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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Joe Wisenthal.

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Speaker 3: And I'm Tracy Alloway.

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Speaker 2: So, Tracy, you know, the war in Iran is primarily,

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Speaker 2: at least from a commodity standpoint, being understood is like

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Speaker 2: an oil shock. That's the number that most people are

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Speaker 2: paying attentions the headline. Sure, but as we know from

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Speaker 2: multiple episodes we've already done, it's not just an oil region.

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Speaker 2: And of course we've been talking about fertilizer in one

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Speaker 2: of our episodes. We did the episode on other sort

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Speaker 2: of dry ball commodity shipping that's affected by the closure

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Speaker 2: or the almost closure of the Strait of for Moves.

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Speaker 2: There's plenty there. It's not just an oil story.

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Speaker 3: Yeah. The one silver lining of all of this, I guess,

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Speaker 3: is that we're all becoming commodities ex supply chain commodity

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Speaker 3: experts and petrochemicals as well. I should just say we're

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Speaker 3: recording this on March seventeenth, because who knows what's going

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Speaker 3: to happen by the time this episode comes out. But

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Speaker 3: one of the big headlines today is that Iran has

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Speaker 3: just struck one of the big gas fields in the UAE, yes,

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Speaker 3: which is the Shaw Field in the sort of empty

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Speaker 3: quarter area, and it's on fire, so pretty dramatic footage,

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Speaker 3: which definitely does tend to concentrate your mind on one

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Speaker 3: particular commodity, which is gas.

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Speaker 2: Well, there's sort of like two dimensions of the supply

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Speaker 2: chain destruction, isn't there, Because there is the fact that

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Speaker 2: for the most part, there are very few vessels going

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Speaker 2: through the straight and Horn moves and people are sort

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Speaker 2: of wondering when will that open again?

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Speaker 4: Right?

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Speaker 2: But then there's the other question of, as you just mentioned,

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Speaker 2: there's a lot of damage to core infrastructure of various

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Speaker 2: swords and so setting aside when the strait opens, how

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Speaker 2: badly will the production infrastructure be impaired and how long

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Speaker 2: will that go on? That's a sort of separate dimension

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Speaker 2: besides just the passing of the ships, right, And.

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Speaker 3: I think that gas in particular have these sort of

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Speaker 3: geopolitical connotations. Even before the war with Iran, we're all

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Speaker 3: used to thinking about, you know, big strategic pipelines, yeah,

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Speaker 3: and thinking about potential disruptions to those. Back when Russia

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Speaker 3: invaded Ukraine, there was obviously a European gas crisis, and

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Speaker 3: so everyone's kind of worried about Europe once again. Yes,

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Speaker 3: there's a lot to discuss totally.

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Speaker 2: I saw a headline today also on the train here

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Speaker 2: talk about how like Pakistan is very serious, like they

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Speaker 2: have like a month of NED gas right now and

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Speaker 2: they're heavily dependent on gas from the region. Of course,

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Speaker 2: the fertilizer story, as we learned uria downstream from NED gas, etcetera. Anyway,

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Speaker 2: last year, we did our live episode with one of

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Speaker 2: our favorite commodities guests, Bob Racket, and I recall as

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Speaker 2: we were walking out of the theater, I was like, Bob,

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Speaker 2: we got to have you back on just for like

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Speaker 2: an episode. Let's pick a commodity, and he said, let's

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Speaker 2: talk about next time I'm on, let's talk about NED gas.

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Speaker 1: Yeah.

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Speaker 2: I was like, all right.

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Speaker 3: And so so it turns out that now is the perfect.

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Speaker 2: Time, the perfect time for the perfect guess. We are

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Speaker 2: going to be speaking with Bob Brackett, Managing Director and

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Speaker 2: senior research analyst covering North American oil and gas exploration

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Speaker 2: and production and global metals and mining at Bernstein Research. So, Bob,

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Speaker 2: thank you so much for coming back on a Law.

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Speaker 4: Thanks for having me, Joe, thanks for having me. Tracy.

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Speaker 2: When I said we should do an episode on one

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Speaker 2: commodity at that time, why do your mind immediately go

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Speaker 2: to ned gas? Was that the big story in your mind?

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Speaker 4: So one, And I've told clients this, I am most

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Speaker 4: useful when I am least loved. The problem with being

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Speaker 4: a cyclical commodity analyst is everyone will ask me about

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Speaker 4: whatever is the highest on the screen. Yeah, that's the

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Speaker 4: thing that's going to be revert lower. The money has

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Speaker 4: already been made there, and therefore you should be looking

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Speaker 4: at the things that no one's really talking about. So

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Speaker 4: I would argue today Henry Hubb us natural gas, not

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Speaker 4: the LNG stuff that's shut in, not other commodity. Henry

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Speaker 4: hub is unloved, okay, sitting at three dollars in MCF,

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Speaker 4: while we have all of these underlying demand drivers in

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Speaker 4: the US. So it's the forgotten molecule today.

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Speaker 3: Forgot the forgotten line. But just broadly though, you were

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Speaker 3: pretty spot on when it came to natgas, because I

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Speaker 3: remember last year you turned bullish after like fifteen years

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Speaker 3: of being bearished something like that. So I know you're

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Speaker 3: too modest to say that you got that call correct,

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Speaker 3: but directionally things seem to be going your way.

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Speaker 2: Yeah.

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Speaker 4: So I've been Bernstein covering the energy space, you know,

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Speaker 4: nyon fifteen sixteen years, and for most of that time

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Speaker 4: we've had these giant disruptions. First, we had shale gas,

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Speaker 4: where the entire oil and gas complex was drilling and

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Speaker 4: learning curves of how do you frack gas? How do

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Speaker 4: you get it out? We drove the cost of shale

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Speaker 4: gas out of three point fifty at mcf. And then

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Speaker 4: shale oil comes along the way and just hands out,

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Speaker 4: you know, gives away the associated gas from oil directed drilling,

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Speaker 4: and so you've had a big chunk of the cost

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Speaker 4: curve that doesn't really care what the price of gas is.

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Speaker 4: It's a byproduct. Waha. Gas prices go negative at time

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Speaker 4: to time, it doesn't slow down the oil drilling. And

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Speaker 4: then finally you're starting to see the light where in

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Speaker 4: the same way that the shale oil industry became well

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Speaker 4: behaved kind of a twenty eighteen, the shale gas industry,

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Speaker 4: and especially the Hainesville shale sitting down there on the

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Speaker 4: border of Louisiana and Texas, starts to behave itself and

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Speaker 4: in a world where you have these really strong structural

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Speaker 4: demand drivers to the upside and you have discipline on

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Speaker 4: the supply side. That's a nice time to come into

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Speaker 4: a sector.

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Speaker 2: Amazing perfect setup. One more sort of setup question. I

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Speaker 2: was sort of thinking about this on the way in,

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Speaker 2: Like when I think about oil, you know, there's various

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Speaker 2: grades of oil, and there's various prices, but basically there's

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Speaker 2: one global price of oil, and everything trades it a

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Speaker 2: little bit of a spread to that, depending a little

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Speaker 2: bit on geography, and depending a little bit on grade

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Speaker 2: and light, sweet and heavy tower whatever it is my impression,

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Speaker 2: and tell me if I'm wrong. Is that with gas,

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Speaker 2: the story is like there's one type of gas, but

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Speaker 2: there is absolutely not one global market because the exact

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Speaker 2: flip side of oil, the supply chain is just so

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Speaker 2: radically fractured.

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Speaker 4: Yeah, if you think about it, VLCC, very large crude carrier,

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Speaker 4: holds two million barrels of oil, and oil today's hundred

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Speaker 4: bucks a barrel. I couldn't have said that three four

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Speaker 4: weeks ago, and the movement, the cost of moving that

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Speaker 4: halfway across the world a few bucks of barrel. So

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Speaker 4: for a couple percent, I can take my product delivered

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Speaker 4: to you wherever you want, anywhere you go to LNG.

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Speaker 4: The cost of getting shale gas out of the Marcellus

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Speaker 4: from two miles down and two miles out through the

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Speaker 4: fractures is less than a dollar. Then it's a couple

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Speaker 4: bucks to get it to market Henry Hub through pipelines.

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Speaker 4: If I want to ship it, cost me two and

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Speaker 4: a half bucks to liquefy it, another buck and a

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Speaker 4: half to put it on a vessel, send it somewhere

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Speaker 4: and then regas it. And so eighty ninety percent of

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Speaker 4: the cost of gas is in the movement. Wow. And

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Speaker 4: so in that world, all right, you've got a law

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Speaker 4: of one price for oil, right because the relative value

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Speaker 4: of the cargo versus the shipping's trivial. With gas, it's

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Speaker 4: all the game of distance and markets, and therefore there

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Speaker 4: is no one price.

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Speaker 3: So can you maybe just situate us on Iran's place

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Speaker 3: in the sort of I guess gas complex of the world,

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Speaker 3: because you know, we think about it as a commodities player,

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Speaker 3: but a sort of unreliable commodities player in some respects.

