1 00:00:10,160 --> 00:00:14,360 Speaker 1: Hello, and welcome to another episode of the Odd Locks podcast. 2 00:00:14,480 --> 00:00:19,040 Speaker 1: I'm Joe and I'm Tracy Halloway. Tracy, you know, the 3 00:00:19,120 --> 00:00:23,400 Speaker 1: high price of energy obviously has put a lot of 4 00:00:23,480 --> 00:00:28,240 Speaker 1: increased interest once again on energy transition, cleaner energy, cheaper energy. 5 00:00:28,520 --> 00:00:31,400 Speaker 1: But the thing that strikes me about two so far 6 00:00:31,720 --> 00:00:35,159 Speaker 1: is the world is using more coal than ever right. 7 00:00:35,400 --> 00:00:38,640 Speaker 1: I think if there's one thing we can internalize from 8 00:00:38,880 --> 00:00:45,880 Speaker 1: the lessons of two, it's that a things we expected 9 00:00:45,920 --> 00:00:48,680 Speaker 1: to happen have not happened. And be on that note, 10 00:00:49,000 --> 00:00:52,440 Speaker 1: the energy transition is just a lot messier and a 11 00:00:52,479 --> 00:00:55,320 Speaker 1: lot less linear than I think a lot of people expected. 12 00:00:55,360 --> 00:00:59,840 Speaker 1: People expected, like you know, once evs became widely available, 13 00:01:00,080 --> 00:01:03,680 Speaker 1: someone somewhere would flip a switch. Everyone would shift their 14 00:01:03,720 --> 00:01:07,240 Speaker 1: dependency away from gas into electricity, and the problem would 15 00:01:07,280 --> 00:01:10,520 Speaker 1: kind of be solved and all these dirty energy industries 16 00:01:10,800 --> 00:01:15,080 Speaker 1: like coal, like oil would be resigned to the dustbin 17 00:01:15,200 --> 00:01:17,880 Speaker 1: of history. I guess yeah, And I think the twenty 18 00:01:18,000 --> 00:01:22,280 Speaker 1: tens sort of lulled us into maybe this false sense 19 00:01:22,319 --> 00:01:28,560 Speaker 1: of complacency about the future of fossil fuels or dirty, 20 00:01:28,720 --> 00:01:31,600 Speaker 1: dirtier sources of energy. And I think, you know, we 21 00:01:31,600 --> 00:01:35,240 Speaker 1: we had the especially starting this big drop in the 22 00:01:35,280 --> 00:01:40,000 Speaker 1: price of oil combined with the boom and electric cars, 23 00:01:40,120 --> 00:01:42,959 Speaker 1: and I think a lot of people sort of thought like, okay, well, 24 00:01:43,000 --> 00:01:45,480 Speaker 1: this is like this is the final chapter of the 25 00:01:45,520 --> 00:01:49,200 Speaker 1: oil era, of the fossil fuels era. It's gonna fade 26 00:01:49,240 --> 00:01:53,240 Speaker 1: over time, you know, people over a long time into oblivion, oblivion. 27 00:01:53,440 --> 00:01:56,000 Speaker 1: But it's already of this linear down. And of course 28 00:01:56,080 --> 00:02:00,400 Speaker 1: now oil is exploding, and not only that, these other 29 00:02:00,480 --> 00:02:03,000 Speaker 1: you know, sort of coal has bounced back, and there's 30 00:02:03,040 --> 00:02:09,360 Speaker 1: sort of this very intense impulse now to expand production, 31 00:02:09,440 --> 00:02:12,760 Speaker 1: at least in the short to medium term, of energy 32 00:02:12,800 --> 00:02:15,079 Speaker 1: sources to bring prices down. Right, I think a couple 33 00:02:15,080 --> 00:02:17,840 Speaker 1: of years ago, no one would have expected governments, you know, 34 00:02:17,919 --> 00:02:21,800 Speaker 1: liberal governments from Europe to the US the Biden administration 35 00:02:21,880 --> 00:02:25,440 Speaker 1: to basically say like, we need more energy, we need 36 00:02:25,480 --> 00:02:28,480 Speaker 1: more oil to be drilled, we need more energy coming 37 00:02:28,480 --> 00:02:31,280 Speaker 1: from somewhere, preferably cleaner energy, but if we have to, 38 00:02:31,600 --> 00:02:34,000 Speaker 1: we will also look at dirtier forms of energy as well. 39 00:02:34,080 --> 00:02:37,240 Speaker 1: Like that was totally unexpected, right, And everyone long term 40 00:02:37,320 --> 00:02:41,000 Speaker 1: is like, yeah, electrification of everything, and hopefully we're renewables, 41 00:02:41,080 --> 00:02:44,680 Speaker 1: maybe even some nuclear and stuff like that. But in 42 00:02:44,760 --> 00:02:48,080 Speaker 1: the short to medium term, suddenly there's just big, this 43 00:02:48,200 --> 00:02:51,160 Speaker 1: big urge to get the price of energy down. So 44 00:02:51,400 --> 00:02:53,959 Speaker 1: it raises the question if we were like lulled into 45 00:02:54,040 --> 00:02:56,800 Speaker 1: this false sense of complacency last decade, like what are 46 00:02:56,800 --> 00:03:00,200 Speaker 1: we getting wrong in our thinking? And what will of 47 00:03:00,200 --> 00:03:04,400 Speaker 1: the energy transition ultimately look like? Absolutely all right, So 48 00:03:04,520 --> 00:03:07,720 Speaker 1: I am very excited about this guest, someone who has 49 00:03:07,720 --> 00:03:12,960 Speaker 1: been talking for many years, long before the two cycle, 50 00:03:13,280 --> 00:03:16,400 Speaker 1: who has been making this argument that people are wrong 51 00:03:16,440 --> 00:03:20,720 Speaker 1: about how energy sources die or wrong about how commodities 52 00:03:20,919 --> 00:03:23,600 Speaker 1: get replaced by something new. We are going to be 53 00:03:23,639 --> 00:03:27,600 Speaker 1: speaking with Bob Brackett. He's a senior analyst covering natural 54 00:03:27,680 --> 00:03:31,720 Speaker 1: resources at Bernstein and he's been covering the resource space 55 00:03:31,800 --> 00:03:35,839 Speaker 1: and various capacities for about thirty years. So, Bob, thank 56 00:03:35,880 --> 00:03:38,280 Speaker 1: you so much for coming on odd lots, Thank you 57 00:03:38,320 --> 00:03:40,640 Speaker 1: so much. Thank you Tracy for having me. So how 58 00:03:40,800 --> 00:03:43,000 Speaker 1: is that that? Like there are people have been like 59 00:03:43,200 --> 00:03:47,200 Speaker 1: wanting to kill cole forever, it seems like, and you know, 60 00:03:47,240 --> 00:03:50,720 Speaker 1: there's been so little funding of coal, like all these 61 00:03:50,760 --> 00:03:53,640 Speaker 1: banks got out of like financing call everyone's like this 62 00:03:53,720 --> 00:03:56,080 Speaker 1: is over. I remember, you know, big thing, and like 63 00:03:56,520 --> 00:03:58,720 Speaker 1: last decade was like what are we gonna you know, 64 00:03:58,840 --> 00:04:01,680 Speaker 1: let's train all the coal workers to learn to code 65 00:04:01,760 --> 00:04:06,360 Speaker 1: and things like that, and yet here in the world 66 00:04:06,440 --> 00:04:09,080 Speaker 1: is using more cold than it ever has in history, 67 00:04:09,160 --> 00:04:12,280 Speaker 1: Like how did that happen? So it happened. That's sort 68 00:04:12,280 --> 00:04:14,560 Speaker 1: of on the supply side, and that happened on the 69 00:04:14,640 --> 00:04:18,599 Speaker 1: demand side, and on the demand side that the reality 70 00:04:18,720 --> 00:04:25,279 Speaker 1: is energy transitions just take time. If we think about coal, clearly, 71 00:04:25,440 --> 00:04:28,760 Speaker 1: on the demand side, there is just an inherent demand 72 00:04:28,920 --> 00:04:32,440 Speaker 1: for the utility that coal provides, or nobody actually wants 73 00:04:32,480 --> 00:04:35,120 Speaker 1: to consume coal. No one wakes up and says I 74 00:04:35,120 --> 00:04:37,680 Speaker 1: wish I had some coal people wake up and say 75 00:04:37,720 --> 00:04:39,760 Speaker 1: I want to electricity, right, I want of the things 76 00:04:39,839 --> 00:04:44,159 Speaker 1: that lifestyle that electricity and genders. And