Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Authoughts podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 3: And I'm Joe Wasenthal.
Speaker 2: Joe, you know what's weird.
Speaker 3: Tell me what's weird.
Speaker 2: There's a lot that's weird. Actually, But we seem to
Speaker 2: be living in this extremely high tech world where you
Speaker 2: can get a chat bot to write you an essay
Speaker 2: or create a video. Sure, you could buy a robot
Speaker 2: dog to play with all that stuff, and yet we
Speaker 2: still seem to be struggling somewhat to provide cheap and
Speaker 2: affordable and abundant energy to power all these things. And
Speaker 2: in fact, because all this new technology guzzles so much energy,
Speaker 2: data centers you so much power, it feels like energy
Speaker 2: is becoming even more strategically important in many ways.
Speaker 3: It definitely feels like we're in an age of sort
Speaker 3: of people remembering the deep constraints that energy, yeah imposes,
Speaker 3: whether it's data center, all kinds of things. Energy is
Speaker 3: not a solve problem by any stritch, although I would
Speaker 3: say that in my limited sort of reading of the
Speaker 3: history of energy, it's never a solved problem. I know,
Speaker 3: at the moment we find we're in a period of
Speaker 3: energy surplus, we quickly find something to do with that energy,
Speaker 3: and once again we are in a period of constraint.
Speaker 3: But it does feel like we're in some sort of
Speaker 3: period of constraint right now.
Speaker 2: When Caines was doing his whole abundance theory, did he
Speaker 2: mention energy at all? What do you say, Well, I'm
Speaker 2: just gonna assume that Kaines promised us all abundant energy
Speaker 2: as well as everything else, and it's not here. So
Speaker 2: we're all upset. Okay. So even though we've had all
Speaker 2: these breakthroughs in alternative energy technologies, you know, things like
Speaker 2: solar and wind, we're still using more coal, more oil
Speaker 2: than ever. And in fact, there's sort of some old
Speaker 2: school energy behaviors going on with China stockpiling massive amounts
Speaker 2: of oil.
Speaker 3: Yeah, as you said, coal is booming, China stockpiling oil.
Speaker 3: Electricity prices in the US on the rise, maybe perhaps
Speaker 3: due to some of this AI data centered demand. It
Speaker 3: feels like I would say pre COVID at least. I
Speaker 3: don't know if people got a little bit naive or
Speaker 3: optimistic or goldilocks, but this view is it's only a
Speaker 3: matter of time before energy is solved because we're gonna
Speaker 3: have all this wind and solar is gonna be cheap,
Speaker 3: it's gonna be clean. We see all these cost curves
Speaker 3: coming down with like batteries and wind and so forth.
Speaker 3: It's only a matter of time before we don't need
Speaker 3: the dirty stuff. And right now it doesn't feel we're
Speaker 3: anywhere close to that. And I'm sort of curious what happened.
Speaker 2: Yeah, well, everyone talked about the energy transition, but so
Speaker 2: far it's not really a transition. It's like a compliment
Speaker 2: to existing sources. Anyway, we could keep talking, but why
Speaker 2: not go to our guest, who is truly, truly the
Speaker 2: perfect guest. We're gonna be speaking with someone I wanted
Speaker 2: to speak with on the podcast for a very long time. Dan,
Speaker 2: you're he is, of course, the author of the Pulitzer Prize,
Speaker 2: winning the prize the Epic Quest for Oil, Money and Power.
Speaker 2: He's also vice chairman of SMP Global, and he also
Speaker 2: has a new book out called The New Map, Energy,
Speaker 2: Climate and the Clash of Nations. So a lot to
Speaker 2: talk about, Dan, Thank you so much for coming on
Speaker 2: all thoughts, It's great to be on with you all.
Speaker 2: So does it feel like energy and security is still
Speaker 2: with us in many forms.
Speaker 4: Yes, it goes through cycles. You know, you mentioned COVID.
Speaker 4: I think during COVID demand went down, prices went down,
Speaker 4: and people kind of forgot about energy, and there was
Speaker 4: a sense in twenty twenty one, International Energy Agency did
Speaker 4: this scenario about getting to basically a renewable world by
Speaker 4: twenty fifty. But now we're in twenty twenty five, going
Speaker 4: into twenty six, energy demand is going up wind and solar,
Speaker 4: but also coal, oil, and natural gas. And this share
Speaker 4: of hydrocarbons and energy has gone from about eighty one
Speaker 4: percent to about eighty point five five percent roughly.
Speaker 3: So it's going to take a while to get down
Speaker 3: to zero in a while.
Speaker 4: You know, though you mentioned energy transition. I think it's
Speaker 4: time to do some rethinking about the energy transition.
Speaker 3: Well good, That's what I was going to ask you about.
Speaker 3: So when people talk about the energy transition, this fantasy
Speaker 3: or you know, maybe fantasy is a little bit scenario
Speaker 3: scenario scenario of Okay, we're going to get to net zero,
Speaker 3: et cetera. Is this just a matter of the timeline
Speaker 3: has been pushed back, or is there a fundamental flaw
Speaker 3: with the premise.
Speaker 4: I think certainly the timeline has been pushed back, the
Speaker 4: notion by twenty fifty the closer we get to twenty fifty,
Speaker 4: the farther way, it seems the goal of net zero
Speaker 4: by twenty fifty zero. And what Tracy said before energy
Speaker 4: transition has been energy addition.
Speaker 3: And what happened.
Speaker 4: What happened is I think the reality came back in
Speaker 4: that we live in a world that rests on an
Speaker 4: energy foundation, and that you just can't overnight take one
Speaker 4: hundred and fifteen trillion dollar world economy and change it
Speaker 4: from one thing to another.
Speaker 2: Are there any scenarios you could see where I guess
Speaker 2: new technologies like AI, the data centers that are getting
Speaker 2: built encourage new players to come in and provide capital
Speaker 2: for energy, so you know, Google building their own gas port.
Speaker 4: Well, exactly what we have now is the tech world
Speaker 4: meeting the energy world, and these two worlds have very
Speaker 4: different cultures. Tech world, things go happen pretty fast energy.
Speaker 4: You know, in your software engineer come out with new software.