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Speaker 3: You never know what's going to get sanctioned. And NAT gas,

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Speaker 3: as we all know, tends to be kind of volatile

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Speaker 3: in and of itself. So what exactly is Iran's role

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Speaker 3: in this particular complex.

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Speaker 4: So we're looking at the largest gas field on the

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Speaker 4: planet and the Qataris call it Northfield, and that extends

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Speaker 4: into Iranian territory where it's kind of parts. But you've

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Speaker 4: got something that the numbers get huge, but we think

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Speaker 4: about it. T CF of gas is a huge amount

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Speaker 4: of gas AF So think of a LNG vessel can

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Speaker 4: hold somewhere the big ones the q max is coming

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Speaker 4: out Katar could be six bcf billion cubic feet to

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Speaker 4: medium one would be four bcf, got it, And so

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Speaker 4: a TCF would be.

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Speaker 3: Two hundred four bcf. Would be a really good boy band. Nay, yeah, sorry,

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Speaker 3: go ahead, I interrupted.

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Speaker 2: I wouldn't have gone there, but yes, BCF.

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Speaker 4: Right, good Haynesville, Well, a good marcellis well might produce

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Speaker 4: over its life twenty BCF. It could load for four

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Speaker 4: five cargoes of LNG. So take that times one thousand,

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Speaker 4: and that's the scale of the field of Northfield. And

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Speaker 4: it's a gas field that also produces a lot of

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Speaker 4: condensate associated and so it's a massive money maker. It

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Speaker 4: sits west of the straight before Moose right, and so

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Speaker 4: all of the LNG coming out of the Gulf except

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Speaker 4: Oman is sort of trapped west of the Strait of Hormus.

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Speaker 2: Wait, just to be clear, that field is Qatar and

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Speaker 2: Oronic goes into both.

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Speaker 4: Its giant structure, largest gas structure on the planet, and

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Speaker 4: it's shared geologically, it's shared operationally. It's absolutely not shared,

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Speaker 4: but yes, operationally, it's all operationally. The North Field, what

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Speaker 4: the Kataris are called Northfield, comes back to Qatar, gets

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Speaker 4: liquefied there, loaded ships east out through the Strait of

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Speaker 4: horm moves typically goes to Asia.

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Speaker 2: This is what I was gonna ask, so again, because

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Speaker 2: it's so fractured, where is it all Asia? Like, where's

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Speaker 2: that gas going? And who's it competing with? What's that market?

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Speaker 4: So the global LNG market's about five hundred million tons

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Speaker 4: per animal, and the units that will kill you, we're

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Speaker 4: going to be converting between a million. It's the minute

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Speaker 4: it gets on a vessel and becomes a ton for

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Speaker 4: whatever reason. Huh. And so out of that, you know Qatar.

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Speaker 4: The three powerhouses of l and G are Qatar, the US,

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Speaker 4: and Australia. The Qataris have the lowest cost field. The

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Speaker 4: condensate pays for the field they could get. They're never

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Speaker 4: going to they could give away the gas, and they

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Speaker 4: sign these really long term contracts you know, around the world,

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Speaker 4: but a lot into Asia. The US is the other powerhouse.

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Speaker 4: It doesn't sign long term contracts. So if you went

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Speaker 4: back in time, and let's say you're a Japanese utility

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Speaker 4: and you're sitting on an island and you need something

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Speaker 4: to burn to spinnatervine and generate electricity, you're sort of indifferent.

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Speaker 4: I got to bring a vessel in, I could bring

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Speaker 4: a cargo of crude, bring the fuel oil, some diesel

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Speaker 4: or gas, and so I'm sort of indifferent. I'll pay

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Speaker 4: roughly the same price for all of those. And so

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Speaker 4: for half a century we've always had oil linked contracts

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Speaker 4: for LG. So when we think about JKM, they're often

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Speaker 4: linked to a crude cocktail price in Japan. The US

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Speaker 4: comes along and breaks that and says, you know what,

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Speaker 4: just pay me TTF. I'll take Henry Hub. I'll buy

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Speaker 4: Henry Hub off of this flooded market in the US,

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Speaker 4: liquefy it on the Gulf coast. Mostly, I'll send it

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Speaker 4: to where you want, and a bunch of merchants will

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Speaker 4: capture that arm and so it's a completely different pricing.

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Speaker 4: It's much more of a spot market than these big,

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Speaker 4: heavily contracted Katari volumes. And so now you know, Asia

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Speaker 4: is running around saying I got forced majeur out of Katar.

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Speaker 4: I don't have this. I gotta go burn something else

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Speaker 4: and maybe I'll burn somebody else's LNG. But if not,

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Speaker 4: I'll burn coal, I'll burn fuel, oil, diesel. I need electrons.

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Speaker 3: So speaking of arbing the price, So with so many

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Speaker 3: different pricing benchmarks and now this dislocation, are you seeing

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Speaker 3: any weird like price movements that people are starting to

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Speaker 3: look at and take advantage of.

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Speaker 4: We're still well under what happened when Russia invaded Ukraine?

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Speaker 4: Huh So, certainly europe prices and we could call them

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Speaker 4: another alphabet soup TTF or MVP, but TTF so a

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Speaker 4: price into the Netherlands has not gotten to nearly the

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Speaker 4: levels it did in Russia Ukraine. Some of that is

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Speaker 4: it always felt. I remember in the end of twenty

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Speaker 4: twenty one, people were wondering why europe gas prices were

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Speaker 4: so high, and they're like, oh, those Russians are terrible.

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Speaker 4: They don't know how to maintain production. In fact, they

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Speaker 4: were just sort of slowly dialing down the gas in

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Speaker 4: order to tighten the market. And then you invade in

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Speaker 4: winter February peak demand. You know, now we're entering the

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Speaker 4: shoulder season in the spring and in the fall, it's

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Speaker 4: beautiful outside in the northern hemisphere, and people don't need

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Speaker 4: that same amount of gas, and so shoulder season is

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Speaker 4: normally a terrible price for gas. So that sort of helps.

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Speaker 4: And what also helps is, you know, to a certain degree,

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Speaker 4: Europe has weaned itself off Russian gas and it feels

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Speaker 4: like it has more options. We'll see how the things

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Speaker 4: turn when we get toward the summer.

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Speaker 2: Let's talk about you know, one of the stories in

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Speaker 2: the US has been the rise of LG exports. Obviously

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Speaker 2: the export terminals, Like how much has that scaled up?

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Speaker 2: But you know, today in twenty twenty six, how much

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Speaker 2: more are we exporting versus what we were in say

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Speaker 2: twenty sixteen or twenty twenty one, prior to the invasion

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Speaker 2: of Ukraine. And what is the how much capacity is

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Speaker 2: going to come online in the coming years.

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Speaker 4: Yeah, so if we wound back the clock. There's an

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Speaker 4: interesting historic anecdote that's coming soon. So right now Qatar

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Speaker 4: is not selling LNG. However, there is an LNG terminal

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Speaker 4: called Golden Pass. It's thirty percent x on seventy percent Katar.

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Speaker 4: It sits in Texas, it's loading now, and so in

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Speaker 4: March it might be that the next cargo that Qatar

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Speaker 4: sells is a Texas cargo, not a Qatari cargo. And

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Speaker 4: that's because this Golden Pass terminal was an import terminal. Right,

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Speaker 4: so if you go back far enough before shale gas,

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Speaker 4: the strategy in the US was the US is going

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Speaker 4: to run out of gas. It's going to get priced

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Speaker 4: off of the price of diesel. Right, I'm going to

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Speaker 4: run out of gas, have to need electricity, I'm going

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Speaker 4: to go burn diesel. And so everyone had their favorite strategy.

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Speaker 4: I'm going to build an import terminal and I'll bring

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Speaker 4: in Katari gas or choose your favorite gas and that'll

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Speaker 4: save my energy bill. And then Shelle Gas completely destroyed

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Speaker 4: that strategy. But along the way, Excellent Mobile and Katar

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Speaker 4: had this import terminal and they just flipped the switch

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Speaker 4: and said, well, instead of being a regas terminal, let's

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Speaker 4: make it an LNG terminal, and so that is loading

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Speaker 4: as we speak. It'll start to sell cargoes as early

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Speaker 4: as this month and right now that's Katar gas is

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Speaker 4: only source of revenue until things get fixed in the

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Speaker 4: Middle East.

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Speaker 3: So, speaking of shale, one of the legacies of the

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Speaker 3: shale boom is that a lot of energy companies got

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Speaker 3: very nervous about over expansion and ramping up supply. In

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Speaker 3: a situation like this, what's your gut check on how

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Speaker 3: fast LNG producers can really ramp things up, both logistically

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Speaker 3: and then just in terms of their sheer willingness and

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Speaker 3: I guess in the face of their shareholders.

