Front door. Happy friday. This is Market Makers. Schatzker. I am i am scarlet fu. It is up to the senate in the Upper Chamber beginning debate on a 1. 1 trillion spending bill just hours after the house barely managed to pass it. It faced strong opposition from the left and right. Elizabeth warren and ted cruz have both threatened to block it. She is worried about a provision that rolls back part of the wall street reform bill and he was to block president obamas immigration plan. The senate has until saturday to avoid a Government Shutdown. Wholesale prices are falling. In november, Producer Price index was down 0. 2 , the strauch sharper than forecast. Economythe overall picks up steam. Oil cost is playing a big part. A data point the fed will be looking into when it meets next week. Pressure yet again this morning after the International Energy agency predicted demand will be weak and supply will be strong. The iaea is protecting what is a vicious circle or virtuous one, depending on your point of view. Lower oil prices are hurting countries like russia. Headed for the 10th weekly decline. Steve schwarzman says now is the best time in years to invest in energy. The blackstone chief executive said Oil Companies will need to restructure and raise capital after the plunging crude prices. Blackstone is grilli raising money for the Second Energy currently raising money for the Second Energy fund. Togreat time for blackstone be investing, by definition, then a terrible time for those who are selling. A closer look at the fallout from plunging oil prices, we turn to skip york. Skip, where is carnage going to be worse . I think where youre likely to see it will be in the or i willthat have say the regions that have the higher breakeven costs. Where it be the balkan will be the fringes, but still see activity in the core areas that have better economics. Along the operators base, the ones that arent as exposed or dont have a hedge, some more exposed to the stock price. And those firms that have high debt structures or a lot of debt on the books loss to be a bit will suffer more than the industry as a whole. In the an expert midstream and downstream. That go from enp in direction for the refinery, where else is there fallout . You could see a bit of the fallout with refiners as a knock on effect. Really, more on the demand side. As we see growth of oil demand of about 800,000 barrels a day, but if if a refinery runs dont keep pace, it might be harder for u. S. Refiners to place their access errols auto the export market and be able to clear those into the International Markets. That could put downward pressure on their economics and their Financial Results as well. Right now we are seeing conservation by some of the smaller players. Anything to save cash. What will be the catalyst for m a for actual consolidation . I think the catalyst for that is it goes back to the debt structure. The companies that have the higher breakeven costs on a development and on a financial basis, the lower prices will put them under stress. And the ones in the better performing areas that have worked that have the lower breakeven cost, can either grow production in the corridor i take some of their stunning financial strength and look for acquiring acreage from some of the weaker players. When you say growth production, why would anyone want to grow production in a 60 crude environment, even if you have a breakeven cost that is clearly,e margin, isnt as good as it was at 70 or 75 or 85. We dont know if and when prices may return there. That will be part of the challenging of the 2015 and even 2016 capital plan for some of these operators. You are right. My breakeven could be 50 a barrel and i met 60 barrel world. That margin is still possible. A lot of these companies have been telling a growth story. If they dont grow production, despite the fact that equity prices have already been under pressure, they fear they would be even under more pressure if they dont continue to show that volume growth. They have that incentive to keep continuing the growth story and try to tell the story that we are one of the stronger players and we can grow our production even at a low price environment. The challenge or the choice they have to make is, do they defer some of that better a great and wait for prices to rise to capture those higher margins in a Higher Oil Price environment . That every company will face a decision. Sounds like a lot of moving parts. I want to go broader. A lot of people are on the deathwatch for countries that are well producing countries. What does that mean for your midstream and downstream companies if there is an economic collapse in any of those countries . If you look at those countries, in particular the middle east or venezuela or russia, a lot of their product demand is met locally so a collapse in demand in those countries is likely going to be a greater impact on the local refiners in those areas where it might impact the nonlocal refiners refiners in the u. S. Or europe if those refineries and russia or the middle east continue to run hard to generate cash, they cant sell the product locally and so now you have even more product flowing into International Market where in a week demand world. Demand growth next year will be 900,000 barrels a day, would they see it as a bit weaker than that with just over 800,000 barrels a day . If you get that demand claps and some of those well dependent markets, you can see even more products flowing into the International Market and you have more barrels chasing less demand growth. Do you see any evidence of that so far . Is one offar, but it the key watch once. A couple of things were watching will be on the upstream side, watching the earnings calls starting in january. On the downstream side, watching we watch the technical factor of the crack spread, the difference between product andes in various markets crude acquisition in those markets. Us the Product Market is softening faster