Speaker 4: In the energy world, an engineer takes seven years to
Speaker 4: build something. And these cultures have come together, and I
Speaker 4: think one of the reasons that we're seeing kind of
Speaker 4: this called the easy or simple notions and transition pushed
Speaker 4: out is what you've mentioned. It's going to take a
Speaker 4: lot more electricity, and some of that will come from
Speaker 4: windows solar. But what's come back into the picture is
Speaker 4: natural gas is an electric generation. If you wanted to
Speaker 4: go out and buy a gas turbine today, you could
Speaker 4: get it delivered in twenty thirty. If we back go
Speaker 4: back to twenty twenty two. I was talking to one
Speaker 4: of the big companies in the field and the guy
Speaker 4: said that year, all over the world, exactly one gas
Speaker 4: turbine was sold and it wasn't one of ours. So
Speaker 4: we said, our market share that year was zero. Now
Speaker 4: they're all sold out.
Speaker 3: Is there an increase in capacity? We talked about this
Speaker 3: recently and this has come up, the shortage of gas turbans.
Speaker 3: Is the scarcity being addressed or is there still this
Speaker 3: phenomenon where no one really wants to do the initial
Speaker 3: upfront investment in a say, factory that makes the gas
Speaker 3: turbans because there's still uncertainty about say twenty thirty.
Speaker 4: What I you know, when I talked to the companies,
Speaker 4: those who are around in about two two and a
Speaker 4: half decades ago, remember there was a huge rush turbance
Speaker 4: and then it all collapsed.
Speaker 3: And there were and that was coincidentally or incidentally that
Speaker 3: boom was also at a time of massive tech investment
Speaker 3: the late nineties. That was another period of the sort
Speaker 3: of marriage of tech and energy at the time.
Speaker 4: Absolutely, that's right, and so I think they are expanding capacity,
Speaker 4: but they're not doing it helter skelter. Also, like so
Speaker 4: many other companies, the shortage of the talent that you need.
Speaker 4: I mean, these are not simple things to build.
Speaker 2: One of the reasons we wanted to talk to you
Speaker 2: is because you do such a fantastic job of connecting
Speaker 2: the oil space with capital markets, and I've always maintained
Speaker 2: that oil is very much a capital market story. Can
Speaker 2: you talk about the difference between how capital is sourced
Speaker 2: for something like oil or gas versus clean energy, and
Speaker 2: whether attitudes towards the two have changed at all.
Speaker 4: Well, I mean it was quite different with clean energy,
Speaker 4: and a lot of it, you know, had tax credits
Speaker 4: and ability to you know, to sell tax credits and
Speaker 4: things like that, and a lot of the oil and
Speaker 4: gas development may be funded by financial institutions, but a
Speaker 4: lot of it is funded by the companies themselves.
Speaker 3: What is it like we see these lines on charts
Speaker 3: that show the collapsing price of solar production, or the
Speaker 3: collapsing price of wind production, or the improvements in battery technology.
Speaker 3: All true, all true, and yet there is still so
Speaker 3: much public money that goes into these areas, and so
Speaker 3: many tax credits and subsidies, etc. To kind of accelerate
Speaker 3: them along. Why is it that you have these lines
Speaker 3: going down and yet they don't undercut traditional sources in
Speaker 3: the way that maybe the tech mindset.
Speaker 2: We yes so well.
Speaker 4: First, remember the renewables, wind and solar. Really we're not
Speaker 4: competing with oil until you started to have electric cars
Speaker 4: coming onto the scene. But you know, it's interesting. I
Speaker 4: was talking to a company that's developing a big battery
Speaker 4: project in Europe I probably shouldn't say which country, and
Speaker 4: they're very excited about it. It's really big. They said, Oh,
Speaker 4: by the way, they couldn't do it on their own.
Speaker 4: They had to go to the government and get incentive
Speaker 4: subsidies or a partnership with it. So the costs are
Speaker 4: still up there, and I think we're seeing a testing
Speaker 4: now for wind and solar. Everybody's rushing right now to
Speaker 4: get steel into the ground so they can get the
Speaker 4: tax credits which will expire in not very long time,
Speaker 4: so the testing will be how competitive will they be?
Speaker 4: And I think we'll still see wind and solar, particularly
Speaker 4: solar put in, but it won't be enough. And what
Speaker 4: they concern right now is about the reliability of the
Speaker 4: electric power system. And you see prognostications about this area
Speaker 4: that stretches from Illinois, you know, as far as New Jersey,
Speaker 4: that by the end of this decade, which is not
Speaker 4: so far away now, we'll be looking at very tight
Speaker 4: markets with really great pressure on it. And I'll tell
Speaker 4: you the kind of regulators. The people looking at it
Speaker 4: but are starting to get pretty alarmed. And that's why
Speaker 4: you see a lot of a lot of discussion and
Speaker 4: focus on can we get permitting reform so you can
Speaker 4: actually get something built?
Speaker 3: Can you just what is the source of alarm? Is
Speaker 3: it about the generation of electrons or is it about
Speaker 3: the transmission and with the grid capacity to balance and
Speaker 3: take in all these things.
Speaker 4: Well, it's both, and certainly the transmission is a very
Speaker 4: key part of it. But what we have been doing
Speaker 4: has been retiring coal plants. We thought, you know, we
Speaker 4: re mar going to have any more gas and electric generation,
Speaker 4: but that's coming back. And now you see kind of
Speaker 4: slow down and closing these coal plants. And also we
Speaker 4: see an election coming up in New Jersey where electricity
Speaker 4: prices are an issue, and suddenly this whole issue. I
Speaker 4: was looking at our numbers, and electricity prices have been
Speaker 4: going up at twice the rate of inflation in the
Speaker 4: United States.
Speaker 2: Why can't clean energy seem to exist without subsidies? Given
Speaker 2: that electricity prices are going up, and we all agree
Speaker 2: that energy is strategically important, why can't it, you know,
Speaker 2: fund itself.
