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Speaker 1: Hello, and welcome to another episode of the Odd Logs Podcast.

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Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 1: Tracy, remember a couple of years ago, you know, when

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Speaker 1: like oil prices started booming and there was this big

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Speaker 1: story that like production wasn't coming back. Then all these

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Speaker 1: oil companies had found discipline, they were all focusing on profits,

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Speaker 1: et cetera, not just volume, and that the expectation would

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Speaker 1: be that production would be depressed for a long time.

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Speaker 2: Wait, I don't think it wasn't that production was ever

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Speaker 2: coming back. It was that production would slow substantially. And

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Speaker 2: the idea was that this is one part of the

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Speaker 2: oil boom story of the sort of mid twenty tens

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Speaker 2: that always fascinated me was it was actually a capital

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Speaker 2: market story. So it was all these investors who just

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Speaker 2: poured money into shale oil basically and thought they were

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Speaker 2: going to make millions and millions. Shale completely over expanded.

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Speaker 2: It became very very difficult for them to actually pump

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Speaker 2: at a profit, and so they all started collapsing. They

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Speaker 2: all started pulling back. All the investors got burned and

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Speaker 2: they were like, we're never going to touch this industry

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Speaker 2: with a ten foot pole ever again, and then lo

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Speaker 2: and behold. In sort of the early twenty twenties, shale

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Speaker 2: starts to become profitable again. It starts to expand. It

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Speaker 2: says it's expanding at a more disciplined pace than previously.

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Speaker 2: But I have questions about that. But yeah, it's all changed,

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Speaker 2: it's all turned around.

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Speaker 1: Yeah, I'm glad. You know, you brought up that capital

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Speaker 1: markets aspect that did seem to be you know, this

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Speaker 1: idea of depressed production seemed to be all part and

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Speaker 1: parcel of that that suddenly financial conditions were tightening, that

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Speaker 1: the market was placing this premium in this new nonser

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Speaker 1: world of you know, cash flow today, et cetera. And

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Speaker 1: so like, I'm slowly confused, like what exactly happened with

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Speaker 1: bad story? You know, there's lots of things. As production

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Speaker 1: has come back, it seems like investors are still into

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Speaker 1: the space. Prices have come down. Then there's all kinds

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Speaker 1: of obviously geopolitical stuff going on. It seems like it's

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Speaker 1: a time to sort of take stock of what's going

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Speaker 1: on in the energy world.

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Speaker 2: Yeah, well, US oil production in particular, right, I mean,

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Speaker 2: I think that's an all time high. I actually if

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Speaker 2: you look at domestic production in the US, I think

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Speaker 2: it's something like thirteen million barrels of crude per day

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Speaker 2: and twenty million including you know, energy and things like that,

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Speaker 2: So an all time high. And it means that US

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Speaker 2: oil basically accounts for one of every eight barrels of

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Speaker 2: global outputs. So pretty big stuff there.

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Speaker 1: Yeah, pretty extraordinary. So what happened to all the narratives?

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Speaker 1: Is production coming back? Why I have prices falling? I'm

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Speaker 1: very pleased to bring in the person we always love

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Speaker 1: to turn to when it comes to oil and energy.

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Speaker 1: We're going to be speaking to our colleague, Javier Blast,

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Speaker 1: Bloomberg opinion columnists on oil and energy. Have you thank

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Speaker 1: you so much for coming back on outlaws.

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Speaker 3: Thank you for having me again?

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Speaker 1: Have you? What is the deal with that? So like

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Speaker 1: we're back at records again in the US production.

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Speaker 4: We add two record levels and it's just an incredible number.

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Speaker 4: As Tracey said, if you look just at what we

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Speaker 4: say is crude oil, it's more than thirteen million borrows

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Speaker 4: a day. But if you add on top of that

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Speaker 4: number other things that they go into the oil liquids

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Speaker 4: streams or like condensates and NGLs or natural gas liquids,

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Speaker 4: a bit of ethanol, et.

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Speaker 3: Cetera, et cetera.

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Speaker 4: We are well above twenty million borrows a day of

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Speaker 4: oil production. That compares to one hundred million worldwide. So

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Speaker 4: you put everything together, the US is producing one in

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Speaker 4: five barrels of oil consumed. That is just an incredibly

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Speaker 4: high number, and it doesn't seem to be about to stop.

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Speaker 4: Probably it's gonna low down a bit in twenty twenty four,

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Speaker 4: but he's going to continue to go up.

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Speaker 2: Okay, where is all that new oil actually coming from?

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Speaker 2: Because it's been a while since I've brought up the

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Speaker 2: rig count chart, But if you look at the rig

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Speaker 2: count chart, I mean, this is such a fun one

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Speaker 2: because you can see the big humps of the early

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Speaker 2: twenty tens and then the big slide into twenty fifteen,

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Speaker 2: and now it seems kind of flat. So there's been

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Speaker 2: some increase between twenty twenty and twenty twenty two. The

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Speaker 2: number of new rigs being drilled has gone up, but

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Speaker 2: it's not like it's not like we're seeing a boom

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Speaker 2: in new gas rigs and new explorations. So where is

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Speaker 2: all this oil coming from?

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Speaker 4: Well, it's coming from the very same places that it

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Speaker 4: was coming about ten years ago. But it's coming in

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Speaker 4: some way, for lack of a better war better. So

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Speaker 4: it's coming from Texas, it's coming from New Mexico, and

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Speaker 4: it's coming up bit from North Dakota, Oklahoma, et cetera. Exitise,

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Speaker 4: it's coming from the shale regions of the United States.

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Speaker 4: But we were to say where in just one single

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Speaker 4: or two or in this case three single words, is

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Speaker 4: Texas and New Mexico. That's where the new oil is coming.

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Speaker 4: And you're right, Tracy, the recount is not significantly up. Actually,

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Speaker 4: if you look at from a long perspective, it's lower

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Speaker 4: than it was during the previous booms of shale. But

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Speaker 4: it's just that the oil companies in Texas and New

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Speaker 4: Mexico have got very good at distracting more oil from

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Speaker 4: those ricks from those wells that they are drilling, and

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Speaker 4: they're also doing much longer well s.

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Speaker 3: If you think about.

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Speaker 4: How an oil shale well looks like, it first goes

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Speaker 4: down vertically and then it just turns around ninety degrees

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Speaker 4: and it goes horizontal for a while. At the beginning,

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Speaker 4: those horizontal wells were relatively short. Perhaps you know, a

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Speaker 4: quarter of a mile half a mile at most. Now

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Speaker 4: they're going as much as three miles Antonia, and that

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Speaker 4: they can get a lot more oil that they were

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Speaker 4: able to do a few years back.

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Speaker 3: So it's important.

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Speaker 1: We're going to talk a lot about the capital market.

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Speaker 1: It's an investor aspect, but it's impart just like ongoing

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Speaker 1: technological improvements as well. What else is happening on this

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Speaker 1: sort of Oh?

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Speaker 2: So can I read? Sorry, I never get a chance

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Speaker 2: to do this. Can I read one of my all

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Speaker 2: time favorite leads from a story that is all about

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Speaker 2: technological improvements? Oil drilling? Okay, okay, Javier, Joe, you guys

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Speaker 2: are ready, I'm gonna read it.

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Speaker 3: Okay.

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Speaker 2: This is a story from twenty sixteen. Last spring, stat

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Speaker 2: Oil announced it had used the same oil well design

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Speaker 2: and components to drill three reservoirs for the price of one.

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Speaker 2: While the specs for Norwegian sea drilling might provoke reactions

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Speaker 2: akin to the oil field's name, the snore, such standardized

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Speaker 2: pipes and casings could hold the key to a pervasive

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Speaker 2: mystery about today's energy market. Why is everyone still drilling

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Speaker 2: when prices are in the man snort? Get it?