so if we 77 00:04:44,279 --> 00:04:48,000 Speaker 1: can't provide that electricity from other means, because we can't 78 00:04:48,400 --> 00:04:52,480 Speaker 1: ramp renewable spending capital fast enough, if we can't tackle 79 00:04:52,520 --> 00:04:56,880 Speaker 1: issues around intermittency and security of supply, then you fall 80 00:04:56,880 --> 00:05:00,719 Speaker 1: back on what's available, and that's coal, and that that's 81 00:05:00,760 --> 00:05:03,880 Speaker 1: the call of demand. On the supply side. If you're 82 00:05:03,920 --> 00:05:08,200 Speaker 1: a coal miner and you're building assets that last decades, 83 00:05:08,880 --> 00:05:12,080 Speaker 1: you were terrified about what the future, what the last 84 00:05:12,120 --> 00:05:14,839 Speaker 1: ten years of that asset could look like. They could 85 00:05:14,880 --> 00:05:18,799 Speaker 1: have no terminal value. So as a result your your burden, 86 00:05:19,000 --> 00:05:22,640 Speaker 1: your risk return, your cost of capital, however you want 87 00:05:22,640 --> 00:05:24,960 Speaker 1: to call it, you just end up being afraid to 88 00:05:25,040 --> 00:05:28,400 Speaker 1: sanction long term supply, and then you end up in 89 00:05:28,400 --> 00:05:31,280 Speaker 1: this sort of perpetual tightness. And Tracy, you know, I'm 90 00:05:31,320 --> 00:05:34,279 Speaker 1: thinking about some of the conversations we've had with Jeff Curry, 91 00:05:34,320 --> 00:05:36,679 Speaker 1: and you know, this is the vault trap, like this idea, 92 00:05:36,680 --> 00:05:39,600 Speaker 1: It's like, Okay, prices are high right now, but if 93 00:05:39,640 --> 00:05:42,000 Speaker 1: everyone is like talking about some peak in a few 94 00:05:42,080 --> 00:05:46,760 Speaker 1: years in consumption, like lie invest how much does regulation 95 00:05:47,120 --> 00:05:50,200 Speaker 1: play into a story like coal? Because one of the 96 00:05:50,240 --> 00:05:52,960 Speaker 1: interesting things about coal is it's I don't think it's 97 00:05:53,000 --> 00:05:56,840 Speaker 1: ever really been considered a good source of energy, Like 98 00:05:56,920 --> 00:06:00,040 Speaker 1: it's always had certain connotations. It's always been dirty to 99 00:06:00,200 --> 00:06:02,760 Speaker 1: actually get out of the ground, dirty to store in 100 00:06:02,800 --> 00:06:06,320 Speaker 1: your house, which I'm experiencing now because I just discovered 101 00:06:06,320 --> 00:06:09,040 Speaker 1: we have a large pile of coal in the basement, um, 102 00:06:09,080 --> 00:06:13,880 Speaker 1: which is fun. Of course Tracy, of course Tracy has 103 00:06:13,920 --> 00:06:16,039 Speaker 1: a basement full of coal, like that is a very 104 00:06:16,120 --> 00:06:18,320 Speaker 1: Tracy thing and keep going all right, and you know, 105 00:06:18,360 --> 00:06:21,719 Speaker 1: associations with child labor and things like that. It feels 106 00:06:21,760 --> 00:06:25,920 Speaker 1: like Cole has sort of been vilified for most of 107 00:06:25,960 --> 00:06:31,599 Speaker 1: its history. So how does that play into its life cycle? Yeah, 108 00:06:31,800 --> 00:06:35,400 Speaker 1: it's funny. And I forget the King of England who 109 00:06:35,480 --> 00:06:40,560 Speaker 1: attempted to ban Cole uh half a millennium ago and 110 00:06:41,000 --> 00:06:44,039 Speaker 1: utterly failed. Cole has an externality. In the old days, 111 00:06:44,160 --> 00:06:47,880 Speaker 1: the externality around Cole was the was the soot and 112 00:06:47,920 --> 00:06:49,960 Speaker 1: the emissions and the socks and the knox, and we 113 00:06:50,720 --> 00:06:53,200 Speaker 1: mostly as a planet cleaned that up, and today the 114 00:06:53,240 --> 00:06:57,640 Speaker 1: externality is carbon dioxide. It's kind of always had an externality, 115 00:06:57,680 --> 00:07:01,880 Speaker 1: and despite that, it is always had a utility that's 116 00:07:01,960 --> 00:07:05,760 Speaker 1: that's overcome that, and so it is just an incredibly 117 00:07:06,040 --> 00:07:09,880 Speaker 1: geologically unique store of energy and it's just very hard 118 00:07:09,960 --> 00:07:13,600 Speaker 1: to find a substitute. And the other aspect, even today, 119 00:07:13,640 --> 00:07:18,960 Speaker 1: what we're seeing is politicians, regulators they don't like coal 120 00:07:19,080 --> 00:07:23,480 Speaker 1: for its externalities, but they also like cheap electricity for 121 00:07:23,640 --> 00:07:28,320 Speaker 1: the voting population. And so we're even seeing in the US, 122 00:07:28,360 --> 00:07:31,560 Speaker 1: we're seeing in Europe, we're seeing softening of taxes against 123 00:07:31,640 --> 00:07:35,160 Speaker 1: hydro carbon's and that's sort of short termism. I've got 124 00:07:35,160 --> 00:07:40,360 Speaker 1: to keep the penalty of inflation against my my voting population, 125 00:07:40,880 --> 00:07:42,880 Speaker 1: even though in the long term I really have to 126 00:07:42,920 --> 00:07:46,320 Speaker 1: tackle this thing. The king who tried to ban cole 127 00:07:46,400 --> 00:07:49,320 Speaker 1: in twelve eighty five, King Edward the First. I only 128 00:07:49,320 --> 00:07:52,320 Speaker 1: know that because I read it in your note wrote 129 00:07:52,800 --> 00:07:55,160 Speaker 1: so the whole you know, we wanted to talk to 130 00:07:55,200 --> 00:07:57,880 Speaker 1: you because you wrote this amazing sort of this long 131 00:07:58,040 --> 00:08:02,040 Speaker 1: piece at Bernstein in twenty seven and team basically talking 132 00:08:02,040 --> 00:08:05,720 Speaker 1: about what people get wrong about the energy transition and 133 00:08:05,800 --> 00:08:08,840 Speaker 1: what the theme seems to be that in our heads, 134 00:08:09,640 --> 00:08:11,560 Speaker 1: you know, when we think about transition or we think 135 00:08:11,560 --> 00:08:15,160 Speaker 1: about disruption, we think the iPhone comes along and then 136 00:08:15,280 --> 00:08:17,800 Speaker 1: like two years later there's no palm pilots, or one 137 00:08:17,840 --> 00:08:20,239 Speaker 1: year later there's no flip phones like it. Just something 138 00:08:20,240 --> 00:08:23,000 Speaker 1: better comes along and then the old thing is over. 139 00:08:23,440 --> 00:08:26,680 Speaker 1: And sort of the thrust of your note is that no, 140 00:08:26,960 --> 00:08:29,800 Speaker 1: like energy just doesn't work like that, and having this 141 00:08:29,840 --> 00:08:34,080 Speaker 1: sort of like tech framework of disruption leads you to 142 00:08:34,160 --> 00:08:36,760 Speaker 1: some bad paths when thinking about the future of commodities, 143 00:08:36,760 --> 00:08:40,320 Speaker 1: of the future of energy exactly. And the genesis of 144 00:08:40,360 --> 00:08:44,880 Speaker 1: this book that I wrote was effectively a debate with 145 00:08:45,080 --> 00:08:48,559 Speaker 1: the ever so popular tech analysts here at Bernstein, where 146 00:08:48,559 --> 00:08:51,600 Speaker 1: the metaphors they were using for the energy transition were 147 00:08:52,360 --> 00:08:57,959 Speaker 1: digital cameras displacing analog cameras, and flat screens displacing crt s, 148 00:08:57,960 --> 00:09:03,720 Speaker 1: and smartphones displacing dumb phone. And my caution, for my 149 00:09:03,840 --> 00:09:08,560 Speaker 1: rather lengthy caution, was in in natural resources industries, in 150 00:09:08,640 --> 00:09:11,560 Speaker 1: depletion based industries where you need just a lot of 151 00:09:11,640 --> 00:09:15,000 Speaker 1: capital not only to grow