Speaker 4: Well, it has to, you know, ultimately, it has to
Speaker 4: be that. But you know, obviously there's a lot of
Speaker 4: debate about what happened in this big beautiful bill where
Speaker 4: they you know, basically are cutting back and then eliminating
Speaker 4: the subsidies. And at least this administration says, well, wait,
Speaker 4: these were put in thirty two years ago for infant
Speaker 4: in industries, and now the prices come down, why are
Speaker 4: we were doing it? So I think these industries are
Speaker 4: going to have to stand on their own right now.
Speaker 2: Would they be economical in their current form?
Speaker 4: I think, you know, it depends on the circumstances and
Speaker 4: where they're built and whether they have access to transmission,
Speaker 4: because of course you can have solar, but then you
Speaker 4: need you need to connect it to the grid, and
Speaker 4: grid connection becomes a very important issue.
Speaker 2: That's the expensive thing. That's why with my solar panels
Speaker 2: on my farm, I mooch off of the entire Connecticut
Speaker 2: system grid.
Speaker 4: How is your solar panels working?
Speaker 2: They're fantastic. Our energy bills are like maybe twenty dollars
Speaker 2: a month. Sometimes we get paid so you.
Speaker 4: Put it back in the system. You didn't get any
Speaker 4: tax creditors.
Speaker 2: Well, the house had it when we bought it. Oh,
Speaker 2: but I'm just very happy with the low electricity bill
Speaker 2: and not having to shoulder the costs of the grid.
Speaker 4: Yeah, and somebody else will take care of it, that's right,
Speaker 4: somebody else's problem.
Speaker 3: I want to talk a little bit more about the
Speaker 3: return of natural gas or LNG. What do you think
Speaker 3: the prospects are for the US as an LNG export powerhouse?
Speaker 3: Can you continue to grow well at the pace that
Speaker 3: it's been growing, especially given some of the bottlenecks and constraints.
Speaker 4: Yeah, well, obviously you need pipes to get gas to
Speaker 4: the Gulf coast or to tide water in order to
Speaker 4: ship the gas, and that ability to build pipes is
Speaker 4: really difficult, or has been difficult. It's going to get
Speaker 4: easier now unless you're in Texas where you could build
Speaker 4: them anyway. But it's an amazing story. A decade ago,
Speaker 4: the US was not exporting any LNG in fact, and
Speaker 4: now it's the world's largest exporter of LNG. And our
Speaker 4: own numbers say that the next half decade or so,
Speaker 4: global capacity will increase by over fifty percent. Half of
Speaker 4: that increase will be in the United States, you know,
Speaker 4: and people don't think about it this way, but we're
Speaker 4: not for USLNG. Putin might well have succeeded using the
Speaker 4: energy weapon cutting off gas to Europe and shouted the
Speaker 4: coalition supporting Ukraine. And what prevented him from doing that
Speaker 4: was USLNG, which he hadn't counted on. In the book
Speaker 4: you mentioned the new Map. I have this story about
Speaker 4: where I had this interaction with Putin in twenty thirteen,
Speaker 4: and it was at the Saint Petersburg International Economic Forum,
Speaker 4: which was his version of Davos, was before he enexed Crimea,
Speaker 4: and he was up there on the platform with Chancellor Merkel,
Speaker 4: and you could see the ice between them, and they
Speaker 4: said to me, oh, you get to ask the first question.
Speaker 4: So I thought I was just asking the question. Yeah, exactly,
Speaker 4: no pressure, the normal question about you know, what are
Speaker 4: you going to do? Your budget is over dependent on
Speaker 4: oil and gas. By accident, I mentioned shale and he
Speaker 4: started shouting at me in front of all these people
Speaker 4: and said, shale is barbaric, it's terrible, poisoned people. He
Speaker 4: went on and on like that, and I can tell
Speaker 4: you it was very unpleasant being shouted at by Vladimir
Speaker 4: Putin in front of three thousand people.
Speaker 3: But it's a good story.
Speaker 4: Yeah, but it's a good story, you know exactly it
Speaker 4: did at the time and think it's a good story.
Speaker 4: At the time, I wanted to get out of there,
Speaker 4: But afterwards I thought he was actually precient. He saw
Speaker 4: that shale gas in the form of then LNG would
Speaker 4: augment us influence in the world, which it certainly has,
Speaker 4: and it would compete with his jewels crown jewel gas problem,
Speaker 4: which has also happened because now Russian gas is being
Speaker 4: pushed out of Europe. So I think, you know, people
Speaker 4: don't connect speaking of connecting the dots that the shale
Speaker 4: gas revolution there tied into the ability to support Ukraine
Speaker 4: in this war that's now gone on almost as long
Speaker 4: as World War One.
Speaker 3: It sounds like you're saying, Aubrey McClinton was a great
Speaker 3: hero for the West and democracy and all of this stuff.
Speaker 4: Well, i'd say a great entrepreneurial. Yes.
Speaker 2: When it comes to old school energy sources, whether it's
Speaker 2: oil or your term old school, is there any low
Speaker 2: hanging fruit left in terms of making the technologies more efficient?
Speaker 2: I remember, maybe like almost ten years ago now, there
Speaker 2: was a big standardization push and all these you know,
Speaker 2: drills that used to have custom parts started to standardize
Speaker 2: them and that actually brought down prices quite a bit
Speaker 2: or helped ease some of the pressure at a time
Speaker 2: when oil prices were quite low. Is there anything like
Speaker 2: that on the horizon.
Speaker 4: Well, I think you're right. I mean shale. The development
Speaker 4: of shale revolution is to kind of continue your memory,
Speaker 4: it really became a manufacturing process. It's a very repetitive
Speaker 4: manufacturing process. And you know, no one back then when
Speaker 4: days of you mentioned Ay mcclennan was one of the
Speaker 4: pioneers could have possibly envisioned the US being the world's
Speaker 4: largest oil producer, the largest natural gas producer. I think
Speaker 4: right now you know about maybe ten percent of the
Speaker 4: oil has recovered from shale. So one thing companies are
Speaker 4: working on, can we increase that output? Can we increase
Speaker 4: it be more efficient? But there is the sense now
Speaker 4: which you wasn't even had a year ago, that maybe
Speaker 4: shale has peaked out, peaked out at a very high number,
Speaker 4: but peaked doubt And people I start to see are
Speaker 4: starting to talk about what's known as exploration, going out
Speaker 4: and finding new oil sources in parts of the world
Speaker 4: where nobody really looked for them.