than the crude market and that will that would be bad news for the refiners in those markets. Explaining thee get dizzy on demand. What about supply gekko what about supply . Lets hypothetically say with 60 oil through next year. Does that mean come 2016, we may see u. S. Crude Oil Reduction begin to decline production begin to decline . A function ofe the decline curve. We think we get some price recovery in 2015 will average more in the mid70s. If you are below the 80, youre still going to see production the u. S. , especially in the front end of 2015 because of the wells that have already been drilled that are awaiting completion. That volume is coming to the market. Pricecoming at any because the wells have already been completed. The back half of 2015 is when you might see the reduction in the slowdown in the drilling. Growth slows. If you need to actually take barrels off the market, if we need not just the Production Growth but we actually need to stop reduction growth or have Production Growth decline. Now youre in a much lower price environment because the operating cost of an existing well a summit slower than the price environment were in today. Final question, does opec matter even if it does do something before its next reading and june meeting in june . It will always matter. Theyre some of the lowest breakeven operating and developing costs and the world. They always have the ability to bring oil to the market. I think the key issue for opec will be on a country by country basis, how much pain is the government budgets feeling in each of these countries in these low oil price environments . You can see different reactions are different desires for policy changes in opec. Among the different members. Think the key is, they are still important, but the roles you might see them playing, you can see some disharmony and a lot of discussion even in advance of the next meeting. They dont just talk to each other in the vienna meetings, but on a constant basis. I think the market will be looking for signals coming from them even in advance of the meeting of where those pain points are for this various members. Given the factors that ever present risk of a saudi Production Cut less the fact that you and other people do expect some price recovery, at least here in u. S. Oil in 2015, doesnt make sense to you looking at the futures curve and using yesterdays numbers we dont see 70 until october 2018. Right. Is, this all comes down to what it is the balance between the demand growth in the supply in the nonopec supply growth. You see price curves weaker than what our outlook is, the consensus is demand growth will not be as strong or the supply responsibility response will be slower than what the mckinsey view anticipates. It just speaks to there is a great deal of uncertainty in the market. Everybody is looking for the next data point that will give them some clarity. Theres not going to be one Silver Bullet of information that tells us where the market has settled or we have hit a bottom. You will be taking data point after data point, report after report, and trying to melt that together into a coherent view. Skip, thank you very much, have a great weekend. Kip york we will be back in a couple of minutes here on Market Makers. Or speed bumps for uber. The headlines this week, none of them good. Does any of it really matter when your startup is light at 40 billion . s we could get worse. Despite all the bad pr, is is still winning . Ands bring in Olivia Sterns paul kedrosky. Lets have you set the scene. There is a lot going on starting with the pairs decision. In the next hour, we are expected to get a ruling from the highest commercial court in paris. The issue is with uber pop, the lowest branch of uber, the ridesharing. Looks a lot like lyft and allows anyone who drives a car to potentially become a driver. One euro is the base fare. Obviously, this is causing a lot of commotion in the very tightly regulated taxi and limousine industry in paris. It is in court. This does not affect the rest of uber. Is aoks likely uber reality it is here to stay in paris. The new economy minister said at a tech conference in paris last week, uber is a reality but you have to protect people, doesnt make sense to have a crazy driver without a license because one day well have an issue. In paris like the rest of the world, it is about background checks. And not just paris, san francisco, ella, spain, brazil, the netherlands. Starting in the u. S. This week, san francisco, los angeles , sued by district attorneys over claims that are making false promises about background checks. Also sued in portland for allegedly violating local laws. South america, declared illegal in rio. In europe and spain this week, they were told to cease operations completely. In the netherlands, uber pop. This wave of record trade backlash around the world. A lot has to do with googler uber pop. Been, go first and asked for permission rather than ask for permission. Paul kedrosky, familiar with the uber story and that of any other startups. Paul, maybe i am in the minority, but i listen to all of these things, let cities negative developments for uber, michael a nation is to say, who cares . Everympany is going for lost, he did say that, what is happening in paris and delhi, uber seems to be winning 10 times over. Degree, that is absolutely true. Think about it in the context of desk people forget ipos are as much marketing events as financial invents events. In a perverse sort of way, a lot of free publicity for uber. In many ways, were such a short attention span, we know uber much better thanlyft or anyone in the market, so there is a degree to which this is fantastic free marketing spend for the company. I think it has to medically help them grow and ripen new markets dramatically help them grow and rise in new markets. Is it fair to liken this growth anders attention to what were seeing with facebook in 2010 and 2011 before its ipo in 2012 . So