but just to stay flat, 152 00:09:15,559 --> 00:09:18,320 Speaker 1: that that dynamic is different. And in those sorts of 153 00:09:18,440 --> 00:09:22,520 Speaker 1: environments where it's not a consumer electronic device, transitions can 154 00:09:22,559 --> 00:09:25,760 Speaker 1: take decades and decades and decades. So that was that 155 00:09:25,840 --> 00:09:29,800 Speaker 1: was ultimately the genesis of why I wrote describe Well, 156 00:09:29,880 --> 00:09:32,600 Speaker 1: could you go into that in a little bit more detail, 157 00:09:32,679 --> 00:09:37,200 Speaker 1: like why is energy different from a consumer good? Why 158 00:09:37,400 --> 00:09:40,440 Speaker 1: does the transition seem to be more complex, and why 159 00:09:40,480 --> 00:09:45,400 Speaker 1: does it definitely take longer? It comes to the supply 160 00:09:45,559 --> 00:09:49,200 Speaker 1: side being afraid of the future. And the term I've 161 00:09:49,240 --> 00:09:51,880 Speaker 1: coined for oil is this green wolf at the door 162 00:09:52,440 --> 00:09:57,520 Speaker 1: that if you're investing in hydrocarbons know someday that green 163 00:09:57,520 --> 00:09:58,960 Speaker 1: wolf at the door is going to come in and 164 00:09:59,000 --> 00:10:01,840 Speaker 1: you're just afraid to to not earn a return on 165 00:10:01,880 --> 00:10:05,600 Speaker 1: your capital, not strand your asset. My favorite analog, and 166 00:10:05,600 --> 00:10:08,800 Speaker 1: I've got a couple, is the mercury industry. So the 167 00:10:08,920 --> 00:10:14,480 Speaker 1: US Geological Survey posts the annual volumes, price, and revenues 168 00:10:14,600 --> 00:10:18,600 Speaker 1: for the mercury industry over the last hundred years and 169 00:10:19,040 --> 00:10:21,840 Speaker 1: store to say, well, mercury is terrible. Talk about a 170 00:10:21,880 --> 00:10:25,559 Speaker 1: bad product. I think, think mad hatters, think insanity, I 171 00:10:25,640 --> 00:10:28,800 Speaker 1: think of all of the terrible things mercury does. But 172 00:10:28,960 --> 00:10:33,120 Speaker 1: the mercury industry has never had higher revenues. And the 173 00:10:33,160 --> 00:10:36,400 Speaker 1: reason is is there is sticky demand for mercury in 174 00:10:36,480 --> 00:10:40,480 Speaker 1: a bunch of niche abuses that are very hard to displace, 175 00:10:41,120 --> 00:10:45,240 Speaker 1: and only a full would open a mercury mind today 176 00:10:45,480 --> 00:10:48,079 Speaker 1: right just to think about what that would take. So 177 00:10:48,559 --> 00:10:52,160 Speaker 1: the supply side that requires capital to keep going has said, 178 00:10:52,360 --> 00:10:56,320 Speaker 1: I just can't deploy capital here, and the demand side says, well, 179 00:10:56,320 --> 00:10:59,040 Speaker 1: but I really don't have a substitute yet. And so 180 00:10:59,080 --> 00:11:01,559 Speaker 1: the mercury in this is going to end someday in 181 00:11:01,640 --> 00:11:04,440 Speaker 1: a time measured in decades, but it's going to go 182 00:11:04,520 --> 00:11:08,440 Speaker 1: out at high prices and a lack of supply, not 183 00:11:09,360 --> 00:11:11,760 Speaker 1: with the shelves full of products the way of consumer 184 00:11:11,840 --> 00:11:17,359 Speaker 1: electronic device that's that's defunct would. So how should investors 185 00:11:17,400 --> 00:11:19,600 Speaker 1: actually think about that? Because I feel like this is 186 00:11:19,600 --> 00:11:22,880 Speaker 1: where things get really tricky, especially when it comes to oil. 187 00:11:23,080 --> 00:11:27,320 Speaker 1: So everyone, I think pretty much agrees that oil is 188 00:11:27,360 --> 00:11:30,920 Speaker 1: going to go away someday. The question is just how 189 00:11:30,960 --> 00:11:33,520 Speaker 1: long it's going to take, and then whether or not 190 00:11:33,559 --> 00:11:36,440 Speaker 1: there are these sort of big peaks and troughs in 191 00:11:36,520 --> 00:11:40,920 Speaker 1: oil use in the meantime during the transition, And as 192 00:11:40,960 --> 00:11:44,319 Speaker 1: we've seen in recent years, it just feels really difficult 193 00:11:44,360 --> 00:11:47,679 Speaker 1: for investors and also the energy businesses themselves to get 194 00:11:47,679 --> 00:11:49,400 Speaker 1: a handle on because how do you plan for the 195 00:11:49,440 --> 00:11:52,800 Speaker 1: future if you're expected not to have one and the 196 00:11:52,880 --> 00:11:55,880 Speaker 1: question is just how long it's going to take. The 197 00:11:56,280 --> 00:11:59,640 Speaker 1: one misconception out there is this concept with the demand 198 00:11:59,720 --> 00:12:02,200 Speaker 1: for a product starts to fall, the price for the 199 00:12:02,200 --> 00:12:05,160 Speaker 1: product starts to fall. But you know, ultimately, if you 200 00:12:05,200 --> 00:12:08,400 Speaker 1: think back to your classic economics one oh one, the 201 00:12:08,440 --> 00:12:11,880 Speaker 1: price of something is where marginal cost meets marginal supply. 202 00:12:12,480 --> 00:12:15,319 Speaker 1: And if the marginal supply is running away from you 203 00:12:15,559 --> 00:12:19,360 Speaker 1: and there's no requirement that price fall. And so if 204 00:12:19,360 --> 00:12:22,720 Speaker 1: you believe the Mercury analogy that I shared with you. 205 00:12:22,760 --> 00:12:25,319 Speaker 1: If you believe the asbestos analogy, if you kind of 206 00:12:25,320 --> 00:12:27,600 Speaker 1: believe call right we're trying to get rid of call 207 00:12:27,960 --> 00:12:30,440 Speaker 1: and prices at all time high, then the answer is 208 00:12:30,920 --> 00:12:35,600 Speaker 1: the oil and gas companies are afraid to deploy long 209 00:12:35,760 --> 00:12:39,480 Speaker 1: cycle asset right ten twent thirty year types of projects. 210 00:12:39,880 --> 00:12:43,559 Speaker 1: They're generating record cash flows, certainly as we go into 211 00:12:43,640 --> 00:12:46,760 Speaker 1: earnings in the next week or two. And the response 212 00:12:46,840 --> 00:12:48,680 Speaker 1: for the typical U, S, E. N P that I 213 00:12:48,760 --> 00:12:52,400 Speaker 1: follow is I'm just gonna return that cash to shareholders 214 00:12:52,640 --> 00:12:55,080 Speaker 1: and let them decide what to do with it. Right, So, 215 00:12:55,320 --> 00:12:59,439 Speaker 1: I don't know when my industry is over. It's a twilight. 216 00:13:00,040 --> 00:13:02,720 Speaker 1: But in the meantime, investors, you take the cash and 217 00:13:02,760 --> 00:13:04,840 Speaker 1: you decide how to read a ploy, and I will 218 00:13:04,880 --> 00:13:09,600 Speaker 1: manage my best short term high return investments as that happens. 219 00:13:09,800 --> 00:13:11,880 Speaker 1: So obviously we're going to have to do a Mercury 220 00:13:11,920 --> 00:13:14,199 Speaker 1: episode at some point in the future. But actually I 221 00:13:14,240 --> 00:13:16,960 Speaker 1: do have. I want to go back to Mercury real quickly. 222 00:13:17,280 --> 00:13:19,520 Speaker 1: When you say the Mercury will come to an end, 223 00:13:19,640 --> 00:13:22,640 Speaker 1: is there a substitute like what that exists for Mercury? 