Speaker 2: Does it make you nervous to use the word peak
Speaker 2: in an oil conversation.
Speaker 4: Now that you mentioned it at times? What should I say? Plateau?
Speaker 4: How's plateau?
Speaker 2: Ok?
Speaker 4: Yeah? Peak oil. I remember when when people were talking
Speaker 4: about peak oil back in you know, decade and a
Speaker 4: half ago, and that the world was going to run
Speaker 4: out of oil. I remember I said, I better go
Speaker 4: back and look in the prize and went back and said, oh,
Speaker 4: the world's actually run out of oil five times, and
Speaker 4: every time it's where you pointed before. It's new technologies
Speaker 4: and new geographies, that changed the game.
Speaker 3: Tell us a little bit more about some of those
Speaker 3: times were, so, I guess probably the seventies, when else
Speaker 3: have there been well, right at the air of peak
Speaker 3: oil running out.
Speaker 4: World War One turned out to be a war that
Speaker 4: really sort of elevated oil because it started with people
Speaker 4: on horses and cavalry, it ended up with banks and
Speaker 4: airplanes and trucks and all of that. And there was
Speaker 4: this great fear after World War One that the US
Speaker 4: had what was it, nine years worth supply left, and
Speaker 4: so what happened as American companies started to go out
Speaker 4: and it went out to the Middle East and of
Speaker 4: course found lots of oil. So that was a period.
Speaker 4: Then after World War Two there was that concern because
Speaker 4: oil had been so important there had been an oil
Speaker 4: war within the larger war, and then of course the seventies.
Speaker 4: But it even happened in the nineteenth century that you know,
Speaker 4: people start ringing the bell saying, you know, it's all over,
Speaker 4: and technology keeps expanding the frontier.
Speaker 2: So, speaking of oil supplies and stockpiles, one of the
Speaker 2: big stories in energy markets has been China buying enormous
Speaker 2: amounts of oil and stockpiling them for reasons that we
Speaker 2: don't know for certain how important has that dynamic been
Speaker 2: to you know, a fairly resilient oil price. Crewd has
Speaker 2: come down a little bit, but it's still, you know,
Speaker 2: around sixty dollars a barrel, I think, and why are
Speaker 2: they doing it?
Speaker 4: In your rod, that is always the question of why
Speaker 4: they're Chinese stockpiling. I've we've been working on minerals too,
Speaker 4: and looking at the stockpile minerals too. It's what they do.
Speaker 4: Is it because they think there may be a conflict?
Speaker 4: Is there a problem? Are they worried about the South
Speaker 4: China Sea which I write about in the new map?
Speaker 4: And they know that during World War Two the US
Speaker 4: cut off the oil line to Japan, and so they
Speaker 4: want to be sure they have supplies. Or is it
Speaker 4: just because it's cheap and they're expecting it to go up.
Speaker 4: We don't know. I'll be there in a couple months
Speaker 4: and I'll ask them again. I'm not sure I'll get
Speaker 4: an answer. But they're doing it. But the role of
Speaker 4: China's changed because for two decades the growth in oil
Speaker 4: demand worldwide, half of it was in China. And now
Speaker 4: the view, I won't use the word peak I'll use
Speaker 4: the word plateau. That demand in China is plateauing at
Speaker 4: a high level. But they're importing seventy five percent of
Speaker 4: their oil and they don't want to continue to do that.
Speaker 4: That's why they've been pushing one of the reasons they've
Speaker 4: been pushing electric cars. The other reason is because I
Speaker 4: see it as a way to an export market, so
Speaker 4: you don't have the growth engine of China. And so
Speaker 4: you know, there's a fair amount of debate today at
Speaker 4: what rate at oil de Man will grow, but is
Speaker 4: it how how much will grow? Will be a million
Speaker 4: barrels a day, a million and a half barrels a day,
Speaker 4: And that is a subject within oil circles of a
Speaker 4: great deal of vigorous debate.
Speaker 3: We obviously don't know what chision ping strategic plans are,
Speaker 3: potential military plans in the future. But for all of
Speaker 3: the EVY adoption in China, which has of course been
Speaker 3: huge military conflict, whatever the source, will still be an
Speaker 3: incredibly oil intensive process.
Speaker 4: Yes, I think exactly. I mean, that's right. All you're
Speaker 4: not going to have battleships, you know, you know, solar
Speaker 4: power times yeah, yeah, yeah, I mean you do mention,
Speaker 4: I mean what is we know some things that are
Speaker 4: ensoes Youping's mind, because he said it, and he does
Speaker 4: talk about the dominating the new indust supply chains, which
Speaker 4: means evs, which means solar panels, which means when and
Speaker 4: of increasingly critical importance batteries, which is another issue that's
Speaker 4: going to actually is percolating up about here. We have
Speaker 4: regulations against batteries that come from foreign entities of concern
Speaker 4: and you say, what's a foreign entity of concern? And
Speaker 4: it tends to be mean parentheses China in the energy discussion, could.
Speaker 2: You ever envision a time where where earths are more
Speaker 2: important strategically than oil?
Speaker 4: No, but I can tell you that they're really important,
Speaker 4: and I would say in the last six months there
Speaker 4: has been, if you are here in Washington, a crisis
Speaker 4: mentality about them, because I think that was a shock
Speaker 4: when Trump was rolling out all of his tariffs and
Speaker 4: the country that they were going to be most aimed at,
Speaker 4: which was China. Suddenly China said, well, you know, to
Speaker 4: complay this game. And then that is, of course, in
Speaker 4: recent days is once again come up the Chinese, whether
Speaker 4: for strategic reasons, but again new supply chains. You know,
Speaker 4: they produce process ninety percent of the rarers and they
Speaker 4: know it. And when you hear an automobile maker saying,
Speaker 4: you know, we have a week and a half supply,
Speaker 4: you realize how urgent it is, and so you know
Speaker 4: it's really come up and trying to grapple with it.
Speaker 4: It's not something you can solve overnight, because it takes
Speaker 4: a long time to open a mind, put up a
Speaker 4: processing a thing. And the Chinese are putting not only
Speaker 4: controls on rareers, they put controls on the machinery and
Speaker 4: equipment for processing rarers, and they put controls on the
Speaker 4: people who have to know how that they may not
Speaker 4: be able to have passports anymore.
