Despite Iran conflict, U.S. oil production is unlikely to budge

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Speaker 5 What do you think? Pretty interesting 48 hours, huh?

Speaker 5 From American Public Media. This is Marketplace.

Speaker 5 In Los Angeles, I'm Kylie Rizdahl. It is Monday today.
This one is the 23rd of June. Good as always to have you along, everybody.

Speaker 5 Tell you what, raise your hand if you saw the news Saturday evening and said, man, Monday is going to be ugly in the markets. Yeah, me too.
Did the exact same thing.

Speaker 5 In the event, though, traders of pretty much everything went on sort of a relief rally today after the choreographed Iranian response.

Speaker 5 So to get a sense of what is going on, not just on Wall Street, but everywhere in this economy right now, we've called Martha Gimbal. She's the executive director of the Budget Lab at Yale.

Speaker 5 Martha, good to talk to you again.

Speaker 6 Good to talk to you.

Speaker 5 So this does seem to be another big pile of uncertainty piled on top of an existing pile of uncertainty, yeah?

Speaker 6 I mean, uncertainty is the name of the game in 2025.

Speaker 6 I do think that part of what you were seeing today was people thinking, oh, maybe the uncertainty is not going to be as bad as I thought it was going to be.

Speaker 5 I wonder, though, if

Speaker 5 the economy had taken the sideways turn that a lot of people thought it was going to take right after tariffs and when when people were using

Speaker 5 recession pretty pretty easily. If the economy wasn't as solid as it is now, might this weekend have played out differently? What do you think?

Speaker 6 I think that part of what you're seeing is people just realizing that they can operate in this uncertain environment. So, yes, tariffs have introduced...

Speaker 6 introduced uncertainty, but people have kind of learned to live with that. And now people are deciding that they're going to live with increased uncertainty in the Middle East as well.

Speaker 5 What are you watching? Just to sort of put a punctuation mark on the Middle East, because today, honestly, turned out to be something less than I think a lot of people thought it would be.

Speaker 5 What are you watching going forward?

Speaker 6 I mean, to be clear, when Saturday happened, I immediately sent my husband out to fill the tank with gas. So I was with you.

Speaker 8 Yeah.

Speaker 6 You know, I was looking at oil prices, which now do look like they've kind of calmed down. People think that this particular

Speaker 6 military action doesn't seem to be heralding a bigger conflict. I'm not a geopolit, so I defer to others.

Speaker 6 But I do think, in some ways, the bigger news from today was in treasuries, which were starting to come down a little bit as you had members of the feds kind of signaling that, hey, we might be more open to cutting rates than you all were previously thinking.

Speaker 5 Yeah, so let's talk about that with the caveat that we've got Justin Ho coming up in a minute on the bond market.

Speaker 5 But I do want to point out now that we have three members of either the Board of Governors or regional Fed presidents, Chris Waller, Michelle Bowman, and today Austin Goolsby, all saying, yeah, you know, maybe if it's not so bad, July could be a cut.

Speaker 5 That does seem to me to be something.

Speaker 6 Yeah, I mean, it's certainly, I think, unanticipated by a lot of people.

Speaker 6 I think a lot of us thought that they were going to want to take longer to see what the impact of tariffs was going to be. on inflation.
But inflation is kind of coming low.

Speaker 6 And there are some signs that maybe the economy isn't as strong as it looks at the headline. And so maybe there's room for a cut, and then they can see what happens.

Speaker 5 Play out that there are signs that maybe it's not as strong as it looks. Say more about that.

Speaker 6 You know, we've had a little bit of a rising unemployment rate. It was obviously low.

Speaker 6 I think there's also questions about what the deportations will do to the labor market. A ton of our economic growth in recent years has come from increased immigration.

Speaker 6 And so if there starts being increased fear, people aren't going to work,

Speaker 6 there's decreased immigration, that might start holding back the labor market, which could then hold back the overall economy as well.

Speaker 5 Last thing, Martha, and then I'll let you go. And I want to talk about it in terms of the U.S.
as the safe haven, right? We are now fully engaged

Speaker 5 in a war. Well, not fully engaged.
We've done our thing, and hopefully everything stays the way it is. But we have played our part, as it were, in a war war in the Middle East.

Speaker 5 And this comes on the president pulling the United States out of a lot of parts of this global economy.

