Speaker 1: Hey there, au thu Oughts listeners. Joe and I are
Speaker 1: very excited to announce that we will be holding our
Speaker 1: first ever live show in London. That's right.
Speaker 2: We've done shows around the country around the US affair
Speaker 2: amount always a lot of fun. Me guests record live
Speaker 2: episodes on stage, fans of the podcast get to meet
Speaker 2: other fans of the podcast, and so forth. But this
Speaker 2: is our first time doing one of these outside the
Speaker 2: US in London.
Speaker 1: As you said, so if you want to come here
Speaker 1: some live recordings of authoughts episodes, if you want to
Speaker 1: hang out with me and Joe, if you want to
Speaker 1: hang out with other au Thoughts listeners, then you should
Speaker 1: definitely head over to bloomberg dot com forward slash aud Thoughts,
Speaker 1: where you can find all the info there and purchase tickets.
Speaker 1: It's going to be on the evening of May seventh
Speaker 1: at Wilton's Music Hall. Doors open at six and the
Speaker 1: recordings start at seven.
Speaker 2: Yep, there's still a few tickets available, so go look
Speaker 2: on the website, go look through our twitters. The ticket
Speaker 2: link is also in the show notes to this episode,
Speaker 2: so go buy a ticket before they sell out.
Speaker 1: Hope to see you there.
Speaker 3: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 1: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 1: I'm Tracy Alloway and I'm Joe. Why isn't thal Joe
Speaker 1: in the Odd Lots tradition of Spring of twenty twenty six.
Speaker 1: I'm going to start this podcast by saying that we
Speaker 1: are recording on April seventeenth at one pm.
Speaker 2: One on one pm. Yes, And of course the reason
Speaker 2: we have to specified dates is because this is yet
Speaker 2: another episode about commodities, oil, do war on Iran and
Speaker 2: so forth. And we've already had multiple mixed headlines today.
Speaker 2: But by and large, even with the mixed headlines, and again,
Speaker 2: who knows what's going to happen, but you know, the
Speaker 2: market is moving past the acute phase of the war.
Speaker 1: Pretty clearly, possibly possibly right.
Speaker 2: Now, the market is moving past it now.
Speaker 1: The market, the market is certainly interpreting this as moving past. Yes, absolutely,
Speaker 1: But again things are very fluid. They can always change
Speaker 1: on a dime, which they have been. I'm convinced that
Speaker 1: one day in early twenty twenty six will be able
Speaker 1: to record one of these energy related episodes without saying
Speaker 1: exactly what time and date it is. But not yet. However,
Speaker 1: I think that no matter what happens with the status
Speaker 1: of the ceasefire, it seems very clear that what we've
Speaker 1: just experienced has been I'm not even sure if you
Speaker 1: could say a wake up call, but certainly an acute
Speaker 1: phenomenon that is being interpreted very differently by different players
Speaker 1: in the world.
Speaker 2: I would say three things that, regardless of how this
Speaker 2: ultimately resolves itself, are on my mind right now, and
Speaker 2: they all relate to past episodes. So of course, we
Speaker 2: did that episode with Bob Brackett. We talked about, Okay,
Speaker 2: this is perhaps going to be a change in global
Speaker 2: and ad gas flows, maybe to the benefit of American
Speaker 2: producers of LNG, depending on how much that can be expanded.
Speaker 2: We did that episode with Alex Turnbull who said in
Speaker 2: East Asia there's going to be an appetite for really
Speaker 2: starting more nuclear plans. And also we've seen this surge
Speaker 2: in ev buying there, so already a change in East Asia.
Speaker 2: And then I'm thinking back to our and this was
Speaker 2: before the war, but our most recent conversation with Jeff Curry,
Speaker 2: who's talked about this sort of the story of global
Speaker 2: commodity hoarding and this being like a sort of real
Speaker 2: post twenty twenty story in generally and so wondering whether
Speaker 2: this will accelerate structural shifts towards more resource nationalism, et cetera.
Speaker 1: Resource guarding. Yeah, I mean, whatever you can say about
Speaker 1: the current environment, one thing seems very certain, which is
Speaker 1: if you compare where we are now to say, I
Speaker 1: don't know, twenty eighteen or twenty nineteen before the pandemic
Speaker 1: just feels so different totally. If you think about that
Speaker 1: energy environment, it was all about you know, cheap us shale.
Speaker 1: It was about lots of money flowing into green energy
Speaker 1: and VSG and aiding the energy transition. Russian gas was
Speaker 1: going to power Europe for pretty much forever. And now
Speaker 1: we are just in a very different worlds. So the
Speaker 1: long term trajectory of the energy layout, let's put it
Speaker 1: that way, seems to happen altered, like no matter what
Speaker 1: happens immediately with Iran. And who do we call when
Speaker 1: we want to talk about longer term structural changes in
Speaker 1: global energy market? Only one name, only one name. So
Speaker 1: I'm very happy to say that we do, in fact
Speaker 1: have the perfect guest again, he's coming back on the podcast.
Speaker 1: Daniel Jurgen. He is, of course vice chairman of S
Speaker 1: and P Global. He's the author of the prize the
Speaker 1: Epic Quest for Oil, Money and Power, basically the book
Speaker 1: on oil history, as well as the new book, The
Speaker 1: New Map, Energy Climate and the Clash of Nations. So Dan,
Speaker 1: thank you very much for coming back on the podcast.
Speaker 1: Really appreciate it.
Speaker 4: Well, thank you, And as you said, it could not
Speaker 4: be more timely, but things do change very quickly.
Speaker 1: Yes, okay, the caveat is right up front. But I
Speaker 1: guess if we go back to early March, I would
Speaker 1: just love to get a sense of what you were
Speaker 1: thinking as you saw some of these headlines about the
Speaker 1: Straight of Horror Moves being closed, Because for anyone who's
Speaker 1: read the book, I mean the closure of the Strait
Speaker 1: of Horror Moves is basically kind of the nightmare scenario
Speaker 1: which has been looming in a lot of energy analyst
Speaker 1: minds for a very long time, and here you were
Speaker 1: seeing it actually happen. What was going through your head.
