Episode 7: Running on fumes: the future of fossil fuels

Transcript: Season 1, Episode 7: Running on fumes: the future of fossil fuels

Caitlin Dean: Welcome to Living Beyond Borders, the podcast from Citi Private Bank and GZERO Media that examines the risks and opportunities in our rapidly changing world — from global politics to economics and what it all means for you. I'm Caitlin Dean, Head of the Financial and Professional Services Practice at Eurasia Group.

There are few sectors of the economy quite as tightly connected to geopolitical power as oil and gas. The business and politics around fossil fuels — at least for the last hundred-plus years — have gone hand-in-hand and impacted each other cyclically — from the oil crisis of 1973 to the Great Recession of 2008. And this year brought the biggest blow to date.

TAPE MONTAGE

Speaker 1: The price of a barrel of West Texas Intermediate crude oil was negative $37 a barrel.

Speaker 2: U.S. oil prices have become technically worthless.

Speaker 3: Prices are down about 75% so far this year to date — on pace for its worst year since at least 1983.

Speaker 4: Producers ended up paying buyers more than $30 a barrel to get oil off their hands.

Speaker 5: Demand has essentially vanished. The results around the world — there is too much crude oil.

Caitlin Dean (01:21): At the same time, there's been a push in fits and starts towards renewable energy sources like solar, wind water and even nuclear. So where are we today? I'm joined now by Luigi Pigorini, Head of Citi Private Bank for Europe, the Middle East, and Africa. Hi Luigi.

Luigi Pigorini (01:39): Hi Caitlin.

Caitlin Dean (01:41): Ed Morris, Global Head of Commodities Research at Citi is also with us. Ed, welcome.

Ed Morris (01:44): Glad to join you. Thanks.

Caitlin Dean (01:46): And from Eurasia Group, we have Robert Johnston, Managing Director of Energy, Climate and Resources. Robert, thanks for being here.

Robert Johnston (01:53): Great to be here with all of you.

Caitlin Dean (01:55): Luigi let's start with you. Fossil fuels have maybe been less top-of-mind for the last few months, but remind us what was the picture for the oil and gas industry before the pandemic?

Luigi Pigorini (02:05): So, just to put things in context, before the pandemic hit global oil demand was approximately a hundred million barrels per day and demand growth forecasts were in the region of 1.1 to 1.3 million barrels per day. But as COVID-19 first morphed into a regional epidemic before eventually being declared a global pandemic, negative oil and gas market sentiment became inevitable.

Then when restrictions to hold the spread of the virus brought curbs on human mobility and with whole economies in lockdown at one point in April, and people driving and flying a lot less, and human consumption patterns were seeing abnormal shifts, then oil prices and demand projections took a knock. Oil’s dependency on mobility, which accounts for just under half of global demand, has created near-term demand destruction on an unprecedented scale.

Market conjecture in the immediate aftermath of the pandemic suggested around a fifth of global demand, or 20 million barrels per day, might be wiped out in 2020. This has not turned out to be the case. The International Energy Agency currently estimates that the month slump in 2020 will likely be around 8 million barrels per day with global consumption, at least above 91 million barrels per day, largely driven by petrochemicals and a gradual recovery of mobility.

A caveat needs to be attached here — any recovery in the oil and gas sector will be gradual, and uneven, and most likely driven by a rise in demand in Asia, especially China, and an uptick in activity in the U.S.

Caitlin Dean: The economics around these resources also always have close ties to geopolitics. Robert, where was the balance of power at the start of the year?

Robert Johnston: Yeah, it was a great question. I think that at the beginning of the year, there was a great focus on the dynamics in the so-called OPEC Plus Partnership, which is the core OPEC group led by Saudi Arabia, along with Russia.

And right around the time COVID was really picking up, there was a dispute between Saudi Arabia and Russia over whether to continue to withhold production, to support prices and kind of make room in the market for expanding U.S. shale supply, or whether to increase production and try to eliminate some of the competition through lower prices. And they ultimately ended up opting to produce more oil. And that happened at the worst possible time to coincide with the COVID downturn and led to the collapse of oil prices in March and April. So the geopolitics at OPEC Plus were important then, they're important now.

