Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Carlisle, chief strategy Officer of Energy Pathways, Jeff Curry, let's
Speaker 2: go to alex right now. Hey, Paul, thanks lot, really
Speaker 2: appreciate it. Jeff, I've been asking CEOs for the last
Speaker 2: day and a half, what do you do with twenty
Speaker 2: five percent tariffs? And now it's going to be what
Speaker 2: do you do with fifty percent tariffs?
Speaker 1: What's going to.
Speaker 2: Happen to the market.
Speaker 3: Well, it's pricing it in, you know, cut coppers, you know,
Speaker 3: heading towards five dollars a pound right now. But I
Speaker 3: think aluminum is the one to really watch because the
Speaker 3: question is can you on shore aluminum production and the
Speaker 3: answer is absolutely not.
Speaker 1: You know, if you think data centers and.
Speaker 3: AI are power intensive, aluminum smelting is in a whole
Speaker 3: different world. It's six times more power intensive per dollar
Speaker 3: revenue than AI data centers.
Speaker 1: So if you're already power constrained, there's.
Speaker 3: No possible way you're going to bring all of this
Speaker 3: aluminum smelting into the United States.
Speaker 2: So where do we get most of our aluminum and
Speaker 2: steel that the refined products, Well, a.
Speaker 3: Lot of it comes from the hydro electric power up
Speaker 3: in Quebec, so it comes down into the US from that.
Speaker 1: So shutting down that cheap source.
Speaker 3: Of aluminum supply and trying to replace it with really
Speaker 3: expensive produced, domestically produced supply, I think it's going to
Speaker 3: be a tall ordered ask.
Speaker 2: It's been a tough commodity road in the last couple
Speaker 2: of weeks. And we did with this molatility right oil
Speaker 2: was it a six month low? That's on recession fears,
Speaker 2: tear fears, growth fears, et cetera. What kind of cycle
Speaker 2: are we in right now?
Speaker 3: Well, I think what we're going through is a huge
Speaker 3: shift in the global order around security. And I think,
Speaker 3: you know, what is the response that probably Ontario is
Speaker 3: going to do to these tariffs. They're probably going to
Speaker 3: cut power. The governor's already threatened he's going to do it.
Speaker 3: He cuts power into the US. Energy security is top
Speaker 3: of mind, and I think that's what's going on right now,
Speaker 3: whether it's in Germany. Actually Germany, the Norwegians threatened to
Speaker 3: cut power into Germany back in December when a crisis
Speaker 3: occurred there. So I think energy security is top of
Speaker 3: mind for every around the world right now.
Speaker 2: Okay, so what does that look like? Because what's so
Speaker 2: interesting about commodities is it will always clear it a price, right,
Speaker 2: you'll always buy something, It just depends on what price
Speaker 2: you'll buy it.
Speaker 1: Is that still true? Absolutely?
Speaker 3: And I think what we're going to start to see
Speaker 3: is that's what's going on with aluminum and copper today.
Speaker 3: Is there going to price in a security premium to
Speaker 3: make sure you have that supply in your country domestically protected,
Speaker 3: in duty paid. You're seeing it in gold, and you're
Speaker 3: seeing it across the metal space and then particularly an energy.
Speaker 3: We're beginning to see that and I think that that
Speaker 3: is going to be the primary driver of the you know,
Speaker 3: let's call it the new cycle and commodities.
Speaker 2: So it's not geopolitical risk, it's not a green premium,
Speaker 2: it's a security premium. Correct, you're going to pay up
Speaker 2: to produce this.
Speaker 1: Stuff at home? Yep, exactly.
Speaker 2: That that's a humongous shift.
Speaker 3: It was huge, huge, and it's going to be really
Speaker 3: difficult to do, you know, whether or not.
Speaker 1: And I think the argument we take.
Speaker 3: Is it's going to be a diversified set of energies.
Speaker 3: That's why we call it the new jewel Order, is
Speaker 3: because you're gonna want oil and gas. You're gonna want renewables, nuclear,
Speaker 3: You're gonna want everything. And you want to diversify yourself
Speaker 3: because if you lose one of those supplies, you want
Speaker 3: to be diversified so that you can deal with that
Speaker 3: that disruption. And I think the key point here is
Speaker 3: when we think about fossil fuels, why do we like
Speaker 3: fossil fuels so much, is because they're tradable, they're portable,
Speaker 3: they're stortable, and they have high energy density, which is
Speaker 3: why we move them around the world. Those same reasons
Speaker 3: we like them, it's the same reasons they're so dangerous
Speaker 3: because somebody can just take them from you. And so
Speaker 3: when we think about what's driving I think this new
Speaker 3: environment we're living in, let's call it peak trade instead
Speaker 3: of you know peak Actually, look at the.
Speaker 1: Evolution of peak oil.
Speaker 3: It started out peak supply, we're gonna run out of supply,
Speaker 3: and then peak demand. We got too much of the stuff,
Speaker 3: so we need to reduce you know, the emissions.