many concerns over privacy. This dispute over the ownership. In these Big Questions about whether facebook would ever be able to go mobile and then monetize its user base with advertising. Last i checked, facebook is worth 220 million. Private desk privacy has been an issue, but does other columns are well in the review mirror. With the added wrinkle, imagine any of the cities that facebook was trying to enter in that period had Community Networks telly regulated in the cities they worked. We want to keep them safe for privacy reasons. That is exactly what you see play out here. Clocks all, i know is talking about regulatory issues and that is one thing, but you have the other angle, the case in new delhi, where uber responded by giving her a credit. As uber a Technology Company its name would suggest or just hitchhiking you pay for . It is both. It doesnt make it a bad business proposition when you build it on top of a platform of technology the way they have. I think it issued to some degree with this narrative that says, this case in delhi which is a tragedy, somehow indicative of a widespread problem within uber network . Theres a study done in london in 2013 and had to do in war with or with cabs. One of the most tightly regulated markets in the world with respect to ridesharing. Taxis, i should say. The key question is whether uber should acquire Higher Standards for local authorities . If city regulators put their stamp of approval on certain process for background check, it becomes a lot harder to blame uber. If you look at new york city, uber svs background checks are done to the official route in some cities. To see kind of stamps data plus could on this company . What can of stamps to see them putting on this company after david clough joined . One of the biggest problems the companies had is probably his charm, a fantastically breast tackles competitor brass knuckles competitor. Turning that around, especially dealing with regulators, is going to be hugely important. Theres a lot they can do. Theyre actually doing a better job of background checking that in many cases local governments are original taxi and 37 doing. Or regional Taxi Services have been doing. Then tell but think this is trough. To what degree do you think regulators in these various highly local markets and attention to what uber is dealing with elsewhere in the world . Is it purely local or is it some contagion, lets say . Oh, i think theres contagion by the contagion comes from this notion of regulatory capture, which is the taxi authorities protecting new yorks famously the diane prices as an example, protecting the asset they have in terms of owning these tightly regulated marketplace and trying to prevent this new competitor from coming in. Hey cite oneoff story did you hear what authorities are doing in paris . That is the way to contagion spreads, telling these oneoff stories like quite honestly have nothing to do with anything. We thank you so much for your perspective, parker roski desk pocket roski and olivia we will be back after the short break. Stick around. Welcome back. Breaking news out of the u. K. All airspace over london is currently closed. Weve also heard from heathrow posting on twitter saying that a power outage at the National Air TransportationSafety Control center. Flies are currently expecting delays. All airspace over london closed. Welcome back to Market Makers. Scarlet, the u. S. Is finally getting the message on credit card security. Mitch and merchants face a key deadline, socalled chip and pin cards will require a lot of spending on upgrades by the merchants and also by the card issuers and that is a big for technologies. About this liability shift. Stepping up the technology to the consumer so your card numbers and information doesnt get stolen and you dont get defrauded. Exactly right. What will happen in october 2015 is if your card is used fraudulently by counterfeiting and if your Financial Institution has issued you a card with a chip, the Financial Institution will not anymore be responsible for the fraud. The fraud will shift to the merchants only if the merchant has not moved itself himself to the chip technology. Incentive pretty good for the merchants to upgrade. I keep hearing from people, at best, maybe, 50 of u. S. Merchants will have adopted the socalled emb terminals next year and most likely about 33 . The race is on. It will happen. The banks are fast issuing cards and merchants are very fastmoving to having pos terminals capable of accepting chip. There are though instances of fraud and fraudulent activity with Emv Technology but it doesnt prevent data breaches from happening, does it . That is true. When we talk about security, security is to be layered. Very strong layer is having chip technology. That is one layer of security. Your data could be stolen but may not be reused. Chip Technology Allows counterfeiting to come down. That is one element of the fraud. But it is significant. You have brought one of the new cards. This is what it looks like. It has a chip right here. On the back, it has a digital ly generated number. As we move to october 15, your card present transaction, in person transactions, will be secure. However, the chip will not help the transactions if you deal on the internet. On the internet, you need to provide new securities. What were introducing to the market is what is known as the code youre requested to enter changes based on time. Every 20 minutes, every 30 minutes, every hour the person will decide that. In other words, if you make a copy of the code or you still the code of someone, after an hour, you will not be a will to use it because it will be a new code. When erik is shopping for christmas presents and has this card, he still needs it next them to input the number. It is not just auto saved in any way. Very true with the dynamic cvv it will be the case, but how much security do you want . As much as possible. Another question that i know they dont li