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Hello, this is Janet Jalil from the Global News Podcast.
We're bringing you the latest on the Middle East war, with tit-for-tat attacks on energy sites in Iran and Qatar, causing gas and oil prices to soar and stock markets to fall.
Join us to hear the day's top stories from BBC News, delivered twice a day on weekdays, daily at weekends.
Search for the Global News Podcast wherever you get your BBC podcasts.
Oil and gas prices rise sharply as Iran retaliates for attacks on one of the world's biggest gas fields.
It's World Business Report from the BBC World Service.
We'll have the very latest from the Middle East as more energy infrastructure comes under attack.
And also on the programme today, what could those price rises mean for the cost of flying?
For many years the American airlines did very well out of hedging the fuel and then they got very burnt because the oil price changed and they bet against it and they lost billions of dollars.
And we'll take a look at the challenges ahead for the new boss of Disney.
Natural gas and oil prices are spiking again today as more energy infrastructure came under attack across the Gulf.
It started with the South Pars offshore gas field, which is shared by Iran and Qatar, reportedly hit by Israeli strikes.
In retaliation, Iran has struck the Ras Laffan site, the world's largest liquefied natural gas, or LNG, facility.
The state energy firm that runs that site, Qatar Energy, said on X that emergency teams were deployed immediately to contain the resulting fires, as extensive damage was caused.
And analysts have already told multiple financial news outlets today that, depending on how severe the damage is, it could spark a global gas shortage.
So plenty again to get into about what's going on in commodity markets and what that might mean for prices we pay around the world going forward.
Susan Schmidt is back with us on the programme.
Susan, our markets guest today on the programme.
She's the Portfolio Manager at Exchange Capital Resources. in Chicago.
And Dr. Siamak Shojai is with us as well.
Siamak is the Dean at Ansell School of Business at Western Connecticut State University.
He also edited the book, The Oil Market in the 1980s, A Decade of Decline.
Thanks both for being with us on the program.
Susan, can I start with you?
Where are we then, as we speak right now, because the oil price as well as the price of natural gas both spiked massively on these attacks, and particularly the retaliation as well.
Absolutely.
So we are seeing interest in it from investors for sure, looking at this large price increase in oil and gas based on these new attacks, as the infrastructure and the oil facilities in the Middle East are threatened and that production potential is down.
Investors get increasingly concerned, and hence we see the price of oil rise.
We have Brent up 7% at $111 a barrel, West Texas Intermediate up 4% at $100.
So it is quite a remarkable move at this juncture to see this move.
We've seen oil settle between 90 and 100 over the recent days, as we've thought that The conflict is somewhat resolved.
But now we're seeing this counterattack, both the attack from Israel into Iran and now Iran threatening other facilities and other countries.
And investors are getting increasingly nervous.
Yeah, we should contextualize that for people, shouldn't we, Susan?
That is the highest that it has been through the whole of this period, through the whole of this war.
That's right.
We've seen it spike.
And remember that oil is a very emotional commodity.
And so we do get a lot of investor reaction to this where it's a knee-jerk reaction up front.
And then we see it settle out.
The problem now is we're not just disrupting the supply chain, which we were previously worried about with the Strait of Hormuz, but now we are actually interrupting and potentially permanently damaging the production facilities, which is a much longer lasting impact.
Well Siamak, take us to those facilities then, because when we spoke to you earlier on and booked you to come on the programme, we were going to get you to talk us through the South Pars offshore gas.
You've now got an even bigger job.
Explain to us about Russ Laffan as well.
Do them in turn?
The significance of them both to global gas supply?
I guess because they both do slightly different kinds of gas, if that's not massively oversimplifying it, right.
Yes.
Yeah, imagine a swimming pool, which is shared by two neighbors in the middle of the Persian Gulf.
The part which is in the Iranian waters is called the South Pars and the part which is in the Qataris borders.
It's called North Dome.
And both countries produce a lot of natural gas in those fields.
Iran with the help of some foreign partners.
For Iran, the production has basically domestic use.
They use the About 145 million metric tons equivalent of liquefied natural gas every year.
And it is used for domestic use for production of electricity and other products, including fertilizers.