224 00:13:22,640 --> 00:13:24,280 Speaker 1: Like is there a reason that at some point there 225 00:13:24,280 --> 00:13:27,760 Speaker 1: won't be a future mercury demand. So it gets to 226 00:13:27,840 --> 00:13:31,520 Speaker 1: the end uses. So luckily, like mercury gets used in 227 00:13:31,600 --> 00:13:35,439 Speaker 1: the mining sector for example, certainly by artisanal miners, it 228 00:13:35,480 --> 00:13:38,920 Speaker 1: can be displaced with cyanide, which you know, there's a 229 00:13:38,920 --> 00:13:43,400 Speaker 1: whole bag of works there. Um, the there are medical 230 00:13:43,600 --> 00:13:48,480 Speaker 1: uses as well, there are some industrial uses, and yeah, 231 00:13:48,600 --> 00:13:52,200 Speaker 1: I mean yeah, there have to be workarounds, but yes, 232 00:13:52,360 --> 00:13:54,920 Speaker 1: and then at some point, like we see with other medals, 233 00:13:55,200 --> 00:13:57,480 Speaker 1: we can get to a world where there's enough efficient 234 00:13:57,520 --> 00:14:00,800 Speaker 1: recycling of mercury that the and can get a messed 235 00:14:00,800 --> 00:14:18,440 Speaker 1: that way, but which is not quite there yet. Let 236 00:14:18,480 --> 00:14:20,760 Speaker 1: me ask you another question, and I guess it's about 237 00:14:20,920 --> 00:14:24,160 Speaker 1: coal and the failure of the sort of typical tech 238 00:14:24,240 --> 00:14:26,600 Speaker 1: disruption frame. Seems to me that there is a way 239 00:14:26,640 --> 00:14:29,560 Speaker 1: to view this is like coal is the disruptive technology. 240 00:14:29,600 --> 00:14:31,960 Speaker 1: I mean, again, all these things sort of breakdown because 241 00:14:32,000 --> 00:14:34,280 Speaker 1: cole has been around forever. But if you think, like 242 00:14:34,640 --> 00:14:38,160 Speaker 1: here's a really cheap form of energy, it's like really 243 00:14:38,240 --> 00:14:40,520 Speaker 1: powerful form of energy, like you get a lot of 244 00:14:40,600 --> 00:14:43,920 Speaker 1: electricity out of it and it's cheap, then you know, 245 00:14:44,000 --> 00:14:46,520 Speaker 1: you could probably make the argument that you know, if 246 00:14:46,560 --> 00:14:50,680 Speaker 1: you're willing to tolerate the externalities. Yes, it's worse for 247 00:14:50,720 --> 00:14:53,400 Speaker 1: the air. Yes, it emits a lot of carbon that 248 00:14:53,520 --> 00:14:56,240 Speaker 1: on a sort of like strictly like like for like 249 00:14:56,360 --> 00:15:00,000 Speaker 1: basis that one might consider coal the disruptor of natural 250 00:15:00,000 --> 00:15:03,000 Speaker 1: a gas or the disruptor of oil. Should all the 251 00:15:03,040 --> 00:15:05,400 Speaker 1: tech ETFs get into coal, is that's what you're saying. 252 00:15:05,520 --> 00:15:07,880 Speaker 1: You can very quickly see how some of the like 253 00:15:07,960 --> 00:15:11,200 Speaker 1: tech thinking could like really break down or lead you astray. 254 00:15:11,680 --> 00:15:13,640 Speaker 1: It's like, well, which one is the real disruptor here? 255 00:15:14,080 --> 00:15:18,360 Speaker 1: If the planet had over invested in l n G 256 00:15:18,960 --> 00:15:22,080 Speaker 1: and other sources of natural gas, and if you're getting 257 00:15:22,080 --> 00:15:24,720 Speaker 1: all of our energy from windmills, then I'm sure coal 258 00:15:24,800 --> 00:15:27,200 Speaker 1: would be a massive disruptor to that. So if we 259 00:15:27,320 --> 00:15:31,479 Speaker 1: started in the reverse and if everything was a wind turbine, 260 00:15:31,640 --> 00:15:35,480 Speaker 1: we would have this issue of intermittency. The wind patterns 261 00:15:35,600 --> 00:15:38,800 Speaker 1: changed daily and seasonally and sometimes not at all. And 262 00:15:38,840 --> 00:15:41,120 Speaker 1: if someone came and said, I've got this product. It's 263 00:15:41,240 --> 00:15:44,560 Speaker 1: very dense, it has a lot of energy, and look 264 00:15:44,600 --> 00:15:47,400 Speaker 1: at it can burn twenty four seven and be a 265 00:15:47,400 --> 00:15:51,119 Speaker 1: baseload of power, Yeah, it would be a remarkable disruption. 266 00:15:51,320 --> 00:15:54,960 Speaker 1: So I have maybe a strange question. You know, we're 267 00:15:55,000 --> 00:16:00,200 Speaker 1: talking about disruption and new technologies and things come in 268 00:16:00,200 --> 00:16:04,120 Speaker 1: to replace other types of commodities in history, has there 269 00:16:04,280 --> 00:16:08,520 Speaker 1: been like a good example of a commodity just going 270 00:16:09,080 --> 00:16:14,080 Speaker 1: completely away? Because it feels like even the really questionable 271 00:16:14,120 --> 00:16:18,960 Speaker 1: stuff like mercury still finds some sort of use, and 272 00:16:19,000 --> 00:16:21,880 Speaker 1: even things that have been vilified, like coal as we've 273 00:16:21,880 --> 00:16:25,560 Speaker 1: been discussing, or like tobacco or instance, those are all 274 00:16:26,000 --> 00:16:28,200 Speaker 1: you know, they're still around. There's still big industries, and 275 00:16:28,400 --> 00:16:31,560 Speaker 1: they're still in the case of tobacco, still quite profitable. 276 00:16:32,240 --> 00:16:34,360 Speaker 1: That is a strange question, and it's one that I 277 00:16:34,400 --> 00:16:37,040 Speaker 1: went to answer, and so I good, okay, not the 278 00:16:37,120 --> 00:16:42,960 Speaker 1: only Yeah. I looked at eighty four different commodities and 279 00:16:43,440 --> 00:16:46,200 Speaker 1: over the last hundred and twenty years, said which one 280 00:16:46,200 --> 00:16:49,680 Speaker 1: of them went away? A category of them that are 281 00:16:49,800 --> 00:16:54,200 Speaker 1: deadly on average declined single digits a year. So even 282 00:16:54,240 --> 00:16:59,280 Speaker 1: the deadliest, the caesiums of the world, the asbestos, the mercury, 283 00:16:59,520 --> 00:17:03,520 Speaker 1: even though things tend to go away slowly, I didn't 284 00:17:03,560 --> 00:17:10,679 Speaker 1: find a commodity that was radically displaced on any short 285 00:17:10,800 --> 00:17:14,080 Speaker 1: term time horizon. I believe the closest you could come 286 00:17:14,080 --> 00:17:17,720 Speaker 1: with strontium, where the biggest source of demand for strontium 287 00:17:18,640 --> 00:17:20,720 Speaker 1: was in in c rt s, the old TVs we 288 00:17:20,800 --> 00:17:22,639 Speaker 1: used to use, and so when flat screens came in, 289 00:17:23,119 --> 00:17:26,800 Speaker 1: strontium demand fell. But that was the exception for that's 290 00:17:26,880 --> 00:17:29,320 Speaker 1: that was kind of the one percent club. The reality 291 00:17:30,080 --> 00:17:33,080 Speaker 1: and it goes back to Jevan's paradox, which which was 292 00:17:33,359 --> 00:17:35,760 Speaker 1: again a guy looking at cold at the end of 293 00:17:35,800 --> 00:17:41,040 Speaker 1: the eight hundreds. Generally, just commodity demand rises. It's it's 294 00:17:41,080 --> 00:17:43,760 Speaker 1: hard to find commodities that we use less of remind 295 00:17:43,800 --> 00:17:47,520 Speaker 1: us what paradox is. So the Japan's paradox was that 296 00:17:47,560 --> 00:17:50,440 Speaker 1: the more efficient you got that producing cold, the more 297 00:17:50,520 --> 00:17:52,960 Speaker 1: you use. And it works for road systems, it works 298 00:17:52,960 --> 00:17:56,959 Speaker 1: for a number of things. But the classic example is, hey, 299 00:17:57,000 --> 00:17:59,760 Speaker 1: I've got a four lane highway, I'll make it an 300 00:17:59,800 --> 00:18:03,199 Speaker 1: eight lane highway, and then congestion will fall, right, And 301 00:18:03,240 --> 00:18:06,280 Speaker 1: then every time we build an eight lane highway, congestion rises. 