Speaker 4: Well, it was that, in fact, the nightmare scenario that
Speaker 4: had been not only for energy but for strategic planners
Speaker 4: for decades had happened. I think it's one of those
Speaker 4: things that people looked at as a scenario but thought
Speaker 4: it would never happen. But then it happened, and it
Speaker 4: does change the world and it changes the way people
Speaker 4: think about energy. We've had supply chain shocks, but this
Speaker 4: was the mother of all supply chain shocks in terms
Speaker 4: of the closure of the strait of horror moves.
Speaker 2: Look if the ceasefire is durable and the strait opens
Speaker 2: up in a short period of time, and look, Okay,
Speaker 2: it made sense that oil prices surged, but didn't go
Speaker 2: to say, two hundred dollars plus, because you know, we'll
Speaker 2: be able to say in retrospect it turned out to
Speaker 2: be a short war. We had buffer stocks, et cetera. Nonetheless,
Speaker 2: I think, like in the middle of March, there was
Speaker 2: this feeling that something is weird because you hear the
Speaker 2: mother of all supply shocks, and what's like and the
Speaker 2: aunt of all what's like the aunt of like what's like?
Speaker 1: Oh, you mean I thought you meant the actual No, no.
Speaker 2: The mother of all supply shocks, and then the aunt
Speaker 2: of all like pricey.
Speaker 1: I'm trying to say, like second cousin removed, the second removed.
Speaker 4: I mean, it was like, remember we had two different
Speaker 4: prices going at the same time. We had the Brent,
Speaker 4: the futures price, which was always saying, well, this is
Speaker 4: going to end and prices are going to come down,
Speaker 4: and then there was a dated Brent the near term.
Speaker 4: We said, we are having a major dislocation and prices
Speaker 4: are really going up, and we've never seen that dislocation
Speaker 4: on that scale before. It was like two different visions
Speaker 4: of the world almost.
Speaker 2: So, actually, why don't you I've read like ten explainers
Speaker 2: on some of these gaps between the front month price
Speaker 2: and the data brand or the quote, physical price, etc.
Speaker 2: But how were you at the time thinking about this gap.
Speaker 2: Was it as simple as the market simply does not
Speaker 2: believe that the straight will stake to well.
Speaker 4: I did think that there was a difference between how
Speaker 4: the financial markets, which were processing things like statements by
Speaker 4: the president's statements from Iran and so forth, looking at
Speaker 4: the future, and the way the physical market, the industry market,
Speaker 4: and at SERA week, I remember one of the CEOs
Speaker 4: said in one of the dialogues that risk is being
Speaker 4: underpriced in the market because I think from the industry
Speaker 4: point of view, they saw there are major dislocations and
Speaker 4: those dislocations are playing out unevenly across the world. Asia
Speaker 4: hit the hardest, Europe feeling it, and then the US
Speaker 4: mainly seeing it in terms of rising prices at the
Speaker 4: gasoline pub but no problem getting supplies. But in Asia,
Speaker 4: a big problem getting supplies.
Speaker 1: So I'm glad you mentioned Siera Week, and this is
Speaker 1: also one of the reasons we wanted to talk to you.
Speaker 1: So Sarah Week, which is the sort of annual energy
Speaker 1: industry gathering in Houston right every year, that took place
Speaker 1: in sort of mid to late March, smack dab in
Speaker 1: the middle of all of these very changing headlines which
Speaker 1: we've been discussing. What was the mood like over there
Speaker 1: when you were talking to you know, actual participants in
Speaker 1: the market.
Speaker 4: I think in terms of actual participants in the market,
Speaker 4: particularly you know, the CEOs of the companies. On the
Speaker 4: interviews that I did on stage platform, they were all
Speaker 4: feeling that there was a real dislocation, a real scramble.
Speaker 4: They had worried about getting their employees to safety, worried
Speaker 4: about the safety their colleagues, their facilities, and then just
Speaker 4: how these markets are going to be supplied and what
Speaker 4: would be the demand destruction what would happen to price.
Speaker 4: So they were very concerned with the logistics of, you know,
Speaker 4: of having lost the biggest supply of oil that had
Speaker 4: ever happened in history. And by the way, it was
Speaker 4: not oil but also natural gas, which people have focused
Speaker 4: on because I think there was less awareness of how
Speaker 4: significant it was in terms of LNG. And then I
Speaker 4: think the eye opener that maybe all these scenarios that
Speaker 4: people had been doing for the years about the closure
Speaker 4: of the Strait of Horror moves people not thought about fertilizer,
Speaker 4: They're not thought about petrochemicals, they've not thought about sulfur,
Speaker 4: they'd not thought about helium, which the semiconductor industry in
Speaker 4: Taiwan desperately needs. And so actually one of the other
Speaker 4: things that came out of this was the recognition of
Speaker 4: how the Gulf countries Saudi Arabia had become much more
Speaker 4: integrated into the world economy. And by the way, there
Speaker 4: were also exporters of one other extremely valuable commodity called
Speaker 4: money with the size of their reserves.
Speaker 1: Well, I'm glad you just listed a bunch of all
Speaker 1: thoughts episodes basically, so I feel like we've ticked each
Speaker 1: of those boxes in separate episodes, including Golf Capital. So
Speaker 1: that's good. But just going back to Joe's question, do
Speaker 1: you have a framework in your mind to explain why
Speaker 1: the physical market and the actual CEOs of energy companies
Speaker 1: are freaking out versus what's going on with the futures
Speaker 1: price or was going on with.
Speaker 4: Well, yeah, well I think it is because the futures
Speaker 4: price is responding to so many forces there, and the
Speaker 4: people investing in futures, a lot of them, they don't
Speaker 4: have to worry about supplying a customer. They don't have
Speaker 4: to worry about how do we get jet fuel to
Speaker 4: sure that the airplanes keep flying, And as you know
Speaker 4: in Asia, flights have been canceled. In India, you know,
Speaker 4: restaurants were closed because they use LPG for cooking and
Speaker 4: they didn't have enough cooking LKPG for that. So for
Speaker 4: Asia it is a real shortage situation. And I think
Speaker 4: that's what if you have a global perspective, that's what
Speaker 4: you were coping with in the United States. You know,
Speaker 4: one difference between this and previous energy crises, the famous
Speaker 4: energy crisis of the past that I've written about in
Speaker 4: the Prize and the New Map, and so forth is
Speaker 4: the position of the United States so dramatically changed, and
Speaker 4: that has been a huge buffer for consumers in this
Speaker 4: country and for the economy.