So it is extremely important to the domestic economy and the manufacturing.
More than 60 close to 70 of Iran's electricity production is fueled by the natural gas produced in South Pars.
Now Asluyeh basically refines all these products, which is an unsure now relatively large city which was struck by the Israelis later today, I guess.
And then Iran's retaliation was aimed at Rafafan.
As you mentioned, Qatar produces about 81 million metric tons per year, mostly for exports.
It is the sole foreign exchange revenue for Qatar.
And their whole industrial base.
And everything depends on the exports of liquefied natural gas, Ras Laffan being the main source, which is doing what Osluye is doing on the other side of the Gulf.
So if Iran manages to damage those facilities, it would be a huge blow to the economy of Qatar.
Fortunately, they have enough international reserves to survive in the short run.
But if the conflict continues in the long run, the whole economy of Qatar will be destroyed.
And Iranian economy.
Iranians, regardless of how long this conflict lasts, will have a very, very cold and dark winter coming to them because of lack of electricity and also natural gas which is fueling the homes to heat up their places.
And broaden it out a bit about what it means for the global supply of gas as well, because I'm reading since we've been on air the United Arab Emirates saying that the Habshan gas facility has been temporarily suspended, operations there and other operations across the UAE, potentially in Saudi Arabia as well, all moving their workers out of these sites because of these kind of ongoing retaliations from things like drones.
How quickly can that have an impact on the global price of gas and the supply of it?
Very quickly.
You know, we were struggling with the problem at the Strait of Hormuz, trying to open it and make sure that it is safe.
And there is no international coalition yet.
And even if there is one and you open the Strait of Hormuz and ships can move back and forward, then you don't have any facility to produce.
Now, this is a complementary disaster.
If you don't produce gas... or even oil from Saudi Arabia, then there's nothing to export.
Now the Asian economies, particularly Japan and Korea, rely heavily on natural gas in order to fuel their industries and everything else that they do.
They'll be competing hard with other countries to have access to whatever gas is available on the global markets, and we will be seeing even a sharper price increase in both oil and gas prices.
Dr. Shojai, thanks so much for your time as always.
Dr Siamak Shojai, there Dean at the Ansell School of Business at Western Connecticut State University.
As we mentioned, also edited the book, The Oil Market in the 1980s, a decade of decline.
Well, Susan Schmidt still with us from Exchange Capital Resources in Chicago.
Amidst all of this, Susan, the U.S.
Central Bank.
As people might have heard in the news headlines, the Federal Reserve deciding to hold interest rates today.
Were you slightly surprised by that, given all of this and the potential inflationary impact you could all have?
Well, given this inflationary impact, I think the Fed has had no choice but to hold interest rates.
That was widely expected by investors as we came into this meeting.
I think what's interesting is the commentary by the Fed afterwards, citing how much of an impact they expect this to have, and The inflationary outlook for the Fed significantly changed, going to 27 expectation for the remainder of this year from a prior 24 expectation.
The Fed's target is 2%, so moving in the wrong direction.
And concern, as this conflict lasts longer and has more impact, how much that will then impact the prices of oil, energy inputs etc.
And push that level of inflation yet higher.
Well, let's hear a little bit of that commentary Susan mentioned.
This is Jerome Powell, the chairman of the Federal Reserve, speaking a little earlier.
We're well aware of the performance of inflation over the last few years and how a series of shocks have interrupted progress that we've made over time.
That happened most recently with tariffs, and now there will be some effects on inflation coming forward.
The thing that's really important that we see this year is progress on inflation through a reduction in goods inflation.
Although Susan, of course, the thing that's not hit goods inflation potentially yet is what's going on with shipping containers, shipping costs, shipping insurance costs, all those kind of issues too, as a result of what's going on in the Middle East.
Exactly.
So there are costs here that still have yet to be felt.
And we'll see them impact more in the third and fourth quarter of this year, as they start to trickle through.
But we are looking at major reroutes of the prime shipping routes throughout the world as people try to figure out how to reconfigure to an economic, cost-effective way, given the higher cost of fuel and the routes that are available to them.
So this is changing things dramatically.
We're not going to see these impacts like tariffs.