Speaker 3: Let's talk about US energy policy. It seems a little
Speaker 3: unfocused to me.
Speaker 4: Or we might say variable, okay.
Speaker 3: Go on, Like how would you characterize it? Or like
Speaker 3: when you say, let's say it's variable, how would you
Speaker 3: characterize what's going on? I think there was a US
Speaker 3: energy security or energy policy.
Speaker 4: And under Biden, of course, it was all about basically renewables,
Speaker 4: climate change, the goal that have no gas, natural gas
Speaker 4: or coal and electric generation. By twenty thirty five, half
Speaker 4: the new cars in America were to be electric by
Speaker 4: twenty thirty. That was then, this is now. It's just
Speaker 4: pretty much in the opposite direction.
Speaker 3: Can the US, you know, I think Trump would like
Speaker 3: powerful dominant US energy industry.
Speaker 4: He uses that word.
Speaker 3: Yeah, is that realistic? Can you get there? I mean,
Speaker 3: there's wanting to expand drilling, but with the price of oil,
Speaker 3: actually it's a below fifty blow six and now it's
Speaker 3: fifteen seventy five today. For like, can these things hang together?
Speaker 3: Can we have prices at these levels and booming domestic
Speaker 3: oil coustrut No.
Speaker 4: I think that's one reason we get into not the peaking,
Speaker 4: but the plateauing for that reason. And you know, you
Speaker 4: look at the survey from the Dallas Federal Reserve that
Speaker 4: came out, and you know, below sixty, people don't you know,
Speaker 4: they just pull back and they husband capital. And you know,
Speaker 4: it certainly seemed that it was possible that we would
Speaker 4: see oil prices below sixty in the latter part of
Speaker 4: the year. And it's come. Maybe it's come earlier than
Speaker 4: people might have expected, and very much affected by the
Speaker 4: trade war between the US and China, among other things.
Speaker 4: But the US is the dominant player right now and
Speaker 4: energy you know, the new trade deal the Europe supposed
Speaker 4: to have with the US, They're supposed to buy more
Speaker 4: natural gas from US and so forth, and they set
Speaker 4: up something called the National Energy Dominance Council, which is
Speaker 4: you know, kind of the view of the US in
Speaker 4: this position. But it is tough to both want to
Speaker 4: have a very vibrant domestic industry and have low prices
Speaker 4: at the same time.
Speaker 2: I know you just mentioned that Europe is still going
Speaker 2: to be getting US oil, But do you foresee a
Speaker 2: more I guess autaric energy future for the world, because
Speaker 2: it does feel like, at least with manufacturing goods and
Speaker 2: some strategically important goods, people are stockpiling and people are
Speaker 2: focused on building out their own capacity. Is that going
Speaker 2: to be the case in energy or will it be
Speaker 2: that energy is just so geographically specific and expertise oriented
Speaker 2: that not everyone will well do.
Speaker 4: We've already seen a partitioning of the global oil market
Speaker 4: in terms of Russian oil not going to its natural
Speaker 4: market Europe, but going to China, which was a market before,
Speaker 4: in India, which was not a market before. We see
Speaker 4: that in natural gas. So I think call it economic
Speaker 4: nationalism or economic sovereignty. I think that the you, and
Speaker 4: in a sense, that's what all the teriff policies are about.
Speaker 4: I think Europe is in a very difficult position because
Speaker 4: they would like to continue to pursue zero as it's called,
Speaker 4: since by twenty fifty, but now they have this other problem,
Speaker 4: which is called being competitive, or rather not being competitive
Speaker 4: and losing industry. And on the other hand, they're now
Speaker 4: supposed to spend not one and a half percent, but
Speaker 4: five percent of GDP on defense. So I think Europe
Speaker 4: is in a very tough position.
Speaker 2: And I know you speak to a lot of experts
Speaker 2: in the energy industry, but what's your sense of the
Speaker 2: mood on the ground among I guess oil and gas
Speaker 2: workers specifically, because on the one hand, Trump has been
Speaker 2: a friend of oil and gas and has said that
Speaker 2: he wants oil and gas to be dominant. But on
Speaker 2: the other hand, a lot of the policies that he's
Speaker 2: actually put in place, you see people in like the
Speaker 2: Dallas Fed survey complaining about them, and the mood seems
Speaker 2: to be kind of bad.
Speaker 4: Well, I think it's both. I mean, I remember CEO
Speaker 4: of one Oil Companies saying that he was actually too
Speaker 4: surprise was invited to I don't know if he's joking
Speaker 4: or not to the Biden White House, but he said
Speaker 4: he had to go in through the basement door. And now,
Speaker 4: of course they're very you know, accepted, and you know,
Speaker 4: in part of the dialogue, you know, I think it's
Speaker 4: a mixed message. They're glad to see a reduction in
Speaker 4: all these new regulations that have been imposed and kind
Speaker 4: of just the general hostility to an important US industry.
Speaker 4: But on the other hand, they at low prices. You've seen,
Speaker 4: you know, layoffs in the industry, you see people putting
Speaker 4: down drilling rigs, you know, at this prices, I think
Speaker 4: if they persist, we'll see more of a negative impact.
Speaker 2: So the US is producing massive amounts of oil and gas.
Speaker 2: How does this sort of change the geography or the
Speaker 2: energy industry.
Speaker 4: Well, it really has changed it dramatically. It was really
Speaker 4: brought home in twenty nineteen when the Iranians attacked the
Speaker 4: most important infrastructure in the entire world oil industry in
Speaker 4: Saudi Arabia, and the price went up for a day
Speaker 4: or two and then went down. And I think that's
Speaker 4: because of the existence of shale and just as it
Speaker 4: kept growing and growing and it gave a sense of
Speaker 4: security that wasn't there before.
Speaker 2: I totally forgot about that, but I think I was
Speaker 2: actually in the Middle East when that happened. Does Opek
Speaker 2: matter anymore? U?
Speaker 4: Yes, Well, it's really OPEK plus that matters right now.