302 00:18:06,440 --> 00:18:08,439 Speaker 1: And so it was kind of as you try to 303 00:18:08,480 --> 00:18:12,600 Speaker 1: improve the efficiency of something, you actually increase the consumption 304 00:18:12,640 --> 00:18:15,240 Speaker 1: of it. So going back to oil for a second, 305 00:18:15,280 --> 00:18:18,240 Speaker 1: because as you've said, like you actually do think there 306 00:18:18,240 --> 00:18:20,720 Speaker 1: will be an end date for oil or at least 307 00:18:20,840 --> 00:18:24,359 Speaker 1: oil as a source of maybe fuel for automobiles, Like 308 00:18:24,760 --> 00:18:27,399 Speaker 1: what does that look like and what is how are 309 00:18:27,440 --> 00:18:32,600 Speaker 1: you thinking about the long term time frame of when 310 00:18:32,640 --> 00:18:35,359 Speaker 1: the oil age comes to an end and how is 311 00:18:35,400 --> 00:18:37,800 Speaker 1: it replaced? And you know, like what what do you 312 00:18:37,840 --> 00:18:40,359 Speaker 1: tell people when they say, like how long is the 313 00:18:40,400 --> 00:18:42,440 Speaker 1: future of all? How long do we have here? Part 314 00:18:42,480 --> 00:18:45,680 Speaker 1: of it is just a mentality shift. So through most 315 00:18:45,720 --> 00:18:50,200 Speaker 1: of my career looking at oil and gas investment, people 316 00:18:50,240 --> 00:18:53,520 Speaker 1: believed in peak oil supply, right, it was Harbard's peak, 317 00:18:53,880 --> 00:18:57,119 Speaker 1: It was the association for the society peak oil. It 318 00:18:57,200 --> 00:19:00,480 Speaker 1: was twilight in the desert, and we all fall in 319 00:19:00,920 --> 00:19:04,080 Speaker 1: hindsight incorrectly that we would run out of supply. And 320 00:19:04,119 --> 00:19:07,720 Speaker 1: in that world, give sanctional project and you say, maybe 321 00:19:07,720 --> 00:19:10,760 Speaker 1: it's over budget, maybe it's late, maybe it's not quite 322 00:19:11,000 --> 00:19:14,080 Speaker 1: up to stuff on deliverability, but price will bail me out. 323 00:19:14,720 --> 00:19:17,720 Speaker 1: And so as long as the mentality of scarcity existed 324 00:19:17,760 --> 00:19:21,520 Speaker 1: in my sector, we as an industry kept growing oil 325 00:19:21,520 --> 00:19:26,160 Speaker 1: and gas supply. And in the last five ish years 326 00:19:26,920 --> 00:19:31,160 Speaker 1: that mentality has pivoted to this world of the end 327 00:19:31,359 --> 00:19:33,600 Speaker 1: of oil demand. So we're going to run out of 328 00:19:33,640 --> 00:19:37,480 Speaker 1: oil demand before supply, and that's where all the capital 329 00:19:37,480 --> 00:19:42,600 Speaker 1: allocation mentality completely flips from sort of i'll lean into 330 00:19:42,640 --> 00:19:46,400 Speaker 1: it into fear. That's what's driving kind of what could 331 00:19:46,440 --> 00:19:50,000 Speaker 1: be perpetual tightness now in terms of windes the oil 332 00:19:50,080 --> 00:19:53,320 Speaker 1: age end. The way we think about oil, we we 333 00:19:53,359 --> 00:19:56,879 Speaker 1: divide oil into six big buckets, and reality, oil into 334 00:19:56,880 --> 00:20:00,800 Speaker 1: a refinery produces dozens and hundreds of products. We think 335 00:20:00,840 --> 00:20:09,680 Speaker 1: about gasoline for passenger travel, diesel for think rail trucks, trains, vessels, 336 00:20:09,760 --> 00:20:13,920 Speaker 1: marine vessels, and then pet cams for plastics, jet fuel 337 00:20:14,160 --> 00:20:18,080 Speaker 1: for air travel, and then into more obscure buckets. The 338 00:20:18,359 --> 00:20:22,439 Speaker 1: obvious bucket that gets disrupted is gasoline, right, So e 339 00:20:22,560 --> 00:20:26,400 Speaker 1: v s attack gasoline demand to some degree, the hydrogen 340 00:20:26,440 --> 00:20:31,119 Speaker 1: economy attacks diesel demand. But even under a range of 341 00:20:31,240 --> 00:20:35,280 Speaker 1: reasonable assumptions, oil demands should rise into the twenty thirties, 342 00:20:35,760 --> 00:20:38,800 Speaker 1: perhaps it's ten percent higher than it is today, and 343 00:20:38,800 --> 00:20:42,920 Speaker 1: then it enters kind of this gradual plateau. We as 344 00:20:43,000 --> 00:20:47,320 Speaker 1: a planet are still looking for ways to substitute jet 345 00:20:47,320 --> 00:20:51,399 Speaker 1: fuel air travel. Air travel grows with GDP, So if 346 00:20:51,440 --> 00:20:55,159 Speaker 1: GDP not this year, but if GDP grows three percent 347 00:20:55,240 --> 00:20:58,879 Speaker 1: a year, then jet fuel demands growing three percent a 348 00:20:58,960 --> 00:21:03,320 Speaker 1: year and compounds in the next ten twenty years, how 349 00:21:03,320 --> 00:21:06,879 Speaker 1: do we substitute air travel in any meaningful time frame. 350 00:21:07,000 --> 00:21:09,920 Speaker 1: So so the answer is, think of a plateau. Think 351 00:21:09,960 --> 00:21:13,480 Speaker 1: of the thirties is where that plateau starts to be visible, 352 00:21:14,040 --> 00:21:17,240 Speaker 1: and think of the supply side of the equation being 353 00:21:17,359 --> 00:21:19,880 Speaker 1: much more afraid of that plateau than the demand side. 354 00:21:20,119 --> 00:21:23,320 Speaker 1: This is a tough question, I think, but in your opinion, 355 00:21:23,359 --> 00:21:28,639 Speaker 1: when it comes to encouraging that transition from gas and 356 00:21:28,720 --> 00:21:33,960 Speaker 1: oil to a more electrified future, what's the best way 357 00:21:34,040 --> 00:21:36,800 Speaker 1: or the most effective way of doing that. Is it 358 00:21:37,240 --> 00:21:40,040 Speaker 1: something on the demand side. Is it trying to you know, 359 00:21:40,280 --> 00:21:44,280 Speaker 1: encourage a better or a larger supply side response, or 360 00:21:44,400 --> 00:21:48,959 Speaker 1: is it you know, government intervention coming in and subsidizing 361 00:21:49,080 --> 00:21:53,040 Speaker 1: things like electric cars? Like what is most effective here? 362 00:21:53,320 --> 00:21:56,760 Speaker 1: So the subsidies have been the past. People have accepted 363 00:21:57,119 --> 00:22:02,320 Speaker 1: Norway is the perfect experiment meant for the energy transition 364 00:22:02,560 --> 00:22:05,879 Speaker 1: for e vs, But we have yet to see, for example, 365 00:22:06,080 --> 00:22:10,840 Speaker 1: Norwegian oil demand roll over significantly. And so I think 366 00:22:10,960 --> 00:22:14,720 Speaker 1: the answer is, and what Norway has done is through subsidies. 367 00:22:14,720 --> 00:22:17,960 Speaker 1: And of course it's a well developed economy, it's a 368 00:22:17,960 --> 00:22:21,800 Speaker 1: wealthy economy, and they can afford those sorts of tools 369 00:22:21,840 --> 00:22:25,600 Speaker 1: that a broader adoption just can't afford. And so if 370 00:22:25,640 --> 00:22:28,639 Speaker 1: you can't really tackle it on the demand side, you 371 00:22:28,720 --> 00:22:32,720 Speaker 1: have to tackle it on the supply side. Now, selfishly, 372 00:22:32,880 --> 00:22:36,200 Speaker 1: I would argue that the mining side, which I also cover, 373 00:22:36,760 --> 00:22:41,880 Speaker 1: is the obvious bottleneck. And so in theory, supporting mining 374 00:22:42,480 --> 00:22:46,760 Speaker 1: in your home country, in your home region, we're supporting 375 00:22:46,800 --> 00:22:51,159 Speaker 1: mining in general the industry. If you think about I 376 00:22:51,200 --> 00:22:54,080 Speaker 1: spent a lot of time thinking about shale, right, So 377 00:22:54,200 --> 00:22:57,560 Speaker 1: shale was a massive disruptor to to what I did 378 00:22:57,560 --> 00:22:59,800 Speaker 1: for a living for a long period of time. And 379 00:23:00,040 --> 00:23:03,840 Speaker 1: shale was a manufacturing process that