Speaker 5 We saw the selling America trade around the 2nd of April tariffs, right, where people were selling bonds and selling the dollar.

Speaker 5 Our standing in the global economy, discuss, and you got a minute to do that.

Speaker 6 I go back to what I said at the beginning of this, which is uncertain. Right.
You know, I think the thing that's hard is people expect all of this to play out immediately.

Speaker 6 People are going to have to figure out where are places that they feel comfortable investing. Are there alternatives to the United States? Or are they going to stick with us for now?

Speaker 6 And I think you saw a little bit of that today and recently, where, given some of the tensions in the Middle East, it does look like some people are moving back into U.S.

Speaker 6 assets because it's comfortable at a time of increased uncertainty. That may not hold next week.
We'll see.

Speaker 5 Right, right. That's the thing.

Speaker 5 We don't know what the next week will bring. Martha Gimbal, she's running the budget lab at Yale.
Martha, thanks a bunch.

Speaker 5 Thank you for having On Wall Street today, stocks up, oiled down, details, numbers, you know the drill.

Speaker 5 All right, so the bond market, as promised, the bond market today was a little complicated, not a whole lot of safe haven buying. See also the not all that threatening so-far Iranian response.

Speaker 5 But also, as I said, more comments from people on the Fed that, yeah, maybe we could cut rates in July.

Speaker 5 Well, as it happens, the Treasury Department is getting set for some bond auctions this week, which, by way of reminder, come as President Trump's tariffs and the GOP's tax cut bill muddy the economic waters a bit.

Speaker 5 Marketplace's Justin Ho looked into how those auctions have been going lately and what they've been telling us about what investors expect.

Speaker 7 Back in April, the Treasury Department held an auction for bonds that mature in three years, and it didn't exactly go well.

Speaker 9 I think at the time I said it was arguably one of the worst ones ever.

Speaker 7 Lawrence Gillam is chief fixed income strategist at LPL Financial. He says there wasn't much demand for those treasuries, and investors that showed up wanted to be paid higher yields.

Speaker 7 Gillum says investors were worried about all of the new tariffs and their potential impact on inflation.

Speaker 7 They were also concerned about the deficit and all of the new bonds the Treasury Department would have to issue in the future to finance it.

Speaker 9 When you have a situation where supply of something is going to increase, you tend to see prices go down, yields go up in anticipation of just the amount of supply coming to market.

Speaker 7 And that's exactly what happened over the next few weeks. The yield on the 10-year T-note jumped between early April and late May.

Speaker 7 Thing is, Gillum says those higher yields started to make investors want to buy bonds, and that's helped Treasury auctions go much more smoothly in the time since.

Speaker 9 Investors have shown up pretty regularly at the prices that the Treasury Department is willing to pay for these securities.

Speaker 7 Another reason investors have been showing up more recently is because of all the new geopolitical uncertainty in the Middle East, says Randy Vogel, head of fixed income at Wilmington Trust.

Speaker 9 Whenever that kind of global type of risk increases, you know, markets are going to flee to what's still the safe haven asset of treasuries.

Speaker 7 And let's not forget all of the ongoing economic risks thanks to the president's tariffs. Guy Laba is chief fixed income strategist at Jenny Montgomery Scott.

Speaker 9 If I don't know whether those tariffs next month are going to be 0%, 10%, 48%, or double that, it's very, very hard to make decisions and that impacts real economic activity.

Speaker 7 And Labas says that's yet another reason for investors to buy government bonds.

Speaker 9 Slowing economic growth and a maybe recession means interest rates should fall.

Speaker 9 And so that means, or at least for bond market participants who broadly agree with that, that they should be buying right now.

Speaker 7 Which means treasury auctions will probably keep going smoothly over the coming months. I'm Justin Howe for Marketplace.

Speaker 5 Among the social media posts from the President of the United States today was one that said, and this is a quote, everyone, keep oil prices down. I'm watching.
All caps. Exclamation points.

Speaker 5 I hope that came through there. Another called on the Department of Energy, and this is another quote, to drill, baby, drill, and I mean now.
Exclamation points again.

Speaker 5 With the caveat that that's not how any of this works, and noting today's tumble in crude prices, because the Iranian counterattack wasn't worse, oil prices are still up the past few weeks, and those higher prices could benefit U.S.