Speaker 4: And they took a lot of oil off the market,
Speaker 4: basically giving room market share to the US. They're now
Speaker 4: begun the process of taking back their market share, and
Speaker 4: that's partly what's reflected in price.
Speaker 3: One of the things that is a constant theme on
Speaker 3: the podcast, and it comes up in numerous industries, whether
Speaker 3: we're talking about housing or lumber or anything else, is that,
Speaker 3: you know, periods of surplus or periods of slack, you
Speaker 3: end up paying for it at the end. You end
Speaker 3: up maybe paying for it five ten years down the
Speaker 3: road because you get this declined in production. The talent
Speaker 3: leaves the industry, the labor moves the industry, the parts run,
Speaker 3: and you can't just take them out of the warehouse,
Speaker 3: et cetera and start drilling or whatever. Again, when you
Speaker 3: look at the declining price of oil today, are we
Speaker 3: going to pay for this?
Speaker 4: I so yeah, I think it's interesting because you know,
Speaker 4: I had to write this new epilogue for the new edition,
Speaker 4: thirtieth edition of the Prize, and I was thinking about
Speaker 4: what are the lessons And one of the lessons to
Speaker 4: me is, among the hundreds of characters in the book,
Speaker 4: there are only two who really matter. One is supply
Speaker 4: and one is demand, and they're always fluctuating between the
Speaker 4: two of them. And I could see that today. Let
Speaker 4: me give you an exact because there's a natural decline
Speaker 4: that goes on in oil, which is people now saying
Speaker 4: and gas maybe it's five percent a year. So in
Speaker 4: twenty twenty one you had the International Energy Agency come
Speaker 4: out with a scenario for net zero by twenty fifty
Speaker 4: in terms of emissions, and all these steps to get
Speaker 4: there made it look rather easy. Because the demand was
Speaker 4: down and price was down. They just came out with
Speaker 4: a new study saying the world needs five hundred and
Speaker 4: forty billion dollars of investment every year between now and
Speaker 4: twenty fifty just to kind of stay where we are
Speaker 4: with oil. So it is that cycle that people forget.
Speaker 4: There's a whole decline there, and I think if you
Speaker 4: have a period of slack, you pay for it down
Speaker 4: the road in terms of the tight market, because investment
Speaker 4: leaves and I think you made a really important point.
Speaker 4: People leave too, They say, I don't want to be
Speaker 4: in this industry.
Speaker 3: Did some episodes a couple of years ago, like actually,
Speaker 3: when oil is much higher about one of the constraints
Speaker 3: that's been well, a bunch of like the petroleum schools,
Speaker 3: they didn't have the same pipeline of engineering talent because
Speaker 3: in twenty nineteen or whatever those years were, who was
Speaker 3: going into majoring in petroleum engineering?
Speaker 4: Right here exactly Now it's actually looks like it's a
Speaker 4: more attractive industry, but it's.
Speaker 2: A competition from geothermal as well. If you want to
Speaker 2: go drilling some rocks somewhere, you don't have options.
Speaker 4: Well, actually we didn't talk about geothermal, but in fact
Speaker 4: there is now the notion can you apply shale technology
Speaker 4: and drilling to geos?
Speaker 3: Are you optimistic about that?
Speaker 4: I don't go through optimist or pessimism. I'd just say,
Speaker 4: but it's promising. Let's see how it plays out.
Speaker 3: I want to talk more about Europe. You mentioned the
Speaker 3: industrial economies getting clobbord. I mean German. Let's just talk
Speaker 3: about just Germany. Maybe they were able to substitute LNG
Speaker 3: imported from the US from some of its Russian sources,
Speaker 3: but the price is up and industrial production in Germany
Speaker 3: has been terrible. Do you think at some point European
Speaker 3: leaders will sort of cry on goal or cave on
Speaker 3: the net zero ambition because it feels like the politics
Speaker 3: of that have been running on fumes first.
Speaker 4: Well, you know, it's interesting because of course they're it's
Speaker 4: so entrenched that it's hard for them. I mean, you
Speaker 4: could say, okay, we're for net zero, but maybe not
Speaker 4: by twenty fifty. But Europe continues to you know, it's
Speaker 4: not just energy costs, it's this incredible weight and burden
Speaker 4: of regulations that are designed without any connection to the markets.
Speaker 4: I was talking to one company on Sunday and they
Speaker 4: said they just closed one facillit plant in Europe. They
Speaker 4: had another one that was eighty percent built that they've
Speaker 4: decided not to go ahead with. Talking to another company
Speaker 4: that's also closing. I mean, they impose these policies with
Speaker 4: no connection to the marketplace or to technology, saying seventy
Speaker 4: percent of jet fuel has to be so called sustainable
Speaker 4: aviation fuel. Well it's less than one percent now, and
Speaker 4: so it's just if you say it, it's going to happen.
Speaker 4: So I think maybe in Germany we're starting to see
Speaker 4: some of that easing up, But I think that those
Speaker 4: economic realities are weighing down with them and if they
Speaker 4: don't step back, and as I say, it's not just
Speaker 4: climate policies, but it's this whole regulatory straight jacket that
Speaker 4: helps people go invest. In the United States, I.
Speaker 2: Do feel like even before Russia invaded Ukraine, there was
Speaker 2: a sense that I guess ESG in general was kind
Speaker 2: of failing. You know, inflation started to.
Speaker 3: Pick up, er bureau phenomenon.
Speaker 2: Yeah, well, inflation started to pick up, and suddenly there
Speaker 2: was what I thought was an inevitable backlash against East
Speaker 2: and targets net zero and things like that. Do you
Speaker 2: think that ever comes back or how would you characterize
Speaker 2: I guess the helpfulness of ESG when it comes to
Speaker 2: building out clean energy, well.
Speaker 4: I think it was clearly that all is a package together.
Speaker 4: I think now really the clean energy argument, the argument
Speaker 4: for solar now is less about that, and it's about
Speaker 4: that you can do it quickly and lay it down
Speaker 4: quickly and get those electrons into the grid. So it's
Speaker 4: more about the economics are working economics rather than virtue
Speaker 4: and ESG clearly is faded away. I can't see it
Speaker 4: coming back with the full force that it did because
Speaker 4: it has a built in backlash, which we're seeing now.