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Speaker 4: So the gestation period of a shale gas well, if

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Speaker 4: you're super quick, might be two three quarters. Realistically, the

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Speaker 4: gestation period and of course these aren't gestational periods of

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Speaker 4: an LNG facility is four years. Wow. So if we

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Speaker 4: anniversary what happened four years ago? Russia invades Ukraine? What

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Speaker 4: was the theme that started this year? Oh, there's going

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Speaker 4: to be an energy glut in twenty twenty six and

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Speaker 4: twenty twenty seven, and many an incorrect analyst hand raised

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Speaker 4: you know, I was written about the approaching ler g glut. Right,

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Speaker 4: this event has changed that logic. And so the reason

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Speaker 4: there was a glut this year is because four years

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Speaker 4: ago everyone ran out and said, I need LNG, I

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Speaker 4: need the cavalry. Quick call the cavalry. How long is

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Speaker 4: it going to take? Right? Four years? And so the

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Speaker 4: answer is LNG facilities, once built, run full. Right, there's

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Speaker 4: an ability to de bottleneck and run above nameplate. But

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Speaker 4: basically there is no spare capacity. To a certain degree,

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Speaker 4: we had Opek with a bit of spare capacity that

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Speaker 4: they released in the first second week of the war.

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Speaker 4: There is no equivalent on energy. Every cargo would have

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Speaker 4: gotten delivered anyway. So there's no flex in the system

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Speaker 4: and the system takes two years to fix.

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Speaker 2: So one of the stories that after Russia's invasion of

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Speaker 2: Ukraine was that, well, this is going to be a

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Speaker 2: boon to US gas and we're going to ship them.

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Speaker 2: Are we shipping a lot more energy to Europe than that?

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Speaker 4: And so we go back to this phase where Golden

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Speaker 4: Pass was an import terminal. Yeah, and then we got

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Speaker 4: to about and so think of US overall gas supply

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Speaker 4: demand as about one hundred and twenty bcf a day.

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Speaker 4: A couple of years ago, ten percent of that would

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Speaker 4: have been lergy exports. Okay, today we just were getting

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Speaker 4: close to twenty b it'll be twenty percent, and so

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Speaker 4: over the next out to twenty thirty will just be

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Speaker 4: adding multiple bcf a day, and so it is the

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Speaker 4: fastest growing part of US gas demand.

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Speaker 2: One of the controversies with export terminals, as you mentioned,

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Speaker 2: not that long ago, we're absolutely swimming in free gas,

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Speaker 2: and it was this concern that, well, if you start

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Speaker 2: exporting it, it raises the domestic price because then you

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Speaker 2: don't have these gluts anymore. Has the rise of LNG

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Speaker 2: exports meaningfully raised the price of domestic gas consumption?

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Speaker 4: I wish that's the EENP investor. That's the dream of

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Speaker 4: all the MP investors. You know, we're sitting here entering

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Speaker 4: the shoulder season in Henry hubs three dollars, it got

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Speaker 4: to five, It got to six during the winter where

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Speaker 4: the seasonal dam and end was the highest. There is

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Speaker 4: no strong evidence that that extra ten going to twenty

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Speaker 4: percent of the demand wedge has changed price. Right, What

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Speaker 4: changes price is where supply equals demand, And up until now,

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Speaker 4: the supply side has been perfectly willing to hand the

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Speaker 4: market as much gas as the world wants the US

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Speaker 4: once it's three point fifty. I think we think that's changed.

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Speaker 4: I think that's changed. I think you know, ultimately, certainly

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Speaker 4: on shale oil, we're approaching a world where oil, your

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Speaker 4: shale oil inventory five to ten years from now looks

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Speaker 4: pretty lean. You're starting to see oil and gas companies say, well,

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Speaker 4: what do we do in a post shale world? Shale

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Speaker 4: oil world?

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Speaker 2: What can we do?

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Speaker 4: We can go international, right, so you've got you can

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Speaker 4: go to the Middle East, and certainly there are people

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Speaker 4: there looking for shale oil and were conventional oil like

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Speaker 4: the Shaw gas field. Today people are looking at M

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Speaker 4: and A, I'll just acquire my partners. Some people are

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Speaker 4: looking at gas. But yeah, there is a sense that

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Speaker 4: it is a It's always been a finite resource. It

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Speaker 4: had been a growing resource, and one where this learning

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Speaker 4: curve had taken cost out every year. You know, that

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Speaker 4: chapter has kind of passed, and now it's a world

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Speaker 4: if you're in a planning cycle of five to ten

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Speaker 4: years and you look out five to ten years, you've

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Speaker 4: got to go replace that stuff.

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Speaker 3: How elastic is demand for something like nat gas? Because

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Speaker 3: I'm used to thinking about it as someone with a

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Speaker 3: house in the northeast and something that I have to

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Speaker 3: buy every year unless I actually get really good at

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Speaker 3: chopping firewood or something like that. But I imagine there

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Speaker 3: must be some marginal source of demand that actually depends

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Speaker 3: on the price.

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Speaker 4: So there's the demand for that which gas gives you,

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Speaker 4: which electricity, and so there's substitution. So one thing to

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Speaker 4: watch is bubbling behind the scenes. Global thermal coal prices

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Speaker 4: are starting to take off. They're up thirty percent year

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Speaker 4: to date. What happened when Russian invaded Ukraine, Europe bought

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Speaker 4: every LNG cargo they could, sucked it all the way

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Speaker 4: into Europe. Asia was left saying, well, we're short electricity,

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Speaker 4: let's go burn some more coal, let's consume more. And

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Speaker 4: so thermal coal price is back in Russia Ukraine three

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Speaker 4: hundred bucks a ton. I started the year a one

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Speaker 4: hundred bucks a ton. We're up to one thirty. And

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Speaker 4: so there's always going to be there's some demand destruction.

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Speaker 4: But you know, people really like electricity, air conditioning and

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Speaker 4: the things that it gives, and so the answer is

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Speaker 4: you'll start to look for certainly coal is an obvious place,

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Speaker 4: and then eventually some demand destruction, but that's a kind

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Speaker 4: of much higher levels.

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Speaker 2: Do you have a read on Tracy is mentioned in

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Speaker 2: the beginning setting Outside the straight and hoorm move, it's

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Speaker 2: just pure infrastructure destruction. Do you have a read on

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Speaker 2: how much Katari production is going to be impaired? And

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Speaker 2: the medium to long term here.

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Speaker 4: So we know LNG terminals have a bit of momentum

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Speaker 4: associated with them, and we've got pretty good experience on

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Speaker 4: the Gulf coast where hurricanes come through, you bring down

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Speaker 4: your LNG facility and you bring it back up. Same

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Speaker 4: with oil platforms in the Gulf of America, Gulf of Mexico.

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Speaker 4: Hurricane comes through, you shut in, you come back. And

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Speaker 4: so in general, oil and gas assets are built. They're

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Speaker 4: built for turnarounds, right, They're built to go down and

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Speaker 4: come back up, especially when you can plan ahead. So

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Speaker 4: you'll get whipsaws on the order of weeks. And so

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Speaker 4: if this is over in weeks, right, we'll kind of

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Speaker 4: have a big wedge of a month of chaos that'll

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Speaker 4: filter through the economy. And if it goes on for

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Speaker 4: months and months, it's something like if we talk about

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Speaker 4: the Big three L and G, the US kutar in Australia.

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Speaker 4: They're kind of each a fifth of fifth a fifth

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Speaker 4: of global supply, So something like twenty percent of the

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Speaker 4: L and G would be knocked out and that needs

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Speaker 4: a lot of coal to replace, or a lot of

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Speaker 4: demand destruction.

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Speaker 3: So just on this point, I think commodity markets in

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Speaker 3: particular are very used to fading Middle East flare ups

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Speaker 3: very quickly. Is there any reason to believe that this

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Speaker 3: time is going to be different? You have, you know,

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Speaker 3: decades of experience in this space. Does it feel different

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Speaker 3: to you.

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Speaker 4: As a geologist and not a geo politician? I'm not sure.

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Speaker 4: I'm the perfect guest that answer. What the market is

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Speaker 4: saying is that we're returning to normal, right and so

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Speaker 4: and yeah, so the is the market right or wrong?

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Speaker 4: I have a few sign posts, and so one of

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Speaker 4: the ones I'll use oil as an example. When you

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Speaker 4: take the price of oil and you add in the crackspread, right,

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Speaker 4: which is effectively what does the consumer pay for diesel,

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Speaker 4: for gasoline, et cetera. When the cost of that gets

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Speaker 4: to seven percent of global GDP, right, the world says

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Speaker 4: that's too much and you stop using it. And that's

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Speaker 4: where we got in twenty twenty two Right today, that'd

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Speaker 4: be about one hundred and twenty dollars crude. Call it

423
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Speaker 4: about a sixty dollars crackspread. So on my screen, I

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Speaker 4: can show you oil never works a year forward when

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Speaker 4: the cost of oil is six percent of GDP, And so.

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Speaker 2: That's kind of that right now.

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Speaker 4: So today we're one hundred plus forty, So crackspreads are

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Speaker 4: around fort and these things are moving by the minute.

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Speaker 4: But yeah, call it about one hundred and forty. So

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Speaker 4: we're not quite there, but there would be an exit

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Speaker 4: alarm ringing if we did get to kind of one

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Speaker 4: eighty crewde plus crackspreads. And then you'd say, I don't

433
00:22:59,119 --> 00:23:02,000
Speaker 4: need to be a g politician. I just know every

434
00:23:02,000 --> 00:23:04,560
Speaker 4: time this has happened, the global economy has gone blah.

