that commodity markets rerated. But the reason why investors don't touch them is there's such a small part of the overall indices. Now you go back at its peak in the last cycle around 2014, energy was roughly 18% of the S&P.
(08:14) It runs around 3% now. So even if it doubled, a portfolio manager who is running a broad portfolio, it looks like I can miss out. And we needed the commodity prices to move higher, to get that capital to come back in the space, to give the build out in the underlying production, to be able to accommodate the AI, the electrification, the data center boom.
(08:36) So we still have a long ways to go here because you've got to get the idea.