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

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Speaker 1: I'm Joe Wis and I'm Tracy Hallway. Tracy, you know,

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Speaker 1: we recently talked with Goldman's top metal strategist, Nick Snowdon,

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Speaker 1: and one of the things that really stuck out there

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Speaker 1: are a lot of things we talked about copper scarcity,

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Speaker 1: but what one of the things, among many interesting points,

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Speaker 1: was the idea of, like there's been a talent shortage

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Speaker 1: in this industry. Yeah, and you can kind of see why, right,

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Speaker 1: I mean, first of all, um environmental concerns, and I

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Speaker 1: imagine that, like particularly the younger generation might have some

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Speaker 1: reservations about going into something like mining. And then secondly,

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Speaker 1: it just wasn't a profitable industry for quite a long

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Speaker 1: period of time, or at least I'm thinking specifically about

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Speaker 1: shale oil in the US. But you had the big

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Speaker 1: boom and sure people made a lot of money in that,

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Speaker 1: but then you had the massive bust and it often

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Speaker 1: feels like kind of an uncertain industry that swings between

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Speaker 1: feast and famine all the time. Yeah. So imagine you're

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Speaker 1: like thinking about your career and you're like pretty technical minded,

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Speaker 1: you're pretty smart, you could do a lot of things.

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Speaker 1: You're intelligence, and you're like face with like two options.

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Speaker 1: It's like, Okay, do you want to like go to

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Speaker 1: North Dakota or somewhere up in Canada and analyzed rock formations?

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Speaker 1: Or do you want to live in California and work

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Speaker 1: for Facebook and get lots of free lunches and free

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Speaker 1: dry cleaning and maybe make millions of dollars. I don't know.

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Speaker 1: It seems like kind of an easy choice from the

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Speaker 1: perspective of a potential tailted person thinking about which direction

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Speaker 1: they want to take their life in. Well. Also, I mean,

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Speaker 1: Silicon Valley was very good at selling the idea of

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Speaker 1: making the world a better place, yeah right, which I

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Speaker 1: don't think is as impactful as it once is. That message,

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Speaker 1: I don't think as many people believe it. But like,

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Speaker 1: certainly for a while it was about come build a

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Speaker 1: better future, um in tech versus come dig out of

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Speaker 1: rock in northern Canada. Yeah, so come to Canada, dig

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Speaker 1: out of rock, be cold all the time. Oh and

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Speaker 1: by the way, you're contributing to the worsening of the

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Speaker 1: planet through global warming. Oh and by the way, this

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Speaker 1: industry has no future. These were like the messages I

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Speaker 1: mean the message we can tell it's like you're gonna

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Speaker 1: contribute to climate change by participating this industry. Also, the

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Speaker 1: industry has no future because it's all gonna be you know,

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Speaker 1: disappear because of electric cars or whatever. So all these

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Speaker 1: things it's like or you know, do software make up fortune?

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Speaker 1: It seems like you can see why people made one

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Speaker 1: choice or not the other. Yeah, so we obviously have

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Speaker 1: to dig into this no pun intended, but um, yeah,

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Speaker 1: we're gonna dig into the talent shortage in energy and mining, right,

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Speaker 1: and so there's all kinds of bottlenecks, you know. Now

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Speaker 1: of course everything's flipped, and you know there's like, well,

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Speaker 1: why can't we restart the minds? Why can't we get

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Speaker 1: drilling again for energy? Uh, you know natural gas and oil.

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Speaker 1: There is a pickup in activity, but it has not

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Speaker 1: been as rebustes people expected. So what are the constraints

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Speaker 1: on getting everything going again and getting dirty stuff out

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Speaker 1: of the ground for whether it's gasoline or fuel or

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Speaker 1: medals that we need for decarbonization and electricity. I'm very

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Speaker 1: excited about our guests, Uh, someone who understands the space deeply.

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Speaker 1: We're gonna be speaking to Peter to sack In. He

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Speaker 1: is the managing director of ARC Financial, a private equity

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Speaker 1: company that specifically focuses on energy, and he knows a

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Speaker 1: lot about the nuts and bolts of this space and

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Speaker 1: investing in this space. So, Peter, thank you so much

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Speaker 1: for joining us. Well, it's my pleasure. I'm delighted to

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Speaker 1: be on the program. So is that true they're sort

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Speaker 1: of like the premise that we started out this conversation

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Speaker 1: that they're really uh, the number of people wanting to

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Speaker 1: make a career sort of like petroleum engineers or mining

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Speaker 1: engineers has really tailed off over the last decade. Yes,

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Speaker 1: that's true. Actually there's a double whammy. Also, what we're

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Speaker 1: seeing and we're going to see more of, is that

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Speaker 1: the older generation is set to retire and now with

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Speaker 1: these higher commodity prices, they are going to cash in,

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Speaker 1: so to speak, and be much more apt to exit

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Speaker 1: the business. And with nobody coming into the business, it's

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Speaker 1: going to make the problem more acute. So so the

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Speaker 1: higher prices increase the need for talent. But what they

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Speaker 1: do in the immediate term is a bunch of people like, oh,

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Speaker 1: I can finally retire because my oil stocks are up,

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Speaker 1: or by commodity whatever it is, by copper Stock, the

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Speaker 1: company that I worked for. So the first order effect,

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Speaker 1: even before it has the effect of bringing a new talent,

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Speaker 1: is to accelerate the departure of the existing til Yeah,

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Speaker 1: that's going to be a big problem. And the other

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Speaker 1: part of losing the older generation is that resources exploration,

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Speaker 1: certainly oil and gas, has a lot of tact knowledge.

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Speaker 1: In other words, it takes years to really build up

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Speaker 1: gut feel expertise, which is just as important as you know,

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Speaker 1: raw numerical expertise. I have this image of like Bruce

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Speaker 1: Willis and Armageddon teaching the youngsters how to mind properly, right,

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Speaker 1: remember that? Yeah? Right? The asteroid Yeah yeah, yeah. I

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Speaker 1: mean those are the sort of the Hollywood perceptions of

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Speaker 1: the way things work. I mean, I have to say

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Speaker 1: that the the industry is actually very technologically advanced, and

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Speaker 1: that uh, you know, the loss of knowledge is much

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Speaker 1: more than just sort of these perceptions of people going

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Speaker 1: and digging holes in the ground. It's it's much more

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Speaker 1: complicated than that, which exacerbates the problem because there's a

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Speaker 1: lot of taskit knowledge that needs to be replaced. So

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Speaker 1: when you mentioned an older generation, potentially entering retirement. It

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Speaker 1: reminds me a lot of the pilot shortage that we

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Speaker 1: saw and this idea that you know, we had a

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Speaker 1: lot of pilots we're coming through the military primarily, and

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Speaker 1: then after they completed their service that would go into

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Speaker 1: commercial flying and then they entered retirement age and we

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Speaker 1: don't have a lot of people to replace them. Where

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Speaker 1: historically has energy talent come from, Well, energy talent comes

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Speaker 1: from to places. First of all, there's the field, and

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Speaker 1: that talent typically comes from hiring people and training them

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Speaker 1: also out of technical schools, and there's a lot of

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Speaker 1: training that goes on in terms of safety and how

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Speaker 1: to operate equipment, and that can take many months certification UH.

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Speaker 1: And then in the offices where a lot of the

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Speaker 1: engineering is done and the and the and the geoscience

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Speaker 1: is done, I mean those the talent pool there comes

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Speaker 1: from universities, petroleum engineering courses, geophysics, geology, chemical engineering, you

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Speaker 1: name it, petroleum engagineering. Yeah. So what has enrollment been

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Speaker 1: like at these uh, at these at the university level

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Speaker 1: for petroleum engineering and some of these related fields, Well,

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Speaker 1: it's declining and in the handful of universities and the

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Speaker 1: Western hemisphere, I'll call it in Europe, United States, Canada.

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Speaker 1: Whereas there's a lot of expertise in the universities to

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Speaker 1: train students, the enrollment is going down. In some instances

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Speaker 1: the university are shutting programs down. And it's what you

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Speaker 1: said earlier. I mean, the the emphasis for students and

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Speaker 1: the desire for students with technical backgrounds is to go

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Speaker 1: into Silicon valley type ventures and so on. It's not

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Speaker 1: to go into the resource economy. So it's so it's problematic. Yeah,

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Speaker 1: what was the sales pitch earlier? So you know, I

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Speaker 1: guess the seventies, eighties, nineties, if someone was thinking about

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Speaker 1: a career in resource management, what would they What would

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Speaker 1: be the benefits of such a career. Well, the benefits

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Speaker 1: certainly would be pay to start with, because historically and

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Speaker 1: even now, these are very high paying jobs. Uh and

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Speaker 1: even so it's difficult to attract paying people. But historically

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Speaker 1: it's also been viewed as well, with the growth of

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Speaker 1: the economy, you need more energy, energy dominated by falsil

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Speaker 1: fuels over the course of the last couple of centuries. Therefore,

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Speaker 1: you are contributing to the UH, the growth of society

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Speaker 1: and energy needs in the economy, and so it's historically

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Speaker 1: been the paradigm. But now that paradigm is broken, certainly

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Speaker 1: in the Western world, it's broken, and that leads to

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Speaker 1: the problems that we're going to see are already seeing

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Speaker 1: in terms of the price of the commodity and the

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Speaker 1: supply shortage. Can you uh, what schools have actually shut down?