435
00:23:04,680 --> 00:23:08,520
Speaker 2: It's private. Geopolitics is a fake field, isn't it. No,

436
00:23:09,000 --> 00:23:11,720
Speaker 2: I don't know about that, but geology, feel sorry, I

437
00:23:12,080 --> 00:23:15,720
Speaker 2: think geology is more of a science than geopolitics. Right, Well,

438
00:23:16,119 --> 00:23:18,280
Speaker 2: anyone can fake being a geopolitical expert.

439
00:23:18,680 --> 00:23:23,080
Speaker 4: Geology doesn't change when you talk about it, but geopolitics changes. Yeah,

440
00:23:23,119 --> 00:23:26,560
Speaker 4: we talk about it. So the experimental influences the experiments.

441
00:23:26,640 --> 00:23:29,200
Speaker 2: You know, here's something I've wondered about you know again

442
00:23:29,880 --> 00:23:33,640
Speaker 2: that GUS there's not a global market. But with the

443
00:23:33,720 --> 00:23:38,480
Speaker 2: rise of L and G, have global markets become somewhat

444
00:23:38,520 --> 00:23:43,360
Speaker 2: more correlated over time? Are we trending towards a global

445
00:23:43,440 --> 00:23:44,720
Speaker 2: price of gas?

446
00:23:44,800 --> 00:23:47,680
Speaker 4: Yes? And in fact, if you think of the role

447
00:23:47,840 --> 00:23:51,040
Speaker 4: the Saudi Ramco plays, and when they're setting their official

448
00:23:51,080 --> 00:23:53,760
Speaker 4: selling prices, they will look east and they'll look west,

449
00:23:53,800 --> 00:23:56,080
Speaker 4: and they'll see what are Atlantic basin prices for oil

450
00:23:56,080 --> 00:23:58,240
Speaker 4: and what are Pacific basin and they're not going to

451
00:23:58,320 --> 00:24:01,720
Speaker 4: let anybody arm them away, right, So kind of they

452
00:24:01,800 --> 00:24:05,040
Speaker 4: help set a law of one price. The kataris that

453
00:24:05,200 --> 00:24:07,520
Speaker 4: not only are sort of a fifth of LERG today,

454
00:24:07,520 --> 00:24:10,840
Speaker 4: but growing right, serve two markets. They can look east

455
00:24:10,880 --> 00:24:13,000
Speaker 4: and they can look west, and so the idea would

456
00:24:13,040 --> 00:24:15,040
Speaker 4: be we used to have ja Ham, you'd have an

457
00:24:15,119 --> 00:24:17,399
Speaker 4: energy market over here, and you'd have TTF over here.

458
00:24:17,920 --> 00:24:20,080
Speaker 4: The Katari's role in the market is to say, no

459
00:24:20,080 --> 00:24:23,080
Speaker 4: one's going to arm me. We're smarter, We've got more

460
00:24:23,080 --> 00:24:25,399
Speaker 4: customers than anybody. And they were going to kind of

461
00:24:25,480 --> 00:24:29,800
Speaker 4: link the price of energy in Europe to the one

462
00:24:29,840 --> 00:24:31,800
Speaker 4: in Asia. So we have kind of the law of

463
00:24:31,880 --> 00:24:34,960
Speaker 4: one seaborn price of gas, and then you can compete

464
00:24:34,960 --> 00:24:36,920
Speaker 4: against that, and then I can say, Okay, if I

465
00:24:36,920 --> 00:24:39,320
Speaker 4: build an import terminal here and the shipping is this

466
00:24:39,480 --> 00:24:42,399
Speaker 4: much and the liquefaction regases this much, I can do

467
00:24:42,440 --> 00:24:42,919
Speaker 4: this project.

468
00:24:44,280 --> 00:24:47,720
Speaker 3: What's actually going on with Russian energy in Europe? Because

469
00:24:47,760 --> 00:24:51,680
Speaker 3: you hear these very different stories. One is they're phasing

470
00:24:51,720 --> 00:24:54,200
Speaker 3: out Russian imports, and then the other story is, well,

471
00:24:54,320 --> 00:24:56,280
Speaker 3: Russian imports are at a record high.

472
00:24:56,880 --> 00:25:02,840
Speaker 4: If Russian crude is getting a free pass on this conflict,

473
00:25:03,000 --> 00:25:05,520
Speaker 4: then Russian energy will likely get a free pass. And

474
00:25:05,560 --> 00:25:08,920
Speaker 4: so yeah, the answer is the longer this conflict takes right,

475
00:25:08,960 --> 00:25:10,920
Speaker 4: if you are a buyer, and who are the big

476
00:25:10,960 --> 00:25:14,639
Speaker 4: buyers of LERG Right, think about Europe and they're buying

477
00:25:14,640 --> 00:25:17,359
Speaker 4: it for electricity, Think about Japan, Korea, Taiwan and China.

478
00:25:17,960 --> 00:25:21,800
Speaker 4: And one of the strategies is diversity of supply is

479
00:25:21,840 --> 00:25:24,320
Speaker 4: security of supply? Right, That's kind of been a mantra

480
00:25:24,560 --> 00:25:27,280
Speaker 4: when you look at the various utilities, and that's been

481
00:25:27,359 --> 00:25:30,520
Speaker 4: proven absolutely correct. If anyone said, well, the Kataris are

482
00:25:30,520 --> 00:25:31,879
Speaker 4: giving me the best deal, I'm going to be one

483
00:25:31,920 --> 00:25:35,040
Speaker 4: hundred percent linked to them, that was a terrible in

484
00:25:35,160 --> 00:25:39,680
Speaker 4: hindsight choice and so diversity of supply means Russia has

485
00:25:40,600 --> 00:25:45,000
Speaker 4: boatloads of gas, They've got pipeloads of gas. Now they've

486
00:25:45,000 --> 00:25:48,080
Speaker 4: got a customer that they're not friendly with anymore, and

487
00:25:48,119 --> 00:25:52,879
Speaker 4: so their ability to build LNG and eventually right. The

488
00:25:52,920 --> 00:25:55,960
Speaker 4: problem with the pipeline is it goes from point A

489
00:25:56,040 --> 00:25:59,919
Speaker 4: to point B, and so it is a marriage between

490
00:25:59,920 --> 00:26:02,040
Speaker 4: the person putting stuff in one end of the pipe

491
00:26:02,480 --> 00:26:04,200
Speaker 4: and the person taking stuff.

492
00:26:03,920 --> 00:26:04,600
Speaker 2: Out of the other end.

493
00:26:04,640 --> 00:26:08,040
Speaker 4: You can't move that pipe. The beauty of LNG is

494
00:26:08,200 --> 00:26:10,920
Speaker 4: you don't have to get married. You can kind of

495
00:26:11,040 --> 00:26:13,119
Speaker 4: have lots of customers with benefits.

496
00:26:13,440 --> 00:26:17,920
Speaker 2: You mentioned that, and I remember these stories Ukraine after

497
00:26:17,960 --> 00:26:21,200
Speaker 2: the invasion of Ukraine and Europe going around and trying

498
00:26:21,240 --> 00:26:23,800
Speaker 2: to buy every LERG tanker that it could on the market,

499
00:26:23,880 --> 00:26:27,040
Speaker 2: and that there were poorer countries that essentially just got

500
00:26:27,359 --> 00:26:29,840
Speaker 2: shut out. What was the next chapter there? What happened?

501
00:26:30,160 --> 00:26:30,800
Speaker 2: What did they do?

502
00:26:31,280 --> 00:26:34,920
Speaker 4: Yeah, And so the challenge is there's probably there are

503
00:26:35,119 --> 00:26:39,679
Speaker 4: two tons of demand for every LNG cargo, right, so

504
00:26:39,760 --> 00:26:43,239
Speaker 4: there are twice as many tons of regas as there

505
00:26:43,240 --> 00:26:46,040
Speaker 4: are liquefaction. And the way to think about that is

506
00:26:46,480 --> 00:26:50,679
Speaker 4: a liquefaction terminal costs one thousand dollars a ton, and

507
00:26:50,720 --> 00:26:53,760
Speaker 4: the ones in the Gulf Coast are big, ten million tons,

508
00:26:53,760 --> 00:26:58,360
Speaker 4: so you're spending ten billion dollars for this terminal. Regas

509
00:26:58,400 --> 00:27:01,720
Speaker 4: terminals are a tenth of that cost. So you invest

510
00:27:01,840 --> 00:27:09,760
Speaker 4: in liquefaction exactly. So the supplier does the liquefaction, the

511
00:27:09,800 --> 00:27:13,480
Speaker 4: buyer does the regas. So you can build regas terminals

512
00:27:13,520 --> 00:27:17,080
Speaker 4: as an option, so you and therefore there are twice

513
00:27:17,080 --> 00:27:19,960
Speaker 4: as many options. And so when the market is tight,

514
00:27:20,720 --> 00:27:23,240
Speaker 4: you can have two people fighting for every cargo, which

515
00:27:23,240 --> 00:27:25,560
Speaker 4: brings us back to the person that pays the most

516
00:27:25,600 --> 00:27:29,000
Speaker 4: gets it. And then the answer is you need another

517
00:27:29,119 --> 00:27:33,520
Speaker 4: form of source of electricity, and it's developing economies are

518
00:27:33,520 --> 00:27:35,840
Speaker 4: generally going to have access to coal, right, They'll have

519
00:27:36,920 --> 00:27:39,960
Speaker 4: coal and power plants and that's going to be their choice. Right,

520
00:27:40,200 --> 00:27:42,840
Speaker 4: So yeah, the second place in fighting for an LERG

521
00:27:43,000 --> 00:27:44,240
Speaker 4: CARYO is to go buy a coal.