Speaker 2: Had it not been for the war, how much would
Speaker 2: a seero week in twenty twenty six have been dominated
Speaker 2: by conversations about powering AI data centers and so forth.
Speaker 2: How much would that have been the story had it
Speaker 2: not been for the war and around well.
Speaker 4: It was anyway. You know, we had the president of Google,
Speaker 4: the president of Microsoft there, we had people from Navidia,
Speaker 4: from other chip manufacturers. It was a real change. The
Speaker 4: focus was, you know, the tech industry meets the energy
Speaker 4: industry and how do we get along and kind of
Speaker 4: this panic about do we have enough electricity, particularly in
Speaker 4: the United States. And I would have said it then
Speaker 4: that energy security had shifted from oil and gas to electricity,
Speaker 4: but of course with this crisis it was back also
Speaker 4: was about oil and gas, but that was you know,
Speaker 4: the big discussion that ran through it, and about particularly
Speaker 4: the role of natural gas because on the one hand,
Speaker 4: the US has built up this big LNG industry, which
Speaker 4: plays a much bigger role in our economy than people recognize.
Speaker 4: I mean, our latest numbers are seventy five percent of
Speaker 4: the value of all semiconductor exports is represented by LNG,
Speaker 4: you know, twice the value of all Hollywood and television
Speaker 4: and entertainment exports. But now natural gas is coming back
Speaker 4: into It's already the significant, but more significant for electric generation.
Speaker 4: And what a change from the Biden administration which wanted
Speaker 4: to have hydrocarbons out of electric generation by twenty thirty five.
Speaker 4: So this question of what are the supply chains to
Speaker 4: assure electricity to support this AI boom, which is represents
Speaker 4: in the United States about half of GDP growth?
Speaker 1: So what were people saying on that front? So, you know,
Speaker 1: we've had episodes of the show where we've talked about
Speaker 1: maybe over capacity when it comes to building out energy
Speaker 1: for data centers. There are still plenty of people out
Speaker 1: there who think that the energy demands are just going
Speaker 1: to be so enormous that we're always going to be
Speaker 1: playing catch up. There's a debate over who should bear
Speaker 1: responsibility for building out that new energy supply. So should
Speaker 1: it be the tech companies themselves or you know, someone else,
Speaker 1: given it's a strategic technology. What are you hearing on
Speaker 1: the ground, Well.
Speaker 4: I think the tech companies are going to be a
Speaker 4: much bigger player's electricity than they would have been in
Speaker 4: the past. I remember again the CEO of one of
Speaker 4: the president of one of those companies said in two
Speaker 4: thousand and eight, when they built their first data center,
Speaker 4: they didn't talk about electricity, they didn't worry about electricity.
Speaker 4: So it's been a huge learning and as one of
Speaker 4: them said, we've had to learn to talk to the
Speaker 4: power industry. You know, a software engineer, maybe I don't know,
Speaker 4: it's a month or two of work to do software.
Speaker 4: It's seven or eight or ten years from an energy
Speaker 4: company for an engineer to get a project done. And
Speaker 4: that's the gulf between the two of them, and the
Speaker 4: sense that there is a race, and it's you know,
Speaker 4: it's always said it's the US China race, but it's
Speaker 4: also a race, very definitely among companies to build capacity. Now,
Speaker 4: one question I think you were getting at is that
Speaker 4: the sense that there is the contrarian view that chips
Speaker 4: will become more efficient and maybe electricity demand will not
Speaker 4: be as great as it is. But at this point,
Speaker 4: every time you know, you talk to you know, a
Speaker 4: utility executive, they say, and we heard this at Sarah,
Speaker 4: you know, and they had years and years of no
Speaker 4: growth or very flat growth in demand. They'll say this
Speaker 4: year it's going to grow five percent, or it's going
Speaker 4: to grow eight percent. And there are only so many electricians,
Speaker 4: there are only so many transformers. So again, those supply
Speaker 4: chains are very important there too.
Speaker 2: How much do you expect to be truly internalized or
Speaker 2: vertically integrated within the tech industry when it comes to energy.
Speaker 2: We see headlines from here and there, like you know,
Speaker 2: like Google will make an investment in a small module
Speaker 2: or reactor startup, but I never I know how like
Speaker 2: serious that is. Or from time to time it's like, oh,
Speaker 2: Meta hired an energy trader and this is new and
Speaker 2: this is different, et cetera. Like what do you think
Speaker 2: that the big tech companies are ultimately going to internalize
Speaker 2: as we need to have this be as part of
Speaker 2: our core competency rather than we are going to work
Speaker 2: with some third party partner on.
Speaker 4: Yeah, we can see that they've hired people who come
Speaker 4: out of the energy industry, either from the oil and
Speaker 4: gas industry or in electric power industry. So they're building
Speaker 4: up the capacity to do that and their investments show it.
Speaker 4: You mentioned, you know, one company. But look at Amazon,
Speaker 4: They've invested in x Energy, which is a small modular
Speaker 4: reactor company. And I think the idea is that I
Speaker 4: hear from other of these tech companies too, will invest
Speaker 4: in them and help drive down the costs and see
Speaker 4: them as part of the way of meeting the electricity demand.
Speaker 4: And I think, I know I wrote down, as you said,
Speaker 4: the themes that you had talked about on nuclear. I mean,
Speaker 4: this crisis is a boost to nuclear, but I think
Speaker 4: AI has been a big boost to nuclear in terms
Speaker 4: of the sense among tech companies that nuclear has to
Speaker 4: be part of the picture. And just this morning I
Speaker 4: was talking with the head of one of the largest
Speaker 4: government funds, and you know, they're invested a non US
Speaker 4: fund and they're invested in fusion. So you know, there's
Speaker 4: just a different attitude towards nuclear, and I think the
Speaker 4: needs of the tech companies is one of the things
Speaker 4: that's really driven that well.