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Speaker 1: I went to University of Texas, so there was a

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Speaker 1: geology program. They're pretty I think at the time there

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Speaker 1: were a pretty decent number of people going into the

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Speaker 1: patrolling industry. But where have we actually seen you said

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Speaker 1: some schools have shut down, like just the Yeah. I

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Speaker 1: can't speak for the American universities as much. I mean,

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Speaker 1: there's certainly the Texas universities, including s m u H,

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Speaker 1: some of the schools in Louisiana, you know, the Oklahoma

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Speaker 1: does big. I mean, those are the states where that

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Speaker 1: have a lot of the resources. Not surprisingly, that's where

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Speaker 1: the schools are. Ditto here up in Canada where I'm located.

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Speaker 1: University of Calgary, Canada is the fourth largest producer of

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Speaker 1: oil and gas in the world now, and so we

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Speaker 1: have the schools here in University of Alberta, University of Calgary.

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Speaker 1: The enrollments are way down and some of the programs

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Speaker 1: are likely to be shut so we are going to

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Speaker 1: see a talent talent pool shortage. There's no question. Can

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Speaker 1: you give us a little bit more color on how

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Speaker 1: much enrollment is down or exactly what the extent of

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Speaker 1: the talent shortage actually is and are there particular areas

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Speaker 1: where it's more are acute versus you know, other types

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Speaker 1: of energy jobs. Yeah, so the petroleum engineering department here.

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Speaker 1: I had a conversation a couple of weeks ago with

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Speaker 1: one of the faculty members and he indicated school are

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Speaker 1: you referring to this University of Calgary? I mean, you know,

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Speaker 1: typically probably see uh thirty students a year and graduating

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Speaker 1: clause maybe more. I mean historically it would have been

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Speaker 1: much more than that. I think they have enrollment for

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Speaker 1: one student. You know, it's uh, you know, it's that

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Speaker 1: kind of thing. Now that may pick up as we

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Speaker 1: get it closer to the fall session, but the numbers

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Speaker 1: are not looking positive in terms of replenishing the knowledge

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Speaker 1: base one student. I introduced you as the managing director

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Speaker 1: of ARC Financial, But can you just sort of give

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Speaker 1: the summary of like you've seen these cycles come and

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Speaker 1: go for a while, like what's your person, what's your

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Speaker 1: sort of like general background and story. Having watched and

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Speaker 1: been in bold within the extract of resources industries, Yeah, well,

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Speaker 1: I started out as a geoscientist back in the eighties.

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Speaker 1: I worked for one of the multinational oil companies. I

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Speaker 1: worked in the field, I worked in the office, UH,

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Speaker 1: and then I migrated to the world of finance, the

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Speaker 1: world of technology, the world of energy technology, and so

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Speaker 1: I sort of have a very holistic background in energy

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Speaker 1: and energy technology, and in my career over the last

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Speaker 1: twenty years, have financed everything from oil and gas to solar,

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Speaker 1: to win to you name it. So, as I watched

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Speaker 1: the boom and the bus cycles, there was always a

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Speaker 1: repetitive theme on the oil and gas side, is that

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Speaker 1: when the price of oil and gas went up, that

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Speaker 1: was the signal, the siren goes off for the companies

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Speaker 1: to go back and drill more and bring more supply on. Now,

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Speaker 1: as we all know, they're over. Over the course of

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Speaker 1: the last half dozen years, that signal has been broken. Right.

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Speaker 1: It's because of the vilification of the industry, the climate

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Speaker 1: change can arns, the divestment movement UH, and of oil narratives,

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Speaker 1: all that kind of stuff. So and then of course, uh,

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Speaker 1: the turnover of investors in many of the publicly traded

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Speaker 1: Western oil and gas companies basically who want their money

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Speaker 1: back in terms of dividends. So that means that there's

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Speaker 1: not a lot of money going back into the ground,

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Speaker 1: certainly not as much as use there used to be

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Speaker 1: to give a supply side response to to meet the

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Speaker 1: demand which is still there. And and and as we

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Speaker 1: can see growing, everybody's back flying and going on vacations

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Speaker 1: and driving, and so you know, it's a and then

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Speaker 1: you lose your your upstream talent pool. And that just

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Speaker 1: combined with the war in Europe with Ukraine and a boy,

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Speaker 1: it's just sort of like the perfect storm two create

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Speaker 1: an energy crisis the likes of which we have not

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Speaker 1: seen since the nineteen seventies perfect storm. We hear that

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Speaker 1: phrase so much on this podcast, but you know, for

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Speaker 1: for eight different things. But okay, so I'm looking at

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Speaker 1: the chart of Brent oil and it's currently above a barrel.

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Speaker 1: So in olden times, olden times being you know, just

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Speaker 1: ten years ago or so, you would expect shale driller

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Speaker 1: of some sort to see that chart and go, oh,

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Speaker 1: we're going to restart some of our old wells um

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Speaker 1: and presumably they would have gotten that done fairly quickly

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Speaker 1: given the incentive there from the price. When that happens. Now,

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Speaker 1: when oil goes above one as it is, now, what's

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Speaker 1: the hold up for restarting those drills? Like walk us

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Speaker 1: through exactly all the points um in actually ramping up

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Speaker 1: that production. Well, first of all, a little bit of perspective,

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Speaker 1: add twenty barrel today. If you inflation adjust the price

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Speaker 1: of oil and take it back historically all the way

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Speaker 1: to the beginning of the lost entry, in other words,

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Speaker 1: undred and twenty years ago, a d is is typically

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Speaker 1: the high point on an inflation adjusted basis, like beyond one,

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Speaker 1: all of a sudden you will get a demand response

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Speaker 1: and people will start peeling back. The supply response typically

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Speaker 1: starts around in earnest. Now, we didn't see that this

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Speaker 1: time around. So last year when we certain that the

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Speaker 1: price started to escalate through and the call went out, hey,

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Speaker 1: you know, like the price is going up, we better

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Speaker 1: get some more production going. Well, the publicly treated companies

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Speaker 1: and the CEO has basically said, well, wait a minute,

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Speaker 1: everybody told me to uh focus on profitability, not production growth,

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Speaker 1: and give give the cash flow back to the shareholders.

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Speaker 1: What are we doing here changing the tune right? And

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Speaker 1: you know not And by the way, everybody's saying, it's

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Speaker 1: the end of oil, so why should I go back

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Speaker 1: and drill? So a's then you get into hundred. Oh

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Speaker 1: that's interesting, and the rid count starts to go back

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Speaker 1: up a little bit, but it's very muted relative to

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Speaker 1: what it would have been historically. And so here we

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Speaker 1: are today at one The allure of going back and

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Speaker 1: bringing on production will be irresistible, but it's still I believe,

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Speaker 1: not going to be the same level of drilling. And

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Speaker 1: then there's all the field level constraints which we haven't

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Speaker 1: talked about yet, the physical the physical equipment, and the

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Speaker 1: people in the field. I mean, to this point, we've

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Speaker 1: talked about university graduates and engineers who typically go work

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Speaker 1: in the office. Now you've got to talk about the

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Speaker 1: shortages in the field. So yeah, what are let's talk

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Speaker 1: about those? So how many people like compare the sort

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Speaker 1: of upswing cycle now, the ease of hiring, the number

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Speaker 1: of people willing to do the work, How is that

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Speaker 1: different than you know, previous cycles that you've seen the

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Speaker 1: challenge of staffing the field. Yeah, so what we've seen, well,

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Speaker 1: you have to wind back to late At that time,

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Speaker 1: shale drilling was so prolific and the money was being

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Speaker 1: given to the industry from Wall Street to drill. We

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Speaker 1: created a supply glut. The Saudis said, we'll wait a minute. Uh,

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Speaker 1: We're not going to give up our market share. So

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Speaker 1: that started the price war. They flooded the market. The

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Speaker 1: price of oil collapsed down to thirty bucks uh. And

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Speaker 1: that started a prolonged period where prices were low. So

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Speaker 1: the industry went into sort of a downturn. Prices recovered

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Speaker 1: back to kind of like the fifty level, and and

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Speaker 1: and stay there. Fifty is not compelling, fifties not compelling.