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Speaker 3: Oh that's good.

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Speaker 2: Maybe you have to read it.

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Speaker 1: So that really held up well. So what changes twenty

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Speaker 1: sixteen have.

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Speaker 4: You Well, technologically wise, we can read longer, particularly the laterals.

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Speaker 4: We can pump fracking fluids at the higher pressure, and

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Speaker 4: companies are also very good at doing this super quick

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Speaker 4: and previously a well could have taken thirty days.

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Speaker 3: Now it takes ten.

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Speaker 4: They just companies and the crews have got very good

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Speaker 4: at doing it, and that means that they can do

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Speaker 4: it cheaply. And that's the funny part of the whole

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Speaker 4: boom of twenty twenty three and twenty twenty four, a

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Speaker 4: difference of the previous ones. Companies are making money and

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Speaker 4: investors are making money, so everyone is loving it. This

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Speaker 4: is the first time, and this is what really terrorized

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Speaker 4: or PEG. This is the first time that shale oil

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Speaker 4: is growing and making money at the same time, and

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Speaker 4: that's a big problem in you are Saudi Arabia.

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Speaker 2: I definitely want to get to the possible response from Peck.

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Speaker 2: But just in terms of technology, I mean one of

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Speaker 2: the things and the reason I brought up that story,

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Speaker 2: it was the idea of standardization. So before you used

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Speaker 2: to have all these bespoke custom fittings for oil rigs

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Speaker 2: or platforms or whatever. But then I think there was

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Speaker 2: actually like an industry wide effort or attempt to start

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Speaker 2: standardizing some of these things so you didn't have to

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Speaker 2: order a bespoke component for every single oil project that

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Speaker 2: you were doing, and that seems to have helped make

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Speaker 2: things go faster to Havier's point, and also brought down costs.

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Speaker 2: How much of a big deal is that in the industry.

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Speaker 4: It is a big deal. I mean it has happened

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Speaker 4: everywhere in the oil industry. Let me give you my

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Speaker 4: favorite anecdote of a standards asia, please in the oil industry.

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Speaker 4: So you are working on a Norsea oil platform. This

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Speaker 4: is offshore outside Norway and and the United Kingdom. You

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Speaker 4: need to paint a lot of the staff yello kind

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Speaker 4: of you know, yellow, danger, very busy ball et cetera,

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Speaker 4: et cetera, very stormy areas of the wall the Norsea folk.

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Speaker 3: You get the kind.

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Speaker 4: It's not the kind of place that you really want

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Speaker 4: to spend an evening in winter there. So every company

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Speaker 4: have their own shade of yello. They were nineteen different

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Speaker 4: kinds of yello to paint things in the Norsea. Each

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Speaker 4: company have their own shade with their own specification.

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Speaker 3: And it was just ridiculous.

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Speaker 4: So at one point a few engineers in the industry

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Speaker 4: got together and said, well, this is a bit ridiculous.

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Speaker 3: I mean, can we're not just doing like a Yello norsea.

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Speaker 4: And so they got together and everyone decided this is

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Speaker 4: the shade of Jello that we're going to use. And

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Speaker 4: now everyone is painting everything that they need to paint

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Speaker 4: in Yello with the same shade. That at a much

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Speaker 4: bigger scale has happened across the oil industry. Everything has

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Speaker 4: got a standard, and companies within themselves they like to

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Speaker 4: do everything best spoke. They really in some ways gold

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Speaker 4: plated a lot of projects, so each well was a

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Speaker 4: bit different to the other one. Now companies are designing

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Speaker 4: one single design and when they I've really thought, okay,

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Speaker 4: this is it. This really works very well. Now copy

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Speaker 4: and paste for the next twenty five fifty one hundred wells.

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Speaker 4: And that has cut costs significantly.

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Speaker 1: I love the fact that like just something as simple

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Speaker 1: as the color.

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Speaker 2: Painting of I'm imagining a room full of oil executives

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Speaker 2: looking at different swatches of yellow and being like, no,

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Speaker 2: that one's too orange. Can we get something a little

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Speaker 2: bit more buttermilk.

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Speaker 4: Maybe I will love to be the competition lawyer who

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Speaker 4: has to stop it on the meeting to make sure

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Speaker 4: that no one is saying anything inappropriate that the Department

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Speaker 4: of Justice could get us, like there was a conspiracy

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Speaker 4: for the yellow color.

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Speaker 1: Yeah, I'll looking at the different panton of shades, but

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Speaker 1: gotta do so in a legal way. All right, Let's

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Speaker 1: talk about the capital markets aspect, because you know, it

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Speaker 1: did seem like the way people thought about it was

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Speaker 1: that the industry face had to face a choice. Would

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Speaker 1: it be pursuing volume or would it be pursuing profitability?

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Speaker 1: And as you just said, like there seems to be

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Speaker 1: this very weird situation in which volume is ramping and

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Speaker 1: productivity is sustained. How is that happening? And how sustainable

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Speaker 1: is that?

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Speaker 4: Well to the question of how long how sustainable? I'm

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Speaker 4: gonna be honest. I either know. I thought that production

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Speaker 4: growth will have a slow down in twenty twenty three,

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Speaker 4: and it never happened.

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Speaker 3: It did the opposite. They accelerated.

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Speaker 4: You look to every oil executive, if you look at

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Speaker 4: the forecasters of the industry, everyone is saying it's gonna

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Speaker 4: sloan in twenty twenty four. But also they said the

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Speaker 4: same for twenty twenty three and they were wrong, So

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Speaker 4: we'll see what happens really. But yes, I mean the

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Speaker 4: industry went into this new era thinking about profitability, So

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Speaker 4: everyone cut kapex, everyone tried to get more efficient, and

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Speaker 4: everyone thought that production growth was going to slow down

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Speaker 4: because the focus was profitability. The fact that they were

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Speaker 4: able to grow quite strongly came a bit of a

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Speaker 4: surprise to the industry and then everyone kind of, you know,

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Speaker 4: celebrated it. But here there is a very important question.

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Speaker 4: If OPEK have not cut production to make room for

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Speaker 4: all these new shale oil from the United States, prices

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Speaker 4: will have come down, and then the industry will have

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Speaker 4: faced the same kind of dilemma of the past. You

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Speaker 4: are producing too much, then the prices come down, your

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Speaker 4: profitability comes down, and then you have a problem. So

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Speaker 4: a lot of these that we are putting based on efficiency,

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Speaker 4: it's true. But if not for OPEC cutting production and

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Speaker 4: keeping prices about seventy dollars a barrel, then shale companies

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Speaker 4: will be in trouble.

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Speaker 2: One thing I'm really curious about is who is actually

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Speaker 2: funding production now. Versus say in the early twenty tens.

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Speaker 1: And just to add on to that a little bit,

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Speaker 1: is there any difference between private, publicly traded domestic US players.

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Speaker 4: Okay, so let's go from parts on Tracy's question, who

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Speaker 4: is founding this well? Back ten years ago, five years ago,

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Speaker 4: it was Waller Street. It was a mix of equity

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Speaker 4: and credit markets which were founding or all of these

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Speaker 4: growth through different instruments. I mean, sometimes it was just

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Speaker 4: issue of fresh equity. Sometimes it was bond high till bonds,

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Speaker 4: research lending, where a bank is lending to an oil

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Speaker 4: company based on the research underground, more or less like

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Speaker 4: a mortgage rather than a house. You mortgage the oil

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Speaker 4: research that they are underground, and a lot of that

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Speaker 4: is still there, but a lot of the money now

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Speaker 4: needed for the expansion and to finance in all these

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Speaker 4: new growth is coming from cash flow. Generation is the

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Speaker 4: internal cash flow of these companies. They generate enough cash

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Speaker 4: to pay for all the new drilling that they are doing,

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Speaker 4: to pay for all the capital investment that they need

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Speaker 4: to do alongside new pipelines, et cetera, and to pay

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Speaker 4: the shareholders. These companies now for the very first time,

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Speaker 4: are paying dividends and that's that sounds like well companies,

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Speaker 4: publicly listed companies would be paying dividends, that that's like normal.