522
00:28:00,160 --> 00:28:03,040
Speaker 3: I'm going to change the subject slightly in the grand

523
00:28:03,080 --> 00:28:05,840
Speaker 3: tradition of us interviewing Bob, I'm just going to throw

524
00:28:05,880 --> 00:28:08,159
Speaker 3: out a random commodity, so anyone who came to our

525
00:28:08,160 --> 00:28:10,560
Speaker 3: live show last year will know we had a segment

526
00:28:10,600 --> 00:28:13,200
Speaker 3: with Bob where we just had the audience basically throw

527
00:28:13,240 --> 00:28:17,320
Speaker 3: out random things and ask him to talknoledgeably on each

528
00:28:17,359 --> 00:28:19,040
Speaker 3: of them for five minutes. So I'm going to do

529
00:28:19,040 --> 00:28:22,520
Speaker 3: the same right now with sulfur and sulfuric acid. And

530
00:28:22,560 --> 00:28:24,840
Speaker 3: the reason I ask is because you know, I was

531
00:28:24,880 --> 00:28:27,639
Speaker 3: in Nabu Dhabi for a while and I remember Adnock,

532
00:28:27,800 --> 00:28:30,960
Speaker 3: the big energy giant over there, striking some off take

533
00:28:31,040 --> 00:28:33,639
Speaker 3: deals for its sulfur, and I was very used to

534
00:28:33,680 --> 00:28:37,600
Speaker 3: thinking of sulfur as a byproducts of crude oil, like

535
00:28:37,640 --> 00:28:41,040
Speaker 3: this thing that is kind of useless. But to my surprise,

536
00:28:41,120 --> 00:28:43,000
Speaker 3: it turns out it is in fact very useful because

537
00:28:43,000 --> 00:28:45,280
Speaker 3: you can make sulfuric acid out of it, and sulfuric

538
00:28:45,320 --> 00:28:49,920
Speaker 3: acid is needed for things like etching of microchips. So

539
00:28:49,960 --> 00:28:53,080
Speaker 3: I'm very curious what's happening to sulfur right now.

540
00:28:53,360 --> 00:28:56,400
Speaker 4: Yeah, So the craziest thing happening to sulfur right now

541
00:28:56,480 --> 00:29:00,760
Speaker 4: is this Shaw gas field in UAE is on fire.

542
00:29:01,560 --> 00:29:04,600
Speaker 4: That gas field, twenty five percent of the gas is

543
00:29:05,280 --> 00:29:08,160
Speaker 4: htwos right. This is a they call it a sour

544
00:29:08,240 --> 00:29:11,480
Speaker 4: gas field. In the old days, if you ever went

545
00:29:11,520 --> 00:29:14,160
Speaker 4: out to a well site that was H two s right,

546
00:29:14,240 --> 00:29:17,400
Speaker 4: Joe would have to shave because the equipment to cover

547
00:29:17,520 --> 00:29:19,479
Speaker 4: you need protective.

548
00:29:19,080 --> 00:29:20,240
Speaker 2: Dear, you would have to shave too.

549
00:29:20,280 --> 00:29:22,560
Speaker 3: Right, to shave, this is the whole oil well killed.

550
00:29:23,040 --> 00:29:25,160
Speaker 4: It would take you longer to shave than me. And

551
00:29:25,200 --> 00:29:27,480
Speaker 4: so you could always see the folks coming back from

552
00:29:27,480 --> 00:29:30,360
Speaker 4: a sour gas field because they'd gone clean shaven. And

553
00:29:30,440 --> 00:29:34,080
Speaker 4: so here we have one of the largest sources of

554
00:29:34,200 --> 00:29:36,400
Speaker 4: H twos. And also it's about ten percent CO two.

555
00:29:37,000 --> 00:29:43,080
Speaker 4: Hopefully it's controlled, but that's an environmental, huge safety risk, right,

556
00:29:43,120 --> 00:29:48,200
Speaker 4: So that's that's worrying. Now, sulfur in general is not

557
00:29:48,240 --> 00:29:50,760
Speaker 4: scarce at all. We got sulfur all over the place.

558
00:29:50,920 --> 00:29:53,640
Speaker 4: This field produces sulfur. You can see if you ever

559
00:29:53,680 --> 00:29:57,480
Speaker 4: go to western Kazakhstan the big Tengi's chevrel field, right,

560
00:29:57,480 --> 00:30:01,360
Speaker 4: big piles of sulfur. Also, so every copper smelter in

561
00:30:01,400 --> 00:30:05,280
Speaker 4: the world generates sulfur because you'll take a mineral, you'll

562
00:30:05,320 --> 00:30:08,320
Speaker 4: take something like a calcupyrite, kind of the copper version

563
00:30:08,360 --> 00:30:11,160
Speaker 4: of fools gold, and it's a copper sulfide. And so

564
00:30:11,200 --> 00:30:13,240
Speaker 4: if you ever visited a smelter, you got this big

565
00:30:13,280 --> 00:30:15,720
Speaker 4: tower where you're in the old days, you just burn

566
00:30:15,800 --> 00:30:18,640
Speaker 4: off the sulfur dioxide. You make the tower tall enough

567
00:30:19,040 --> 00:30:21,720
Speaker 4: so that that acid rain spreads across a large area,

568
00:30:23,240 --> 00:30:26,240
Speaker 4: or you can capture the sulfur. So around the world today,

569
00:30:26,720 --> 00:30:30,600
Speaker 4: copper smelters lose money, right You don't make money running

570
00:30:30,640 --> 00:30:34,160
Speaker 4: a copper smelter. They call them treatment charges refining charges.

571
00:30:34,320 --> 00:30:37,040
Speaker 4: They're kind of zero and they're sometimes negative. So a

572
00:30:37,080 --> 00:30:39,680
Speaker 4: copper smelter will ring me up as a copper minor

573
00:30:39,720 --> 00:30:42,680
Speaker 4: and say I want your copper concentrate. You can take

574
00:30:42,680 --> 00:30:46,680
Speaker 4: that copper concentrate and normally you'll get the precious metals

575
00:30:46,680 --> 00:30:48,480
Speaker 4: out of it. So I'll squeeze all the gold out

576
00:30:48,520 --> 00:30:51,040
Speaker 4: of your copper ore and I'll make some money. Or

577
00:30:51,080 --> 00:30:53,920
Speaker 4: I'll get an efficiency uplift. I'll pay for ninety five

578
00:30:53,920 --> 00:30:57,040
Speaker 4: percent conversion and I'll squeeze them out. The other product

579
00:30:57,080 --> 00:30:59,800
Speaker 4: I get is sulfuric acid. So right now copper smelters

580
00:30:59,800 --> 00:31:02,760
Speaker 4: are looking and saying, hey, we're getting a revenue stream

581
00:31:02,960 --> 00:31:06,320
Speaker 4: off of sulfuric acid. Most sulfur is going to go

582
00:31:06,320 --> 00:31:11,000
Speaker 4: into agriculture. So if you've ammonium sulfate, for example, is

583
00:31:11,280 --> 00:31:14,760
Speaker 4: an explosive but it's also a great fertilizer. And so

584
00:31:15,360 --> 00:31:20,000
Speaker 4: for example, if you in Kazakhstan, the leading producer of uranium,

585
00:31:20,200 --> 00:31:24,120
Speaker 4: uses sulfuric acid in the operations, they compete with agriculture,

586
00:31:24,200 --> 00:31:26,360
Speaker 4: and so when the market is tight sulfuric acid, you

587
00:31:26,440 --> 00:31:29,080
Speaker 4: might say, hey, I got to let the people make

588
00:31:29,120 --> 00:31:32,080
Speaker 4: in food win, so you can have areas where your

589
00:31:32,120 --> 00:31:36,840
Speaker 4: short sulfuric acid. We're taking sulfur off of the market.

590
00:31:37,120 --> 00:31:40,920
Speaker 4: It's pretty abundant, and there will be sources, and there

591
00:31:40,920 --> 00:31:43,520
Speaker 4: are lots and lots of copper smelters that can help

592
00:31:43,560 --> 00:31:45,680
Speaker 4: convert it. So we'll find a way. So it's not

593
00:31:45,720 --> 00:31:47,360
Speaker 4: clear to me that we've run out of sulfur. I

594
00:31:47,360 --> 00:31:50,360
Speaker 4: think it's the fifth most abundant element in the crust.