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Speaker 1: And then layered on top of that, the end of

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Speaker 1: oil narrative started. And so there's this whole negative paul

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Speaker 1: around the industry. So in that context, it's been now

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Speaker 1: seven years of negativity. And so the service companies that

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Speaker 1: go out to the field with their people basically said, well,

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Speaker 1: why would I build new equipment, why would I even

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Speaker 1: maintain equipment. I'm just going to cannibalize parts off old

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Speaker 1: equipment to keep the equipment of a smaller equipment fleet going.

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Speaker 1: So here we are today with a shrunken field capacity

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Speaker 1: and by the way, a lot of loss of knowledgeable

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Speaker 1: people trained on how to operate this equipment that's being

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Speaker 1: called back and saying, hey, go go drill again. We

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Speaker 1: need it because we want to get off Russian oil. Well,

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Speaker 1: wait a minute, Like, I can't just tool up and

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Speaker 1: and hire a cruise overnight to do this, even if

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Speaker 1: I wanted to. And then on top of that, you

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Speaker 1: have the inflationary effects of things like steel and chemicals

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Speaker 1: and raw parts, supply chain issues, and so even if

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Speaker 1: you wanted to grow it meaningfully, it would be very difficult.

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Speaker 1: Can you talk a little bit about this from a

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Speaker 1: technical perspective? So, if I have a well that I

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Speaker 1: haven't been using for a while because oil prices were

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Speaker 1: so low, what does it actually take to restart it?

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Speaker 1: I mean, assuming I can get the labor, what are

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Speaker 1: the technical things that I need in order to get

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Speaker 1: it going again. Well, it's not so much restarting old

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Speaker 1: wells because wells you typically do not want, especially oil wells,

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Speaker 1: you don't. You never want to shut them in because

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Speaker 1: restarting them is is problematic. So a lot of wells

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Speaker 1: the other get choked back. But if you want to

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Speaker 1: grow production back to where it was before, you have

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Speaker 1: to drill more new wells. And so that's where the

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Speaker 1: problem lies is you need drilling rigs, you need hydraulic

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Speaker 1: fracturing crews, you need all sorts of peripheral services to

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Speaker 1: get these things going, and so the ability to bring

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Speaker 1: on new wells, and then you also need service equipment,

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Speaker 1: by the way, to wrap up the old wells. Again. Uh,

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Speaker 1: it's it's said that you want to bring on the

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Speaker 1: amount that we're forfeiting from sanctioning Russia. I mean, you're

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Speaker 1: talking several million earls a day, which the Permian and

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Speaker 1: feels like that and up here and kind of we

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Speaker 1: can do, but you just can't turn this spigot on overnight.

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Speaker 1: And then there's just this general reluctance by investors and

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Speaker 1: others saying, well, I don't know if I believe all this,

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Speaker 1: And by the way, you told me was the end

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Speaker 1: of oil, so why would I put money into the ground.

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Speaker 1: I'm sort of fascinated by something you said about like

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Speaker 1: equipment either having been not preserved or preserved in a

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Speaker 1: bad state, like what equipment, Where was it housed? You know,

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Speaker 1: for these last seven years while the industry was sort

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Speaker 1: of shrinking or downstairs? Where was it housed? And what

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Speaker 1: you know? Now it's like, okay, we're back. And then

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Speaker 1: they opened the warehouses. What is it like literally rusted?

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Speaker 1: Like can you tell what type of equipment and what

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Speaker 1: is actually well, I don't know if it's arrusted, I

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Speaker 1: guess environment. Yeah, yeah, I get what you're saying. Yeah,

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Speaker 1: So I mean the whole thing is is that when

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Speaker 1: when prices fall and they still commodity prices, when they

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Speaker 1: fall and they stay low, that's a signal to just contract. Right.

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Speaker 1: So basically, the service companies, unfortunately, especially if the downturn

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Speaker 1: is severe, which it was, have to shed people and

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Speaker 1: they basically have to stop building new equipment. In fact,

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Speaker 1: you have to contract your fleet. So they say, well,

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Speaker 1: why would I keep say a hundred units active and

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Speaker 1: maintained when my customers, the oil and gas companies, only

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Speaker 1: want the equivalent of forty units. So basically you park

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Speaker 1: everything in a yard and you keep the forty units going,

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Speaker 1: But instead of buying a whole bunch of new spare parts,

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Speaker 1: you just start cannibalizing the other parts of the for

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Speaker 1: the existing are in action. You're cannibalizing the other sixty

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Speaker 1: to keep them buying new spare parts because you don't

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Speaker 1: like exactly new. But then when it's time to go

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Speaker 1: access those other sixty, they're missing parts exactly. So that's

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Speaker 1: what's been happening over the last seven years, is saying, well,

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Speaker 1: why would I buy new stuff? I just keep things going.

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Speaker 1: And it's so you know, this creates the situation now

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Speaker 1: where he say, okay, I need a bunch of spare

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Speaker 1: parts if I want to ramp up, and then he say, okay,

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Speaker 1: now we've got supply chain issues. Now I've got people issues,

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Speaker 1: and so the ability to ramp back up at the

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Speaker 1: snap of your fingers is very difficult. So I remember

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Speaker 1: back when oil prices were quite low, So I guess

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Speaker 1: around one of the talking points in the industry was

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Speaker 1: well why do people keep pumping at these prices? And

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Speaker 1: we saw production be a lot um sticky, I suppose

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Speaker 1: than than many people had expected, and so so a

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Speaker 1: why do you think that happened? And then be one

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Speaker 1: of the things that I remember people talking about around

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Speaker 1: that time was standardization of parts for rigs and drills

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Speaker 1: and things like that, and basically just a discussion that

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Speaker 1: technological advancement and standardization meant that producing oil was a

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Speaker 1: lot more efficient than it used to be, so you

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Speaker 1: could pump more without necessarily spending tons of money. So

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Speaker 1: is that, like, doesn't that also work the other way?

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Speaker 1: You know, with high oil prices, shouldn't standardization help um

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Speaker 1: keep some production up and hopefully increase it? Yeah? Okay,

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Speaker 1: so I think it's actually brought up some really important points.

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Speaker 1: But let's let's let's tackle the one. Why keep pumping

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Speaker 1: if prices are low, as I said, because it's very,

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Speaker 1: very costly for oil wells to to turn them off

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Speaker 1: and then to bring them, so you you want to

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Speaker 1: keep producing for as long as possible. Now, in two

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Speaker 1: thousand fifteen, when the price went down, you know, we

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Speaker 1: went down to for a while, but for the most part,

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Speaker 1: over the course of the latter half of it was

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Speaker 1: fifty bucks of barrel. So there's three kind of costs here.

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Speaker 1: There's operating cost, which is the cost to keep pumping,

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Speaker 1: and the oup costs are typically lower than that, and

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Speaker 1: so it makes you make money just by pumping. But

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Speaker 1: what happens is is that if you don't drill more

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Speaker 1: into the same reservoirs, the production declines, and it's called

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Speaker 1: a decline curve. In other words, today you're pumping a

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Speaker 1: hunter barrels uh and typically some of these wells decline,

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Speaker 1: maybe more a year. In the first year, it's even

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Speaker 1: more so a year on you're only pumping let's just

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Speaker 1: say seventy barrels for the sake of argument, and the

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Speaker 1: next year it's only fifty barrels. So the basic operating

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Speaker 1: costs keeps the oil flowing. Then you need the maintenance

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Speaker 1: capital costs, which is drilling us to keep production level.

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Speaker 1: So what happens is when you're go into a downturn,

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Speaker 1: depending upon your cost structure of an individual company, you

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Speaker 1: have typically pull back on your maintenance cost and you

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Speaker 1: might decline your production. But if you're in growth mode

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Speaker 1: and you want there's the call because prices are high,

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Speaker 1: then you start drilling new wells to not only offset

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Speaker 1: your declines but to grow. So for the past seven

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Speaker 1: years it's largely been a off costs plus maintenance costs

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Speaker 1: to keep production level. The big event was the pandemic. Okay,

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Speaker 1: when the pandemic, you know, we saw zero dollars for

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Speaker 1: a few days we saw prolonged prede. That's when they

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Speaker 1: said no maintenance costs, no growth, no nothing, and American

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Speaker 1: production fell by at least a couple million barrels a day,

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Speaker 1: and we haven't really recovered. Actually, yeah, I realize we

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Speaker 1: haven't really discussed like what happened in those months of

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Speaker 1: the acute early months of the pandemic. You know, of

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Speaker 1: course there's the infamous like briefly like w T I

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Speaker 1: at least on a computer screen, traded at negative forty

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Speaker 1: barrel I think at one point. But obviously it seems

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Speaker 1: like something snapped there. So you had this degradation of

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Speaker 1: the industry from through and then something like broke there.