Speaker 4: So I think it means that these things have to
Speaker 4: be more market driven.
Speaker 3: Does the boom and energy exports from the US raised
Speaker 3: prices for American households?
Speaker 4: That is, of course a very critical question was raised
Speaker 4: at the end of the Biden administration. We did a
Speaker 4: study on that, you know, we being S ANDP and
Speaker 4: the Commodity Insight team there and concluded that we have
Speaker 4: a lot of natural gas so that it's not a
Speaker 4: threat in terms of prices. Natural gas is not as
Speaker 4: constrained as oil.
Speaker 2: What about nuclear? We've gone this entire conversation without talking
Speaker 2: about nuclear, but nuclear, you know, could solve all these
Speaker 2: problems well.
Speaker 4: And it's also interesting because that circles back to one
Speaker 4: of the points we talked about before, because you say, well,
Speaker 4: what's brought nuclear back? Partly it's you know, just time,
Speaker 4: Partly its need, but I think it's also the entry
Speaker 4: of the tech companies from being just consumers, you know,
Speaker 4: for software, to really worrying about data centers. And you
Speaker 4: look at it last time I looked, there's been six
Speaker 4: billion dollars of venture capital infusion. Nobody ever used to
Speaker 4: do venture capital in fusion. That was what the government
Speaker 4: did because it was fifty years away. And we had
Speaker 4: an event at our SERRAH conference in Houston this year
Speaker 4: where we had Commonwealth Fusion, which came out of MIT.
Speaker 4: The head of the largest, the main utility in Virginia
Speaker 4: and the governor of Virginia saying, you know, we think
Speaker 4: we're going to have fusion here by twenty thirty two.
Speaker 4: So nuclear is definitely back. Small modular reactors are a
Speaker 4: hot topic. I think the first ones will be deployed
Speaker 4: around twenty thirty.
Speaker 3: So you think they're actually going to happen because this
Speaker 3: seems like another technology that's always five or ten years old.
Speaker 4: Well, I think it's going to happen, But I think
Speaker 4: the test will be then can you bring down the
Speaker 4: cost and is it a more flexible way to add nuclear?
Speaker 4: But it is. I think that it's really the tech
Speaker 4: companies who I mean there you had Amazon investing in
Speaker 4: one of the SMR companies with the notion that they
Speaker 4: will then buy successive reactors with the idea that each
Speaker 4: one the cost will come down. Now that will still
Speaker 4: be tested. It still has to go through a regulatory
Speaker 4: process at the Nuclear Regulatory Commission and all of that,
Speaker 4: but there's certainly you have the sort of entrepreneurial Silicon
Speaker 4: Valley spirit now imbued into nuclear, which of course is
Speaker 4: not an overnight thing, but it is back on the agenda,
Speaker 4: and I think history will go back and say, in
Speaker 4: Germany Chancellor Mercles one of her two biggest mistakes was
Speaker 4: shutting down the nuclear basically in a weekend. Well was
Speaker 4: the other and that was and that was twenty five
Speaker 4: percent of her electricityke The other mistake was saying, you know, immigration,
Speaker 4: the door is open.
Speaker 2: This might be a dumb question, but you know, if it's.
Speaker 4: Not such any dumb there's not such a thing. I
Speaker 4: better watch out now.
Speaker 2: Okay, But if Amazon or someone invests in a small
Speaker 2: nuclear reactor or some other type of energy plant, how
Speaker 2: are those agreements actually structured in terms of the off take?
Speaker 2: Because I assume they get priority, and then does whatever
Speaker 2: is left over get sent into the grid?
Speaker 4: Well, I guess it depends if it is a reactor
Speaker 4: that's owned by a utility, or is it possible that
Speaker 4: these would be like merchant nuclear reactors. You have seen
Speaker 4: examples already where some of the I guess we used
Speaker 4: to call them big tech. Now we call them hyperscalers.
Speaker 3: When did that happen? We just all started using that term.
Speaker 4: Yeah, exactly. I think it's about a year. Yeah, I
Speaker 4: mean for the first time you had to think, what's
Speaker 4: a hyperscale? Is like an elephant, But it's scaling. But
Speaker 4: where they've signed where they will take the entire off
Speaker 4: take of nuclear power plant. So they are very these
Speaker 4: companies are very concerned about power because it's so electricity intensive.
Speaker 4: The other day there was a story saying that the
Speaker 4: two data centers that that Elon muskis building in Memphis
Speaker 4: will use more electricity than all the households. So this
Speaker 4: is a big issue for regulators of what are you
Speaker 4: going back to the question you raised before about who
Speaker 4: pays for this? How do these costs get disaggregated?
Speaker 3: Right now, you mentioned electricity costs having gone up faster
Speaker 3: than inflation. Right now, can we draw a line between
Speaker 3: these prices and the data enter boom or is this
Speaker 3: two things that happened to be happening. Well, I've seen
Speaker 3: different views on how directly data centers are right now.
Speaker 4: I think it's it's part of it, but it's just
Speaker 4: the general increase of demand, including you know, evs, although
Speaker 4: not on the scale that had been envisioned, So all
Speaker 4: those things and just having I mean, we had gone
Speaker 4: for twenty five years with flat demand in electricity the
Speaker 4: United States then and now it's just recently that it
Speaker 4: started to grow again. And so you have a whole
Speaker 4: generation of utilities who've grown up in flat demand and
Speaker 4: now figuring out how do you get things built, how
Speaker 4: do you get into the regulatory process, and even when
Speaker 4: you get it approved and you end up in court
Speaker 4: because somebody challenges it.
Speaker 2: Are we ever going to solve the energy problem?
Speaker 4: No? I think it will just I mean, it will
Speaker 4: always be there as long as industrial society will be
Speaker 4: one form or another. Maybe fusion, the dream.
Speaker 2: Of ah fusion. Yes, I used to play some city
Speaker 2: and that was all was the ultimate goal. You work
Speaker 2: out from the gas plant to nuclear and then to.
Speaker 4: Confusion solves everything. But it's also striking to me what
Speaker 4: I've noticed, you know, having studied the energy for you know,
Speaker 4: some time that you get a consensus about energy and
Speaker 4: it lasts about three years and then something new comes
Speaker 4: along and just changes the view.