595
00:31:50,520 --> 00:31:53,760
Speaker 3: I love asking let's just do this.

596
00:31:53,840 --> 00:31:56,640
Speaker 2: Yeah, I know you basically know all commodity. But you're

597
00:31:56,680 --> 00:31:59,640
Speaker 2: not a soft sky, right, didn't you like carrying? Yeah,

598
00:31:59,240 --> 00:31:59,960
Speaker 2: so you're.

599
00:31:59,840 --> 00:32:03,280
Speaker 4: Not things that were once Yeah, if it comes from

600
00:32:03,320 --> 00:32:05,120
Speaker 4: the earth, I'm more comfortable.

601
00:32:04,680 --> 00:32:06,720
Speaker 2: Than if it were right the things that are grown, Yes,

602
00:32:06,760 --> 00:32:09,560
Speaker 2: from the earth. Got it. When we think about particularly

603
00:32:09,560 --> 00:32:13,120
Speaker 2: the war right now, and we've obviously oil and gas

604
00:32:13,160 --> 00:32:15,720
Speaker 2: and solve further. Any what else do we bee watching?

605
00:32:15,720 --> 00:32:17,400
Speaker 2: Any other weird I think I thought there was a

606
00:32:17,400 --> 00:32:20,680
Speaker 2: good headline in Bloomberg about zinc prices have served, but

607
00:32:20,960 --> 00:32:23,240
Speaker 2: anything else going up into the right these days.

608
00:32:23,360 --> 00:32:26,480
Speaker 4: Yeah, So if you think about aluminum's one. So if

609
00:32:26,520 --> 00:32:29,840
Speaker 4: you went back to when Russian invaded Ukraine, everyone went

610
00:32:29,880 --> 00:32:33,520
Speaker 4: and said, okay, what portion of which element does Russia produce?

611
00:32:33,760 --> 00:32:36,200
Speaker 4: And at the time a lot of nickel out of Russia,

612
00:32:36,240 --> 00:32:38,840
Speaker 4: a lot of PGMs, platinum group metals and plati imprimed,

613
00:32:39,240 --> 00:32:40,840
Speaker 4: and so people were like, oh, we're gonna run into

614
00:32:40,880 --> 00:32:43,720
Speaker 4: those things. You know this time around the Middle East

615
00:32:44,000 --> 00:32:49,640
Speaker 4: from a mining perspective, doesn't mine a lot west of

616
00:32:49,680 --> 00:32:52,120
Speaker 4: the Straits of Horror moves, but they process a lot.

617
00:32:52,240 --> 00:32:56,560
Speaker 4: So smelters are basically an aluminum People talk about illuminum

618
00:32:56,600 --> 00:33:00,000
Speaker 4: as solid electricity. Most of the costs to make aluminum

619
00:33:00,360 --> 00:33:04,160
Speaker 4: is electricity to me in the smelter. And so therefore

620
00:33:04,200 --> 00:33:08,280
Speaker 4: you put aluminum smelters where you have cheap energy, and

621
00:33:08,360 --> 00:33:10,640
Speaker 4: so we have some of the certainly in Bahrain, we've

622
00:33:10,680 --> 00:33:13,920
Speaker 4: got these very large aluminum smelters running off cheap local

623
00:33:14,000 --> 00:33:18,360
Speaker 4: feedstock natural gas. And you've seen aluminum price take off.

624
00:33:18,400 --> 00:33:21,560
Speaker 4: As a result, zinc smelters are similar, not quite as

625
00:33:21,640 --> 00:33:25,360
Speaker 4: energy intensive, and so to the extent that the Middle

626
00:33:25,360 --> 00:33:28,560
Speaker 4: East was both a local and a global source of

627
00:33:28,640 --> 00:33:32,840
Speaker 4: cheap energy, and so those that invested locally are seeing

628
00:33:32,840 --> 00:33:34,040
Speaker 4: some of those consequences.

629
00:33:34,280 --> 00:33:37,400
Speaker 3: All those zinc bar tops in danger. Why did that

630
00:33:37,440 --> 00:33:38,000
Speaker 3: become a thing?

631
00:33:38,160 --> 00:33:39,000
Speaker 2: Is zinc bar time?

632
00:33:39,160 --> 00:33:39,800
Speaker 1: Yeah?

633
00:33:40,120 --> 00:33:42,080
Speaker 3: Is this not a thing in America? In London, it

634
00:33:42,200 --> 00:33:44,120
Speaker 3: used to be like if a bar had a zinc

635
00:33:44,200 --> 00:33:45,560
Speaker 3: bar top, it was like a thing.

636
00:33:45,920 --> 00:33:47,920
Speaker 2: It was like a nice class Yeah it was.

637
00:33:48,120 --> 00:33:51,440
Speaker 3: Yeah, And I never really understood why people were really

638
00:33:51,480 --> 00:33:54,360
Speaker 3: into zinc bar tops. But maybe we can start ripping

639
00:33:54,360 --> 00:33:55,040
Speaker 3: them mountain converting.

640
00:33:55,160 --> 00:33:55,320
Speaker 4: Yeah.

641
00:33:55,760 --> 00:33:58,840
Speaker 2: Well, yeah, you know, whether we're talking about domestic American

642
00:33:58,920 --> 00:34:01,920
Speaker 2: gas or whether we're talking about oil, et cetera. I'm curious,

643
00:34:01,960 --> 00:34:05,400
Speaker 2: like over the last year since Liberation Day, one of

644
00:34:05,440 --> 00:34:08,560
Speaker 2: the stories, Tracy and I were up in Alaska. We

645
00:34:08,560 --> 00:34:12,439
Speaker 2: were at a little manufacture of oil Country tubular goods

646
00:34:12,480 --> 00:34:14,680
Speaker 2: and they were talking about, you know, the fluctuating price

647
00:34:14,719 --> 00:34:18,080
Speaker 2: of steel and how this was creating all kinds of issues.

648
00:34:18,360 --> 00:34:21,440
Speaker 2: What has been the effect in terms of domestic energy

649
00:34:21,560 --> 00:34:25,600
Speaker 2: infrastructure from the tariffs and just the sheer cost of

650
00:34:25,719 --> 00:34:27,359
Speaker 2: you know, building out the infrastructure.

651
00:34:28,000 --> 00:34:30,839
Speaker 4: For the most part, energy has been somewhat exempt from

652
00:34:30,880 --> 00:34:33,440
Speaker 4: the tariffs. Okay, the metal, so what did we have.

653
00:34:33,520 --> 00:34:36,480
Speaker 4: We had aluminum tariffs in the US, and we'd steal tariffs.

654
00:34:36,480 --> 00:34:38,839
Speaker 4: We've had this threat of copper tariffs that I think

655
00:34:38,920 --> 00:34:42,160
Speaker 4: is distorting copper price. The oil patch, the gas patch,

656
00:34:42,280 --> 00:34:45,480
Speaker 4: the energy patch mostly been left alone. Okay, so that

657
00:34:45,520 --> 00:34:48,520
Speaker 4: flow through of things like the domestic content of steel

658
00:34:49,520 --> 00:34:52,920
Speaker 4: that's shown up. But yeah, to first order, if you

659
00:34:52,920 --> 00:34:55,879
Speaker 4: think about how the oil industry set their budgets this year,

660
00:34:56,040 --> 00:34:58,640
Speaker 4: it wasn't based it wasn't a factor. It was based

661
00:34:58,640 --> 00:35:00,560
Speaker 4: on what was the price of oil on their screen

662
00:35:00,600 --> 00:35:01,520
Speaker 4: when we started the year.

663
00:35:02,560 --> 00:35:05,400
Speaker 3: Actually related to this, one of the things we heard

664
00:35:05,440 --> 00:35:07,520
Speaker 3: from the Trump administration coming in was that they were

665
00:35:07,560 --> 00:35:10,400
Speaker 3: going to be very energy friendly, you know, friendly to

666
00:35:10,640 --> 00:35:14,280
Speaker 3: all the molecules, whether it's coal or gas or whatever.

667
00:35:14,520 --> 00:35:18,600
Speaker 3: Have we actually seen policies that have helped those industries.

668
00:35:18,600 --> 00:35:21,160
Speaker 3: Do people feel good about it right now?

669
00:35:21,520 --> 00:35:26,439
Speaker 4: I would argue bombing Iran is a pro oil price policy.

670
00:35:27,000 --> 00:35:32,400
Speaker 3: Took a year and okay, but domestic policies, I guess there's.

671
00:35:32,200 --> 00:35:35,839
Speaker 4: This tension between you know the fact that, you know,

672
00:35:36,080 --> 00:35:38,640
Speaker 4: one of Trump's mantra seems to be low oil price.

673
00:35:38,680 --> 00:35:42,480
Speaker 4: Low gasoline prices extremely sensitive to that, and at the

674
00:35:42,520 --> 00:35:44,879
Speaker 4: same time you sort of pro the oil industry. That's

675
00:35:45,040 --> 00:35:47,560
Speaker 4: a very narrow path to tread. Yeah, right, the oil

676
00:35:47,600 --> 00:35:50,600
Speaker 4: industry makes money when oil prices are reasonable.