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Speaker 1: It sounds like that really changed the trajectory so that

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Speaker 1: the energy players were just not going to go back

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Speaker 1: to the old way of sort of well losing a

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Speaker 1: lot of money. But what was it? Can you talk

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Speaker 1: a little bit about more like that? How transformative and

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Speaker 1: significant those few months in Yeah, it was huge because

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Speaker 1: you know, the event really weakened the industry and created

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Speaker 1: the contraction and the capacity and the cannibalizing and spare

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Speaker 1: parts and so on. But you know, many companies still

427
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Speaker 1: hung on but when you get to twenty a barrel

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Speaker 1: and you know, momentarily zero and all of a sudden,

429
00:26:00,400 --> 00:26:02,800
Speaker 1: all the pipes are backing up because no, there's no

430
00:26:02,920 --> 00:26:06,440
Speaker 1: demand and there's a global immobility with lockdowns and nobody's

431
00:26:06,520 --> 00:26:12,080
Speaker 1: using this stuff momentarily, then you create cash flow crisis

432
00:26:12,160 --> 00:26:16,040
Speaker 1: for service companies and producers, and those that were on

433
00:26:16,480 --> 00:26:20,320
Speaker 1: the verge of bankruptcy went bankrupt. And certainly there was

434
00:26:20,359 --> 00:26:22,680
Speaker 1: more layoffs, and so you lose more talent and more

435
00:26:22,760 --> 00:26:29,600
Speaker 1: tacit knowledge, and and and so the pandemic really was problematic.

436
00:26:29,720 --> 00:26:31,879
Speaker 1: And that was at the same time, again that was

437
00:26:31,920 --> 00:26:34,359
Speaker 1: a layered on top of that the whole end of

438
00:26:34,400 --> 00:26:37,560
Speaker 1: an oil narrative like okay, electric vehicles are taking over

439
00:26:37,600 --> 00:26:40,200
Speaker 1: the world and so on and so forth, we don't

440
00:26:40,200 --> 00:26:44,720
Speaker 1: need this stuff anymore, and zoom is going to help us, uh,

441
00:26:45,560 --> 00:26:49,119
Speaker 1: you know, overcome our commuting and blah blah blah. And

442
00:26:49,320 --> 00:26:54,080
Speaker 1: so it really weakened the industry further. And then all

443
00:26:54,160 --> 00:26:57,240
Speaker 1: of a sudden, of course, the demand comes back, comes

444
00:26:57,440 --> 00:27:02,240
Speaker 1: roaring back, and the supply side is hampered, especially the

445
00:27:02,320 --> 00:27:05,800
Speaker 1: Western oil and gas industry, which has been under intense

446
00:27:05,920 --> 00:27:11,520
Speaker 1: pressure UH to decarbonized cut its production, so on and

447
00:27:11,600 --> 00:27:15,119
Speaker 1: so forth, and so here we are, so talk to

448
00:27:15,240 --> 00:27:19,920
Speaker 1: us a little bit more also about the financing aspect

449
00:27:20,000 --> 00:27:22,880
Speaker 1: of it UM. And this is something that we hear

450
00:27:23,440 --> 00:27:28,080
Speaker 1: from energy producers in particular, this idea that well, for

451
00:27:28,280 --> 00:27:30,840
Speaker 1: them credit, you know, for the rest of the world,

452
00:27:30,920 --> 00:27:34,440
Speaker 1: credit has been an ample supply for the past few years.

453
00:27:34,560 --> 00:27:38,359
Speaker 1: But for anything that's considered a polluting industry or a

454
00:27:38,480 --> 00:27:41,880
Speaker 1: non E s G compliant industry, it's much more difficult.

455
00:27:41,960 --> 00:27:45,320
Speaker 1: So how how real has that been for the industry.

456
00:27:46,680 --> 00:27:50,120
Speaker 1: It's been very real. I mean there's two major sources

457
00:27:50,119 --> 00:27:53,640
Speaker 1: of financing, like in any company, it's equity and debt.

458
00:27:54,480 --> 00:27:58,960
Speaker 1: So historically, certainly, when the price of the commodity goes

459
00:27:59,080 --> 00:28:02,399
Speaker 1: up at any players from Wall Street come in and

460
00:28:03,160 --> 00:28:06,840
Speaker 1: and say here go drill, go produce more. Uh, And

461
00:28:08,080 --> 00:28:10,080
Speaker 1: you produce more of the cash flows are strong, so

462
00:28:10,200 --> 00:28:15,520
Speaker 1: you're able to borrow more. But the combination of seven

463
00:28:15,840 --> 00:28:20,000
Speaker 1: years of low prices and not making any money already

464
00:28:20,080 --> 00:28:22,119
Speaker 1: investors were saying, well, you know, give me a call

465
00:28:22,200 --> 00:28:24,280
Speaker 1: when you make money. And then on top of that,

466
00:28:24,359 --> 00:28:28,119
Speaker 1: the divestment movement and end of oil narrative E s

467
00:28:28,240 --> 00:28:32,800
Speaker 1: G and many financial institutions pension plans for example, saying no,

468
00:28:33,080 --> 00:28:36,760
Speaker 1: we're we're not allowed to invest in these companies and anymore,

469
00:28:37,160 --> 00:28:39,600
Speaker 1: and banks coming out and joining things like the Net

470
00:28:39,720 --> 00:28:43,440
Speaker 1: Zero Banking Alliance, which basically says no more fossil fuel

471
00:28:43,800 --> 00:28:50,000
Speaker 1: debt investing. And so now we're in a situation where

472
00:28:50,160 --> 00:28:52,600
Speaker 1: the oil and gas companies are making a lot of

473
00:28:52,680 --> 00:28:56,400
Speaker 1: cash flow, right, they can finance themselves and they can

474
00:28:56,440 --> 00:28:59,880
Speaker 1: even drill themselves. But the investors who stuck with the

475
00:29:00,160 --> 00:29:03,560
Speaker 1: companies are basically saying, well, you know, I stuck it

476
00:29:03,600 --> 00:29:05,720
Speaker 1: out with you, give me my money back and a

477
00:29:05,840 --> 00:29:08,680
Speaker 1: divid end and buy back shares and so on, and

478
00:29:08,840 --> 00:29:14,160
Speaker 1: so again we're in a situation where the ability to

479
00:29:14,360 --> 00:29:17,080
Speaker 1: make decisions to put money back into the ground to

480
00:29:17,200 --> 00:29:24,160
Speaker 1: grow production is very encumbered. Yeah. So in theory, okay,

481
00:29:24,280 --> 00:29:28,200
Speaker 1: So the the shareholders of these companies who are sitting

482
00:29:28,240 --> 00:29:30,720
Speaker 1: on years and years of cash for losses, they're like, no,

483
00:29:31,160 --> 00:29:34,440
Speaker 1: don't indvise. So the idea is they don't want UH

484
00:29:34,920 --> 00:29:37,280
Speaker 1: to invest because they wanted to get repaid after years

485
00:29:37,320 --> 00:29:40,160
Speaker 1: of losses, and then there isn't some pool of other

486
00:29:40,360 --> 00:29:43,760
Speaker 1: money and that would be more the sort of E. S. G.

487
00:29:44,120 --> 00:29:46,640
Speaker 1: Defined broadly, but that would be more of the E

488
00:29:46,840 --> 00:29:50,840
Speaker 1: s G impaired financing because all different kinds of industries,

489
00:29:50,920 --> 00:29:52,920
Speaker 1: it sounds like a are all different sorts of players

490
00:29:53,320 --> 00:29:57,800
Speaker 1: basically made a formal decision to get out of the game. Yeah. Well,

491
00:29:58,000 --> 00:30:00,280
Speaker 1: so what's happening is is that there's what I call

492
00:30:00,360 --> 00:30:03,720
Speaker 1: the alt finance universe that's starting to emerge. So the

493
00:30:03,760 --> 00:30:09,240
Speaker 1: alt finance universe are financial provide uh what do you

494
00:30:09,320 --> 00:30:13,880
Speaker 1: call it? Equity providers, debt providers that are not overly

495
00:30:13,960 --> 00:30:16,480
Speaker 1: concerned about E s G. And they say, find sure,

496
00:30:16,520 --> 00:30:19,280
Speaker 1: we'll give you the money, maybe at a higher price. Uh.