Speaker 1: Actually, on this note, I wanted to ask you about
Speaker 1: renewables and you know, the green energy transition and all
Speaker 1: of that. It feels like in some parts of the
Speaker 1: world recent events in the golf have maybe hastened some
Speaker 1: of that transition. Although I can't even call it a
Speaker 1: transition because, as we discussed with Alex Turnbull, it's like, yes,
Speaker 1: people are buying a bunch more evs, but those evs
Speaker 1: are going to be powered by coal for you know,
Speaker 1: the foreseeable future, because there's an energy shortage. What exactly
Speaker 1: is going on with renewables now is are people still
Speaker 1: seeing that as a substitute for traditional energy or is
Speaker 1: this more of an addition to bolster I guess diversification.
Speaker 4: Well, first, we have to note that over ninety percent
Speaker 4: of the new electric capacity worldwide that was installed last
Speaker 4: year was wind and solar, so it is a growing business. Secondly,
Speaker 4: like I've heard of an example of a project in
Speaker 4: Vietnam that was going to be done with energy, they're
Speaker 4: buying solar panels. I think that wind and solar gain
Speaker 4: less about climate now and more about a part of diversification,
Speaker 4: part of energy security. So I think that dialogue that
Speaker 4: has changed maybe and certainly we'll hear it in Europe
Speaker 4: and well I hear it at least not from everybody,
Speaker 4: but from people in the United States as well. So
Speaker 4: it's a different way of looking at wind and solar
Speaker 4: as a way to be more independent more secure, more diversified.
Speaker 4: Doesn't answer the question of how you power an airplane,
Speaker 4: or the fact that only about six percent of the
Speaker 4: new cars being sold in the US today, even with
Speaker 4: this crisis, are evs.
Speaker 2: It's pretty crazy how little evs have taken off, you know,
Speaker 2: something just you know, like, you know, here's something I
Speaker 2: think about, Like in the US, we are, obviously our
Speaker 2: lands are blessed with commodities, including abundant oil and gas,
Speaker 2: especially since we've gotten really good at high tech and
Speaker 2: sideways drilling and all of these things like that. Could
Speaker 2: it be a curse in this sense that you know,
Speaker 2: the world is getting electrified one day, maybe not in
Speaker 2: our lifetimes, but one day there'll probably electric airplanes, right,
Speaker 2: batteries will eventually get good enough and airplanes will no
Speaker 2: longer need jet fuel, et cetera. Is part of the
Speaker 2: story that the US is going to stay on this
Speaker 2: path of the internal combustion engine and so forth, in
Speaker 2: part because we are just so blessed with fossil fuels.
Speaker 4: Well, I think that's part of it that I think
Speaker 4: I'm just reflecting on that. I think that's part of it.
Speaker 4: It's part of what consumers wanted. I think that the
Speaker 4: notion that there would be this big pickup and electric
Speaker 4: cars hasn't occurred here in Europe. I think it's about
Speaker 4: twenty percent. Then you go to China, and of course
Speaker 4: it's much higher because not only of the price point,
Speaker 4: but also government policies of all kinds. You know, you're
Speaker 4: not going to get a license for new car in
Speaker 4: Beijing unless it's an electric car. But here's some numbers
Speaker 4: that may not be clear. I mean, we were looking
Speaker 4: at this when we were doing our copper study, because
Speaker 4: electric cars use almost three times as much copper as
Speaker 4: a conventional car. And it turns out that in twenty
Speaker 4: twenty five, about twenty three million, twenty two twenty three
Speaker 4: million electric cars were sold worldwide compared to the entire
Speaker 4: US new car market of sixteen seventeen million new cars.
Speaker 4: So you see that it's happened worldwide. Now a big
Speaker 4: portion of them are in China. But China is also
Speaker 4: really you know, they have reoriented their exports much more
Speaker 4: to outside of the United States than even Europe, to
Speaker 4: the developing world, and they're going to really be pushing
Speaker 4: their electric cars. But of course you do need reliable
Speaker 4: electricity supplies. If you're going to have a penetration of
Speaker 4: electric cars.
Speaker 1: I just want to go back to the situation in
Speaker 1: the Strait of hormones directly for a few minutes. So
Speaker 1: you mentioned initially that this was something that people thought
Speaker 1: would never happen because the stakes were so high. If around, I.
Speaker 4: Thought they would do scenarios about it. But assume that
Speaker 4: all these things could happen.
Speaker 1: But not that right, So I mean, this is the
Speaker 1: surprising thing, Like it actually happened despite the stakes being
Speaker 1: so high, and you know, despite the world relying on
Speaker 1: the straight for twenty percent of its oil and gas.
Speaker 1: What's your take on, like why this particular moment, Like
Speaker 1: what are the conditions that allowed the closure of the
Speaker 1: strait of hormones.
Speaker 4: Well, I think it was the war. Here's a war
Speaker 4: in which the United States, the mightiest military was at
Speaker 4: war with the country. As somebody I heard somebody remark
Speaker 4: the day half the GDP of Belgium, but with a
Speaker 4: lot of missiles and a lot of drones and kind
Speaker 4: of leading to a standoff. And it was the moment
Speaker 4: for Iran two pounce, even though the very senior leadership
Speaker 4: was destroyed right at the beginning of the war. Clearly
Speaker 4: they had decentralized. This was a war when you look
Speaker 4: at the amount of drones and missiles they had and
Speaker 4: they continue to have. This is a war that they
Speaker 4: had prepared for for a long time to struggle with
Speaker 4: the United States, and they seize the moment. And you know,
Speaker 4: maybe it was it's the advent of drones that was
Speaker 4: able for them to pull off saying that we control
Speaker 4: the strait, and when you shend your ship through the strait,
Speaker 4: you'll follow the route that we tell you. And by
Speaker 4: the way, it's actually a canal and you're going to
Speaker 4: pay a toll, and the toll is going to go
Speaker 4: to the IRGC. Maybe it was the capability of drones
Speaker 4: that enabled that.