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Speaker 4: Well that was not the case a few years back,

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Speaker 4: but now they're generat enough cash to do all of

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Speaker 4: them both. And in terms of there is there a difference. Yes,

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Speaker 4: publicly listed companies have been a bit more caustios. They

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Speaker 4: have been trying to They have the shareholders, they have

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Speaker 4: wall strips on top of them, and they have to

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Speaker 4: really try to focus as much as possible on paying

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Speaker 4: dividends and buying back shares privately on they don't have

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Speaker 4: that pressure, that super strong pressure, so they have done

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Speaker 4: a bit more of growing, and there is a suspicion

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Speaker 4: in the industry. A lot of that growth was to

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Speaker 4: try to maximize the amount of production that you are

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Speaker 4: doing so you can sell yourself to a big player,

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Speaker 4: say Exomobile or Chevron, and perhaps that's not as sustainable

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Speaker 4: as it looks like.

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Speaker 1: Talk more about OPEK, because you mentioned that US shell

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Speaker 1: has benefited from OPEC cutting production. You know, I remember,

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Speaker 1: I guess it was twenty fifty fifteen, I think when

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Speaker 1: OPEK did that huge increase in production to try to

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Speaker 1: kneecap us shell. Why are they sort of I guess

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Speaker 1: in alignment these days where OPEC's impulse to maintain production

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Speaker 1: is good for Opek, but also I guess clearly as

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Speaker 1: you say, benefiting US production.

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Speaker 4: Well, Opek is trying to keep oil prices as closed

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Speaker 4: as he can to one hundred dollars. It's not as

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Speaker 4: successful as they will hope. Prices have been between seventy

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Speaker 4: and eighty despite a lot of geopolitical tension that you

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Speaker 4: wually mind will have pushed prices even higher. I think

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Speaker 4: that the key question here is that OPEK is convenced

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Speaker 4: that this is a bit of a bleep that at

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Speaker 4: some point the growth in US production slows down, the

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Speaker 4: demand remains there, the annual demand growth remains there, and

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Speaker 4: then they have room to expand their production to bring

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Speaker 4: some of the production that they have taken off the market.

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Speaker 3: Now so they were able to bring it back and.

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Speaker 4: I was, to be honest, the same kind of bed

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Speaker 4: that Opek made in twenty eleven twenty twelve. You know,

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Speaker 4: this is a blip. Usl growth is going to slow

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Speaker 4: down at some point and after a few years, by

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Speaker 4: twenty and fifteen, twenty sixteen, they cannot discovered Actually, no,

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Speaker 4: this is not working. At seventy five eighty one hundred

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Speaker 4: dollars oil. These guys can grow and they can grow forever.

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Speaker 4: We need to change the strategy. And that's when OPEK

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Speaker 4: decided to float the market kill prices. The price of

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Speaker 4: West Texas and a brand crew the two global benchmark

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Speaker 4: collapsed to thirty dollars a barrel, and that's what really

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Speaker 4: brought down shale growth for a few years. The jury

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Speaker 4: is out whether they're making the same mistake or not,

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Speaker 4: and I think that we are going to see it

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Speaker 4: by the middle of this year, at most Q three

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Speaker 4: of this year. We are going to see whether ushale

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Speaker 4: really is slowing down or not, and whether demand is

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Speaker 4: either sustaining the growth or where you need to see

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Speaker 4: a slowdown in demand because you know, electric vehicles and

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Speaker 4: more energy efficiency, et cetera, et cetera. So this is

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Speaker 4: this is a very important year for OPEK because if

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Speaker 4: it doesn't really go as plan, OPEK really needs to

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Speaker 4: change the strategy completely.

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Speaker 2: What can it do in that scenario.

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Speaker 3: Well, they can only do two things.

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Speaker 4: One is to accept that you know, the one current

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Speaker 4: prices of seventy five dollars, plus they need to cut

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Speaker 4: even more production, giving shale more share of the market,

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Speaker 4: or they accept that they need to bring prices down

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Speaker 4: because shale can grow at seventy five dollars and perhaps

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Speaker 4: cannot grow at say fifty or forty and then OPEK

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Speaker 4: and that's how the Arabbia puts a lot more production

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Speaker 4: into the market and triggers a crash.

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Speaker 3: But that means lower prices for OPEK.

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Speaker 2: Yeah, and it didn't really work the last time because

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Speaker 2: it just incentivized everyone to cut costs and streamline and

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Speaker 2: become more efficient.

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Speaker 4: Indeed, you're absolutely right, and on both options means lower revenue,

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Speaker 4: either because you are producing less or because you are

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Speaker 4: accepting lower oil prices.

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Speaker 3: But if the strategy of OPEK.

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Speaker 4: Doesn't work, and I am not really one hundred percent

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Speaker 4: sure that OPEK really has a much of a strategy

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Speaker 4: of the next six months, I think that they are

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Speaker 4: holding the line for the next six months and then

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Speaker 4: they will.

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Speaker 3: See what they do.

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Speaker 4: But if they are wrong, it means a period of

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Speaker 4: lower revenues for open countries and that will be very painful.

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Speaker 4: Just in mind, lower revenues when you have experience a

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Speaker 4: significant increase in inflation. That means that the purchasing power

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Speaker 4: of your barrel goes even lower. That's very painful for

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Speaker 4: Saudi Arabia.

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Speaker 2: This is a slightly off topic question, but shale producers

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Speaker 2: in the US cannot join OPEK right because we do

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Speaker 2: not like price fixing cartels.

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Speaker 3: I think that the Department of Justice may have one

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Speaker 3: or two.

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Speaker 2: Yeah, it might have something to say, yeah, you know.

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Speaker 4: Like no, I mean, it's not a completely you know,

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Speaker 4: it's not a crazy question.

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Speaker 3: Tracy Texas.

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Speaker 2: I know it's come up every once in a while.

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Speaker 4: The State of Texas sent observice to OPEK meetings in

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Speaker 4: the eighties. They never joined, but actually they sent up

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Speaker 4: service and the state of Alaska so send observers to

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Speaker 4: the OPEC meetings. I mean they will be you know,

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Speaker 4: an American gentleman sit down during the OPEC meeting as

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Speaker 4: an observer.

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Speaker 3: I mean, I think at.

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Speaker 4: Some point cool heads and so legal advice decided that

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Speaker 4: I was not very cool.

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Speaker 1: It's funny the things that like one remembers from like

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Speaker 1: the sort of fever swamp days of spring twenty twenty

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Speaker 1: during the peak of the pandemic. But I just remember

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Speaker 1: there was like some like railroad commissioner in Texas, and

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Speaker 1: of course the Railroad commission in Texas is the oil regulator.

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Speaker 3: There was some oil.

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Speaker 1: There was some railroad commissioner who was like trying to

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Speaker 1: like do diplomacy with Opek in the middle of it.

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Speaker 1: I can't remember his name, but he was like some

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Speaker 1: guy on Twitter. Do you guys remember that?

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Speaker 3: Yes, there was someone. I cannot remember one hundred percent,

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Speaker 3: but I will come back.

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Speaker 2: It was.

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Speaker 1: Yeah, there was some random guys.

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Speaker 3: Let's not forget that.

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Speaker 4: When Opek and an Opek plush with this this alliance

386
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Speaker 4: between Opek and and other oil producers including Russia, they

387
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Speaker 4: were negotiating how to respond to the pandemic and just

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Speaker 4: basically trying to agree how to split a ten million

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Speaker 4: bottles that they cut. Ten percent of global oil production

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Speaker 4: was taken out of the market by Opek and his allies.