497
00:30:19,680 --> 00:30:22,280
Speaker 1: So they come in and they start financing these companies.

498
00:30:22,640 --> 00:30:25,560
Speaker 1: At the moment, though, I'll reiterate at a barrel and

499
00:30:25,600 --> 00:30:27,920
Speaker 1: even a hundred bucks of barrel. Oil and gas companies

500
00:30:27,960 --> 00:30:31,400
Speaker 1: are actually vigorously paying debt down. They don't need they

501
00:30:31,440 --> 00:30:36,480
Speaker 1: don't need any money, and they are issuing special dividends

502
00:30:37,080 --> 00:30:39,520
Speaker 1: and so on. But the issue is going to come

503
00:30:39,600 --> 00:30:42,400
Speaker 1: when the price of oil falls back to say eighty

504
00:30:42,440 --> 00:30:45,720
Speaker 1: dollars and we think it's all okay, but really it's not.

505
00:30:45,920 --> 00:30:51,480
Speaker 1: It's a very precarious situation because you know the root

506
00:30:51,600 --> 00:30:56,840
Speaker 1: issue of still the need for fossil fuels, oil and

507
00:30:56,920 --> 00:31:00,520
Speaker 1: gas for several decades, in my opinion, is not going away.

508
00:31:01,840 --> 00:31:04,760
Speaker 1: So just to play devil's advocate on that question, I mean,

509
00:31:05,440 --> 00:31:07,440
Speaker 1: a lot of people in the E s G would

510
00:31:07,560 --> 00:31:10,560
Speaker 1: presumably say, well, this is exactly the kind of dynamic

511
00:31:11,000 --> 00:31:13,920
Speaker 1: that we do want. Okay, so not we don't necessarily

512
00:31:13,960 --> 00:31:17,800
Speaker 1: want oil at a barrel, but we want people to

513
00:31:17,960 --> 00:31:21,480
Speaker 1: go into other industries. We want to choke off funding

514
00:31:21,920 --> 00:31:27,360
Speaker 1: for dirtier industries in order to encourage newer types of energy,

515
00:31:28,120 --> 00:31:32,080
Speaker 1: cleaner types of energy. What would be your response to

516
00:31:32,720 --> 00:31:37,000
Speaker 1: that message, Well, I have the benefit of financing all

517
00:31:37,040 --> 00:31:43,040
Speaker 1: types of energy and have seen how transitions work. In fact,

518
00:31:43,240 --> 00:31:46,960
Speaker 1: even written books on energy transition before energy transition was

519
00:31:47,040 --> 00:31:51,840
Speaker 1: even a buzzword. Uh. So you know, the thing is

520
00:31:51,960 --> 00:31:57,280
Speaker 1: is that it's not a good idea to prematurely abandoned

521
00:31:57,400 --> 00:32:00,440
Speaker 1: this industry. Because the price goes up to a hundred

522
00:32:00,480 --> 00:32:04,160
Speaker 1: twenty bucks gasoline goes to five dollars a barrel. Uh,

523
00:32:04,320 --> 00:32:07,880
Speaker 1: it's like a massive carbon tax. Uh let's say the

524
00:32:07,960 --> 00:32:11,920
Speaker 1: equivalent from going from fifty dollars a barrel to barrel.

525
00:32:12,360 --> 00:32:15,840
Speaker 1: That's like imposing a two ton carbon tax and the

526
00:32:15,920 --> 00:32:22,200
Speaker 1: people right, which is huge, and it disenfranchises obviously the

527
00:32:22,400 --> 00:32:25,800
Speaker 1: lower income strata of society and creates all sorts of

528
00:32:25,880 --> 00:32:29,960
Speaker 1: social issues and polarization. So yeah, it's one way to

529
00:32:30,120 --> 00:32:33,960
Speaker 1: think about, you know, forcing people to switch off of

530
00:32:34,600 --> 00:32:39,400
Speaker 1: oil and gas into alternatives, except the alternatives are not

531
00:32:39,480 --> 00:32:44,400
Speaker 1: available easily. It costs people money which they don't have

532
00:32:44,680 --> 00:32:48,720
Speaker 1: now to say, buy a new vehicle electric vehicle, or

533
00:32:49,320 --> 00:32:52,240
Speaker 1: replace their heat their furnace with a heat pump, or

534
00:32:52,520 --> 00:32:55,560
Speaker 1: are conditioning or whatever, and and so we'll just create

535
00:32:55,680 --> 00:33:00,520
Speaker 1: this really distorted economy that speaks to a very sorderly

536
00:33:00,640 --> 00:33:07,880
Speaker 1: transition that has potentially a lot of civil uh unrest

537
00:33:08,000 --> 00:33:11,320
Speaker 1: and problems. So you're somewhat beautiful and this is right

538
00:33:11,560 --> 00:33:15,320
Speaker 1: because you're invested in the transition. So he but well,

539
00:33:15,920 --> 00:33:17,440
Speaker 1: I guess sort of a one and a half part

540
00:33:17,560 --> 00:33:20,320
Speaker 1: question is like you're invest in the transition, what new tech?

541
00:33:20,720 --> 00:33:22,760
Speaker 1: I guess it sounds like this is a really bad

542
00:33:22,880 --> 00:33:25,640
Speaker 1: way to accelerate it in your view, But what is

543
00:33:25,760 --> 00:33:27,760
Speaker 1: like what do you see as like the problem? You know,

544
00:33:27,840 --> 00:33:31,000
Speaker 1: what is the orderly transition? Look like the order of

545
00:33:31,040 --> 00:33:35,640
Speaker 1: the transition is that you know, I'm very still bullish

546
00:33:35,720 --> 00:33:38,680
Speaker 1: on renewables. I mean the cost curves coming down and

547
00:33:38,760 --> 00:33:42,360
Speaker 1: the adoption rates. Personally, I drive, I've been driving an

548
00:33:42,360 --> 00:33:45,560
Speaker 1: electric vehicle for five and a half years, so I'm

549
00:33:45,600 --> 00:33:51,960
Speaker 1: a fan of electric vehicles, however, and I'm also a

550
00:33:52,120 --> 00:33:55,120
Speaker 1: social what do you call color commentator and energy and

551
00:33:55,240 --> 00:33:58,600
Speaker 1: I can tell you, like, the transition does not occur overnight.

552
00:33:58,760 --> 00:34:01,200
Speaker 1: I mean this is if you look at historical transitions,

553
00:34:01,240 --> 00:34:05,040
Speaker 1: they take decades and to think that, you know, it's

554
00:34:05,040 --> 00:34:07,560
Speaker 1: almost a lot of hubris to think that we could

555
00:34:07,600 --> 00:34:09,480
Speaker 1: get off this stuff in a matter of a few

556
00:34:09,600 --> 00:34:13,680
Speaker 1: years and make us which is being disproven right right now.

557
00:34:14,320 --> 00:34:16,800
Speaker 1: And you know it's going to be disproven doubly because

558
00:34:17,080 --> 00:34:19,200
Speaker 1: they said, what we have right now is the equivalent

559
00:34:19,200 --> 00:34:22,480
Speaker 1: of a two carbon tax, and all it's doing is

560
00:34:22,560 --> 00:34:26,080
Speaker 1: creating um a lot of animosity and society is what

561
00:34:26,200 --> 00:34:47,520
Speaker 1: I can see, and disenfranchising the lower income strata. So

562
00:34:47,960 --> 00:34:50,480
Speaker 1: if this is my new favorite question to ask people,

563
00:34:50,600 --> 00:34:53,480
Speaker 1: but if you could wave a magic wand and change

564
00:34:53,560 --> 00:34:57,520
Speaker 1: one thing about the way the current world works or

565
00:34:57,840 --> 00:35:01,160
Speaker 1: the way policy is formed or whatever, in order to

566
00:35:02,320 --> 00:35:05,960
Speaker 1: help some of the problems, help alleviate some of the

567
00:35:06,000 --> 00:35:10,400
Speaker 1: problems we've been discussing what would it be, Well, I

568
00:35:10,480 --> 00:35:12,920
Speaker 1: mean it's it's probably not one one, But I'll just

569
00:35:13,200 --> 00:35:18,640
Speaker 1: say one thing that we should be doing is focusing

570
00:35:18,760 --> 00:35:25,200
Speaker 1: back on the core objective, which is to reduce emissions. Okay,

571
00:35:25,600 --> 00:35:31,520
Speaker 1: So reducing emissions is not the same as shutting down

572
00:35:32,560 --> 00:35:36,520
Speaker 1: and thinking the oil and gas industry is dead. Okay,

573
00:35:37,239 --> 00:35:41,480
Speaker 1: the put putting an industry out of business is a