I would also say that the question of so-called U.S. energy dominance under the Trump administration has been very important as well. I think prior to COVID, there was a view that the U.S. was becoming a significant exporter and was in fact challenging Saudi and Russia leadership in the global oil market. And moreover, that Trump was actually linking that sort of newfound energy independence, and strong energy exports to foreign policy with China, with Europe, and even with allies like Japan. So obviously now with the U.S. shale production down by about 15% post-COVID the energy dominant story certainly is not as powerful now as it was before COVID.

Caitlin Dean: Ed, let's bring you in here to talk about where we've been in recent months. Like everything else, COVID has impacted energy. So how have oil and gas markets been affected by the pandemic?

Ed Morris: This has been a challenge to both oil-producing companies and oil-producing countries. And that challenge is of course linked because of the impact of lower prices on both of them. When it comes to oil producing countries, we have some countries that are better off — the larger countries in the Gulf Cooperation Council, Saudi Arabia, Kuwait, UAE.

And they have taken strides to diversify their economies. And in many ways are using the pandemic as a mechanism, or an occasion, to accelerate the changes within them. But there are other countries both within the region and outside the region that have no borrowing power at home or abroad that can't meet the payroll of the government, that can't deliver services that are expected of them, whether in education or in healthcare or in internal security.

So like in other cyclical downturns, we have a concern on the horizon for disruptions to supply coming from the failure of the petrol state. Yes, we are moving toward an energy transition, but we're not there yet. And I say one of the biggest risks on the horizon, really is what might happen to some oil-producing countries — disruption to supply even more so than in the past in places like Nigeria, or even Iraq.

When it comes to oil-producing companies, they are challenged in terms of the cash flow in terms of their capital spending. And this is particularly noteworthy and it's a big unknown while the shale plays in the United States. Robert had mentioned that U.S. production is down, but U.S. production is also very price sensitive. It's our judgment that the oil market is rebalancing at a very rapid rate. If I take a look at the fourth quarter, we think our average production year on year will be down in the eight to nine million barrel a day range. But we think oil demand, which has been rebounding spectacularly, will only be down year on year in the fourth quarter by four to five million barrels a day. That means inventory draws, and indeed visible inventories have been drawing. So prices are down, but we think they will come back up.

So there is great uncertainty from a market perspective of where all this will lead. And I'd say hanging over this as a political uncertainty.It may be an uncertainty no matter who wins the U.S. elections, but there is a sentiment in the market that the U.S. is likely to find a way to go back to the JCPA agreement, bringing Iran back into the market. That could be a lot of oil to absorb or not depending on how that works out.

Catlin Dean: Ed, thanks. So you talked quite a bit about disruptions to supply and also about the geopolitical uncertainty, but we also had much lower demand because so many people were stuck at home. Are those the sort of main dynamics here?

Ed Morris: They are the main dynamics, but there is something about the demand side that we find certain, and there's a bunch of things about the demand side that remain uncertain. What is certain? Jet fuel demand will not be what it was in 2019 until sometime in the future. And for some people it may be forever. So there is uncertainty on the jet fuel side, not just because of business travel and leisure travel not rebounding past enough, but also because inefficient aircraft are being replaced by much more efficient aircraft. There’s probably going to be another generation of new efficient engines before the end of the decade. And then on top of that, the aviation industry is moving rapidly toward sustainable fuels. Fuels that come from waste products or biofuels, which mean less of a demand for refined products, less of a demand for crude oil — at least on the jet fuel side.

There's a very big uncertainty on gasoline. Of all the areas of demand growth, gasoline demand has responded the best to date. Some of that may be temporary because of fears that people have in terms of using mass transportation. We don't know what changes in office habits will be in terms of people commuting in or people moving to suburbs. Gasoline demand has rebounded much more closely to what it was than has demand for other fuels.