we did a hundred 380 00:23:03,840 --> 00:23:07,280 Speaker 1: thousand times, and we drove the cost of it down 381 00:23:07,760 --> 00:23:11,920 Speaker 1: massively just through that classic learning curve. As we look 382 00:23:11,960 --> 00:23:14,879 Speaker 1: at building e vs, we're going to go from a 383 00:23:14,920 --> 00:23:17,600 Speaker 1: planet that's sold ten tho ev s and then a 384 00:23:17,680 --> 00:23:20,440 Speaker 1: hundred thousand and now north of a million, will get 385 00:23:20,440 --> 00:23:23,840 Speaker 1: to ten million someday, and those learning curves will just 386 00:23:23,960 --> 00:23:27,960 Speaker 1: reduce the cost of all the manufacturing parts of the 387 00:23:28,320 --> 00:23:32,200 Speaker 1: e V supply chain. But you know, mining the extractive 388 00:23:32,200 --> 00:23:37,479 Speaker 1: industries just following a different drummer and those get tougher 389 00:23:37,560 --> 00:23:41,000 Speaker 1: over time. We drill the best wells first, we find 390 00:23:41,040 --> 00:23:45,040 Speaker 1: the best copper minds first, we mind the best grades first, 391 00:23:45,440 --> 00:23:50,280 Speaker 1: and so to me, encouraging the supply side, the metal 392 00:23:50,359 --> 00:23:54,919 Speaker 1: side of the battery revolution, would be something policymakers could do. 393 00:23:55,400 --> 00:23:58,720 Speaker 1: And frankly, that's the toughest part because it's the one 394 00:23:58,760 --> 00:24:03,320 Speaker 1: place where local s G issues are fighting full force 395 00:24:03,400 --> 00:24:08,120 Speaker 1: against global E s G issues. I'm really fascinated by 396 00:24:08,119 --> 00:24:13,400 Speaker 1: this idea that there's a shift in mentality when everyone 397 00:24:14,200 --> 00:24:17,080 Speaker 1: went from talking about peak supply and I think, you know, 398 00:24:17,119 --> 00:24:19,320 Speaker 1: we all remember I used to read the Oil Drum 399 00:24:19,520 --> 00:24:22,440 Speaker 1: that blog years ago where everyone talked about like peak 400 00:24:22,520 --> 00:24:24,240 Speaker 1: oil and we're going to run out of oil, and 401 00:24:25,760 --> 00:24:28,440 Speaker 1: that was a great resource. I'd love to have them 402 00:24:28,440 --> 00:24:30,800 Speaker 1: back now because the people on that site would be 403 00:24:30,840 --> 00:24:34,280 Speaker 1: great contributors to sort of the current discussion. But I remember, 404 00:24:34,400 --> 00:24:36,679 Speaker 1: you know, peak it was like this huge thing, and now, 405 00:24:36,720 --> 00:24:39,000 Speaker 1: as you mentioned, now it's all about the concerns over 406 00:24:39,080 --> 00:24:42,399 Speaker 1: peak oil demand, and that's really changed this sort of 407 00:24:42,440 --> 00:24:46,520 Speaker 1: mentality and calculus of the industry. Is there anything that 408 00:24:46,640 --> 00:24:49,960 Speaker 1: could flip it back in terms of the industry really 409 00:24:49,960 --> 00:24:53,000 Speaker 1: wanting to ramp up investment again, or do you think 410 00:24:53,000 --> 00:24:55,480 Speaker 1: this is going to be a long term I don't 411 00:24:55,480 --> 00:24:58,520 Speaker 1: know if permanent, but a very long term persisting thing 412 00:24:58,640 --> 00:25:02,480 Speaker 1: where even with soaring prices and actual oils come down 413 00:25:02,520 --> 00:25:05,840 Speaker 1: a bit lately, but even with highly elevated prices, that 414 00:25:06,160 --> 00:25:09,280 Speaker 1: impulse to really expand production just isn't going to come back. 415 00:25:09,920 --> 00:25:13,960 Speaker 1: It takes some fairly sci fi scenarios. During the pandemic 416 00:25:14,000 --> 00:25:16,600 Speaker 1: that we were spending as a plan at roughly three 417 00:25:17,320 --> 00:25:20,720 Speaker 1: billion dollars a year on on upstream oil and gas. 418 00:25:21,040 --> 00:25:24,679 Speaker 1: Pre pandemic, it was half a trillion, five billion, and 419 00:25:24,720 --> 00:25:28,160 Speaker 1: then back in the glory days of too much capics, 420 00:25:28,160 --> 00:25:31,920 Speaker 1: it started to approach a trillion. So the idea that 421 00:25:32,000 --> 00:25:35,440 Speaker 1: it ever gets back to those levels it's just hard. 422 00:25:35,800 --> 00:25:39,720 Speaker 1: We know the typical USC and P doesn't plan to 423 00:25:39,720 --> 00:25:45,400 Speaker 1: grow more than three. We know the typical European integrated 424 00:25:45,520 --> 00:25:50,040 Speaker 1: energy company is ex oil growth and is reallocating capital 425 00:25:50,080 --> 00:25:54,240 Speaker 1: to the energy transition from mobility, solution, renewables, etcetera. And 426 00:25:54,280 --> 00:25:57,879 Speaker 1: so you're kind of left with OPEC plus to not 427 00:25:58,000 --> 00:26:01,520 Speaker 1: only increase their capital, but increase it enough to offset 428 00:26:01,560 --> 00:26:05,600 Speaker 1: the following capex in these other buckets and for them 429 00:26:05,640 --> 00:26:08,560 Speaker 1: to do that would be sort of willingly flood the 430 00:26:08,680 --> 00:26:13,000 Speaker 1: market to take control. So that seems that first blush blush, irrational. 431 00:26:13,880 --> 00:26:19,280 Speaker 1: So yeah, except for a world where a sequestration techn 432 00:26:19,359 --> 00:26:22,399 Speaker 1: leques direct direct their capture worked, and we could flip 433 00:26:22,400 --> 00:26:24,520 Speaker 1: a switch for next to nothing and put all the 434 00:26:24,520 --> 00:26:28,600 Speaker 1: CEO two that we needed away, then you'd say, well, 435 00:26:28,640 --> 00:26:32,240 Speaker 1: we solved the externality. Now let's go produce more hydrocarbons. 436 00:26:32,280 --> 00:26:35,239 Speaker 1: But that's decades and that's more than decades away. This 437 00:26:35,320 --> 00:26:39,280 Speaker 1: is also an extreme question, but it isn't. I feel 438 00:26:39,320 --> 00:26:42,320 Speaker 1: like you you have these like deep thoughts on the industry, 439 00:26:42,359 --> 00:26:45,880 Speaker 1: so we can ask you these questions. But is nationalization 440 00:26:46,400 --> 00:26:49,240 Speaker 1: a possibility here? Like we have seen some instances of 441 00:26:49,240 --> 00:26:51,880 Speaker 1: that in or at least one instance of that in Europe. 442 00:26:51,960 --> 00:26:54,359 Speaker 1: And if you think of an industry that you know 443 00:26:54,760 --> 00:26:59,440 Speaker 1: it's responding rationally to what the market is telling it. 444 00:26:59,560 --> 00:27:02,480 Speaker 1: But the other hand, you know this is a vital resource. 