574
00:35:41,560 --> 00:35:45,640
Speaker 1: lot harder than reducing emissions in my opinion. Okay, And

575
00:35:46,040 --> 00:35:48,480
Speaker 1: you can go deep into the subject, but this, to

576
00:35:48,600 --> 00:35:51,719
Speaker 1: me is the core issue that and the and the

577
00:35:51,800 --> 00:35:54,960
Speaker 1: core mistakes that's been made to this point is that

578
00:35:55,080 --> 00:35:59,160
Speaker 1: the only way to decarbonize quickly is to shut down

579
00:35:59,239 --> 00:36:02,080
Speaker 1: the oil and gas industry and call it dead and buried,

580
00:36:02,600 --> 00:36:06,080
Speaker 1: which is what we've been doing over the last half

581
00:36:06,160 --> 00:36:09,200
Speaker 1: dozen years and has resulted in the situation that we're

582
00:36:09,239 --> 00:36:12,200
Speaker 1: in right now. You know, we need to get people

583
00:36:12,320 --> 00:36:16,400
Speaker 1: back into the industry that is innovating now fairly vigorously

584
00:36:16,560 --> 00:36:20,400
Speaker 1: in terms of how to reduce their upstream emissions and

585
00:36:20,880 --> 00:36:24,560
Speaker 1: with carbon capture and other technologies that are yet to

586
00:36:24,640 --> 00:36:28,680
Speaker 1: come to the fore, so we can reduce emissions dramatically

587
00:36:30,239 --> 00:36:34,160
Speaker 1: and we can have a transition to electrification in all

588
00:36:34,280 --> 00:36:38,800
Speaker 1: sorts of things that will help us decarbonized going forward

589
00:36:38,880 --> 00:36:42,880
Speaker 1: and create clean and prosperous energy. But you know, we

590
00:36:42,960 --> 00:36:45,080
Speaker 1: have to do it smoothly, because if we don't do

591
00:36:45,160 --> 00:36:47,800
Speaker 1: it smoothly, you're going to create all sorts of social

592
00:36:47,880 --> 00:36:52,600
Speaker 1: tensions which we're seeing get manifested. And that's just obstructionist

593
00:36:53,000 --> 00:36:55,560
Speaker 1: in terms of getting it. It's friction in terms of

594
00:36:55,600 --> 00:36:59,360
Speaker 1: getting to the end goal. What about is there anything

595
00:36:59,400 --> 00:37:02,040
Speaker 1: in the short to medium term, either in the US

596
00:37:02,400 --> 00:37:05,759
Speaker 1: or Canada policy wise, that could just simply accelerate the

597
00:37:05,800 --> 00:37:08,680
Speaker 1: production of oil right now? Because that's a big thing

598
00:37:08,760 --> 00:37:11,520
Speaker 1: just getting in the US right Like supposedly Biden wakes

599
00:37:11,600 --> 00:37:13,920
Speaker 1: up every day and he isn't he in the staff

600
00:37:13,960 --> 00:37:16,600
Speaker 1: look at the price of gastly and every day. Supposedly

601
00:37:16,680 --> 00:37:18,400
Speaker 1: that's what I read a report that said that is

602
00:37:18,440 --> 00:37:22,279
Speaker 1: the other policies that could meaningfully accelerate I mean, as

603
00:37:22,320 --> 00:37:24,120
Speaker 1: you mentioned, you know, you can look at the ridcounts

604
00:37:24,360 --> 00:37:28,279
Speaker 1: they are going up. Other policies that in the sort

605
00:37:28,320 --> 00:37:31,520
Speaker 1: of short to medium term could accelerate both production and

606
00:37:31,600 --> 00:37:35,560
Speaker 1: refine such that the price has come down. Yeah, well,

607
00:37:35,680 --> 00:37:38,879
Speaker 1: I don't think actually it's as much policy. Um. Now,

608
00:37:39,000 --> 00:37:40,920
Speaker 1: Canada is a little bit different than the US, but

609
00:37:41,120 --> 00:37:44,880
Speaker 1: maybe not too far different. I think the industry and

610
00:37:45,160 --> 00:37:52,800
Speaker 1: the shareholders of the industry are really exhausted by the

611
00:37:52,960 --> 00:37:58,760
Speaker 1: vilification and the negative rhetoric, and so actually having leaders

612
00:37:58,880 --> 00:38:03,360
Speaker 1: right at the top say that our domestic industry is

613
00:38:05,600 --> 00:38:09,640
Speaker 1: among the best in the world and is plays a

614
00:38:09,760 --> 00:38:16,120
Speaker 1: valuable role not only in terms of the carbonization, but

615
00:38:16,280 --> 00:38:21,000
Speaker 1: plays a valuable role in energy security and energy affordability globally.

616
00:38:22,440 --> 00:38:24,719
Speaker 1: Just to say that, just just just to say the

617
00:38:24,800 --> 00:38:28,600
Speaker 1: industry is important, I think would make a lot of

618
00:38:28,680 --> 00:38:31,320
Speaker 1: people be much more inclined to be part of the

619
00:38:31,400 --> 00:38:34,759
Speaker 1: solution and maybe even encourage people to come back to

620
00:38:34,840 --> 00:38:38,680
Speaker 1: work in the industry. You know, there's nothing you almost

621
00:38:38,719 --> 00:38:40,400
Speaker 1: need like a rally cry and say you know, this

622
00:38:40,560 --> 00:38:43,000
Speaker 1: is important to us that we have a smooth transition

623
00:38:43,120 --> 00:38:48,239
Speaker 1: with safe, secure, cheap clean energy. You know, in your view,

624
00:38:48,760 --> 00:38:52,200
Speaker 1: we're nowhere closed towards this sort of end of carbon

625
00:38:52,320 --> 00:38:55,360
Speaker 1: of fossil fuels, oil and gases. What is like the

626
00:38:55,400 --> 00:38:58,080
Speaker 1: transition look like when you like, when you think about

627
00:38:58,120 --> 00:39:00,319
Speaker 1: this and you say it is a decade to cage

628
00:39:00,360 --> 00:39:03,000
Speaker 1: one decade, what is what does it look like when's

629
00:39:03,080 --> 00:39:06,759
Speaker 1: peak energy production, peak energy demand? What's the sort of

630
00:39:07,080 --> 00:39:10,719
Speaker 1: ideal transition looked like from your perspective. Yeah, so let's

631
00:39:10,760 --> 00:39:12,759
Speaker 1: focus it on the word transition. Well, first of all,

632
00:39:12,800 --> 00:39:16,879
Speaker 1: I think the peak oil demand is probably around that's

633
00:39:16,920 --> 00:39:21,399
Speaker 1: that's my estimates based on numbers and things. But let's

634
00:39:21,400 --> 00:39:25,160
Speaker 1: think about transition. I mean transitions save from DVD players

635
00:39:25,280 --> 00:39:30,360
Speaker 1: to streaming. You know, basically, you the demand for DVD

636
00:39:30,480 --> 00:39:33,440
Speaker 1: players and DVDs goes down and the demand for streaming

637
00:39:33,480 --> 00:39:37,800
Speaker 1: goes up. You know, what we're seeing in energy is

638
00:39:38,239 --> 00:39:43,919
Speaker 1: that we have oil and gas and actually, unfortunately even

639
00:39:44,000 --> 00:39:49,600
Speaker 1: coal continuing to rise at the same time as renewables

640
00:39:49,600 --> 00:39:52,320
Speaker 1: are rising and electric vehicles are rising. It's more of

641
00:39:52,360 --> 00:39:55,520
Speaker 1: a diversification of our energy system rather than our transition

642
00:39:55,560 --> 00:39:58,239
Speaker 1: that's occurring. And then there's a big difference. And so

643
00:39:58,440 --> 00:40:01,280
Speaker 1: let's let's bring that to cars, which is really important.

644
00:40:01,440 --> 00:40:05,000
Speaker 1: You know, there's all these headlines and metrics measuring the

645
00:40:05,480 --> 00:40:08,000
Speaker 1: sales of electric vehicles, and I think that's great. As

646
00:40:08,040 --> 00:40:10,319
Speaker 1: I said, I've driven one for five and a half years.