There's a very big uncertainty on diesel demand. And then on top of that, diesel demand is directly related to trade. We were in a period of time that predates the COVID pandemic in which trade was actually not just slowing down but collapsing. So in the six months before we got into the 2020 situation, demand for diesel was slowing, and that was related to trade growth being negative month-on-month, year-on-year, not just for the six solid months before 2020, but for the first six months of 2020 as well. And unless we find a rebound in crate growth, which is tied to the Chinese economy, the U.S. economy, the European economy, and their interactions with one another, we might not see that diesel demand growth returning.

Caitlin Dean: Luigi, from a global perspective, how has COVID impacted oil markets and the corresponding strength of governments that depend on fossil fuels for much of their power and their leverage?

Luigi Pigorini: The short answer is that it has impacted them a lot, and we continue to do so. Some oil-producing countries are already under great budgetary pressure with the lower oil price. And the COVID-19 pandemic has exacerbated their problems. I think it's also worth noting that the key point here is that the acceleration of the transition away from fossil fuel in the aftermath of the pandemic, also has profound implications for producers and consumers alike.

So for the oil producers, their strength on their agility, given a changing energy demand dynamic, and on their breakeven price for fossil fuel production. State owned entities — so if you will, national law companies and especially the Middle Eastern ones — such as Adnoc and Aramco, who enjoy much lower breakevens — would accelerate energy transition that will start in their home markets. But at the same time, they will capitalize on the reshaping of global demand towards petrochemicals and towards aviation and Marine fuels and refining and their anticipated demand centers.

At the same time, those who can, will optimize their production. For instance, many oil companies are investing heavily in technologies, such as blockchain, centralized inventories, remote site management, artificial intelligence, and advanced analytics to further squeeze already low per-barrel costs of extraction.

However, national law companies from less diverse economies. So for example, Nigeria and Angola are likely to feel the pain more. Although some producers with operational mitigation measures, for example, in Russia where oil revenues are received in dollars, but taxation is in Russia rubles — may minimize short-term pain. And finally, there are likely to be extreme laggards with unpredictable consequences as well. For example, Venezuela, which needs a one-hundred dollar per barrel oil price to balance its budget and the near term prospects of which appear quite remote.

Caitlin Dean: And there have been some projections that the world might hit peak demand for oil somewhere in the next 10 to 15 years, so between 2030 and 2035. And BP has projected that could come even sooner. Has this been sped up by COVID?

Luigi Pigorini: So core OACD markets, with the exception of Poland and Australia, have made direct overtures towards reducing the reliance on fossil fuels. Now the acceleration of the march towards renewables might be palpable, but a reality check is required based on a much wider timeline for energy transition. So for example, China is the world's largest energy consumer, as well as the biggest investor in renewable energy. Yet nearly 60% of its energy needs are still serviced by coal. China's also logging bumper crude oil imports in its post-COVID-19 economic rejuvenation efforts. And more generally speaking, when it comes to transition and peak demand for oil, there is no market unanimity on when we might actually get there.

So the likes of BP, Yotal, and even OPEC see demand plateauing sometime between 2030 and 2040. Also, overtures by big oil in general, at least the non-U.S. component of the group towards renewable energy, have been the subject of many recent headlines along with the near stalling of fresh oil and gas prospection. And these will continue in-step with an acceleration of process optimization and technology by the independent companies to extract maximum value from their portfolios, and seek lower breakeven akin to national oil companies.

All of the world's top 20 independent oil companies have outlined their ambitions for a lower breakeven, with BP doing so with a 30 breakeven goal as early as 2017. The pandemic will serve to accelerate this with venture capital funding, arms of energy companies, and their partner vendors going into overdrive to find both green as well as processing and resource maximization technology.