Speaker 2: Let's say the straight reopens, but as you mentioned, you know,
Speaker 2: all cheap drones, the Shahid drone may maybe enough, and
Speaker 2: Iron will has a lot of them, and they'll probably
Speaker 2: keep We're seeing a lot of them. Maybe that is
Speaker 2: enough to close the street, even against the mightiest military
Speaker 2: in the world. Does that permanently change how the world
Speaker 2: thinks about energy security? We see that because they were
Speaker 2: capable of doing this, Therefore we know it could happen again, right,
Speaker 2: We know it could happen down the Fuure and does
Speaker 2: that change energy planning?
Speaker 4: Yeah, I was thinking, you know, the beta test for
Speaker 4: World War two is the Spanish Civil War, and in
Speaker 4: a sense the beta test for the new world of
Speaker 4: warfare is Ukraine. And now we've seen it played out
Speaker 4: in the Gulf with what Iran does, and I think
Speaker 4: it introduces a sense of risks that wasn't there before.
Speaker 4: I remember I was in Kuwait in January when they
Speaker 4: were announcing new policy for investment, international investment in their
Speaker 4: oil and gas industry, and it felt very optimistic time,
Speaker 4: it felt. And you've had that excitement, you know, really
Speaker 4: the optimism around in Dubai and Abu Dhabi Vision twenty
Speaker 4: thirty in Saudi Arabia. Well, it's going to be as
Speaker 4: optimistic now. And I think there is going to be
Speaker 4: deeper thought about energy security and diversification and what kind
Speaker 4: of security premium. And by the way, also that you
Speaker 4: need to spend more money, more share of your sovereign
Speaker 4: wealth fund on defense. So I think all of those changes.
Speaker 4: I mean, you know, we don't know what the full
Speaker 4: outline of this settlement is, if it is a settlement,
Speaker 4: but we do know that it is going to be
Speaker 4: a different world than the one that existed before the
Speaker 4: war began.
Speaker 1: Do you see the possibility or I guess in what
Speaker 1: sense would this particular eventuality like change oil routes and markets.
Speaker 1: But if the US maintained some sort of control or
Speaker 1: input in the Strait, collecting a toll, maybe alongside Iran
Speaker 1: at some you know, at one point, I think Trump
Speaker 1: was talking about this being on the table. How would
Speaker 1: that change global oil flows? If you had a sort
Speaker 1: of like US involvement in that particular area.
Speaker 4: Well, that would be a pretty dramatic expansion of the
Speaker 4: authority of the US. I mean, some have talked about
Speaker 4: a international authority which would be composed of Iran, Oman
Speaker 4: and the UE, which are the three countries that border
Speaker 4: the strait, that some sort of international system. But I
Speaker 4: think also that for the Gulf countries, for Saudi Arabia,
Speaker 4: I don't think it's tolerable for them to be paying
Speaker 4: a toll to Iran and having Iran have that domination
Speaker 4: over supplied and having those funds that they pay go
Speaker 4: to the IRGC, which apparently is what would be the
Speaker 4: destiny of those funds. So I think there's things here
Speaker 4: that are just unresolved, and obviously at the top of
Speaker 4: that list is the Strait along with what Iran is
Speaker 4: or is not going to do in terms of nuclear weapons.
Speaker 2: I'm glad that you said there's going to be a
Speaker 2: different world regardless after the war, because thank you for
Speaker 2: giving us the headline that we're going to use to
Speaker 2: run this episode. Always nice to get a nice, clean
Speaker 2: phrase like that. But what else could we see in
Speaker 2: this different world? Maybe from the you mentioned how the
Speaker 2: golf regions would react or maybe completely find it unacceptable
Speaker 2: for Iran to take that toll. But what else do
Speaker 2: you see as some of the potential fallouts in this
Speaker 2: different world after what we've seen. I liked what you
Speaker 2: put a beta test to. I mean Ukraine may have
Speaker 2: been a beta test for this this I don't want
Speaker 2: to be dark, but we see the incredible power of
Speaker 2: drones here. What else do countries do for their own
Speaker 2: energy security in this different world?
Speaker 4: Well, one is drone capacity. And you know a year
Speaker 4: ago we heard that Ukraine was told they had no cards.
Speaker 4: It turns out they do have cards. Which is there
Speaker 4: no country is more experienced in terms of dealing with drones,
Speaker 4: And there's the President of Ukraine in the Gulf doing
Speaker 4: drone deals with those countries to give them protection. I
Speaker 4: think there are other consequences too. I think that the
Speaker 4: I guess we'll call this the hor Moose crisis. It
Speaker 4: sounds like the Suez crisis, the Horrormones crisis. But I
Speaker 4: think it's also accentuates really a crisis for NATO, which
Speaker 4: really began with of course well it has years in
Speaker 4: the making, but over Greenland, and you know, now you
Speaker 4: have the Europeans talking about a NATO without the United States,
Speaker 4: and so I think the relationship there's been less focus
Speaker 4: on that. But I think that's one of the lasting
Speaker 4: questions that come out of this too. You know, one
Speaker 4: thing that you don't see, you don't think about unless
Speaker 4: it's not there is trust, and trust has been eroded
Speaker 4: things that become more transactional and yet to solve. Really
Speaker 4: to deal with global energy issues, you need kind of
Speaker 4: global cooperation. That was a very fundamental idea that led
Speaker 4: to the establishment of the International Energy Agency as a
Speaker 4: way to coordinate so that you don't have sort of
Speaker 4: bruising competition among countries.
Speaker 1: If I could ask you to put your sort of
Speaker 1: macro hat on for a second. If I think about
Speaker 1: the current world, you know, it seems like one where
Speaker 1: people are going to be more focused on energy security.
Speaker 1: Maybe they're going to be building out their own production capacity,
Speaker 1: their own stockpiles of oil. They're probably going to be
Speaker 1: increasing their defense budgets. Maybe it's also a world where
Speaker 1: smaller powers, because of drones, are able to mount their
Speaker 1: own offensive campaigns and sort of hold the line and
Speaker 1: create their own choke points in different geographies. When I
Speaker 1: think about that world, it strikes me as inherently inflationary.
