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Oil prices resuming declines after a brief rally on Wednesday as investors worry about the fallout from trade tensions between the US and China. Prices are down roughly 8% since the start of the month. So here to discuss the recent declines and where we're heading in the energy market, Rob Thummel, he is Tortoise's senior portfolio manager and managing director. Rob, great to have you here. These tariffs and the 90-day pause, the 125% on China. Where does that tell you the energy market is heading next?

Yeah, so the US and China are the largest consumers of oil in the world. And so obviously tariffs would imply that we potentially will have an economic slowdown. How severe it is, well we're going to find out. But, but oil prices and oil demand and GDP growth really go hand in hand. So if there's a slowdown in the economy there'll be a slowdown in oil consumption. So, oil prices are indicating clearly we're going to have a slowdown in consumption. And maybe the oil markets might be oversupplied at the current time. So that, that's kind of where we're headed right now.

What do you think about the argument that people are making that, well, now oil prices are down that's going to boost the consumer and this is an offset to tariffs?

That, you know, the solution to low prices as you said Stephanie, is low prices. And that's exactly what's happening, right? So that, that, that will be an offset. It takes a little while but that, that is the positive of all this low oil prices as consumers, gasoline prices are lower. Some other, uh, oil is a commodity that's used in a lot of consumer goods. Those consumer goods will be a little lower price potentially because of, of oil prices. So, so yeah, that will boost demand down the road. And it's a good question. It always offsets. It just has to be what's, what's the degree? What's the severity of the decline?

And this is what Treasury Secretary Scott Beson wanted was these low energy prices and low yields on the 10-year in particular. But Rob, is there a point where the pain tips over into being a negative?

Well it does for the producers, right? And, and you can, so, so you know the oil price a lot of people look at the oil price as kind of an indicator of the global economy or what's going to happen in, in the future in the global economy. With oil prices so low, I think a lot of people feel like oh my gosh, we're, there's an impending recession or something we're going to approach that. Definitely slower economic growth. Oil and gas producers though, are the ones who get hurt the most because they have commodity price exposure, right? Their cash flows are tied to what the commodity price exposure is. So lower oil prices mean lower revenues, lower earnings, lower cash flow for these companies. And so that's why you're going to hear a lot of them here in these first quarter calls, probably reassess how much money they're going to invest in oil and gas drilling for this year and definitely probably next year because of the, the current low, low oil price environment.

How do you think about that relative to the administration's goal of boosting production? Are they going to actually be able to achieve that?

Yeah. Well the good news is, is oil and gas production is still up. Um, and, and will probably still rise again this year. Maybe not just as much as everybody thinks. I think about the administration's uh, goal a little, a little bit differently. Um, and, and that the goal is to keep prices low. Now we can debate what our low prices. I think 50, $60 oil is, is a low price. What the administration wants is, I think, doesn't want oil prices going 80, 90, $100. While the US oil and gas industry has ample capacity to ramp up drilling capacity and expand production even more if prices go much higher. When they get below 60 though, I think the industry will be, maybe a little bit at odds with the administration. But that's where the industry thinks the prices are quote low.

And how does this play out in terms of countries that are allies of the U.S. banning together with countries that are typically on a little bit more of a strained relationship with the United States? How does that dynamic impact the oil market if we see the likes of Europe and China? You know, they're, we've continued to have sources tell us they're not going to partner up necessarily. But if we do see that relationship coming a little bit more friendly, how does that impact you?

Do we have an hour to talk about this? No, 30 seconds, right? Well, I mean obviously you're talking about geopolitics, Madison. And this is, this is where it gets really interesting. So, so if you look at, you know, the biggest consumers, China, Europe, India, obviously they want lower oil prices as well and demand will be fairly steady there. Um, OPEC obviously Saudi Arabia are they a friend or a foe? I think they're probably generally a friend but they're raising oil production, right? Well so long story, the, the, the short story is simply look, supply, demand in oil, in the oil markets is always changing. But what we, what we think could happen, what nobody's paying attention to is the fact that the oil supply actually could, could be, maybe be lower than what people think globally for two reasons. Number one, um, there could be sanctions on Venezuela and Iran that will actually reduce the amount of oil supply in the current market. In addition, OPEC plus, uh, Saudi Arabia just raised oil production. But they partially did that because they want Kazakhstan, Russia, and Iraq to lower their production. And so, the net of all of this is the surprise could be actually less oil supply added to the market and when the market is thinking we're going to have excess supply, we could actually be undersupplied. We'll see how that plays out in the next six months.

Yeah, certainly an interesting dynamic to follow. Rob, thank you so much. Thanks for coming into studio. Appreciate it.

Thanks Rob.