Caitlin Dean: So I think all of you have mentioned renewable energy sources at some point. So let's dive right into that topic. Robert, there's a growing awareness of the circular economy as an alternative to a traditional linear economy where you make something, you use it and you dispose of it. And that's true in academia and policy making and in the industrial complex. So how vital is a transitioning energy sector, especially big oil in championing this drive since oil companies are investing more and more in renewables and recycling?

Robert Johnston: Yeah, I think as Ed mentioned, it's going to be a long transition to a fully circular economy where you have much higher utilization rates of reuse, of recycling, of various feedstocks. But that sort of aspirational goal of the circular economy, much like some of the net zero carbon neutral goals that oil and gas companies are announcing for a 2050 timeline with various benchmarks along the way, as Luigi mentioned, I would put this in that category as well. But I think the oil and gas companies will be part of the circular economy. I mean, they do have a big presence in the chemical sector where circular economy principles are particularly important. They do have experience operating these large fixed assets, capital intensive projects and managing various kinds of risks around them from policy risk to sort of execution risks to market risk. So I think there will be a critical role there.

And they also have the human talent. You know, the engineers and scientists that had the ability to maybe shift the strategy in a circular economy direction, but leveraging the same expertise at scale that the companies represent. That said,we do think at Eurasia Group, that the incumbent IOCs, international energy oil companies, — yes, some of the European ones are evolving as we discussed — but we expect to see both sort of legacy, big oil and the big automakers challenged by the tech sector and by new entrants that we'll be making their presence felt in the circular economy and in the low carbon transition here as well.

If you look at the amount of capital that the Googles and Amazons of the world have to work with and their low cost of capital, and again, their immense technical capabilities, and you start thinking of what they could do with circular economy principles, say in the smart city concept, that's something where that could be very interesting as a disruption to the sort of traditional integrated oil and gas model. So that's something we'll be watching with interest, but I suspect that you'll see both traditional oil and gas supermajors, like Shell, as well as the tech companies among others making a big splash in the circular economy space.

Caitlin Dean: And should we be skeptical of industries that are the biggest polluters also becoming part of the solution?

Robert Johnston: Yeah. You know, it's an interesting question. I can understand why there's some skepticism, and I've certainly been watching with interest, you know, the Democrat party in the U.S. — not necessarily Vice President Biden, but some others that ran for Democrats taking a very, almost prosecutorial stance towards oil and gas and saying that we need to investigate them for climate fraud and all these things. But I guess the flip side of that would be to say, ultimately, the pathway to decarbonization is going to run through the consumer. Because if you look at life cycle emissions from oil and gas, but 15% of it is coming from what happens in the oil field or in the refinery. And 85% of that comes to combustion level, meaning in all of our gas tanks, in our cars, in our home heating oil and everything else.

So I think yes, it's reasonably skeptical, but also it's probably reasonable to be skeptical about whether or not voters are going to be willing to absorb carbon taxes and higher costs to support the energy transition. Because I think, even if the oil and gas companies went a hundred percent carbon neutral on their so-called scope one emissions, which is through upstream direct emissions, that would still leave 85% of the emissions that have to be paid for elsewhere.

Caitlin Dean: Luigi, the International Energy Agency, or the IEA, expects that renewable energy sources will account for 30% of global capacity by 2024, which really isn't that long from now at all. So is it feasible to imagine that parts of the developing world could bypass fossil fuels and head straight to renewables?

Luigi Pigorini: I think that the proliferation of electric mobility for ground transportation, especially, you know, you see the markets, which is increasingly driven by renewable energy, is really having an impact. But the emerging markets, which are deemed to be the large centers of energy demand, the emerging markets hold the key. And we have plenty of anecdotal and empirical evidence pointing to renewable energy, especially wind and solar leading electrification of rural areas in developing economies as diverse as India and Vietnam.

And a case can already be made here for sub-Saharan Africa, following a similar trajectory in bypassing fossil fuels in favor of renewable led electrification with many localized power grid infrastructure. What lends support to this argument is that emerging markets are not held back by legacy issues. And that really helps them, provided obviously the capital and social political will is there. That really helps them to jump the fossil fuel chain when it comes to electrification. And this is very similar to how certain African nations. So mobile operators jump fixed line telephony in favor of cell phone communications.