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Speaker 4: A lot of the negotiations Donald Trump. That the point

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Speaker 4: President Donald Trump was heavily involved. I mean, the whole

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Speaker 4: final deal was effectively cook on a three way phone

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Speaker 4: conversation between President Donald Trump, President bladymir Putting, which was

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Speaker 4: still you know, negotiating these things with the White House

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Speaker 4: face to face effectively and King salmon or Saudi Arabia,

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Speaker 4: So the US in some ways it was not part

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Speaker 4: of the cartel or anything like that, but it was

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Speaker 4: participating in the conversations.

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Speaker 3: And Trump got actually acquired.

401
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Speaker 4: A sweet deal because he got the saudiast and the

402
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Speaker 4: Russians to agree to cut production. Why the US industry

403
00:21:00,920 --> 00:21:02,040
Speaker 4: got absolutely nothing.

404
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Speaker 1: I think his name. He even wrote a Bloomberg opinion

405
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Speaker 1: column in March March twenty, twenty twenty. Ryan Sitton was

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Speaker 1: his name. The railroad commissioner who called on OPEK to

407
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Speaker 1: coordinate with the US in constraining supply. I want to

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Speaker 1: pivot for a second and talk about the Red Sea,

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Speaker 1: and we talked about it a couple of weeks ago

410
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Speaker 1: with the context of container freight. What is the rising

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Speaker 1: tensions there? We recently saw the US strike at uti Asset.

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Speaker 1: What is the rising tension there mean from an oil perspective.

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Speaker 3: Well, it's more or less a binary situation.

414
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Speaker 4: As long as the straight Hormos, which is the big

415
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Speaker 4: outlet from the Persian Gulf for countries like Kubey or

416
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Speaker 4: Saudi Arabia into the open markets, as long as that

417
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Speaker 4: remains open. What's happening on the Red Sea is of

418
00:21:53,040 --> 00:21:57,159
Speaker 4: less importance. Yes, it's gonna mean an increasing cause because

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Speaker 4: a lot of the oil tankers and also the lng CA,

420
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Speaker 4: this is liquefied natural gas carriers, they're gonna have to

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Speaker 4: divert about the Red Sea and go around Africa. That

422
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Speaker 4: ads from the person Gulf into Europe. That ads probably

423
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Speaker 4: a good ten to fifteen days extra. So you know,

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Speaker 4: it's not as small and it could really increase the

425
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Speaker 4: cost of shipping, but it's not the end of the world.

426
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Speaker 4: And that's what the oil market is taking it quite relaxed.

427
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Speaker 4: I mean, prices has barely increased over the last few days.

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Speaker 3: But then you could think.

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Speaker 4: Well, okay, so that is basically on a scale of

430
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Speaker 4: one to ten, probably that's a two, maybe a three.

431
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Speaker 4: What is the other scenario? Where the other scenario is

432
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Speaker 4: the you know, open five with Iran, not with his proxies,

433
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Speaker 4: the hoodies in Germen, but actually with Iran and the

434
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Speaker 4: straight of hormones from somehow gets in trouble. Shipping is

435
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Speaker 4: more difficult through it probably is not completely close, but

436
00:22:54,040 --> 00:22:56,600
Speaker 4: things get really bad, and that on a scale of

437
00:22:56,600 --> 00:22:59,479
Speaker 4: one to ten, that's probably twenty five. And that's the problem.

438
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Speaker 4: That's what I say, it's a bit of a binary

439
00:23:01,280 --> 00:23:05,200
Speaker 4: situation at the moment. Are we well so so far

440
00:23:05,320 --> 00:23:05,960
Speaker 4: not so bad.

441
00:23:06,160 --> 00:23:09,320
Speaker 2: Could it mean that more LNG gets exported from the

442
00:23:09,480 --> 00:23:12,760
Speaker 2: US to Europe. That seems to be the obvious solution, right.

443
00:23:12,760 --> 00:23:15,240
Speaker 4: Yeah, The obvious solution is that all the Atlantic LENG

444
00:23:15,440 --> 00:23:17,639
Speaker 4: goes into euro So that's the US, but also in

445
00:23:17,720 --> 00:23:20,800
Speaker 4: Nigeria trily that that's gonna go as much as possible

446
00:23:20,840 --> 00:23:25,560
Speaker 4: to Europe, and then all the non Atlantic basin LENG.

447
00:23:25,600 --> 00:23:26,640
Speaker 3: Goes to Asia.

448
00:23:26,720 --> 00:23:29,399
Speaker 4: So Gutar will try to radio rect as much of

449
00:23:29,560 --> 00:23:32,680
Speaker 4: the LEG that they can into into Asia. I could

450
00:23:32,720 --> 00:23:37,120
Speaker 4: provide some training opportunities for LNG exporters in the United States.

451
00:23:37,160 --> 00:23:40,440
Speaker 4: And let's not forget that means also more Russian leg

452
00:23:40,680 --> 00:23:43,520
Speaker 4: is gonna remain in Europe rather than going into Asia

453
00:23:43,640 --> 00:23:46,560
Speaker 4: because Europe continues buying LERG from Russia. I mean, we

454
00:23:46,640 --> 00:23:50,840
Speaker 4: stop buying Russian gas through pipeline, but LEG is free

455
00:23:50,880 --> 00:23:51,160
Speaker 4: for all.

456
00:24:07,720 --> 00:24:10,159
Speaker 1: Real quickly, just going back to the Opek conversation, I

457
00:24:10,240 --> 00:24:12,080
Speaker 1: just remembered one of the other things that we talked

458
00:24:12,080 --> 00:24:15,000
Speaker 1: about a lot, I think in like twenty twenty two

459
00:24:15,240 --> 00:24:17,360
Speaker 1: was just that, you know, setting aside what was going

460
00:24:17,400 --> 00:24:20,520
Speaker 1: on with US show production, that there were various structural

461
00:24:20,600 --> 00:24:24,159
Speaker 1: impediments to OPEC supply or non OPEC supply or OPEC

462
00:24:24,240 --> 00:24:26,840
Speaker 1: plus supply, that a number of countries have let their

463
00:24:26,880 --> 00:24:30,680
Speaker 1: own infrastructure slowly get into disarray with the low prices

464
00:24:30,720 --> 00:24:34,360
Speaker 1: of twenty tens, that that was constraining the ability to expand.

465
00:24:34,640 --> 00:24:39,639
Speaker 1: What is happening with sort of non US OPEK related capacity.

466
00:24:39,440 --> 00:24:40,600
Speaker 3: Well, it's true in part.

467
00:24:40,640 --> 00:24:42,960
Speaker 4: I mean you look at so of particularly the African

468
00:24:43,000 --> 00:24:46,159
Speaker 4: producers of OPEK, the likes of Nigeria, Well, they have

469
00:24:46,280 --> 00:24:48,640
Speaker 4: been in travel and they have been striving to meet

470
00:24:48,680 --> 00:24:52,320
Speaker 4: their own production on targis. Recently, Angola left OPEK because

471
00:24:52,320 --> 00:24:54,720
Speaker 4: he was not happy with the fact that OPEK was

472
00:24:54,760 --> 00:24:57,080
Speaker 4: pointing to Angola, you cannot produce as much as we

473
00:24:57,160 --> 00:24:59,200
Speaker 4: even allowed you to produce, so we are going to

474
00:24:59,400 --> 00:25:02,520
Speaker 4: bring your deduction level officially to what you are able

475
00:25:02,560 --> 00:25:02,760
Speaker 4: to do.

476
00:25:02,840 --> 00:25:02,959
Speaker 2: Well.