Speaker 5 oil companies, which, despite the president's exhortations, have been, shall we say, reluctant to do more drilling of late. Marketplace's Henry Epp reports.

Speaker 10 Before crude prices began rising earlier this month, here was the backdrop for U.S. oil producers.

Speaker 10 One, there was already a lot of oil on the market, and OPEC countries were talking about increasing supply even more.

Speaker 10 Two, the outlook for global economic growth and oil demand was shaky, says Hugh Daigle at UT Austin.

Speaker 11 And so in general, the producers have been exhibiting a lot of discipline in not expending a lot of capital, not really

Speaker 11 increasing their drilling rate and their rig count.

Speaker 10 On top of that, tariffs on steel have added to producers' costs because drilling for oil requires a lot of the metal. So even though oil prices may be a bit more favorable for U.S.

Speaker 10 producers now, a lot of them may hold off on drilling. The ones that could start, Daigle says, are smaller.

Speaker 11 I'm thinking particularly of ones that might operate in West Texas in the Permian Basin.

Speaker 11 They could say, hey, maybe let's drill a couple of additional wells and bring them online right now while we can.

Speaker 10 Drilling isn't a sure bet because oil prices are jumping around a lot due to geopolitical risks, not any fundamental change in supply or demand, says Morgan Bazillian at the Colorado School of Mines.

Speaker 12 That

Speaker 12 kind of price situation, especially the volatility and the uncertainty, rarely makes for a clear investment decision anywhere, including domestically.

Speaker 10 Still, even if they don't expand drilling, U.S. oil companies will benefit from higher prices, says Clark Williams Derry at the Institute for Energy Economics and Financial Analysis.

Speaker 13 The oil industry is probably going to to be content to just sort of sit back, take higher profits, and not adjust their drilling plans.

Speaker 10 Williams Dairy says what could get them to actually expand drilling is if oil prices jumped up even further and stayed high. But bringing that production online would take months.

Speaker 10 I'm Henry App for Marketplace.

Speaker 5 The thing about the modern industrialized economy, one of the things, I guess, is that it relies on natural resources of virtually all kinds. Oil, of course, Henry Upp was just talking about that.

Speaker 5 Copper and aluminum and wood and so many others, including some that, honestly, not too many people have probably even heard of.

Speaker 5 And today in that category is a flaky white-ish mineral called trona that goes into everything from beer bottles to kitty litter. And it turns out that the biggest natural deposit of it is in Wyoming.

Speaker 5 Wyoming Public Radio's Caitlin 10 takes us to where the supply chain starts.

Speaker 14 A giant cage elevator lowers me and miner Cale Pitt and his hard hat from the surface of southwest Wyoming

Speaker 14 into the underground world of Trona mining.

Speaker 15 Tiny light at the very bottom is where we're headed.

Speaker 17 It's a little over 1600 feet.

Speaker 16 How deep?

Speaker 18 1600.

Speaker 14 As the elevator descends, it gets warmer, dust hangs in the air. Four minutes later, the cage opens up to a dark abyss of mine tunnels.

Speaker 14 Pitt's headlamp catches shimmers of Trona crystal on the walls, ceiling, and floor.

Speaker 18 Kind of has a hollow type sound to it.

Speaker 14 The mine operates 24-7 and is a labyrinth of 3,000 miles of rough two-track.

Speaker 14 So to get anywhere, you gotta drive.

Speaker 18 It takes a few months to learn where you're at in the mine to navigate.

Speaker 2 Does Google Maps work down there?

Speaker 18 No, we don't have any GPS or any phone service.

Speaker 14 They communicate via radios, which are also used to let people know about big things like family emergencies or Super Bowl scorers and things like that.

Speaker 14 A little farther in the tunnel, Pitt pulls up to a crew of burly, sweaty men. He yells over the loud mining sounds, you guys all good?

Speaker 5 Is all good? You look good, man. Thanks.

Speaker 2 You look as crammed up behind you.

Speaker 18 Come on.

Speaker 14 The workers are coming off a 12-hour shift mining those sparkling chunks of rock, which are a big deal for Wyoming.

Speaker 14 Above ground, they're processed into a fine powder called soda ash, which is an ingredient in so many things we all use, like baking soda, windows, and even the batteries in your phone.

Speaker 14 John Conrad heads up governmental affairs for Tata Chemicals, which runs this mine. We meet above ground in his office, and he says Wyoming is the place for Trona.