Speaker 1: Does that seem to be the case for you? Is
Speaker 1: there a new term premium that comes about? I guess
Speaker 1: because of everything that we've just seen in the Gulf.
Speaker 4: I think you're absolutely right. I think it really began.
Speaker 4: You know, what drove the incredible development of supply chains
Speaker 4: so complicated. I remember looking at one for automobile parts
Speaker 4: that look like a bowl of spaghetti as the fact
Speaker 4: that it drove down costs. It was all about efficiency
Speaker 4: and increasingly security, predictability, reliability, resilience has come to the
Speaker 4: fore in it. And I think, as you describe, that
Speaker 4: is going to be even more true today. So spending
Speaker 4: more money on defense and trying to localize production, build security,
Speaker 4: and that's inherently adds costs that we're not there. It's
Speaker 4: reversing a trend that had been decades in the making.
Speaker 4: So I think that builds it in.
Speaker 2: You know, obviously the AI industry needs the energy industry
Speaker 2: or it needs energy expertise, and so either it'll be
Speaker 2: working more closely in partnership with companies. It'll bring some
Speaker 2: of it in the house. When you're down in Houston,
Speaker 2: do you hear anything about the reverse in terms of
Speaker 2: how AI is going to change the change energy, in
Speaker 2: terms of the usage of artificial intelligence or robots in
Speaker 2: terms of production and mining and all that.
Speaker 4: Well, absolutely certainly we had a big mining track there
Speaker 4: and more of that now. Robots, by the way, are
Speaker 4: also copper and cant which is goes back to this
Speaker 4: whole question about this kind of potential gap and copper
Speaker 4: supplies that you need for electrification. Again, supply chains back
Speaker 4: on the table in a different version. But of course
Speaker 4: the question there is what does it due to jobs?
Speaker 4: What is it due to efficiency? And I think every
Speaker 4: CEO was talking about how we're applying AI in all
Speaker 4: these different cases in our companies and probably there's the
Speaker 4: same anxiety about jobs there what the future of work
Speaker 4: will be that you see generally reflected and we'll probably
Speaker 4: hear more about as we go into the November midterm election.
Speaker 2: You know, there's a part in Landman where they're they're
Speaker 2: at an oil they're in an oil industry gathering or something,
Speaker 2: and they see a robot. One of the providers is there.
Speaker 2: Show it's like you can replace some of your workers
Speaker 2: with robots. But also, as a to Daniel's point, after
Speaker 2: we build humanoid robots, probably the first thing that they'll
Speaker 2: be used for us to go into the copper minds
Speaker 2: so that they can reproduce themselves and then build more robots.
Speaker 1: You know, that would be don't even think they have
Speaker 1: to be humanoids.
Speaker 4: I think I think that I believe that's the movie
Speaker 4: script that you're with right now.
Speaker 1: I see the thing is, Joe, if you keep talking
Speaker 1: about land Man, I'm never going to watch it because
Speaker 1: all those give it all. Like I know, I do
Speaker 1: think there's a real.
Speaker 2: Thing that makes sense though, Like it's going to be
Speaker 2: all about the copper to keep building robots in the
Speaker 2: national security, So what are you to do?
Speaker 4: I think I see your movie with the robots go
Speaker 4: down there and they're reproducing themselves.
Speaker 2: Yeah, they got to get that robots.
Speaker 4: Yeah. Okay. I think there's one other thing that's important
Speaker 4: to talk about, which is, you know, assuming that we
Speaker 4: are going to go into a stabilization and a more ceasefire,
Speaker 4: et cetera, how long does it take to actually recover
Speaker 4: from this? And I think this goes back to Tracy
Speaker 4: to your comments about inflation. It's not going to be
Speaker 4: This is not something that's solved overnight, and at least
Speaker 4: it will take probably if peace breaks out, you know,
Speaker 4: maybe a couple of months before the oil markets are
Speaker 4: back in position, because remember the last tankers had already
Speaker 4: left and it had docked from before the war. Inventories
Speaker 4: have been run down, so and that captains have to
Speaker 4: be sure and their crews have to be willing to
Speaker 4: go through the Gulf, and so it's a couple of
Speaker 4: months before the oil market starts to get you know,
Speaker 4: get back into balance. And then I know one of
Speaker 4: the CEOs said that if you look at the overall
Speaker 4: disruption including petrochemicals and everything in the destruction of refineries,
Speaker 4: it might be as much as two thirds of a
Speaker 4: year before things are really cleared up and back to normal,
Speaker 4: So it isn't there's no light switch here, and so
Speaker 4: that will be reflected in prices. Yeah.
Speaker 1: So, just going back to AI and electrification for a minute,
Speaker 1: I mentioned in the intro that one of the things
Speaker 1: that's different to today is the almost complete absence of
Speaker 1: ESG investing in today's world. So we used to hear
Speaker 1: so much about it pre twenty twenty, and I got
Speaker 1: the sense maybe this was a bit of advertising, but
Speaker 1: you certainly got the sense there was a lot of
Speaker 1: money flowing into ESG funds for green energy or socially
Speaker 1: beneficial programs or whatever. You do not get that sense
Speaker 1: today at all. Is there a possibility though, that ESG
Speaker 1: sort of gets rebranded, either under an energy security umbrella
Speaker 1: or under a sort of AI electrification umbrella and we
Speaker 1: start to see capital flow into it in a meaningful way.
Speaker 4: Yet again, Well, I think I think that's a very
Speaker 4: reasonable expectation, and I think we'll see even the tech
Speaker 4: companies still have their net zero objectives, so they may
Speaker 4: be using gas, but then they'll be looking to invest
Speaker 4: in renewables as well to show that they're net zero.
Speaker 4: So one of the things that we've got to get
Speaker 4: used to in the United States is to have these
Speaker 4: one hundred and eighty degrees swings from one administration to another.
Speaker 4: And I do see that people one way, that people
Speaker 4: kind of investing in energy but still maybe have ESG
Speaker 4: in the back of their mind or concerned about it.
Speaker 4: You're rebranded as infrastructure, and then you're not investing in energy,
Speaker 4: you're investing in infrastructure, and infrastructure generally considered a very
Speaker 4: good thing to invest in as long as you get
Speaker 4: a return.