677
00:35:51,120 --> 00:35:51,359
Speaker 2: Now.

678
00:35:51,520 --> 00:35:54,360
Speaker 4: Now, I would argue that a good mid cycle price

679
00:35:54,400 --> 00:35:58,040
Speaker 4: of oil seventy five dollars eighty dollars, right, and that's

680
00:35:58,120 --> 00:36:01,920
Speaker 4: where marginal producers can turn. We haven't really had that,

681
00:36:02,239 --> 00:36:05,879
Speaker 4: right and undisturbed. We haven't had that since Trump took

682
00:36:05,880 --> 00:36:09,400
Speaker 4: office or much before. We've been bouncing, you know, below

683
00:36:09,440 --> 00:36:12,879
Speaker 4: seventy five. We've had a glut. The shale industry has

684
00:36:12,920 --> 00:36:17,280
Speaker 4: been remarkably resilient, right amidst sixty dollars oil. We haven't

685
00:36:17,320 --> 00:36:21,480
Speaker 4: seen shale oil give up very much, and Opek has

686
00:36:21,520 --> 00:36:24,200
Speaker 4: been adding barrels to the market. Am it's kind of

687
00:36:24,239 --> 00:36:27,160
Speaker 4: tepid demand. So we've kind of been under mid cycle

688
00:36:27,239 --> 00:36:30,520
Speaker 4: prices for oil through most of the Trump administration. You know,

689
00:36:31,200 --> 00:36:35,759
Speaker 4: Biden posts the solution in Russia Ukraine. So yeah, there

690
00:36:35,800 --> 00:36:39,000
Speaker 4: is no policy. So the question is how do you

691
00:36:39,080 --> 00:36:43,120
Speaker 4: get somebody to drill more in Texas, and you know,

692
00:36:43,160 --> 00:36:46,840
Speaker 4: first and foremost it's the returns. Right, So clarity of

693
00:36:46,880 --> 00:36:49,759
Speaker 4: policy permitting has improved. You'll hear folks in the oil

694
00:36:49,800 --> 00:36:52,400
Speaker 4: patch say, right, some of the time you would spend

695
00:36:52,400 --> 00:36:57,200
Speaker 4: to get things approved permitted has improved, But that hasn't changed. Right,

696
00:36:57,320 --> 00:37:00,600
Speaker 4: the input, which is how many rigs are running, hearts rings,

697
00:37:00,680 --> 00:37:02,200
Speaker 4: you know, how many frags spread throughout there.

698
00:37:03,200 --> 00:37:05,719
Speaker 2: One of the big themes you know of the last

699
00:37:05,760 --> 00:37:07,840
Speaker 2: several years kind of since we've been doing the podcast,

700
00:37:07,880 --> 00:37:11,040
Speaker 2: but really since COVID has been one thing after another

701
00:37:11,560 --> 00:37:14,440
Speaker 2: that encourages basically every country in the world to think

702
00:37:14,440 --> 00:37:19,600
Speaker 2: about sovereignty, resource security, and so forth. And so obviously

703
00:37:19,719 --> 00:37:23,120
Speaker 2: COVID major impetus to like make sure you have stuff,

704
00:37:23,320 --> 00:37:26,080
Speaker 2: then the trade war, then Ukraine now that war and

705
00:37:26,320 --> 00:37:29,760
Speaker 2: Iran et cetera. Like big structurally when you think about,

706
00:37:29,800 --> 00:37:32,480
Speaker 2: I guess the last six years. Now, are we going

707
00:37:32,520 --> 00:37:35,359
Speaker 2: to be living with the ramifications of this six year

708
00:37:35,400 --> 00:37:38,240
Speaker 2: period for years? In terms of global commodity markets.

709
00:37:39,080 --> 00:37:42,080
Speaker 4: So if you went back to the First World Second World,

710
00:37:42,200 --> 00:37:43,959
Speaker 4: you had the West and you had the Soviet Union,

711
00:37:44,000 --> 00:37:46,440
Speaker 4: and you had sort of two complete supply chains of

712
00:37:46,520 --> 00:37:49,839
Speaker 4: all the commodities. Right, there were Soviet smelters and there

713
00:37:49,840 --> 00:37:52,160
Speaker 4: were Western smelters, and there was just a lot of

714
00:37:52,200 --> 00:37:55,520
Speaker 4: redundant capacity. Then you sort of got into the nineties

715
00:37:55,560 --> 00:37:58,239
Speaker 4: and you have the collapse of the Soviet Union and

716
00:37:58,320 --> 00:38:02,040
Speaker 4: you had at the same time, I am the China rose.

717
00:38:02,760 --> 00:38:05,319
Speaker 4: You were lucky enough, so the China supercycle, the China

718
00:38:05,400 --> 00:38:08,400
Speaker 4: demand supercycle, came at a point in time where you

719
00:38:08,440 --> 00:38:13,360
Speaker 4: had all of this excess capacity undermanaged. So all you

720
00:38:13,440 --> 00:38:17,759
Speaker 4: needed was a bit of capitalism applied to Soviet assets

721
00:38:18,400 --> 00:38:21,440
Speaker 4: and that was sort of the only reason China could

722
00:38:21,760 --> 00:38:24,640
Speaker 4: feed on consuming half of the world's copper or and

723
00:38:24,680 --> 00:38:26,200
Speaker 4: half of the world's deal and half of the world's

724
00:38:26,239 --> 00:38:28,799
Speaker 4: et cetera. Now we're almost flipping that and say, well,

725
00:38:28,840 --> 00:38:32,879
Speaker 4: you know what, China has a bunch of rare earth processing,

726
00:38:33,040 --> 00:38:35,440
Speaker 4: but now Japan and Malaysia will have it. Now the

727
00:38:35,560 --> 00:38:39,160
Speaker 4: US is going to have it, and tariffs on copper, well,

728
00:38:39,200 --> 00:38:42,200
Speaker 4: the US needs to be self sufficient in copper. So

729
00:38:42,239 --> 00:38:45,479
Speaker 4: we're entering sort of this long cycle of globalization where

730
00:38:45,520 --> 00:38:50,040
Speaker 4: are we going to recapitalize the end of globalization and

731
00:38:50,120 --> 00:38:52,880
Speaker 4: we're going to go out and build two smelters in

732
00:38:53,120 --> 00:38:55,400
Speaker 4: or five or however we're going to divide the planet.

733
00:38:55,960 --> 00:39:00,000
Speaker 4: It's very capital intensive, it's inefficient, it would be powerful

734
00:39:00,160 --> 00:39:03,719
Speaker 4: for it's inflationary. Yeah, and then someday in the next

735
00:39:03,760 --> 00:39:06,560
Speaker 4: cycle we release it, all right. So yeah, So that's

736
00:39:06,640 --> 00:39:11,520
Speaker 4: again a geopoliticians view, like his globalization over If if

737
00:39:11,560 --> 00:39:15,279
Speaker 4: a geopolitician convinces you of that, then there's gonna be

738
00:39:15,320 --> 00:39:18,960
Speaker 4: a lot of assets. Yeah, that's a big economy.

739
00:39:18,520 --> 00:39:20,400
Speaker 2: All right. I have one that tiny question, Tracey is

740
00:39:20,400 --> 00:39:20,880
Speaker 2: gonna love it?

741
00:39:20,960 --> 00:39:21,080
Speaker 4: Do you?

742
00:39:21,400 --> 00:39:21,759
Speaker 2: Land Man?

743
00:39:22,520 --> 00:39:26,120
Speaker 4: I have watched. I tend to binge watch when I

744
00:39:26,120 --> 00:39:28,320
Speaker 4: get a chance, So I binge watched the first season.

745
00:39:28,360 --> 00:39:30,040
Speaker 4: I have not binge watched the second.

746
00:39:30,080 --> 00:39:31,359
Speaker 2: Does it feel realistic to you?

747
00:39:31,520 --> 00:39:31,759
Speaker 1: Is that.

748
00:39:33,320 --> 00:39:37,520
Speaker 4: My lived experience has very little?

749
00:39:37,600 --> 00:39:37,920
Speaker 2: Okay?

750
00:39:38,440 --> 00:39:39,680
Speaker 4: Yeah? Versus Landmann.

751
00:39:39,960 --> 00:39:41,880
Speaker 3: I would just like to say a significant portion of

752
00:39:41,880 --> 00:39:44,080
Speaker 3: my life right now is listening to.

753
00:39:43,600 --> 00:39:48,920
Speaker 2: Talk about the show. I love land Man so much anyway.

754
00:39:48,520 --> 00:39:51,480
Speaker 4: Bob Brackley, land Man is the Moby Dick of our times.

755
00:39:53,080 --> 00:39:56,280
Speaker 2: Bob Brackett, thank you so much for coming back on olods.

756
00:39:56,440 --> 00:39:58,600
Speaker 2: Always a true true pleasure.

757
00:39:58,719 --> 00:39:59,319
Speaker 4: Thank you so much.