Having said that, there’s a long, long way to go, even if a transition cycle is shortened by the pandemic. And moving away from electrification and vehicular traffic in the case of air transportation, there are unfortunately not obvious, or immediate, or viable substitute for fossil fuels and likewise for petrochemical products, which we rely on for our day to day use. Even if, for example, single use plastics are being increasingly frowned upon in developing and developed economies alike.

Caitlin Dean: Well even if, as Luigi said, there isn't a renewable source of energy that's likely to completely supplant fossil fuels immediately, Ed, where are the most promising developments when we look at energy alternatives? Is it wind? Is it solar? And can nuclear energy ever shake that bad reputation that it's earned, especially in the U.S.?

Ed Morris: Obviously, wind and solar have taken, along with hydro, the initial road into renewables impact particularly in the power generating sector. And they, the cost structure has come down to the point where depending where in the world we're looking at is competitive clearly with coal and getting increasingly competitive with other fossil fuels, including in some places, natural gas. But I think the more promising developments that we need to look at now are in battery power, to what to do when interruptible supply is not available, or when there's nobody to off-take it, and when it needs to be stored. So I think we will see major inroads in battery power capacity in the decade ahead.

Along with that, I would not underestimate two other areas. One being developed by the oil industry itself, including the countries in the Middle East, Saudi Arabia and the UAE in particular, that are looking very seriously at the circular economy principles and applying them as part of their national programs. And with that, when they look at making green hydrogen, they like others have come to the conclusion that you still need carbon capture utilization and sequestration, in order to get to whatever degree level in Centigrade or Fahrenheit you want to look for. So I think we're going to be seeing a major inroads in technologies in carbon capture and sequestration to the degree that carbon can be priced as it can be. AndCalifornia, for example, or in the European Union, and where we expect even higher prices for carbon to accelerate, CC —U.S.and various parts of the world. I would not underestimate what can be done there.

We're still looking for breakthroughs in hydrogen. 2020 has been the year of hydrogen. Hydrogen is very promising. It also has significant obstacles to its full implementation based on how small the molecules of hydrogen are, how difficult they are to store, how really difficult they are to transport on their own. But nonetheless, we've had multibillion dollar projects in Europe, in Australia, and even the Middle East where maybe the most notable as part of the NEOM city in Saudi Arabia — and where Saudi Arabia made the first international delivery of blue hydrogen not so many weeks ago. All in all, yes, there's wind and solar, and yes, they're exciting, but there are many other places to go.

One final point on nuclear energy. I doubt that it's going to come storming back in the United States, but, there's a lot of nuclear capacity coming online. And I would note ironically, in the past few weeks, we've had nuclear power coming online in the United Arab Emirates. And when that entire project gets to its full capacity, it could be providing 15 to 25% depending on other things that might happen, but 15 to 25% of the energy needs in the country for power generation. So, we have that unfolding and we have a commitment in Saudi Arabia to do the same. A very interesting area to look at in those two economies, as they have taken the circular principles really seriously.

Caitlin Dean: Let's take a deeper look at some of the geopolitical issues. So Luigi, the two largest energy consumers in the world are China and the U.S. In China, we have 58% of electricity still generated by coal. And we have the U.S. facing a pivotal presidential election.in less than a month.So both of these countries could be pivotal in shaping and pacing the energy transition. How would you think Chinese policy in 2021 and the U.S. election can have an impact on the direction of travel and the slated ambition of carbon neutrality by 2050?

Luigi Pigorini: Okay, so let me address China first. And as we've discussed earlier on, in our conversation, how carbon heavy fuels account for two thirds of its energy needs, and the Chinese government has previously said that its CO2 emissions would peak around 2030. And that is a target that sounded plausible. However, in September of 2020 Beijing flagged the ambition of achieving absolute carbon neutrality before 2060. And such a move will require drastically reducing the use of fossil fuels in both transportation and electricity generation. Let's not forget of setting any remaining emissions through carbon capture and storage or planting forests, but nonetheless, what is a very ambitious plan. No details on achieving this have yet been revealed.