477
00:25:03,000 --> 00:25:06,320
Speaker 4: Then Golen didn't take that very well and then decided that, well,

478
00:25:06,359 --> 00:25:08,440
Speaker 4: we don't want to be part of this club anymore.

479
00:25:08,840 --> 00:25:11,920
Speaker 4: Then we have two other countries that they have been

480
00:25:11,960 --> 00:25:15,200
Speaker 4: producing far less than in the past, but due to sanctions.

481
00:25:15,200 --> 00:25:18,199
Speaker 4: That's Venezuela and Iran. The sanctions are still there, but

482
00:25:18,520 --> 00:25:21,920
Speaker 4: the US is enforcing them. Well, the US is not

483
00:25:22,040 --> 00:25:25,720
Speaker 4: really enforcing them anymore. It's particularly in the case of Iran,

484
00:25:26,000 --> 00:25:28,919
Speaker 4: has turned a blind eye because you know, the priorities

485
00:25:28,960 --> 00:25:32,119
Speaker 4: get oil prices under control. So Iranian and Venezuelan production

486
00:25:32,280 --> 00:25:36,959
Speaker 4: has increased significantly last year, to the point in twenty

487
00:25:37,000 --> 00:25:41,239
Speaker 4: twenty three the biggest source of extra oil into the

488
00:25:41,280 --> 00:25:44,680
Speaker 4: market was the usail industry. The US was the kind

489
00:25:44,680 --> 00:25:47,240
Speaker 4: of the big number into the oil market put in

490
00:25:47,280 --> 00:25:51,320
Speaker 4: extra oil. The second source of extra oil in twenty

491
00:25:51,359 --> 00:25:55,040
Speaker 4: twenty three compared to twenty twenty two was Iranian oil production.

492
00:25:55,119 --> 00:25:57,960
Speaker 4: And that's just incredible to me that Iran added so

493
00:25:58,040 --> 00:26:00,680
Speaker 4: much oil into the market to the tune of half

494
00:26:00,680 --> 00:26:03,560
Speaker 4: a million borrowers a day. So the story of Opek

495
00:26:03,640 --> 00:26:06,360
Speaker 4: is struggling is not as true as it was three four,

496
00:26:06,520 --> 00:26:09,840
Speaker 4: five years ago. And then you have the UAE, which

497
00:26:09,880 --> 00:26:12,119
Speaker 4: is adding a lot of production and not happy that

498
00:26:12,160 --> 00:26:14,960
Speaker 4: it cannot produce more. And we are beginning to see

499
00:26:14,960 --> 00:26:18,760
Speaker 4: also the saudiast starting to try to increase the production capacity.

500
00:26:19,040 --> 00:26:21,480
Speaker 4: Some of that will come on a stream next year,

501
00:26:21,560 --> 00:26:23,800
Speaker 4: and then in twenty twenty six and twenty twenty seven.

502
00:26:24,240 --> 00:26:27,920
Speaker 4: So the story within OPEK is starting to change from

503
00:26:28,000 --> 00:26:31,760
Speaker 4: one of struggling to keep production to one where Ian

504
00:26:31,800 --> 00:26:34,280
Speaker 4: and Venezuela are adding a lot of barrowls. But also

505
00:26:34,359 --> 00:26:38,280
Speaker 4: we have this new production capacity expansion plants of the

506
00:26:38,480 --> 00:26:43,040
Speaker 4: UIE and Saudi Arabia really about to hit the market potentially,

507
00:26:43,080 --> 00:26:46,200
Speaker 4: because we don't know if they will translate that capacity

508
00:26:46,240 --> 00:26:47,520
Speaker 4: into actual production or not.

509
00:26:47,560 --> 00:26:49,760
Speaker 3: That's a political that's a political decision.

510
00:26:49,960 --> 00:26:52,479
Speaker 2: Yeah, Saudi Arabia needs to pump more in order to

511
00:26:52,800 --> 00:26:56,680
Speaker 2: afford Rinaldo's contract, I guess. But you know, hearing you

512
00:26:56,760 --> 00:26:59,640
Speaker 2: weigh all this out Avier, it sounds almost as if

513
00:26:59,640 --> 00:27:05,680
Speaker 2: we're wi like a slow motion reconfiguration of the world's

514
00:27:05,800 --> 00:27:09,879
Speaker 2: energy sources or energy trade, one where the US is

515
00:27:09,920 --> 00:27:13,600
Speaker 2: far more prominent, Iran is more prominent than it used

516
00:27:13,640 --> 00:27:15,960
Speaker 2: to be. Is that a fair way of putting it? Like?

517
00:27:16,119 --> 00:27:19,159
Speaker 2: Is this a reordering of the system in some respects?

518
00:27:19,400 --> 00:27:21,680
Speaker 4: I think that you are putting it absolutely right. I mean,

519
00:27:22,000 --> 00:27:24,280
Speaker 4: the fact that the US is exporting so much oil,

520
00:27:24,280 --> 00:27:27,440
Speaker 4: and when you can crude and refined products many weeks,

521
00:27:27,800 --> 00:27:30,320
Speaker 4: the US on a growth basis, is sporting more than

522
00:27:30,359 --> 00:27:33,080
Speaker 4: ten million borrows a day, obviously, at the same time,

523
00:27:33,119 --> 00:27:35,159
Speaker 4: it's imported in a bit so on a net basis

524
00:27:35,200 --> 00:27:36,320
Speaker 4: about two million.

525
00:27:36,040 --> 00:27:36,600
Speaker 3: Borrows a day.

526
00:27:36,600 --> 00:27:40,040
Speaker 4: But the fact that the US has oil to export

527
00:27:40,119 --> 00:27:42,159
Speaker 4: on a net basis that, you know, more than it

528
00:27:42,280 --> 00:27:45,280
Speaker 4: consumes and it can esport it. It's just mind blowing,

529
00:27:45,359 --> 00:27:48,160
Speaker 4: and particularly for you know, I have been writing about

530
00:27:48,160 --> 00:27:51,840
Speaker 4: this industry for twenty five years. If even ten years

531
00:27:51,880 --> 00:27:54,399
Speaker 4: ago you have told me that the US was going

532
00:27:54,480 --> 00:27:57,719
Speaker 4: to be exporting the amount of crude that is doing today,

533
00:27:58,240 --> 00:28:01,120
Speaker 4: I would have said absolutely not that you know, no way,

534
00:28:01,200 --> 00:28:03,639
Speaker 4: I mean, no way, this is happening. And you know,

535
00:28:03,680 --> 00:28:07,560
Speaker 4: the fact that Iran and Sancians is back producing qualottle

536
00:28:07,640 --> 00:28:11,119
Speaker 4: oil is also quite surprising. And the fact that Saudi

537
00:28:11,160 --> 00:28:16,119
Speaker 4: Arabia has accepted again to cut unilaterally his production without

538
00:28:16,119 --> 00:28:19,560
Speaker 4: the help of other production countries, something that if promise,

539
00:28:19,640 --> 00:28:23,000
Speaker 4: will never do again, that is also very surprising.

540
00:28:23,160 --> 00:28:26,800
Speaker 2: Yeah, where does the Biden administration set in all of this?

541
00:28:27,080 --> 00:28:28,680
Speaker 2: And we've sort of touched on it in a few

542
00:28:28,720 --> 00:28:31,560
Speaker 2: episodes at this point, but Biden came on on a

543
00:28:31,680 --> 00:28:38,200
Speaker 2: very oil unfriendly campaign, basically talking about transitioning to green energy,

544
00:28:38,800 --> 00:28:41,720
Speaker 2: and yet here we are a few years later, and

545
00:28:41,960 --> 00:28:46,360
Speaker 2: US domestic production is a record. Iran is pumping again,

546
00:28:46,360 --> 00:28:48,960
Speaker 2: which is a whole other political situation. But you talk

547
00:28:49,080 --> 00:28:52,720
Speaker 2: to people in the industry, how are they feeling about

548
00:28:52,760 --> 00:28:54,960
Speaker 2: the Biden administration at the moment.