Speaker 16 90% of the world's economically mineable Trona is here, here on top of today.

Speaker 14 Now, there is a way to make soda ash without Trona, using chemicals. It's called synthetic soda ash, and the the main producer, China.

Speaker 16 I mean that's our threat. Their ability to make soda ash at a cheaper price are just the same.

Speaker 14 The majority of the world's soda ash comes from China's synthetic pile. So Conrad says Wyoming is trying to hold its place in the market.
But U.S. trade policy could disrupt that.

Speaker 14 Most of Wyoming's soda ash is exported, and Conrad is worried about reciprocal tariffs imposed by countries that buy it.

Speaker 16 If some of our overseas markets don't want to compete or pay the tariffs, they'll probably turn to China.

Speaker 14 Threatening Wyoming's $1.5 billion industry and thousands of jobs.

Speaker 14 Conrad says they have capacity to mine even more Trona, which means more jobs and money flowing, but they're waiting for the global politics to quiet down.

Speaker 14 It's everything but quiet, 1,600 feet underground with minor kale pit. He wants to show me the gut of the operations here.
A half dozen workers are cutting 450 feet into the rock wall today.

Speaker 18 Morning light is starting, so they're going to start our panel belt up.

Speaker 14 Pit stands in a sludge that occasionally bubbles.

Speaker 15 Methane gas coming out of the floor will start bubbling up out of water.

Speaker 14 Too much methane shuts down the machines. A snakey tube shoots in fresh air and the mining equipment fires back up.

Speaker 14 The crew guides a giant machine that chews through the wall and spits out chunks of Trona that slide onto a conveyor belt.

Speaker 14 That'll bring the Trona above ground to be processed and eventually used all over the world.

Speaker 14 1600 feet below the desert of southwest Wyoming, I'm Caitlin Tan for Marketplace.

Speaker 5 Coming up.

Speaker 19 A little teeny hippo that has a little tutu on, and it's just adorable.

Speaker 5 Exit through the gift shop, please. But first, let's do the numbers.

Speaker 5 Dow Industrials up 374 points today, 9 tenths percent, closed at 42,581. Did the blue chips? The NASDAQ lifted 183 points, also 9 tenths percent.
Finished at 19,630. The SP 500 added 57 points.

Speaker 5 Any guesses what that was percentage point-wise? Yes, nine-tenths of 1%, 6,025.

Speaker 5 Oil dropped, as I said. Checking some oil and gas exploration stock Schlumberger slipped 5.9% today.
Oxidana Petroleum fell back about 3.7%. ConocoPhillips down 3.1%.
Novo Nordisk lost 5.5% today.

Speaker 5 Results of next generation obesity drug tests proved somewhat disappointing.

Speaker 5 Also, the pharmaceutical company also reported it's ending an obesity drug collaboration with Him's and HERS Health, which promptly lost 34%.

Speaker 5 Tesla is running Robo-Taxis in Austin, Texas for a limited group of testers. That news sent shares up there.
Tesla up 8.2%. You're listening to Marketplace.

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Speaker 5 This is Marketplace. I'm Kai Rizdahl.
The housing market stirred ever so slightly last month. Existing home sales were up eight-tenths of 1% April to May.

Speaker 5 That is fresh data from the National Association of Realtors. Still, though, it's down year over year and way down from the peak of the post-COVID housing boom.
Part of the reason why?

Speaker 5 Well, it turns out renting isn't looking so bad right now for both buyers and sellers. Marketplace's Met Levin has more.

Speaker 24 Even though buying a home feels like one of those fading pandemic activities that has gone the way of making your own sourdough bread, homes are still really expensive.

Speaker 24 The median national sales sales price for a home sold last month was almost 423 grand, a record high for the month of May.

Speaker 24 Meanwhile, rents are not as high as they used to be, or at least not getting much higher. Lawrence Yoon is an economist at the National Association of Realtors.

Speaker 25 So anytime when you have a more stable rent or in some markets like Austin, Texas, Jacksonville, where rents are actually falling, it doesn't provide urgency to look for purchasing a home.

Speaker 24 If you don't think your landlord is going to jack up your rent 10% when your lease expires, the appeal of locking in a high mortgage payment for the next 30 years loses some luster.

Speaker 24 Plus, who wants to fork over their life savings for a down payment when the economy feels so uncertain? I mean, did you listen to the first half of the show?