We didn't see the impacts immediately.
We saw them in the coming quarters, and I expect that to happen again this year.
Yeah, another area where we may well see that is in the airline industry.
Of course, oil huge part of that industry, the cost of oil making up around a third of airlines running costs, for example.
But how they pay for that varies pretty widely.
There's a divide between the airlines that hedge fuel by buying in advance, notably airlines in Europe and Asia, and those that don't, notably the big American airlines.
So why that difference?
And what could it mean for the cost of flying going forward?
Peter Campbell, Global Transport Correspondent for the Financial Times explained.
So airlines will do almost anything to reduce their fuel costs.
Typically, spending on fuel is around somewhere between a quarter and a third of their overall costs.
And they can either buy their jet fuel up front or they can agree to buy it at a year's time for a fixed price, or sometimes at six months time or several months ahead.
This gives them much more certainty of what their costs will be in the future.
And that's helpful because the oil price, as we all know, is incredibly volatile.
It can go up or down much more than anyone expects.
Many of the big European airlines do hedge.
For many years the American airlines did very well out of hedging the fuel and then they got very burnt because the oil price changed and they bet against it and they lost billions of dollars.
And so about 10 years ago, all the big American airlines stopped hedging.
And that was fine.
But it does mean that in the last few weeks, when the oil price has gone up significantly following the Iran conflict, they are now left potentially paying far more for their fuel than many of the European airlines such as Lufthansa or British Airways.
Right.
And we've seen, for example, one of the big low cost carriers in Europe Ryanair, locking in there for three years, I think, isn't it?
Sort of 60 odd, mid $60 a barrel.
Obviously when the oil price is where it is now well above 100 regularly, that looks pretty sensible.
None of us know what is going to happen in a few weeks time, or a few months time, let alone three years time.
So it looks incredibly smart at the moment to lock in at that level, with oil today being about 110 a barrel.
Oil can easily change.
It can easily fall down.
You've seen airlines in the past lock in for long term contracts of what they thought was a very reasonable price.
Oil then fell down to about $40 a barrel and they lost a lot of money as a result of it.
So it is in some ways a financial gamble to hedge.
But it does at least give you certainty, right?
So if you are locked in at 60 a barrel for the next three years, you are not going to be stung if oil climbs to 110.
You're going to have certainty for your finances for the next few years.
Yeah, and if you actually can see your prices or know what you're going to do with your prices, quite a long way out potentially an advantage, right?
The model is different based on whether you're someone like Ryanair, who is incredibly low cost and incredibly aggressive on price, where your selling point is that you can buy a plane ticket for £25, versus whether you're one of the big long haul carriers who will sell tickets for several hundred, several thousand pounds.
The fuel price will be significant in that, but people are paying for something else.
They're paying for service.
They're much less buying on price.
So if you're right now having really, really cost competitive on fuel is definitely a benefit to you.
And I guess the big winners always are the traders, right?
One way or another.
It is amazing the number of times where the oil goes up or down.
The traders always seem to do very well out of this.
The airlines, to be fair, have done very well in the past.
Have managed to keep their costs stable through using hedging.
So, even though it is effectively a kind of legitimized form of long term speculation, it is actually useful to be able to lock in fixed prices.
And is there a sense of what it's going to mean for everybody listening for flight prices in at least the next six months?
Perhaps say
We're already seeing lots of airlines around the world adding extra prices on as a fuel surcharge because of the rising prices.
Even some of the airlines that are significantly hedged.
Even if you've hedged 80 of your fuel this year, you're still having to pay more for that extra bit of fuel that you're buying on the open market.
So people should expect prices to increase in the next few months.
You're seeing lots of airlines talking about that.
Not all of them.
IAG, which owns British Airways, has said it doesn't have to raise ticket prices at the moment because of its hedging.
But a lot of it comes down to how long the conflict goes on and how high the oil price gets and how long it stays at that level.
If airlines are having to lock in future long-term prices based at an oil market which is above 100 a barrel, That will inevitably feed through to prices for at least the next year.
Thanks to Peter Campbell, the global transport correspondent at the Financial Times.
Susan airline and travel company shares.