How will China get there? Well, apart from being the world's largest spender in solar and wind power, China has 48 nuclear power reactors in operation and 12 under construction. And the government has aimed for 58 gigawatts nuclear capacity by end 2020, but will not get beyond 52. Also China coal fire generating capacity grew by about 40 gigawatts in 2019 to about 1,050, and another one-hundred gigawatts is under construction. So this demonstrates the tough nature of the task ahead.

So yes, Chinese policy decisions will have a massive bearing on the energy mix. And one final point — China’s five-year plan for 2021 to 2025 is currently being drafted and may contain concrete measures to help realize this ambitious target, but we just don't know yet. And all of that is reflected in market data that the incremental purchases of crude on the spot market to take advantage of lower oil prices for strategic storage are happening. Secondly, coming to the U.S. presidential election. Donald Trump's reelection could be deemed positive, less restrictive for the oil and gas industry while a Joe Biden presidency less so, but not necessarily detrimental in the main. The latter has already said he doesn't intend to ban fracking.

And one difference is that Joe Biden has pledged to take the U.S. back into the Paris Climate Accord, as well as back to the negotiating table with Iran, and both have implications from the carbon footprint and oil prices. As for exports of U.S. crude oil, well their competitiveness will be subject to market forces, but neither Trump nor Biden are likely to reverse the Obama Administration's compromise with the Republicans in 2014, that opened up the global markets to American exports. So, a lot would be riding on the November 3rd ballot box for the global energy market.

Caitlin Dean: Okay, Robert let's come back to you. So centers of energy demand are largely in the East, whether you're measuring in kilowatt hours or in barrels. So would it be fair to say that if a paradigm shift were to occur, it would largely be shaped by emerging Eastern economies and the powerhouses of India and China?

Robert Johnston: Yes, I think that's a hundred percent correct. I think that Luigi talked about some of the dynamics in China. I think it's, as you suggested, also important to look at India and Southeast Asia, given the population growth and economic growth in those regions. And the fact that they are now more net energy importers in places like Southeast Asia countries, like Indonesia and Malaysia, than they were historically as some of their demand has grown, and they've seen decline in their traditional production. But of course, India, along with China, the US and European union, that's almost 65% of global GHG emissions.

So if you think about a scenario where Biden gets elected in the U.S. where China has the peak emissions goal for 2030 and carbon neutral goal for 2060, and of course you already have the EU Green New Deal in Europe, then India would be that the other big piece of the puzzle you would need to resolve for, in order to get a really robust global climate framework with cross-border carbon trading in article six and all the things that will be discussed at the upcoming top 26.

So, the degree at which India can solve that problem, which they can lever their strong population growth and economic growth into lower carbon fuels, versus a scenario where they do continue to build refineries and build LNG import terminals and pet chem plants, that can be a very important question. And I think under Modi, the government's probably done a bit of both.

So, India, I think, is going to be a key fulcrum here in the future of energy for sure, but also Southeast Asia. That combined Vietnam, Indonesia, Malaysia, Philippines, you're almost talking about 700 million people, uh, with, with very strong energy import dependence growing in large part because we see manufacturing shifting out of China towards places like Vietnam. And as that goes, then of course the energy demand goes with it. So we're keeping an eye on that part of the world as well.

Caitlin Dean: Finally, looking a bit to the future. I'd like to pose a question to all three of you. Taking in the three main segments of energy demand — so we have mobility, industrial-complex, and households — what elements do you see shifting to a new normal come 2025?

Ed Morris: I think we're going to see big shifts in mobility. As I suggested earlier, in all of the advanced economies, all of the OACD economies, and nearly all of them, there is this big movement to clean up cities and to make sure that the last kilometer of delivery is done through clean energy. I think that will definitely be holding in Europe, in the U.S., and much of Asian OACD within a short period of time. This can be done in five years.