Speaker 2: You know, we've mentioned some of these big, mega trends
Speaker 2: that the war has brought to light, including obviously the
Speaker 2: resource nationalism. Is the potential for US l G exports
Speaker 2: is that tapped out? Like, are we already going as
Speaker 2: fast as we can to build out that capacity or plausibly,
Speaker 2: is there an even further a higher gear that that
Speaker 2: could go into.
Speaker 4: Oh, there is much additional capacity in process that will
Speaker 4: Gutter has a very big expansion plan, but we'll see
Speaker 4: the US coming on with it. If we'd been having
Speaker 4: this call, you know, if we're in January, of course
Speaker 4: and looking out on twenty twenty six, the big concern
Speaker 4: would be is there going to be too much LNG
Speaker 4: capacity and market. But there is a concern too about
Speaker 4: demand destruction. Will people feel as confident about it, you
Speaker 4: know in Southeast Asia gone back to coal, or will
Speaker 4: they push in other directions renewables. But I think still
Speaker 4: we expect, you know, roughly that by twenty forty the
Speaker 4: LNG market could be fifty percent bigger than it is.
Speaker 4: But of course that market has to be there, and
Speaker 4: it has to be at a price that people are
Speaker 4: willing to pay incompetent. And it also means I think countries,
Speaker 4: and this is a question. There are a lot of
Speaker 4: Europeans at Sarah Week who were there about tying up
Speaker 4: LN supplies long term and wanting to have those supplies.
Speaker 4: But you know, there's always the question of you know,
Speaker 4: wanting to be sure that the US is a reliable
Speaker 4: provider and you're not going to see something like the
Speaker 4: Biden administration where they'd put a freeze on energy. But
Speaker 4: the US ellen G is by far the largest supplier
Speaker 4: now and with part of Gutter really damaged, at least
Speaker 4: for a few years out of it be even more
Speaker 4: reliance on US llergy.
Speaker 2: You know, I have another question, So the US is
Speaker 2: just such an energy powerhouse now, with both respect to
Speaker 2: oil and gas obviously, and we're oil independent, although I
Speaker 2: know these things are technical because of refining capacity and
Speaker 2: so forth, but we're an oil powerhouse too. I'm just
Speaker 2: sort of curious, however, like costs in the oil fields
Speaker 2: are rising, is US oil self sufficiency a guaranteed thing
Speaker 2: for decades to come or would it be plausible with
Speaker 2: shale decline, ray and rising domestic costs, et cetera, that
Speaker 2: the US ever like sort of returns. So I don't
Speaker 2: know what it looked like in the nineties or something
Speaker 2: like that, Like how guaranteed is our oil security? Just
Speaker 2: because we've had these sort of twenty really good years.
Speaker 4: You never want to say anything is for sure forever,
Speaker 4: because things really do change any even I think tracing
Speaker 4: your remarks at the beginning about how the world looked
Speaker 4: in twenty nineteen and here seven years later, the world
Speaker 4: looks very different, so many changes could happen. I think
Speaker 4: there's been the general view and this. You know, there
Speaker 4: was a debate really at SIERA week among the CEOs
Speaker 4: about shale that question, some saying well, it's plateaued or
Speaker 4: going to plateau pretty soon now, it's platawing at a
Speaker 4: very high number, I mean almost fourteen million barrels a
Speaker 4: day and maybe going a little higher than that. Others say, no,
Speaker 4: technology is going to unlock the recovery rates now like
Speaker 4: seven percent, and if you can get it to ten
Speaker 4: or twelve percent, it will go on longer. So I
Speaker 4: think it's at least if we look out at a
Speaker 4: few decades, the US will continue to be a big
Speaker 4: producer of oil in as something dramatically changes, and even
Speaker 4: longer that we have very abundant gas forever. I you know,
Speaker 4: things can change, policy can change. You know, if you
Speaker 4: have a Bernie Sanders administration some day, you know it
Speaker 4: will be a very different picture than what we have today.
Speaker 1: Again, going back to the Straight of War Moves and
Speaker 1: your book, I looked up how many times you mentioned
Speaker 1: the straight of War moves in the prize, and it
Speaker 1: actually wasn't that much. It was like just four or
Speaker 1: five times. But then I looked up how many times
Speaker 1: you mentioned Iran, and it's like five hundred times. You know,
Speaker 1: Iran is really central to the history of oil, and
Speaker 1: so you would say the situation is like very central
Speaker 1: to our thinking about oil. What's been most surprising to
Speaker 1: you in you know, watching these events, historic events really
Speaker 1: unfold over the past month or so.
Speaker 4: Well, I feel what I'm struck by is the continuity
Speaker 4: that the Iranian oil workers went on strike in nineteen
Speaker 4: seventy eight, and that was the beginning of the Iranian
Speaker 4: Revolution and then the Second Revolution where the Islamisist captured
Speaker 4: the whole system and it's chanted death to America. So
Speaker 4: in a sense, it's like this war has been brewing
Speaker 4: for forty seven years. But you know, it is interesting
Speaker 4: because of course, you know, oil was discovered in then
Speaker 4: Persian Iran in nineteen oh eight, and Winston Churchill made
Speaker 4: the decision to convert the Royal Navy from coal to oil,
Speaker 4: and it was going to be dependent on Iranian oil.
Speaker 4: And in Parliament people were saying, you're going to be
Speaker 4: turned it on Persia. That's very dangerous, and he came
Speaker 4: up with well, first of all, he said, the prize
Speaker 4: of the venture is world mastery itself, and that's where
Speaker 4: I got the title of the book from. And then
Speaker 4: he said, the basic axium of energy security, which is
Speaker 4: on variety in oil, is variety is the source of
Speaker 4: safety diversification. So that continues to be the principle, even
Speaker 4: though at that point he was making the Royal Navy
Speaker 4: very dependent upon Iran Persia. But so it is. You
Speaker 4: know how central Iran has been to the oil story
Speaker 4: since nineteen oh eight, and here it is today, We're
Speaker 4: in twenty twenty six, and it is still central. It's
Speaker 4: not the large producer it was. There was a day
Speaker 4: when Iran and Saudi Arabia vied with each other to
Speaker 4: be the biggest producer in OPAK. But its ability to
Speaker 4: influence what happens in the entire Gulf and to shut
Speaker 4: down the Gulf shows that it too has a form
Speaker 4: of mastery, which it has exerted with drones and missiles.