Company shares been pretty badly affected during all of this too.
Yes, they have.
So you see this when we see a shock in oil prices, you tend to immediately see reaction in airlines and transport stocks.
We've seen that, with a drop in US carriers and their stocks down 5 to 15 within days of the conflict starting.
That pressure will continue and investors are going to remain skeptical and dubious of these stocks, with that uncertainty rolling forward as to how much this will cost them in their operating profits.
Yeah, absolutely.
A kind of direct impact potentially for a lot of our listeners, I know.
Susan, thanks a lot for that.
You're with World Business Report on the BBC World Service.
Hello, this is Janet Jalil from the Global News Podcast.
We're bringing you the latest on the Middle East war, with tit-for-tat attacks on energy sites in Iran and Qatar, causing gas and oil prices to soar and stock markets to fall.
Join us to hear the day's top stories from BBC News, delivered twice a day on weekdays, daily at weekends.
Search for the Global News Podcast wherever you get your BBC podcasts.
Well, we talked a lot about supply issues of oil already today, haven't we?
But Cuba is suffering an acute shortage itself.
No oil has reached the island for three months, as a result of both a physical blockade of tankers and sanctions from the United States.
It's led to days of increasingly long rolling blackouts across the island, as our correspondent Will Grant reports from Havana.
Hey!
After 26 hours without electricity, fraying tempers in the central Cuban town of Morón finally snapped.
Residents took to the streets on Friday night and descended on the local headquarters of the Cuban Communist Party.
To chants of libertad, meaning freedom.
Some in the crowd began to smash windows before attempting to set the building on fire.
After the protest died down, the authorities made numerous arrests.
Even amid the extreme economic and energy crisis, such public outbursts of anger are rare in Cuba.
What stands out is the extent to which the frustration was directed at the Cuban authorities, rather than the Trump administration which, since January, has imposed a near total fuel blockade on the island.
With Cuba experiencing its first nationwide blackout since Washington began its fuel blockade, much of ordinary life is shut down.
All my life I've been hearing about the United States and Cuba.
President Trump seems convinced the end is nigh for the Cuban revolution and that it will happen on his watch.
I do believe I'll be the honour of having the honour of taking Cuba.
That's a big honour.
Taking Cuba?
Taking Cuba, in some form, yeah.
Taking Cuba.
I mean, whether I free it, take it...
I think I can do anything I want with it.
You want to know the truth?
For its part, the government has blamed the island's problems on the US fuel blockade.
Yet now Havana has confirmed it's in talks with the Trump administration with a view to finding a route out of the crisis.
Clearly there are things that Cuba can do in terms of reducing tensions with the United States.
And I would imagine that, given the pressure that they're under, they will be willing to make considerable concessions.
Victor Bulma-Thomas is the former director of the Chatham House think tank and one of the world's leading experts on the economies of Latin America.
But the Cubans have limits.
Let us not forget that the Cubans have, one way or another, had to deal with a bullying United States since 1898, and they have become very adept at doing so.
And this is not a people I'm talking about a people now who would, I think, tolerate too many concessions to the United States.
Now, Havana has made its first apparent concession.
Talking to NBC News, the deputy prime minister said foreign-based Cuban nationals, whether in Miami or Madrid, will be allowed to own private businesses on the island.
Cuba is open to having a fluid commercial relationship with US companies, as well as with Cubans residing in the United States and their descendants, he said.
On the face of it, it sounds like a significant easing of the strict economic rules.
However, the measure still faces major restrictions inside the US.
And in truth, it means little to impoverished Cubans, like retiree Gregorio Madagirri.
Between his diabetes and related ill health, he is struggling with the new challenges of daily life, which were already hard enough.
Sometimes the power comes on at three in the morning and we just have to get up and start cooking rice and beans, because food is the most important.
Then we worry about charging our phones and so on.
But often the electricity comes back for such a short period, it's not enough time to cook anything.
And the prices, even simple foods, are so expensive.
The food issue is very serious in this country.
While the demonstration in Morón was the most significant, there have been smaller protests, mainly via the banging of pots and pans, known as cacerolasos, in the darkness of the power cuts.