I think there are underway very significant elements of transformation on the utility side. So power generation, that's a subject that we can spend another hour on because the old utility model, whether in Europe or the U.S. or Canada is broken, we have competition on power delivery. We have a power crisis in some of the parts of the world, including California, where a grid needs to be rebuilt. So I think we'll be seeing significant merchant competition as distributed energy takes hold even more so than it has to date. But I think there's a political element to this as well that I really am tempted to speak about, even though you didn't ask the question.

And it comes from your question to Luigi earlier, and what might happen in a Biden administration, should he be elected?I think we have to remember that the Paris agreement was largely forged by two countries that aligned with one another on pollution. And those were the United States and China. And I think, as we know, that there will be continuing tensions between the two countries. I think the people in the Biden administration will actually resemble if not be some of the same people who co-negotiated that with China, I think China and the U S will want to tone down the level of trade noise and trade obstruction that has emerged particularly since 2018. And I thinklooking to the future, one of the things that's likely to be the case by 2025 is the emergence of a joint Chinese-American leadership on making these complex changes viable around the world.

Caitlin Dean: Luigi, let’s hear from you next.

Luigi Pigorini (40:37): So are we on the cusp of profound changes in terms of energy consumption and transition? Yes. In the case of ground transportation and power generation, are fossil fuels on the way out? No, simply due to lack of near-term substitutes for mainly petrochemical products and aviation. And as we've discussed earlier, oil and gas companies will continue to diversify, will continue to invest in all forms of energy, accelerate investments in renewable energy and explore alternative fuels. The operating climate will remain tricky in the face of relatively lower oil prices. And unless aviation bounces back, chances of a price recovery to pre-crisis levels are hard.

Jet fuel was the fastest growing avenue for demand growth. And it will now take nearly a half a decade to recover, even if there is a COVID vaccine later this year or early next year. Now, there will both be recovery in 2021, but also marked reshaping of the energy landscape in the run up to the end of the decade. And that is already underway.

Caitlin Dean: And finally, RJ let's hear from you.

Robert Johnston: Yeah, I'll go back to what Ed said about trade. And I think that between the mobility, industrials, buildings — different parts of the economy here that are in play — I think we should also talk about supply chains and the combination of sort of rising protectionism and nationalism plus COVID focus on sort of reassuring shorter and more resilient supply chains. It just may mean that we have goods moving over shorter distances, less sort of bunker fuel demand and diesel demand to move commodities all over the world. But in fact, we may see some of these industries, especially on healthcare and food and energy, be the focus of a more of a strategic sectors approach, bringing some of these industries back closer to where they're being consumed for security reasons as a hedge against the kind of protectionism that we've seen from the Trump administration and other governments. But also, for pandemic resilience as well so that you're not vulnerable to pharmaceutical delivery from a country that's across an ocean. So that could have a big impact on this world that's already headed towards a deceleration of oil demand, given how important that long distance trade is for diesel bunker fuel and other forms of energy consumption. So that's just one more idea to chew on.

Caitlin Dean: And I think that's a great place to leave it. Luigi Pigorini, Head of Citi Private Bank for Europe, the Middle East, and Africa. Ed Morris, Global Head of Commodities Research at Citi. And Robert Johnston, Managing Director of Energy, Climate and Resources at Eurasia Group. Thanks to all of you for being here.

Luigi Pigorini: Thank you, a real pleasure.

Ed Morris: I greatly appreciate being with my colleague Luigi and my longtime friend, RJ. And it's been a pleasure to be with you.

Robert Johnston: Great to be with you, Caitlyn. Thanks for putting this together.

Caitlin Dean: That's it for this episode of Living Beyond Borders. Stay with us throughout the fall as we look at the biggest issues impacting your world and your money. Next time, the impact of the U.S. election. I'm Caitlin Dean, thanks for listening.