549
00:28:55,520 --> 00:28:58,320
Speaker 4: Well, I think that the Biden administrations say it has

550
00:28:58,360 --> 00:29:03,200
Speaker 4: a narrative in public, very climate change, green transition, and

551
00:29:03,640 --> 00:29:06,560
Speaker 4: in practice what you see has been they have not

552
00:29:06,760 --> 00:29:13,040
Speaker 4: really done much to limit the US industry ability to expand. Yes,

553
00:29:13,400 --> 00:29:15,560
Speaker 4: people in the oil industry will say, oh my god,

554
00:29:15,640 --> 00:29:18,160
Speaker 4: you know, we have all these problems with the White House,

555
00:29:18,600 --> 00:29:22,240
Speaker 4: and you know they are really anti oil and anti

556
00:29:22,320 --> 00:29:25,600
Speaker 4: fossil fuels and so on. But you really sit down

557
00:29:25,600 --> 00:29:29,640
Speaker 4: with them and told privately and relaxed, they will admit, Look,

558
00:29:29,840 --> 00:29:31,880
Speaker 4: they leave us alone. We can produce as much as

559
00:29:31,920 --> 00:29:35,160
Speaker 4: we can. Their focus is on keeping energy prices down,

560
00:29:35,240 --> 00:29:37,640
Speaker 4: and we are all happy. Can we get more things

561
00:29:37,640 --> 00:29:38,080
Speaker 4: from them?

562
00:29:38,240 --> 00:29:38,480
Speaker 3: Yeah?

563
00:29:38,520 --> 00:29:41,280
Speaker 4: Probably without Republican administration we will get it more. But

564
00:29:41,440 --> 00:29:43,760
Speaker 4: to be honest, we are getting more than enough, and

565
00:29:43,800 --> 00:29:46,720
Speaker 4: actually we do not really produce too much oil. The

566
00:29:46,760 --> 00:29:49,760
Speaker 4: same price is crashing, so yeah, I mean, I think

567
00:29:49,760 --> 00:29:53,040
Speaker 4: that everyone in the industry privately at least, is pretty

568
00:29:53,040 --> 00:29:55,760
Speaker 4: happy with the Biden administration in public, of course, the

569
00:29:55,840 --> 00:29:57,880
Speaker 4: lobbies and so on, they have to say, oh my gosh,

570
00:29:58,080 --> 00:30:01,800
Speaker 4: President Biden, an energy crisis in America.

571
00:30:01,840 --> 00:30:03,640
Speaker 3: That's just completely utter nonsense.

572
00:30:04,840 --> 00:30:08,640
Speaker 1: Let's pivot real quickly. You have a new big piece out,

573
00:30:08,760 --> 00:30:12,360
Speaker 1: I know, not all related, but about the changes happening

574
00:30:12,600 --> 00:30:16,800
Speaker 1: in European energy market. What's the story about.

575
00:30:17,080 --> 00:30:20,880
Speaker 3: Well, it's it's particularly about how we trade electricity.

576
00:30:21,080 --> 00:30:24,520
Speaker 4: And you think about a few years back, and by

577
00:30:24,520 --> 00:30:26,840
Speaker 4: that I mean five six years ago. A lot of

578
00:30:26,920 --> 00:30:30,400
Speaker 4: the electricity market in Europe was controlled by the typical

579
00:30:30,520 --> 00:30:33,320
Speaker 4: names that we all knew, the utilities that have been

580
00:30:33,440 --> 00:30:37,840
Speaker 4: privatized but used to be stay owned companies, big names

581
00:30:37,880 --> 00:30:41,240
Speaker 4: like you know e theF Electricity of the France, r WUE,

582
00:30:41,840 --> 00:30:45,480
Speaker 4: et cetera, et cetera. And the market was quite sedated.

583
00:30:45,600 --> 00:30:49,080
Speaker 4: Prices were not really moving much, there was no much volatility.

584
00:30:49,560 --> 00:30:52,120
Speaker 4: There were very few of the independent trade that's really

585
00:30:52,160 --> 00:30:54,320
Speaker 4: making money trading electricity.

586
00:30:54,680 --> 00:30:56,120
Speaker 3: And a few years back.

587
00:30:56,000 --> 00:30:58,480
Speaker 4: In the middle of nowhere in them market, in a

588
00:30:58,520 --> 00:31:03,440
Speaker 4: town called Archhus, big big university town in rural Denmark,

589
00:31:03,840 --> 00:31:06,720
Speaker 4: a group of companies kind of started to plot how

590
00:31:06,760 --> 00:31:08,959
Speaker 4: we can make out of money out of this market,

591
00:31:08,960 --> 00:31:13,280
Speaker 4: and they were really driven by two things that were

592
00:31:13,280 --> 00:31:15,800
Speaker 4: happening in Europe. Was the liberalization of the market. It

593
00:31:15,880 --> 00:31:20,040
Speaker 4: was a lot more of crossborder electricity trading in Europe,

594
00:31:20,240 --> 00:31:22,480
Speaker 4: and there was also a lot more volatility in the

595
00:31:22,480 --> 00:31:25,840
Speaker 4: supply of electricity in Europe because win and solar you

596
00:31:25,840 --> 00:31:28,680
Speaker 4: cannot predate how much win and solar power you're gonna

597
00:31:28,680 --> 00:31:32,080
Speaker 4: get more than five days, perhaps ten days. But you know,

598
00:31:32,240 --> 00:31:34,920
Speaker 4: meteorologies have a limit of you know, how strongly the

599
00:31:34,960 --> 00:31:37,560
Speaker 4: wind is gonna blow, or whether it's gonna be you know,

600
00:31:37,680 --> 00:31:40,000
Speaker 4: cloud covered in one area of the continent or not

601
00:31:40,040 --> 00:31:43,880
Speaker 4: for solar, et cetera, et cetera. So that variability created

602
00:31:43,920 --> 00:31:47,480
Speaker 4: a lot of price polatility, particularly in the very short

603
00:31:47,800 --> 00:31:50,880
Speaker 4: of the short market. I mean, electricity used to be

604
00:31:50,960 --> 00:31:54,640
Speaker 4: traded one year in advance, one month in advance. And

605
00:31:54,760 --> 00:31:57,120
Speaker 4: this company is kind of specialized in trading in the

606
00:31:57,160 --> 00:32:00,000
Speaker 4: next thirty minutes of the electricity market. But it's gonna

607
00:32:00,120 --> 00:32:03,280
Speaker 4: be you know, what is mid morning, what is going

608
00:32:03,360 --> 00:32:05,920
Speaker 4: to be the demand for electricity by lunchtime. That's what

609
00:32:05,960 --> 00:32:09,040
Speaker 4: they specialized. But it was you know, the five or

610
00:32:09,080 --> 00:32:12,720
Speaker 4: six top of these companies were making perhaps one hundred

611
00:32:12,800 --> 00:32:15,720
Speaker 4: million dollars combined, so not a lot, and you know

612
00:32:15,760 --> 00:32:17,960
Speaker 4: they were in the rather of the industry, but not that.

613
00:32:18,400 --> 00:32:22,080
Speaker 4: In twenty twenty two they made five billion dollars. Their

614
00:32:22,160 --> 00:32:25,960
Speaker 4: return on equity on many names of the industry went

615
00:32:26,200 --> 00:32:29,400
Speaker 4: well above one hundred percent, in some cases well about

616
00:32:29,440 --> 00:32:30,880
Speaker 4: two hundred and fifty percent.

617
00:32:31,280 --> 00:32:33,200
Speaker 3: So let me put it this way.