Speaker 24 Selma Hipp is an economist at the real estate data company Cotality.

Speaker 26 Similarly to businesses, we've seen in consumer data that consumers are holding off big decisions as well.

Speaker 26 So whether, they were renting and they've been thinking about buying, they may hold off on that.

Speaker 24 Would-be home sellers are also increasingly opting to just rent out their properties instead of listing them.

Speaker 24 A lot of homeowners are sitting on bargain basement mortgage rates of 2% or 3% they got after the pandemic hit, which makes the economics of renting pretty profitable.

Speaker 24 The National Association of Realtors Yoon has a name for them, Incidental Landlords.

Speaker 25 They don't want to give up those low interest rate environments, and the rents they can extract is much higher than the mortgage payment obligations.

Speaker 24 If, say, you have to move to a new city for a new job, maybe you rent out your old home and rent your new one and wait for rates and the market and the world to normalize again.

Speaker 24 I'm Matt Levin for Marketplace.

Speaker 5 Absent, understandably, from the news fire hose the past couple of days has been much talk of tariffs, which again, one understands.

Speaker 5 But tariffs are, though, very much still a thing.

Speaker 5 And for those at the end of the supply chain, think small businesses, those tariff-induced higher prices mean lower margins, which makes running a business all the more tricky.

Speaker 5 Here's today's installment of our series, My Economy.

Speaker 19 My name is Catherine Lundine from Lundine's Gifts in Culver City, California.

Speaker 19 People always ask what kind of store. It really is a true gift store.
Well, we've been around for 17 years this July.

Speaker 19 You know what they're going to ask for? They're going to ask for, do you have a jelly cat?

Speaker 6 People love it so much.

Speaker 19 I think being in Culver City

Speaker 19 has its unique

Speaker 19 problems after COVID because it's such a studio city. And so I relied on all of the studios and I'm right in the hub of it.
So like at lunchtime, I was super busy because everyone was out at lunch and

Speaker 19 that was my time. And now naively, I thought we would get back to that.
And this year, honestly, we're starting to see a little bit more people in the offices, but it's been a tough five years.

Speaker 19 The tariffs haven't impacted me yet. It's impacted my emotional well-being.

Speaker 19 Hundreds and hundreds of emails. of companies saying not yet.
We don't know if we're going to increase our price. We don't know if we're going to, what we're going to do.
It's also uncertain.

Speaker 19 A sales rep came in and she said, you have to buy now. And I'm like, oh, are you just trying to scare me into buying stuff right now?

Speaker 19 We're looking at a little teeny hippo that has a little tutu on, and it's just adorable.

Speaker 19 And they have little mice.

Speaker 19 This is a Danish company, and

Speaker 19 they are all manufactured in China. So

Speaker 19 they are doing

Speaker 19 starting, I believe it was June 1st,

Speaker 19 10% tariff. I price these out like a little bit higher than I normally would because when I get them back in,

Speaker 19 it's going to be a higher price point.

Speaker 19 The holidays are where retail make all their money. for the whole year.
If you don't have a good holiday, you are not going to make the rest the next year. You will have to close.

Speaker 19 So, depending on how well the holidays are this year,

Speaker 19 I will sign another year lease next March, I hope.

Speaker 19 I love doing this. I don't know what else I will do.
I'm 53. I was 54.

Speaker 19 What am I going to do? This is what I want to do.

Speaker 5 I get that. Same here.
Catherine Lundine, owner of Lundine's Gifts in Culver City, California. We cannot do this series without you.
So write to us, won't you? Let us know what's going on.

Speaker 5 Marketplace.org slash myconomy.

Speaker 5 This final note on the way out today, just to put some actual numbers behind the so-far biggest economic story of this war in the Middle East.

Speaker 5 Crude oil today, Brent North Sea, that's the global benchmark, down 8.9%,

Speaker 5 $70.14

Speaker 5 a barrel. Martha Gimbal's watching that.
I'm watching that too.

Speaker 5 Our daily production team includes Andy Corbin, Nicholas Guillong, Maria Hollenhorst, Iru Ekpinobi, Sarah Leeson, Sean McHenry, and Sophia Terenzio. I'm Kai Risdall.

Speaker 5 We will see you tomorrow, everybody.

Speaker 5 This is APM.

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