647
00:40:10,960 --> 00:40:13,680
Speaker 1: I love it. But the real metric in terms of

648
00:40:13,760 --> 00:40:16,320
Speaker 1: decarbonization and transition is well, how many cars are we

649
00:40:16,400 --> 00:40:19,680
Speaker 1: taking off the road that are combustion vehicles Because the

650
00:40:19,719 --> 00:40:22,520
Speaker 1: reality is is that when somebody sells their combustion vehicle

651
00:40:23,000 --> 00:40:25,640
Speaker 1: to buy an electric vehicle, that combustion vehicle goes to

652
00:40:25,719 --> 00:40:28,279
Speaker 1: somebody else, and then when that person is done with it,

653
00:40:28,360 --> 00:40:30,640
Speaker 1: it typically goes to a developing country and it gets

654
00:40:30,760 --> 00:40:36,160
Speaker 1: driven for another twenty years. So yeah, because I mean,

655
00:40:36,440 --> 00:40:38,520
Speaker 1: if you think about vehicles today, I mean, they'll go

656
00:40:38,680 --> 00:40:43,239
Speaker 1: to three miles easy, right, because they're built robotically. The

657
00:40:43,360 --> 00:40:45,399
Speaker 1: quality is a lot better than the cars we even

658
00:40:45,440 --> 00:40:49,520
Speaker 1: produced ten years ago. And and so you know, the

659
00:40:49,880 --> 00:40:53,160
Speaker 1: real metric for a transition is how fast are we

660
00:40:54,080 --> 00:41:01,960
Speaker 1: not using legacy paradigms for energy versus just focusing on

661
00:41:02,320 --> 00:41:05,400
Speaker 1: on the growth curve of new energy systems. We have

662
00:41:05,520 --> 00:41:08,200
Speaker 1: to figure out how to retire the old stuff. And

663
00:41:08,320 --> 00:41:10,239
Speaker 1: this is one of the big issues with oil and gas.

664
00:41:10,560 --> 00:41:14,160
Speaker 1: Oil in particular and petroleum uses that oil demand is

665
00:41:14,640 --> 00:41:17,839
Speaker 1: not likely to go down because population continues to grow

666
00:41:19,360 --> 00:41:24,440
Speaker 1: in in developing economies. Uh, people are buying more and

667
00:41:24,520 --> 00:41:29,320
Speaker 1: more vehicles still, and you know they're they're not necessarily

668
00:41:29,360 --> 00:41:33,120
Speaker 1: buying electric vehicles, are buying somebody's used combustion vehicle that

669
00:41:33,280 --> 00:41:36,680
Speaker 1: just gets shifted in container ships around the planet, and

670
00:41:36,840 --> 00:41:41,440
Speaker 1: so it's a you know that the real transition, as

671
00:41:41,480 --> 00:41:44,200
Speaker 1: I said, where you get the decline of the fossil

672
00:41:44,239 --> 00:41:47,479
Speaker 1: fuel systems and the growth of the the new clean

673
00:41:47,600 --> 00:41:50,280
Speaker 1: energy systems in earnest I don't I don't really expect

674
00:41:50,320 --> 00:41:54,839
Speaker 1: that to happen until So that means between now and then,

675
00:41:54,960 --> 00:41:58,960
Speaker 1: we've got this massive gap that's deteriorating in terms of

676
00:41:59,080 --> 00:42:05,480
Speaker 1: the incumbent system. Well, Peter Church second, really great perspective.

677
00:42:05,680 --> 00:42:07,080
Speaker 1: You know, we've been sort of talking about some of

678
00:42:07,160 --> 00:42:10,160
Speaker 1: these topics very generally in terms of the financing and

679
00:42:10,239 --> 00:42:12,680
Speaker 1: the constraints, but it's great to get this sort of

680
00:42:12,800 --> 00:42:14,719
Speaker 1: like very clear ideas and like how they were thinking

681
00:42:14,840 --> 00:42:17,600
Speaker 1: through these things with the constraints and plus the machinery.

682
00:42:17,680 --> 00:42:20,279
Speaker 1: So I really appreciate you coming out online. That was

683
00:42:20,400 --> 00:42:24,640
Speaker 1: very very educational. Well, my pleasure, thanks for having me,

684
00:42:25,320 --> 00:42:44,160
Speaker 1: Thanks so much, Peter. Yeah, that was really interesting, Tracy.

685
00:42:44,360 --> 00:42:47,000
Speaker 1: That example of just thinking through Okay, you have a

686
00:42:47,120 --> 00:42:50,920
Speaker 1: hundred pieces of equipment, you only use forty, but then

687
00:42:51,000 --> 00:42:54,000
Speaker 1: you cannibalize the other sixty to maintain the existing forty

688
00:42:54,080 --> 00:42:55,480
Speaker 1: and then at the end, you do not have a

689
00:42:55,600 --> 00:42:57,879
Speaker 1: hundred anymore because you didn't buy anything new. I think

690
00:42:57,880 --> 00:42:59,879
Speaker 1: it was actually one of the clearest sort of big

691
00:43:00,000 --> 00:43:04,480
Speaker 1: examples of I guess, like history sist or supply side degradation,

692
00:43:04,960 --> 00:43:08,600
Speaker 1: what happens when you have a protracted slumping in they

693
00:43:08,640 --> 00:43:11,759
Speaker 1: in an industry totally. And then I guess the um

694
00:43:12,280 --> 00:43:16,759
Speaker 1: extending that to the labor side, that anecdote of one

695
00:43:16,920 --> 00:43:20,400
Speaker 1: person enrolled versus classes that used to be you know,

696
00:43:20,560 --> 00:43:23,800
Speaker 1: thirty or more are that's kind of stunning to me.

697
00:43:24,040 --> 00:43:27,160
Speaker 1: But I guess, you know, to Peter's point, what would

698
00:43:27,200 --> 00:43:30,040
Speaker 1: you expect when for years and years and years people

699
00:43:30,080 --> 00:43:32,160
Speaker 1: have been like, oh, this is a terrible industry, you're

700
00:43:32,239 --> 00:43:34,560
Speaker 1: ruining the planet. Who in their right mind would want

701
00:43:34,600 --> 00:43:37,160
Speaker 1: to go into that? No, it doesn't seem like you know, okay, yes,

702
00:43:37,239 --> 00:43:39,799
Speaker 1: I'm sure in many cases they were very very well

703
00:43:39,840 --> 00:43:43,080
Speaker 1: paying jobs still even during the downturn years, but very

704
00:43:43,160 --> 00:43:46,839
Speaker 1: little about that career over the last ten years would

705
00:43:46,880 --> 00:43:49,799
Speaker 1: have seemed to be particularly appealing for a lot of people.

706
00:43:50,160 --> 00:43:52,520
Speaker 1: And then it's sort of like kind of mind blowing

707
00:43:52,600 --> 00:43:55,840
Speaker 1: to think, uh, you know, the first order effect of

708
00:43:55,920 --> 00:43:59,080
Speaker 1: a of a surgeon energy stocks is that you probably

709
00:43:59,160 --> 00:44:02,680
Speaker 1: have a lot of people who worked for Exxon or

710
00:44:02,800 --> 00:44:07,239
Speaker 1: whoever else they like, finally, my portfolio stocks is high

711
00:44:07,400 --> 00:44:10,040
Speaker 1: enough that I can retire. So even before you have

712
00:44:10,239 --> 00:44:13,600
Speaker 1: the positive price signal of of putting people into the market,

713
00:44:13,800 --> 00:44:16,400
Speaker 1: you finally get people who could cash out and retire.

714
00:44:17,200 --> 00:44:19,680
Speaker 1: The two other things that struck me was one just

715
00:44:20,000 --> 00:44:22,719
Speaker 1: the idea that maybe if people were a little bit

716
00:44:22,880 --> 00:44:27,080
Speaker 1: nicer to the industry. And again, like so much of it,

717
00:44:27,480 --> 00:44:30,359
Speaker 1: it sounds like messaging, and it is, but I think

718
00:44:30,400 --> 00:44:32,920
Speaker 1: that matters to people, right, Like, no one wants to

719
00:44:33,040 --> 00:44:35,400
Speaker 1: feel like they're coming into a job and they're not.

720
00:44:35,920 --> 00:44:38,200
Speaker 1: It's weird making it different. Yeah, I know, I know

721
00:44:38,360 --> 00:44:40,520
Speaker 1: it's weird. But on the other hand, and that's true.

722
00:44:40,520 --> 00:44:43,200
Speaker 1: But something else has I've thought about. It's like Trump

723
00:44:43,360 --> 00:44:47,320
Speaker 1: was like really nice, like rhetorically to the industry, and

724
00:44:47,480 --> 00:44:49,680
Speaker 1: that was the years when like they lost hundreds of

725
00:44:49,719 --> 00:44:52,120
Speaker 1: billions of you know how many hundreds of billions of

726
00:44:52,200 --> 00:44:56,800
Speaker 1: dollars in the industry Louise from through so yeah, but

727
00:44:56,880 --> 00:44:59,200
Speaker 1: I mean they were still producing, right, that's the difference.