618
00:32:33,240 --> 00:32:35,760
Speaker 4: The companies that were making a couple of million dollars

619
00:32:35,920 --> 00:32:39,560
Speaker 4: were making ten twenty five thirty million. The guys who

620
00:32:39,560 --> 00:32:43,120
Speaker 4: were making twenty five thirty million before were making a

621
00:32:43,160 --> 00:32:45,520
Speaker 4: couple of one hundred million dollars, and the guys who

622
00:32:45,600 --> 00:32:49,160
Speaker 4: were making one hundred all the way, they just went

623
00:32:49,240 --> 00:32:52,520
Speaker 4: to a billion. It was just one of the biggest

624
00:32:52,560 --> 00:32:56,840
Speaker 4: booms in commodity trading profitability I have ever seen. And

625
00:32:56,960 --> 00:33:01,040
Speaker 4: that the piece is about these names with outside the industry. Basically,

626
00:33:01,080 --> 00:33:03,240
Speaker 4: no one really knows about how much of.

627
00:33:03,160 --> 00:33:06,120
Speaker 2: A parallel is there with the sort of old school

628
00:33:06,160 --> 00:33:09,440
Speaker 2: commodities traders like a Glencore or a traffic Era. To

629
00:33:09,480 --> 00:33:12,960
Speaker 2: the point where as we saw after the pandemic, you

630
00:33:13,080 --> 00:33:17,000
Speaker 2: had sort of systemic issues among those commodities traders that

631
00:33:17,120 --> 00:33:20,680
Speaker 2: became a headache or problem for everyone in Europe at

632
00:33:20,720 --> 00:33:23,120
Speaker 2: one point in time. Could something like that happen with

633
00:33:23,320 --> 00:33:26,240
Speaker 2: this new breed of electricity traders.

634
00:33:26,400 --> 00:33:29,160
Speaker 4: The results are different, but there are very significant races

635
00:33:29,160 --> 00:33:32,160
Speaker 4: with this new breed of electricity traders. A lot of

636
00:33:32,200 --> 00:33:34,960
Speaker 4: what they are doing is computer driven. Some of the

637
00:33:35,040 --> 00:33:39,600
Speaker 4: desks where this happening they are called automated electricity trading desk.

638
00:33:39,680 --> 00:33:42,040
Speaker 4: I mean everything is done by the computers. I have

639
00:33:42,160 --> 00:33:45,080
Speaker 4: been on their trading floors and in some cases eighty

640
00:33:45,120 --> 00:33:48,760
Speaker 4: percent of the volume is run by computers, with the

641
00:33:48,800 --> 00:33:51,120
Speaker 4: traders and the meteorologies just sitting in front of the

642
00:33:51,120 --> 00:33:53,840
Speaker 4: computers making sure that everything is fine, but just the

643
00:33:53,880 --> 00:33:57,640
Speaker 4: computers deciding what to buy and sell. To the point

644
00:33:57,760 --> 00:34:00,760
Speaker 4: that the kind of the umbrella of the regulators in

645
00:34:00,880 --> 00:34:03,760
Speaker 4: UD that look at the electricity market reported that in

646
00:34:03,800 --> 00:34:09,480
Speaker 4: twenty twenty two they monitor four point four billion transactions

647
00:34:09,520 --> 00:34:12,560
Speaker 4: in the electricity market in Europe. That's one hundred and

648
00:34:12,600 --> 00:34:15,000
Speaker 4: forty transactions every second.

649
00:34:16,200 --> 00:34:16,960
Speaker 3: For the whole year.

650
00:34:17,600 --> 00:34:20,920
Speaker 4: And how you monitor that that, I don't think that

651
00:34:20,960 --> 00:34:25,239
Speaker 4: the regulators really have the capacity. And then that a

652
00:34:25,280 --> 00:34:30,120
Speaker 4: significant chunk of the market now is traded by firms

653
00:34:30,200 --> 00:34:35,000
Speaker 4: that they have relatively small capital bases that they are

654
00:34:35,080 --> 00:34:37,200
Speaker 4: all trading from the same place in the middle of

655
00:34:37,239 --> 00:34:40,120
Speaker 4: nowhere in then market, using the same banks and the

656
00:34:40,160 --> 00:34:45,040
Speaker 4: same brokers. Well, it's when you know, the words systemic

657
00:34:45,880 --> 00:34:48,359
Speaker 4: risks kind of come to mind. And I'm not saying

658
00:34:48,400 --> 00:34:51,200
Speaker 4: that there is a problem, but I am concerned that

659
00:34:51,320 --> 00:34:55,840
Speaker 4: regulators and policymakers in Europe don't really know much about them.

660
00:34:56,239 --> 00:34:59,160
Speaker 4: And I was recently, as I was reporting for this column,

661
00:34:59,200 --> 00:35:01,400
Speaker 4: I was talking to one of the top people in

662
00:35:01,440 --> 00:35:04,239
Speaker 4: the European Commission that looks at, you know, these kind

663
00:35:04,280 --> 00:35:06,120
Speaker 4: of situations, and I said, well, what do you know

664
00:35:06,160 --> 00:35:09,040
Speaker 4: about XY said the names of these companies And this

665
00:35:09,200 --> 00:35:12,000
Speaker 4: person told me so honestly, haveavier. I know that they

666
00:35:12,040 --> 00:35:15,239
Speaker 4: exist and that's about it. I have never met then

667
00:35:15,280 --> 00:35:17,680
Speaker 4: I don't really know much about them. When I said, oh,

668
00:35:17,760 --> 00:35:19,759
Speaker 4: do you know that you know, this company made a

669
00:35:19,800 --> 00:35:21,880
Speaker 4: billion dollars, you know, in twenty twenty two, and the

670
00:35:21,880 --> 00:35:25,360
Speaker 4: person was utterly surprised by the level of profitability. And

671
00:35:25,440 --> 00:35:28,480
Speaker 4: the fact is kind of the I think that a

672
00:35:28,480 --> 00:35:31,560
Speaker 4: lot of European policymakers they don't know what they don't.

673
00:35:31,360 --> 00:35:35,920
Speaker 1: Know high policymakers all around the world that could be

674
00:35:35,960 --> 00:35:38,919
Speaker 1: said Javier Blas, thank you so much for coming back

675
00:35:38,960 --> 00:35:43,560
Speaker 1: on outlauds, and I guess describing across many different realms

676
00:35:43,360 --> 00:35:46,439
Speaker 1: the massive changes that are happening in the energy world

677
00:35:46,560 --> 00:35:48,440
Speaker 1: is great to have you back my pressure.

678
00:35:48,560 --> 00:35:48,800
Speaker 3: Thank you.

679
00:35:49,080 --> 00:35:50,359
Speaker 2: I think that was fun.

680
00:35:50,719 --> 00:36:00,000
Speaker 3: Thank you.

681
00:36:03,640 --> 00:36:07,040
Speaker 1: Just real quickly, Tracy, we should do more on electricity trading.

682
00:36:07,080 --> 00:36:08,799
Speaker 1: I've had some requests, and I have to say, like,

683
00:36:08,880 --> 00:36:12,520
Speaker 1: I still don't totally understand like the basics of electricity

684
00:36:12,560 --> 00:36:15,560
Speaker 1: trading in the sense that when I think about trading shops,

685
00:36:15,600 --> 00:36:19,560
Speaker 1: whether it's commodities or even just the traditional financial instruments,

686
00:36:19,560 --> 00:36:21,760
Speaker 1: you know, I think about like entities that are able

687
00:36:21,800 --> 00:36:25,520
Speaker 1: to wear house or absorb some sort of risk in

688
00:36:25,600 --> 00:36:28,520
Speaker 1: exchange for but you can't wear house electricity because it's.