758
00:39:59,400 --> 00:40:01,720
Speaker 3: Joe, Thanks for things so much, Bob. That was great,

759
00:40:01,719 --> 00:40:24,920
Speaker 3: as always yeah.

760
00:40:15,120 --> 00:40:18,040
Speaker 2: God, I love talking to Bob so much. One thing

761
00:40:18,600 --> 00:40:21,200
Speaker 2: with a lot of Energy episodes is that and I've

762
00:40:21,239 --> 00:40:23,520
Speaker 2: mentioned it, we both mentioned it. Energy math is not

763
00:40:23,560 --> 00:40:26,359
Speaker 2: intuitive to me, you know, like I have a very

764
00:40:26,400 --> 00:40:30,399
Speaker 2: hard time conceptualizing like what is a billion cubic feed

765
00:40:30,520 --> 00:40:33,840
Speaker 2: or whatever. But in that gas, especially with all the

766
00:40:33,840 --> 00:40:37,880
Speaker 2: conversions that happened between the liquefaction, and it's like, I

767
00:40:37,920 --> 00:40:38,640
Speaker 2: find it, really.

768
00:40:38,560 --> 00:40:40,960
Speaker 3: It's really hard. No, I sympathize. I was one of

769
00:40:41,000 --> 00:40:44,600
Speaker 3: those like toddlers that was trying to stick like triangle

770
00:40:44,680 --> 00:40:47,799
Speaker 3: pieces into round holes. Yeah, I've always struggled to sort

771
00:40:47,840 --> 00:40:50,040
Speaker 3: of visualize shapes and sizes.

772
00:40:50,160 --> 00:40:53,520
Speaker 4: So absolutely the word cells and we're yeah.

773
00:40:53,360 --> 00:40:55,720
Speaker 3: That's exactly it. But there is a bunch of stuff

774
00:40:55,760 --> 00:40:58,600
Speaker 3: that stood out from that episode. One thing I should

775
00:40:58,680 --> 00:41:01,360
Speaker 3: just clarify because I don't mean to make light of,

776
00:41:01,480 --> 00:41:04,440
Speaker 3: you know. I asked about the Trump administration being energy friendly,

777
00:41:04,560 --> 00:41:08,759
Speaker 3: yeah to domestic US energy producers, and Bob was like, well,

778
00:41:08,800 --> 00:41:10,680
Speaker 3: the war is very friendly, and I kind of waved

779
00:41:10,680 --> 00:41:15,400
Speaker 3: it off, like it is a huge giveaway to US energy.

780
00:41:15,800 --> 00:41:20,480
Speaker 3: And you know, Isabella Weber, another Great Odd Lots guest,

781
00:41:20,520 --> 00:41:24,239
Speaker 3: had a paper about like where the value of these

782
00:41:24,320 --> 00:41:27,040
Speaker 3: higher oil prices actually flows to and it's all the

783
00:41:27,160 --> 00:41:27,919
Speaker 3: US energy comes.

784
00:41:27,920 --> 00:41:30,600
Speaker 2: Trump said himself. Yeah, maybe in one of his truth

785
00:41:30,680 --> 00:41:33,279
Speaker 2: social posts something like that, he's like, we're actually going

786
00:41:33,360 --> 00:41:36,560
Speaker 2: to make more money. Yeah, you know, because most people

787
00:41:36,640 --> 00:41:39,479
Speaker 2: are not oil producers. Most people are oil consumers rights,

788
00:41:39,920 --> 00:41:42,120
Speaker 2: and so people are not happy that gas prices, but

789
00:41:42,160 --> 00:41:44,560
Speaker 2: you like sort of spun it. He's not, Look, we're

790
00:41:44,600 --> 00:41:47,560
Speaker 2: gonna make a lot of money because we're a net

791
00:41:47,600 --> 00:41:53,080
Speaker 2: oil exporter and energy exporter now between LNG and crude.

792
00:41:53,320 --> 00:41:59,319
Speaker 2: So yes, clearly domestic energy has benefited, obviously benefiting you know,

793
00:42:00,200 --> 00:42:03,480
Speaker 2: a wave that it's riding because obviously the demand for

794
00:42:03,640 --> 00:42:08,040
Speaker 2: LNG after the invasion of Ukraine. That's just that's a

795
00:42:08,160 --> 00:42:09,000
Speaker 2: very big story.

796
00:42:09,160 --> 00:42:09,399
Speaker 4: Yeah.

797
00:42:09,400 --> 00:42:11,920
Speaker 3: And I also think this brings us back to the

798
00:42:11,960 --> 00:42:15,279
Speaker 3: episode were recorded on the impact of the Strait of

799
00:42:15,280 --> 00:42:19,799
Speaker 3: Horror Moon's closure on China's Yeah, and this idea that well,

800
00:42:19,840 --> 00:42:23,239
Speaker 3: the more disruptions to commodity supply you have like this,

801
00:42:23,440 --> 00:42:26,560
Speaker 3: the more you have governments sort of worried about choke

802
00:42:26,640 --> 00:42:30,360
Speaker 3: points materializing, the more you're going to see a hasten

803
00:42:30,480 --> 00:42:34,440
Speaker 3: shift to renewables that might be to more immune from

804
00:42:34,480 --> 00:42:36,280
Speaker 3: these types of disruptions.

805
00:42:35,760 --> 00:42:39,480
Speaker 2: I hadn't appreciated at all until Bob said it at

806
00:42:39,480 --> 00:42:42,520
Speaker 2: the very end that you know, like when we think

807
00:42:42,560 --> 00:42:46,280
Speaker 2: of the early two thousands, you know, the commodity super

808
00:42:46,320 --> 00:42:48,920
Speaker 2: cycle driven by China. But then for the first several

809
00:42:49,040 --> 00:42:53,319
Speaker 2: years of Chin Chinese opening up, they really benefited from

810
00:42:53,360 --> 00:42:56,120
Speaker 2: the fact that there was just a glut of capacity

811
00:42:56,239 --> 00:42:59,120
Speaker 2: that the combining of Bloo, which I hadn't really thought

812
00:42:59,120 --> 00:43:01,880
Speaker 2: about at all. That is, like, from an economic perspective,

813
00:43:01,880 --> 00:43:04,239
Speaker 2: there was a lot of capacity to supply China with

814
00:43:04,360 --> 00:43:08,360
Speaker 2: raw commodities, particularly in the mid nineties, simply due to

815
00:43:08,400 --> 00:43:11,560
Speaker 2: the fact that you know, as you said, apply a

816
00:43:11,560 --> 00:43:14,840
Speaker 2: little bit of capitalism to those Soviet assets and suddenly

817
00:43:14,880 --> 00:43:18,160
Speaker 2: you have a lot of production broad online. The nineties

818
00:43:18,200 --> 00:43:21,200
Speaker 2: were a special time. Everything was just working out peak humanity,

819
00:43:21,280 --> 00:43:23,640
Speaker 2: peak humanity, I already believe. So all right, shall we.

820
00:43:23,680 --> 00:43:24,040
Speaker 3: Leave it there.

821
00:43:24,080 --> 00:43:24,799
Speaker 2: Let's leave it there.

822
00:43:24,920 --> 00:43:27,240
Speaker 3: This has been another episode of the Odd Lots podcast.

823
00:43:27,320 --> 00:43:30,359
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.

824
00:43:30,239 --> 00:43:32,400
Speaker 2: And I'm Jill Wisenthal. You can follow me at the

825
00:43:32,440 --> 00:43:36,160
Speaker 2: Stalwart follow or producers Carmen Rodriguez at Carman Ermann dash

826
00:43:36,160 --> 00:43:39,200
Speaker 2: Ol Bennett at dashbot and kel Brooks at Kilbrooks. And

827
00:43:39,239 --> 00:43:41,600
Speaker 2: for more odd Laws content, go to Bloomberg dot com

828
00:43:41,600 --> 00:43:43,799
Speaker 2: slash odd Lots or of a daily newsletter and all

829
00:43:43,840 --> 00:43:45,880
Speaker 2: of our episodes, and you can chat about all of

830
00:43:45,880 --> 00:43:49,239
Speaker 2: these topics twenty four to seven in our discord Discord

831
00:43:49,280 --> 00:43:50,920
Speaker 2: dot gg slash odd Lots.

832
00:43:51,160 --> 00:43:53,680
Speaker 3: And if you enjoy Oddlots, if you like it when

833
00:43:53,719 --> 00:43:56,920
Speaker 3: we get bought bracket on to answer random commodity questions,

834
00:43:57,000 --> 00:43:59,280
Speaker 3: then please leave us a positive review on your favorite

835
00:43:59,320 --> 00:44:02,600
Speaker 3: podcast potform. And remember, if you are a Bloomberg subscriber,

836
00:44:02,640 --> 00:44:05,640
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837
00:44:05,840 --> 00:44:08,600
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838
00:44:08,600 --> 00:44:11,719
Speaker 3: on Apple Podcasts and follow the instructions there. Thanks for

839
00:44:11,760 --> 00:44:12,120
Speaker 3: listening