Given the public anger, there's widespread speculation about President Miguel Diaz-Canel's future.
The New York Times reports his removal is one of Washington's preconditions in the negotiations.
That's our correspondent Will Grant reporting from Havana, Cuba.
Well, let's round out today's programme in the House of Mouse.
Yeah, Josh DeMauro until now the boss of Disney's theme parks takes over from Bob Iger as the new chief executive of perhaps the most recognisable entertainment business on the planet today.
He does so, though, with plenty of challenges ahead.
And Brooks Barnes, Hollywood reporter for The New York Times, is going to talk us through some of them.
Brooks, thanks so much for being with us on the programme.
Of course.
It's a big symbolic moment for Hollywood today.
And, of course, to match such a symbolic moment, of course it's been crowned, signed off, with an obligatory LinkedIn post.
I see between the two men, arm in arm.
There's a lot of stage managing happening behind the scenes around this sort of transfer.
If you recall, when Bob Iger ended his first reign a few years ago, it went sort of terribly wrong.
A textbook example, really, of how not to do succession.
And so in this time he's turning over the company again and they're really trying to to make everything look smooth and happy.
Make it stick this time.
You wrote a great piece back in January for The Times.
Can this man break Disney's succession curse?
And you were talking about Josh DeMauro.
Why don't you talk us through what you think are the reasons for that?
Perhaps the hurdles, the planks that make up that curse?
Well, you're seeing part of Josh DeMauro having learned already in today's handoff, including the post that you mentioned earlier.
Let me say the CEO of Disney is one of I don't know a handful of CEO jobs that resonates with the public.
You're really like a rock star in the United States and many places around the world.
And when you no longer have that attention, it seems to go poorly.
Yeah. sometimes um and and uh you know the last time bob liger felt like his successor you know wasn't deferential enough or didn't didn't you know seek out his counsel um enough so you're seeing a lot of of the new guy josh tomorrow being very um you know thankful and and you know we'll do everything we can to continue bob's legacy but so so that's that's a positive the The reason Josh DeMauro was chosen, a couple of things.
He really sort of stands for the brand of Disney.
He can speak authentically for that, you know, dreamy family thing. style entertainment.
He also has been running what's the most successful part of the company.
The theme parks and cruise line is growing much faster than certainly the old-fashioned television business or streaming pick.
The guy who has been doing a good job.
Hope that he has the ability to take some of these other challenges and make something of Well.
They are some challenge though, aren't they as well?
We've talked lots on the program recently, obviously about what's going on in the streaming wars because of what's been happening with Warner Brothers and the battle to buy that.
But ultimately what that means is there's a bigger, even more significant player potentially on the market for Josh DeMauro to continue to take on with, exactly as you say Brooks, an area of the business that hasn't always been going entirely smoothly, even without that kind of level of competition.
It's this transfer from an old-fashioned linear is the nice word entertainment company to thinking more like a technology company.
How do we interact with audiences that are used to TikTok and YouTube?
And using AI tools, even though some of them are rudimentary, now to make our own content.
And so that technology is really what the next decade will be about at Disney, whether they're successful or not at navigating, that you know, pivoting to that direction.
And what do you think that would look like?
Will there be tangible things that our listeners might see, perhaps if they're a Disney Plus user, for example?
Sure.
So one of the things that Tomorrow talked about today without specifics, but he talked about wanting to make at their annual meeting, talked about wanting Disney Plus to be much more central to everything at the company.
And what he means by that is being able to sign on and play games, or sign on and buy merchandise, or sign on and maybe even contribute your own short form video that you've made, you know, with OpenAI or one of the other AI tools and have it seen right there in a feed on Disney Plus rather than YouTube.
Yeah, really mirroring those two bits, as you say, taking them Into the future.
Going to be a fascinating one to watch.
Sure, we'll have you back on to talk about it again.
Thanks so much, Brooks.
Really appreciate your time.
Brooke Barnes there, Hollywood Reporter for The New York Times, bringing us just about to the end of this edition of World Business Report.
Rob and Neil have been the producers.
Nathaniel's been driving the programme.
Thanks so much for listening.
TikTok era só curiosidade.
Agora é hábito.