Speaker 3: Are past periods we actually talked, we talked a little
Speaker 3: bit about the late nineties when there's the gas boom.
Speaker 3: Then are there any other past periods that people should
Speaker 3: study right now that might help them form the current environment.
Speaker 4: Well, I think that what we have to remember, which
Speaker 4: to me is absolutely critical, is energy security, and that
Speaker 4: it gets forgotten. And for me, I have this story
Speaker 4: and the prize about Winston Churchill converting the Royal Navy
Speaker 4: from coal to oil before the First World War, which
Speaker 4: to me is that is what made oil a strategic commodity,
Speaker 4: that transition.
Speaker 3: Why do you do that?
Speaker 4: He did it because he gained speed, flexibility, you didn't
Speaker 4: need to have all these guys shoving coal on board,
Speaker 4: and you gained thirty percent extra cargo space.
Speaker 2: That's the very start of the book, right, that's opening exactly.
Speaker 4: And I've always thought that phrase. He said safety in oil,
Speaker 4: but we could say an energy lies in variety and
Speaker 4: rite alone that you don't want to be overdependent on anything.
Speaker 4: You want variety, whether in terms of your suppliers, in
Speaker 4: terms of your sources.
Speaker 3: We're never going to bring whale oil back, you know.
Speaker 4: I said there's not a single energy source that has
Speaker 4: not increased, even wood has increased. The only one that
Speaker 4: hasn't increased is whale oil.
Speaker 2: All right, joke and dream, I guess Dan Jurgen, author
Speaker 2: of the probably I'm pretty sure, the best book on
Speaker 2: the oil market ever, thank you so much for coming
Speaker 2: on all thoughts.
Speaker 4: Thank you.
Speaker 2: It's great, Joe, that was so much fun. I'm so
Speaker 2: glad we finally got to take You can't.
Speaker 3: Believe it took us that long to talk to Dan,
Speaker 3: but that was great.
Speaker 2: I know, well, fortuitous meeting in Washington, DC. I gotta
Speaker 2: say his point about the sort of interconnection between energy
Speaker 2: and technology, Definitely, it does seem to be a driving force, right,
Speaker 2: And as soon as you get new advancements in weaponry
Speaker 2: or transport or in this case software, you do tend
Speaker 2: to get a sudden like rethinking of what your energy
Speaker 2: needs actually are or some sort of transition.
Speaker 3: And then on the flip side, like if you ever
Speaker 3: are in an era of energy surplus, you're gonna find
Speaker 3: something to do with it. Yeah, Like you never just
Speaker 3: sit around it, like here's a bunch of cheap energy,
Speaker 3: let's not do anything.
Speaker 2: With Although China is stockpiling successfully, right.
Speaker 3: Well, they are stockpiling. We don't know for what exactly,
Speaker 3: but yes.
Speaker 2: They haven't spent it yet.
Speaker 3: They haven't spent it yet, although they're spending I guess
Speaker 3: sense to acquire all the oil. It does feel to me,
Speaker 3: And it's not like this is that new, but there
Speaker 3: was a phase in probably the US and Europe in
Speaker 3: the late twenty tens, and maybe it extended through twenty
Speaker 3: twenty magical thinking with respect to energy being solved. We're
Speaker 3: you know that there is just like this, like clear
Speaker 3: path towards cheap, clean, abundant energy and some sort of
Speaker 3: realities clearly smacked a lot of policymakers in the face.
Speaker 3: And I guess the question is how locked into current
Speaker 3: plans are they? What has to give? It does feel
Speaker 3: like in Europe specifically, the constraints when it comes to industry, energy,
Speaker 3: climate security are pretty real.
Speaker 2: It seems to me like the big problem is the
Speaker 2: cyclicality of the industry, Like you're constantly going through booms
Speaker 2: and bus and as soon as you get a boom
Speaker 2: in oil production, it inevitably leads to a collapse in
Speaker 2: oil prices, and then you struggle to build out capacity
Speaker 2: for years and years, and then there's not enough oil,
Speaker 2: and then prices start to rise and everyone goes back
Speaker 2: in again. If we could find some way to moderate that,
Speaker 2: I don't know how you would do it, but that
Speaker 2: might be a way forward.
Speaker 3: I feel like an underrated element of the Chinese economic
Speaker 3: story over the last however many decades has just been
Speaker 3: this like sustained boom without major downturn, et cetera. And
Speaker 3: so then you don't get these like big periods of
Speaker 3: people leaving an industry or whatever that are really hard
Speaker 3: to escape out of. It's like I sort of think
Speaker 3: the cure for the boom bus cycle is just perpetual boom,
Speaker 3: Like that's the answer. Just always be booming, always be booming, booming.
Speaker 2: I like that, But I also have to say China
Speaker 2: as a source of energy demand. You know, they're buying
Speaker 2: for stockpiles right now, but they're using so many electric
Speaker 2: vehicles that their gas consumption is actually going down. Gasoline
Speaker 2: very impressive. All right, shall we leave it there.
Speaker 3: Let's leave it there.
Speaker 2: This has been another episode of the All Thoughts podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3: And I'm Jill wasn't the Oh. You can follow me
Speaker 3: at the Stalwart, follow our producers Kerman Rodriguez at Kerman
Speaker 3: armand Dshel Bennett at Dashbot and Kilbrooks at Kilbrooks. From
Speaker 3: more Oddlots content, go to Bloomberg dot com slash odd Lots.
Speaker 3: We've a daily newsletter and all of our episodes, and
Speaker 3: you can chat about all of these topics twenty four
Speaker 3: seven in our discord Discord dot gg slash odd Lots.
Speaker 2: And if you enjoy odd Lots, if you like it
Speaker 2: when we talk about the future landscape of the energy industry,
Speaker 2: then please leave us a positive review on your favorite
Speaker 2: podcast platform. And remember, if you are a Bloomberg subscriber,
Speaker 2: you can listen to all of our episodes absolutely ad free.
Speaker 2: All you need to do is find the Bloomberg channel
Speaker 2: on Apple Podcasts and follow the instructions there. Thanks for listening,
Speaker 2: E