Speaker 1: And now it's peak trade, meaning I can't get my
Speaker 1: hands on it.
Speaker 2: So it's gonna be really interesting then is if we
Speaker 2: get a piece in the Ukraine War, what happens with
Speaker 2: Germ in Europe and buying Russian.
Speaker 3: Gas, they're going to be hesitant. They'll probably take a
Speaker 3: little bit. Yeah, they're still buying it, but they're going
Speaker 3: to diversify their sources. And I think that's the key
Speaker 3: message here is diversify your sources so you're not so
Speaker 3: dependent on one supplier one type of energy. And I
Speaker 3: like to point out what is the best selling car
Speaker 3: out there, a PHEV, a plug in hybrid. Why because
Speaker 3: it operates off oil, gas, solar, wind, nuclear, the entire
Speaker 3: gambit of.
Speaker 1: All the energy sources.
Speaker 3: And I think that that type of diversity is going
Speaker 3: to be key in this new jewel order.
Speaker 2: Okay, so if I'm looking at prices in general, like
Speaker 2: does the band move up prices become more volatile? Do
Speaker 2: they move down? Like if I'm looking at say oil
Speaker 2: or copper, what's my trading band.
Speaker 3: I think that the volatility is going to explode across
Speaker 3: all these markets. You're already seeing it in power and
Speaker 3: the metals and across the space. That's going to lead
Speaker 3: to a higher average price. By the way, the volatility
Speaker 3: then discourages the ms MA.
Speaker 1: I don't want to invest in this thing is too volatile.
Speaker 3: Lower investment creates more volatility, and it just feeds off
Speaker 3: of itself.
Speaker 2: You're one of the first to invent the word supercycle, right,
Speaker 2: I mean, have big supercycles. There's big ups, there's big downs,
Speaker 2: and there's an investment cycle that goes with it.
Speaker 1: Are we no longer in that, you know? I think
Speaker 1: that's a great question. And those supercycles.
Speaker 3: Before were created by demand pull creating big shortages, created
Speaker 3: these big trends that created that supercycle.
Speaker 1: This one's a malinvestment cycle.
Speaker 3: It's industrial policy push, which creates pockets of imbalances. I
Speaker 3: like to call that cyc a bubbling cauldron, a little
Speaker 3: mini supercycles everywhere, and you get these high volatility and
Speaker 3: that's what we're seeing.
Speaker 1: By the way, the opportunity for investors in this environment
Speaker 1: is phenomenal.
Speaker 3: In fact, one of the themes going around here in
Speaker 3: Seer Week is the oil market. These markets are micro bullish,
Speaker 3: but macro bearish, so that micro creates these little opportunities
Speaker 3: inside there that you can take advantage of.
Speaker 1: But you don't get that big upward trend.
Speaker 3: And I think this bubbling cauldron of a little supply
Speaker 3: and demand imbalance is probably the best way to descrive
Speaker 3: change the.
Speaker 2: Time horizon for investments or the return for those investments.
Speaker 3: When we think about long term investments, it's going to
Speaker 3: provide a very similar return, but you got to manage
Speaker 3: that risk. And I think that that's the real the
Speaker 3: message here we think about you know, the focus before
Speaker 3: was on levelized cost of energy, get.
Speaker 1: The l c OE down. We got it down, but
Speaker 1: we were unable to deliver the jewels. So you think
Speaker 1: about Germany.
Speaker 3: It got it's levelized cost down, but it could only
Speaker 3: produce the power when the wind blew or the sunshine.
Speaker 3: Now the focus is on that delivered jewel. You can
Speaker 3: think about Now the focus is on Roe instead of
Speaker 3: l c OE. And so our other way to say
Speaker 3: it is dispatched power that goes to the consumers opposed
Speaker 3: to a centralized production of power.
Speaker 2: Okay, fascinating. One more quick question, because you're you and
Speaker 2: it's an oil conference. What's the lowest price of oil
Speaker 2: you think we're going to see this year and what's
Speaker 2: the highest?
Speaker 1: Totally any bad question.
Speaker 3: I think that's a great question because about this drill,
Speaker 3: baby drill, we're sitting on the bottom of the cost structure.
Speaker 3: You already see it drillings coming off. You know, you
Speaker 3: know all the OPEC countries are under pressure. Yeah, maybe
Speaker 3: you can get down into the low sixties or something
Speaker 3: like that.
Speaker 1: I would argue, you know, the markets to the upside,
Speaker 1: you know, looking at the amount of investment out there.
Speaker 3: Inventories are low, by the way, and now you put
Speaker 3: the security premium, people are going to be scrambling to
Speaker 3: get the barrels bringing in and I think that that's
Speaker 3: going to be going to be the key message.
Speaker 2: Jeff, always a pleasure love chatting with you is always
Speaker 2: going to count w at Sarah as well. Jeff Curray Carlisle,
Speaker 2: Chief Strategy Officer of Energy Pathways