689
00:36:28,560 --> 00:36:31,600
Speaker 2: I suddenly have this vision of like these electricity traders

690
00:36:31,600 --> 00:36:34,640
Speaker 2: on a trading for with tool belts filled with batteries,

691
00:36:34,760 --> 00:36:37,160
Speaker 2: and they're like, I'm buying electricity and then someone comes

692
00:36:37,160 --> 00:36:39,279
Speaker 2: and like charge their battery and then they like hold

693
00:36:39,320 --> 00:36:41,080
Speaker 2: on to it and sell it two days later. But

694
00:36:41,160 --> 00:36:41,919
Speaker 2: that's not how it works.

695
00:36:41,920 --> 00:36:42,560
Speaker 3: I don't think so.

696
00:36:42,719 --> 00:36:46,000
Speaker 1: But for real, like there's not much electricity storage or

697
00:36:46,000 --> 00:36:48,560
Speaker 1: it's pretty small, so like I want to do more.

698
00:36:49,080 --> 00:36:51,600
Speaker 2: It does seem Yeah, it does seem like it's a

699
00:36:51,760 --> 00:36:55,560
Speaker 2: unique commodity in the sense that, like the timeframe is

700
00:36:55,600 --> 00:36:57,840
Speaker 2: so short and you don't have a good line of

701
00:36:57,880 --> 00:37:01,800
Speaker 2: sight into electricity availability, you know, beyond a few days,

702
00:37:01,880 --> 00:37:03,759
Speaker 2: because you don't know what the wind's going to be like,

703
00:37:04,160 --> 00:37:06,879
Speaker 2: or what how strong the sunlight's going to be and

704
00:37:06,920 --> 00:37:09,440
Speaker 2: things like that. So it is really interesting from that perspective.

705
00:37:09,520 --> 00:37:11,760
Speaker 1: Yeah, we should do more just on like the basics

706
00:37:11,760 --> 00:37:14,399
Speaker 1: of what electricity traders do and where they they're sort

707
00:37:14,400 --> 00:37:17,760
Speaker 1: of how they harvest profits. But on the oil question,

708
00:37:17,920 --> 00:37:20,440
Speaker 1: I mean, it's pretty wild that, at least for the

709
00:37:20,480 --> 00:37:22,640
Speaker 1: moment and who knows how long it lasts, the US

710
00:37:22,680 --> 00:37:26,440
Speaker 1: industry hasn't had to choose between volume and profitability. Yeah,

711
00:37:26,480 --> 00:37:27,560
Speaker 1: it's like why not both?

712
00:37:27,920 --> 00:37:31,600
Speaker 2: Yeah, And I think that story about technology, I mean,

713
00:37:31,719 --> 00:37:35,640
Speaker 2: shale was always a technology story and a capital market

714
00:37:35,719 --> 00:37:40,560
Speaker 2: story and investors getting excited about the new technology that

715
00:37:40,640 --> 00:37:43,560
Speaker 2: made all this possible. But it feels like people think

716
00:37:43,560 --> 00:37:46,640
Speaker 2: about technology and they think some like really cool new

717
00:37:46,680 --> 00:37:49,920
Speaker 2: way of drilling, And Okay, yes, the horizontal drills are

718
00:37:50,040 --> 00:37:55,040
Speaker 2: getting more horizontal and more powerful, but horizontal at horizontal aert.

719
00:37:55,040 --> 00:37:58,080
Speaker 2: That's right, But we can also talk about like just

720
00:37:58,320 --> 00:38:03,160
Speaker 2: really small incremental changes, like standardizing the type of bolts

721
00:38:03,480 --> 00:38:06,960
Speaker 2: that you're using in her rig, standardizing the color yellow

722
00:38:07,080 --> 00:38:09,919
Speaker 2: on your north Sea platforms. That was pretty fun.

723
00:38:10,000 --> 00:38:11,840
Speaker 1: I love that example. But no, it's like you just

724
00:38:11,920 --> 00:38:14,200
Speaker 1: don't know where you are in the tech cycle and

725
00:38:14,239 --> 00:38:16,239
Speaker 1: the fact while you were talking, I looked up your

726
00:38:16,239 --> 00:38:19,719
Speaker 1: old article from twenty fifteen that you mentioned and seem

727
00:38:19,760 --> 00:38:23,000
Speaker 1: to have nailed it perfectly. We should do more on standardization.

728
00:38:23,120 --> 00:38:26,160
Speaker 1: Standardization bodies are really interesting organizations too.

729
00:38:26,239 --> 00:38:26,439
Speaker 3: Yeah.

730
00:38:26,480 --> 00:38:29,680
Speaker 2: Standardization is kind of like what drives the world and

731
00:38:29,719 --> 00:38:33,640
Speaker 2: also causes problems a lot. It's really interesting. Yes, let's

732
00:38:33,640 --> 00:38:36,160
Speaker 2: do a standardization series. I really want to speak to

733
00:38:36,200 --> 00:38:38,879
Speaker 2: the guys that make the cure, the barcodes, the bar

734
00:38:38,960 --> 00:38:41,239
Speaker 2: Code Association, what are they up to.

735
00:38:41,400 --> 00:38:43,240
Speaker 1: I love the idea of a standardization series.

736
00:38:43,320 --> 00:38:46,000
Speaker 2: Yeah, all right, Okay, well this is one of those

737
00:38:46,040 --> 00:38:48,239
Speaker 2: episodes where we've kind of come away with five other

738
00:38:48,320 --> 00:38:50,080
Speaker 2: things to discuss. Shall we leave it there?

739
00:38:50,120 --> 00:38:50,759
Speaker 3: Let's leave it there.

740
00:38:50,840 --> 00:38:51,200
Speaker 4: Okay.

741
00:38:51,560 --> 00:38:54,360
Speaker 2: This has been another episode of the ad Thoughts podcast.

742
00:38:54,480 --> 00:38:57,800
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

743
00:38:57,440 --> 00:38:58,640
Speaker 3: And I'm Joe, why isn't though?

744
00:38:58,680 --> 00:39:01,680
Speaker 1: You can follow me at the Star, Follow Javier Bloss

745
00:39:01,719 --> 00:39:05,839
Speaker 1: at Javier Bloss, Follow our producers Carmen Rodriguez at Carmen Arman,

746
00:39:06,040 --> 00:39:09,640
Speaker 1: Dashel Bennett at Dashbot and kel Brooks at Kelbrooks. Thank

747
00:39:09,680 --> 00:39:12,800
Speaker 1: you to our producer Moses onm. For more Oddlogs content,

748
00:39:12,840 --> 00:39:15,160
Speaker 1: go to Bloomberg dot com slash odd Lots, where we

749
00:39:15,200 --> 00:39:19,759
Speaker 1: have a transcript blog and weekly newsletter and chat out

750
00:39:19,800 --> 00:39:22,320
Speaker 1: with fellow listeners twenty four to seven in the discord

751
00:39:22,400 --> 00:39:25,240
Speaker 1: Discord dot gg. Slash odd Log's one of my favorite

752
00:39:25,239 --> 00:39:28,319
Speaker 1: places to hang out, an excellent place to learn about energy.

753
00:39:28,320 --> 00:39:29,879
Speaker 1: There's a whole channel on there where people are talking

754
00:39:29,880 --> 00:39:30,840
Speaker 1: about energy stories.

755
00:39:31,120 --> 00:39:33,920
Speaker 2: And if you enjoy odd Lots, if you want us

756
00:39:33,960 --> 00:39:37,279
Speaker 2: to do our standardization series and figure out what the

757
00:39:37,320 --> 00:39:39,759
Speaker 2: Barcode Association is actually up to on a day to

758
00:39:39,800 --> 00:39:43,000
Speaker 2: day basis, then please leave us a positive review on

759
00:39:43,120 --> 00:39:47,160
Speaker 2: your favorite podcast platform. And remember, Bloomberg subscribers can listen

760
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761
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