445 00:27:02,520 --> 00:27:06,760 Speaker 1: People need oil at reasonable prices in order to live 446 00:27:06,800 --> 00:27:09,919 Speaker 1: their lives, at least at the moment. Would something like 447 00:27:09,960 --> 00:27:15,280 Speaker 1: that makes sense. I spent years as a management consultant 448 00:27:15,359 --> 00:27:19,520 Speaker 1: serving a huge host of national oil companies and there 449 00:27:19,640 --> 00:27:23,800 Speaker 1: is a spectrum of extremely high quality national oil companies 450 00:27:23,840 --> 00:27:26,679 Speaker 1: and extremely low quality ones. It's a bit of a 451 00:27:26,840 --> 00:27:31,520 Speaker 1: philosophical view, right, can can the state be a better 452 00:27:31,600 --> 00:27:37,159 Speaker 1: deliverer of volumes than the private market? Clearly on the 453 00:27:37,560 --> 00:27:42,080 Speaker 1: choice of utilities, most nations have decided that utilities need 454 00:27:42,160 --> 00:27:46,400 Speaker 1: to be heavily regulated but still stay in private hands 455 00:27:46,440 --> 00:27:51,639 Speaker 1: with a very strong government overprint. And that's more or 456 00:27:51,720 --> 00:27:55,919 Speaker 1: less worked, sometimes less so than others. But the wholesale 457 00:27:56,000 --> 00:28:00,800 Speaker 1: nationalization by and large is not succeed e did for 458 00:28:00,840 --> 00:28:05,000 Speaker 1: the typical oil company. And part of it is if 459 00:28:05,000 --> 00:28:08,040 Speaker 1: you think about an oil company, that their core capabilities 460 00:28:08,640 --> 00:28:15,520 Speaker 1: are taking risk, managing contractors, and allocating capital, and putting 461 00:28:15,560 --> 00:28:20,679 Speaker 1: those three, especially risk taking into political hands generally just 462 00:28:21,200 --> 00:28:39,440 Speaker 1: the the incentives to start alive. I want to ask 463 00:28:39,480 --> 00:28:42,160 Speaker 1: about another niche commodity because you wrote about it and 464 00:28:42,200 --> 00:28:46,280 Speaker 1: it seems instructive. The first chapter of your big paper 465 00:28:46,440 --> 00:28:49,959 Speaker 1: is about rubber and how we actually have a superior 466 00:28:50,080 --> 00:28:54,400 Speaker 1: technology that exists today to rubber, and yet rubber hasn't 467 00:28:54,400 --> 00:28:56,920 Speaker 1: gone away. What's the story there? I found that really interesting. 468 00:28:57,000 --> 00:28:59,800 Speaker 1: It goes back to the days where if you were 469 00:29:00,280 --> 00:29:05,640 Speaker 1: smuggling rubber seeds or saplings out of Brazil. The penalty 470 00:29:05,720 --> 00:29:08,760 Speaker 1: was the death penalty, right this This was a commodity 471 00:29:08,800 --> 00:29:12,800 Speaker 1: that made parts of Zil extremely wealthy. It was a 472 00:29:12,800 --> 00:29:16,480 Speaker 1: commodity that during wartime was it such high demand that 473 00:29:16,520 --> 00:29:19,680 Speaker 1: we launched effectively in Manhattan project to try to find 474 00:29:19,720 --> 00:29:24,360 Speaker 1: synthetic alternatives. And so, by and large, the old approach 475 00:29:24,400 --> 00:29:27,760 Speaker 1: to rubber was a plantation. If you grow rubber plants, 476 00:29:27,760 --> 00:29:30,800 Speaker 1: you harvest them and you make natural rubber, and then 477 00:29:30,840 --> 00:29:35,640 Speaker 1: synthetic rubber. Petrochemical pathways were determined that could make synthetic rubber, 478 00:29:36,080 --> 00:29:39,840 Speaker 1: and they each have slightly different properties and they exist, 479 00:29:40,000 --> 00:29:45,080 Speaker 1: they coexist and kind of a share even today. And 480 00:29:45,160 --> 00:29:49,680 Speaker 1: so rubber, if the analogy is electric vehicles, I think 481 00:29:49,760 --> 00:29:53,400 Speaker 1: a lot of people that follow sperbs and think about adoption, 482 00:29:53,920 --> 00:29:58,800 Speaker 1: think about buyin ay or zero percent. You know, if 483 00:29:58,840 --> 00:30:01,960 Speaker 1: if e vs turn out to be like rubber, you 484 00:30:02,000 --> 00:30:06,400 Speaker 1: get to a penetration. There's lots of internal combustion engines, 485 00:30:06,520 --> 00:30:09,800 Speaker 1: lots of e vs, and rubber tells you that that's 486 00:30:09,840 --> 00:30:14,280 Speaker 1: a plausible path. Since we're throwing out random commodities, can 487 00:30:14,320 --> 00:30:17,800 Speaker 1: I ask, can we make a game show now to 488 00:30:17,960 --> 00:30:22,800 Speaker 1: fertilize it like commodity. Commodities with Bob, commodities with bracket 489 00:30:23,080 --> 00:30:25,520 Speaker 1: for the audience, just throw. Let's do a live event 490 00:30:25,600 --> 00:30:28,560 Speaker 1: with Bob and the audio. I think commodity out and 491 00:30:28,640 --> 00:30:31,080 Speaker 1: he can tell the history gets to throw commodities at me. 492 00:30:31,480 --> 00:30:33,800 Speaker 1: Let's do it. Okay, we'll plan this. I think it'll 493 00:30:33,800 --> 00:30:37,560 Speaker 1: be a fun event. Nothing unsafe though, like mercury, that 494 00:30:37,600 --> 00:30:42,920 Speaker 1: would be bad. Okay, Uh, random commodity, it's not really random. 495 00:30:42,960 --> 00:30:45,160 Speaker 1: But can we talk about copper for a little bit, 496 00:30:45,240 --> 00:30:48,040 Speaker 1: because I think this is one instance where again the 497 00:30:48,080 --> 00:30:52,240 Speaker 1: short term versus long term trajectory, or the tension there 498 00:30:52,600 --> 00:30:55,320 Speaker 1: comes into play. Because we've had people on the show, 499 00:30:56,160 --> 00:30:59,080 Speaker 1: notably the analysts over at Goldman Sacks, talking about how 500 00:30:59,080 --> 00:31:03,040 Speaker 1: they are extreme dreamely bullish on copper over the longer term, 501 00:31:03,120 --> 00:31:05,200 Speaker 1: and I think most people would agree that if we 502 00:31:05,240 --> 00:31:09,280 Speaker 1: are moving to a more electronic future, we will need 503 00:31:09,520 --> 00:31:11,760 Speaker 1: a lot of copper in order to make that possible. 504 00:31:11,800 --> 00:31:13,760 Speaker 1: But on the other hand, if you look at a 505 00:31:13,840 --> 00:31:18,120 Speaker 1: chart of the copper price right now, it's down a lot. 506 00:31:18,360 --> 00:31:21,200 Speaker 1: It's down a lot. Yeah, scientific term, it's down quite 507 00:31:21,240 --> 00:31:24,560 Speaker 1: a lot. So clearly like there's a mismatch there between 508 00:31:24,600 --> 00:31:27,600 Speaker 1: the long run expectations and the short run expectations. So 509 00:31:27,800 --> 00:31:30,800 Speaker 1: how are you thinking about copper? So the nickname that 510 00:31:31,000 --> 00:31:35,360 Speaker 1: Copper earns is Dr Copper. Copper has a PhD in economics. 511 00:31:35,440 --> 00:31:38,560 Speaker 1: And in the short run, we have tools where we 512 00:31:38,840 --> 00:31:42,480 Speaker 1: from Bloomberg pulled every macro indicator you can think of 513 00:31:42,840 --> 00:31:46,040 Speaker 1: and see what correlates best with copper, and copper can 514 00:31:46,200 --> 00:31:50,400 Speaker 1: smell the economy better than just about any other commodity. 515 00:31:50,800 --> 00:31:53,760 Speaker 1: And so in the short run it's extremely rational what 516 00:31:53,840 --> 00:31:58,640 Speaker 1: copper is doing. It's smelling some level of recession and 517 00:31:58,760 --> 00:32:02,080 Speaker 1: it's responding. In the long run, it's phenomenal. But so 518 00:32:02,120 --> 00:32:06,000 Speaker 1: in the short run, the good news is we know 519 00:32:07,000 --> 00:32:10,720 Speaker 1: as far as copper can fall. So, for example, when 520 00:32:10,760 --> 00:32:14,200 Speaker 1: copper minds get to zero ev to when the cost 521 00:32:14,760 --> 00:32:18,040 Speaker 1: of that worst ton of copper in the market equals 522 00:32:18,080 --> 00:32:20,760 Speaker 1: the revenue of that ton of copper, those minds go 523 00:32:20,800 --> 00:32:23,240 Speaker 1: to care and maintenance. And that's a great way to 524 00:32:23,360 --> 00:32:26,280 Speaker 1: sort of prevent the free fall in all but the 525 00:32:26,280 --> 00:32:30,480 Speaker 1: worst recessions. And so you know where your downside is 526 00:32:31,040 --> 00:32:34,440 Speaker 1: on copper. On the upside, you know, the very simple 527 00:32:34,480 --> 00:32:37,640 Speaker 1: way to think about it is the planet uses about 528 00:32:37,640 --> 00:32:41,280 Speaker 1: twenty million tons of copper a year. Of mind copper, 529 00:32:42,480 --> 00:32:46,040 Speaker 1: each e V we add is about point one tons 530 00:32:46,280 --> 00:32:49,880 Speaker 1: hundred kilograms. So if we get to a world where 531 00:32:49,960 --> 00:32:53,560 Speaker 1: every vehicle is an e V, that's a hundred million 532 00:32:53,720 --> 00:32:57,720 Speaker 1: rounding up vehicles a year, that's ten million tons of copper. 