Speaker 1: Yeah, for sure. I realized. I actually have one more question,
Speaker 1: which is are you also watching Landman Down alongside your.
Speaker 4: Well, yeah, I listened. I watched it, and there was
Speaker 4: that famous episode at the wind turbine. The hero got
Speaker 4: in an argument with the ell lawyer from Houston. Yeah, yeah,
Speaker 4: the wold lawyer. That's right about how everything, including everything
Speaker 4: she was wearing, was made an oil product. And I
Speaker 4: thought that was really interesting. But then I stopped watching
Speaker 4: it because of the subplot got a little sidetracked, but
Speaker 4: then I started watching it again, So now I'm not
Speaker 4: up there with Joe, but I'm going to catch up
Speaker 4: with it because, you know, I got to find out
Speaker 4: how the oil industry really works, and what better way
Speaker 4: to learn it by watching Landman.
Speaker 1: You need to ask for a cameo. I think they
Speaker 1: should you Know?
Speaker 2: In season three they really should you Know has a
Speaker 2: cameo in it. The owner of the Dallas Cowboys who
Speaker 2: like comes There's like a scene where like he comes
Speaker 2: in the really important people, like yeah, exactly. He talks
Speaker 2: about like the first his first oil lease or something like.
Speaker 2: She tells the story about I think his daughters were
Speaker 2: to college and like paid for it by like doing
Speaker 2: an oil lease like around where their dorm was or
Speaker 2: something like.
Speaker 4: I don't know.
Speaker 2: It's really good, but I think, like I am, we're
Speaker 2: putting this out there in the world. That Taylor shirt.
Speaker 4: Would you put a recommendation in me?
Speaker 2: Now the Taylor Sharton needs to have, you know, it
Speaker 2: needs to happen. This was first of.
Speaker 1: All, Taylor Sheridan also needs to come on all Bots.
Speaker 2: But this is the scene. Okay, the scene is at
Speaker 2: Sero Week and it's you interviewing the head of M
Speaker 2: text Oil, because that's the that's it's Dan, you're going
Speaker 2: to interviewing the CEO of M text oil or what
Speaker 2: we're actually billy about Thornton. I don't want to give
Speaker 2: a spoiler. If if you ever got to the very
Speaker 2: end maybe about expansion plans live on stage, that would
Speaker 2: be such a what they call an easter egg for
Speaker 2: oil nerds to see. Okay, yeah, I'm putting that into
Speaker 2: the world. Okay, this episode, Okay.
Speaker 4: I'm all on board with it, and if you could
Speaker 4: just make it happen.
Speaker 1: This is this is We'll try, we'll try.
Speaker 4: I know your show is very influential, but this is
Speaker 4: going to demonstrate the true past.
Speaker 1: Oh god, okay, so we actually need to make this
Speaker 1: happen nowt okay, Dan, that was fantastic as always, really
Speaker 1: appreciate you coming back on all thoughts and fingers crossed
Speaker 1: on the landman cameo.
Speaker 4: Thank you, great to be on with you. Vote, Thanks
Speaker 4: a lot, and we'll see how it all uncold.
Speaker 1: Joe, that was very fun. I really hope you're gonna
Speaker 1: get like, if there's anyone great, Yeah, that would be fantastic.
Speaker 1: There's a lot to pick out of there. I mean,
Speaker 1: one thing I thought was that was really interesting just
Speaker 1: in the context of geopolitics, was the point about the
Speaker 1: drones and the idea of like this new technology being
Speaker 1: an enabling factor in allowing like some powers to assert
Speaker 1: control over areas that perhaps would have been much more
Speaker 1: difficult to assert control over before.
Speaker 2: Sometimes while we're doing episodes, you know, like I'll like
Speaker 2: browse on my computer and like look something up and
Speaker 2: mental Wikipedia page twenty eleven Iran US RQ one seventy incident.
Speaker 2: Do you know what that is? No, it's when Iran
Speaker 2: captured a Lockheed Martin RQ one seventy Sentinel on mandarial vehicle,
Speaker 2: and it is believed that this is a pivotal moment
Speaker 2: in being able to reverse engineer the technology of that drone.
Speaker 2: Interesting that then became an enabler of the Shiheid one
Speaker 2: ninety one, and that you know, this idea, it's like,
Speaker 2: are we seeing like sort of the beta tests for
Speaker 2: World War three here, or beta test for war starting
Speaker 2: with Ukraine? This there's like an incredible leveler of the
Speaker 2: playing field or the ability of a non lesser powers
Speaker 2: to inflict incredible to put up an incredible fight in
Speaker 2: some respect, you know that incident in twenty eleven could
Speaker 2: be like sort of like a key moment in history
Speaker 2: that doesn't get enough, get enough attention.
Speaker 1: Wait, since you're quizzing me on history, yea, even though
Speaker 1: it's recent history. Which oil company is descended from the
Speaker 1: Anglo Persian Oil National? I can't remember the exact name,
Speaker 1: but Iran State National Oil Company? What is it now? B?
Speaker 4: Yes?
Speaker 1: Okay, well away I did yeah?
Speaker 3: Yeah?
Speaker 1: Did I say Anglo?
Speaker 2: Did you said Anglo? So there's like our al star
Speaker 2: from my Oh yeah, I.
Speaker 1: Totally gave it away. Yeah, I'm gonna have to come
Speaker 1: up with a better question. All right, Well next time,
Speaker 1: next time, shall we leave it there?
Speaker 2: Let's save it there.
Speaker 1: This has been another episode of the Authoughts podcast. I'm
Speaker 1: Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisanthal. You can follow me at the Stalwart.
Speaker 2: Follow our guest Daniel Jurgan. He's at Daniel Jurgen. Follow
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Speaker 2: Bennett A Dashbot and Kale Brooks and Kale Brooks and
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