728
00:44:59,239 --> 00:45:00,799
Speaker 1: I know. It's so it's so weird, it's like, oh,

729
00:45:00,880 --> 00:45:03,040
Speaker 1: we're nice and we're like going bankrupt and now we

730
00:45:03,120 --> 00:45:06,239
Speaker 1: have a president doesn't you know, doesn't quite say as

731
00:45:06,360 --> 00:45:08,560
Speaker 1: nice things, at least at the UYS about the industry,

732
00:45:08,600 --> 00:45:10,160
Speaker 1: but they're all making a fortune. It is sort of

733
00:45:10,239 --> 00:45:13,480
Speaker 1: this weird I don't know well. And the other thing

734
00:45:13,840 --> 00:45:16,360
Speaker 1: that I thought was interesting was this notion of you know,

735
00:45:16,400 --> 00:45:18,160
Speaker 1: when he was talking about peak oil, which is a

736
00:45:18,440 --> 00:45:22,040
Speaker 1: something that I haven't heard about for a long time

737
00:45:22,160 --> 00:45:26,080
Speaker 1: because it kind of died during that era, which again

738
00:45:26,160 --> 00:45:29,360
Speaker 1: tells you, you know, how extreme the sentiment kind of

739
00:45:29,440 --> 00:45:33,719
Speaker 1: swings here. But when he was talking about the energy transition,

740
00:45:34,239 --> 00:45:38,600
Speaker 1: we're not actually replacing all these combustible engines with new

741
00:45:38,680 --> 00:45:42,239
Speaker 1: electric vehicles, were just moving them to a different place.

742
00:45:42,400 --> 00:45:45,640
Speaker 1: So if the pool of the global population that needs

743
00:45:45,719 --> 00:45:48,920
Speaker 1: a car continues to grow, then you can have a

744
00:45:49,040 --> 00:45:51,840
Speaker 1: situation in which maybe you know, in the US and

745
00:45:52,280 --> 00:45:55,080
Speaker 1: Norway and some of these other places have booming e

746
00:45:55,200 --> 00:45:57,799
Speaker 1: V demand of course China as well, but then still

747
00:45:57,880 --> 00:46:01,239
Speaker 1: like all of these used combustion vehicle don't actually leave

748
00:46:01,280 --> 00:46:03,799
Speaker 1: the road and go to poorer countries, and the fact

749
00:46:03,880 --> 00:46:06,080
Speaker 1: that you know, cars are made pretty well these days,

750
00:46:06,080 --> 00:46:08,759
Speaker 1: I was sort of that they might live another twenty years,

751
00:46:08,880 --> 00:46:11,279
Speaker 1: even after the second owner in the US sells it

752
00:46:11,360 --> 00:46:13,600
Speaker 1: to someone an emerging market. Well, I mean, even like

753
00:46:13,880 --> 00:46:19,560
Speaker 1: Landrovers from the nineties are really desirable. No, no, I

754
00:46:19,719 --> 00:46:21,839
Speaker 1: had a really bad experience with the used land Rover.

755
00:46:22,200 --> 00:46:25,319
Speaker 1: Never buy used land Rover. I think he would feel

756
00:46:25,360 --> 00:46:28,880
Speaker 1: differently if you were living in like tens of years. No, no, no, no, no,

757
00:46:29,080 --> 00:46:32,080
Speaker 1: I would not on any I would never wish anyone,

758
00:46:32,560 --> 00:46:35,200
Speaker 1: even the most desperate person for a car, to buy

759
00:46:35,560 --> 00:46:38,359
Speaker 1: an old land Room. Okay, they're great. I love them

760
00:46:38,440 --> 00:46:41,799
Speaker 1: visually and aesthetically, but I would never, no matter how

761
00:46:42,080 --> 00:46:46,200
Speaker 1: hard up you are, never buy an old land Rover. Okay, well,

762
00:46:46,360 --> 00:46:47,960
Speaker 1: I feel like we're gonna have to talk about that

763
00:46:48,040 --> 00:46:51,600
Speaker 1: that that website Bring a Trailer. It's so cool because

764
00:46:51,600 --> 00:46:54,239
Speaker 1: they have all these like old classic cars, but it's

765
00:46:54,239 --> 00:46:57,720
Speaker 1: called like bring a Trailer because it's it's old classic

766
00:46:57,760 --> 00:47:01,680
Speaker 1: car auctions. But like these really like land Rovers, or

767
00:47:01,760 --> 00:47:04,360
Speaker 1: these like BMWs and Mercedes that are like from the

768
00:47:04,440 --> 00:47:07,120
Speaker 1: eighties and nineties that are like so cool and retro looking,

769
00:47:07,400 --> 00:47:09,959
Speaker 1: but you just know, like it's there's not gonna work.

770
00:47:10,120 --> 00:47:14,480
Speaker 1: You're you're gonna drive yourself crazy. But okay, but here's

771
00:47:14,520 --> 00:47:18,000
Speaker 1: my point before I clearly touched a nerve by mentioning

772
00:47:18,120 --> 00:47:20,080
Speaker 1: land Rover. But you know, like a lot of the

773
00:47:20,160 --> 00:47:24,160
Speaker 1: newer cars, people don't have the expertise needed to fix

774
00:47:24,239 --> 00:47:26,680
Speaker 1: them if something goes wrong because they're computer. Trust me,

775
00:47:26,840 --> 00:47:30,000
Speaker 1: you don't have the expertise. I know this because we

776
00:47:30,239 --> 00:47:32,359
Speaker 1: had so we had a land Rover that we got

777
00:47:32,560 --> 00:47:36,239
Speaker 1: used in our family and the problem was not that

778
00:47:36,400 --> 00:47:39,040
Speaker 1: like actually no one hit the expertise like it was like,

779
00:47:39,120 --> 00:47:43,120
Speaker 1: oh we had to find someone Manueilson. No, don't do it. Never,

780
00:47:43,880 --> 00:47:45,840
Speaker 1: it doesn't matter how cool they look. Don't buy What

781
00:47:45,920 --> 00:47:49,120
Speaker 1: if I okay, what if instead of like Rover, I

782
00:47:49,200 --> 00:47:52,160
Speaker 1: say land Cruiser. Would that be better like a Toyota

783
00:47:52,239 --> 00:47:55,600
Speaker 1: land Cruiser. Toyota probably a little bitter Okay, okay, okay.

784
00:47:55,760 --> 00:47:58,799
Speaker 1: My point is there are different reasons why you might

785
00:47:58,920 --> 00:48:02,759
Speaker 1: want an older vehicle. And so to Peter's point, the

786
00:48:02,840 --> 00:48:05,240
Speaker 1: assumption that we're just all going to switch to electric

787
00:48:05,320 --> 00:48:10,239
Speaker 1: vehicles that might be unrealistic. The broad point, you just

788
00:48:10,320 --> 00:48:13,400
Speaker 1: picked a category that I have. Okay, Look, if anyone,

789
00:48:13,520 --> 00:48:15,640
Speaker 1: if anyone wants to get a reaction out of Joe

790
00:48:15,760 --> 00:48:18,600
Speaker 1: on Twitter, just tweet like pictures of land Rovers out

791
00:48:18,600 --> 00:48:20,640
Speaker 1: of it. I guess that's the way they look. Still

792
00:48:20,800 --> 00:48:23,839
Speaker 1: drive on. Tell him you're thinking of buying one? All right,

793
00:48:24,160 --> 00:48:27,359
Speaker 1: don't buy. I don't give it financial advice, but don't

794
00:48:27,440 --> 00:48:30,759
Speaker 1: buy a nineties land. Okay, shall we leave it there.

795
00:48:30,880 --> 00:48:33,840
Speaker 1: Let's leave it there. This has been another episode of

796
00:48:33,960 --> 00:48:36,480
Speaker 1: the All Thoughts Podcast. I'm Tracy Alloway. You can follow

797
00:48:36,560 --> 00:48:39,719
Speaker 1: me on Twitter at Tracy Alloway. And I'm Joe Eisenthal.

798
00:48:39,800 --> 00:48:42,800
Speaker 1: You can follow me on Twitter at the Stalwart. Follow

799
00:48:42,880 --> 00:48:45,239
Speaker 1: our guests on Twitter Peter Church sack In and he's

800
00:48:45,400 --> 00:48:50,160
Speaker 1: at Peter Second. Follow our producer Carmen Rodriguez at Carmen Erman.

801
00:48:50,480 --> 00:48:54,280
Speaker 1: Follow the Bloomberg head of podcast, Francesca Levi at Francesco Today,

802
00:48:54,640 --> 00:48:57,480
Speaker 1: and check out all of our podcasts at Bloomberg under

803
00:48:57,560 --> 00:49:26,600
Speaker 1: the handle and podcasts. Thanks for listening to