533 00:32:58,280 --> 00:33:01,360 Speaker 1: So we've got to not only keep the copper demand 534 00:33:01,520 --> 00:33:05,600 Speaker 1: in the broader economy at that, we've got to add 535 00:33:05,680 --> 00:33:09,680 Speaker 1: ten And in a world where we have watched copper 536 00:33:09,720 --> 00:33:13,760 Speaker 1: grades fall for a hundred years, in a world where 537 00:33:14,080 --> 00:33:19,040 Speaker 1: e s G issues around local community saying, wait a minute, 538 00:33:19,240 --> 00:33:21,960 Speaker 1: why do I have to bear the brunt of mining 539 00:33:22,600 --> 00:33:26,280 Speaker 1: to help the EV market some electric vehicle in the 540 00:33:26,320 --> 00:33:29,200 Speaker 1: O E C D for example, right there really is 541 00:33:29,560 --> 00:33:32,040 Speaker 1: a strong mismatch between where that demand could be in 542 00:33:32,080 --> 00:33:36,520 Speaker 1: that supply. So we similarly look at are very bullish 543 00:33:36,520 --> 00:33:38,600 Speaker 1: long term copper. There's some people that look at the 544 00:33:38,680 --> 00:33:41,720 Speaker 1: high price of oil right now, the high price of 545 00:33:41,840 --> 00:33:45,240 Speaker 1: natural gas, and they say, like, good, this will accelerate 546 00:33:45,240 --> 00:33:49,800 Speaker 1: the transition, This will encourage more market forces to you know, 547 00:33:50,000 --> 00:33:54,040 Speaker 1: invest in battery technology or people to buy e v s, etcetera. 548 00:33:54,600 --> 00:33:59,080 Speaker 1: On the flip side, though, tens and particularly the second 549 00:33:59,080 --> 00:34:02,520 Speaker 1: half of the times, even after oil crashed, like is 550 00:34:02,640 --> 00:34:05,720 Speaker 1: essentially when the ev industry grew up or it really 551 00:34:05,760 --> 00:34:08,920 Speaker 1: started to become a thing. And obviously Tesla had a 552 00:34:08,920 --> 00:34:12,000 Speaker 1: phenomenal decade, basically invented the modern industry, and now all 553 00:34:12,080 --> 00:34:14,840 Speaker 1: these other car players are scrambling to catch up. The 554 00:34:14,880 --> 00:34:19,959 Speaker 1: twenty tens were also a really big decade for installed 555 00:34:20,120 --> 00:34:23,040 Speaker 1: wind and solar capacity around the world. So even in 556 00:34:23,080 --> 00:34:27,000 Speaker 1: a period of low commodity prices, it didn't seem to 557 00:34:27,000 --> 00:34:31,960 Speaker 1: be an impediment towards a rapid expansion of renewables and alternatives. 558 00:34:32,200 --> 00:34:35,280 Speaker 1: And so I guess my question is do high prices 559 00:34:35,960 --> 00:34:39,879 Speaker 1: actually proved to be an accelerant of transition or new 560 00:34:39,920 --> 00:34:43,480 Speaker 1: technologies or is the price mechanism or the short term 561 00:34:43,520 --> 00:34:48,319 Speaker 1: price mechanism kind of irrelevant for the longer term transition. 562 00:34:48,640 --> 00:34:50,680 Speaker 1: So I think the jury is out, but I'll throw 563 00:34:50,719 --> 00:34:54,960 Speaker 1: out So one thought is what you mentioned is almost 564 00:34:54,960 --> 00:34:57,360 Speaker 1: a second order thinking, which is, hey, the price of 565 00:34:57,440 --> 00:35:00,640 Speaker 1: oil is high, that will hasten substitute shouldn't let me 566 00:35:00,680 --> 00:35:03,839 Speaker 1: invest in the substitutes. The first order thinking is the 567 00:35:03,880 --> 00:35:06,000 Speaker 1: price of oil is high, let me invest in oil, 568 00:35:06,200 --> 00:35:09,600 Speaker 1: right that's kind of the simply yeah or coal or 569 00:35:10,480 --> 00:35:13,960 Speaker 1: so um. You know. The other thing I'll throw into 570 00:35:14,000 --> 00:35:18,320 Speaker 1: the mix is high stable prices are much more likely 571 00:35:18,400 --> 00:35:23,440 Speaker 1: to drive substitution than the incredibly volatile prices that we've seen. 572 00:35:23,600 --> 00:35:26,400 Speaker 1: So to some degree, the fact that oil was negative 573 00:35:26,440 --> 00:35:30,240 Speaker 1: two years ago, was okay last year is great right now, 574 00:35:30,760 --> 00:35:35,960 Speaker 1: doesn't provide a stable competitor against which to plan the 575 00:35:36,080 --> 00:35:39,120 Speaker 1: energy transition. What about here, like the role of government, 576 00:35:39,160 --> 00:35:43,839 Speaker 1: so sitting aside nationalization, Are there other things governments could 577 00:35:44,239 --> 00:35:48,800 Speaker 1: theoretically do to de risk production? You know, you mentioned 578 00:35:49,160 --> 00:35:52,760 Speaker 1: every resource player is worried that the last ten years 579 00:35:52,760 --> 00:35:55,160 Speaker 1: of the life of this mind will actually be a 580 00:35:55,239 --> 00:35:57,960 Speaker 1: zero because the transition is coming. Are there other things 581 00:35:58,000 --> 00:36:00,920 Speaker 1: that policymakers could do too? Do you risk some of 582 00:36:00,960 --> 00:36:04,000 Speaker 1: these decisions? What policy makers should do is reduced the 583 00:36:04,040 --> 00:36:06,040 Speaker 1: demand for the things they want to get rid of 584 00:36:06,760 --> 00:36:10,879 Speaker 1: and not subsidize that demand, even though in the short 585 00:36:10,960 --> 00:36:13,799 Speaker 1: run that's quite painful, and it almost harkens back to 586 00:36:13,920 --> 00:36:18,760 Speaker 1: Jimmy Carter where President Carter told the nation were a sweater, 587 00:36:20,040 --> 00:36:23,279 Speaker 1: reduce speed limits to fifty. So there's lots of things 588 00:36:23,320 --> 00:36:26,640 Speaker 1: you can do to reduce demand we have not seen 589 00:36:26,680 --> 00:36:29,120 Speaker 1: the political will to do that, and in fact, some 590 00:36:29,200 --> 00:36:32,000 Speaker 1: of those efforts get mocked. Right, So instead of reducing 591 00:36:32,040 --> 00:36:35,920 Speaker 1: speed limits this time around, we've reduced taxes on gas right, right, 592 00:36:36,000 --> 00:36:39,400 Speaker 1: And so that's counterproductive if your goal is to reduce 593 00:36:39,480 --> 00:36:42,600 Speaker 1: the price of something. Subsidizing the price of something doesn't 594 00:36:42,640 --> 00:36:47,840 Speaker 1: reduce its demand. But but telling Americans, for example, hey COVID. 595 00:36:48,280 --> 00:36:52,120 Speaker 1: During COVID, we were very effective at reducing oil demand. 596 00:36:52,400 --> 00:36:54,200 Speaker 1: So we'd ask all of you to stay home for 597 00:36:54,239 --> 00:36:57,799 Speaker 1: another year to reduce oil demand feels like a nonstarter. 598 00:36:58,440 --> 00:37:04,640 Speaker 1: I would be very favor of that policy at any 599 00:37:04,719 --> 00:37:08,239 Speaker 1: mention of more reasons to work from home. I like 600 00:37:08,280 --> 00:37:10,600 Speaker 1: commands to the office, but I like recording in the 601 00:37:10,640 --> 00:37:15,240 Speaker 1: same studios. Thank you, thank you. Yeah. So, certainly, in 602 00:37:15,239 --> 00:37:18,160 Speaker 1: in the short run, markets will do what they're going 603 00:37:18,200 --> 00:37:20,200 Speaker 1: to do, and a lot of what we've talked about 604 00:37:20,320 --> 00:37:22,000 Speaker 1: is kind of that long run. But yeah, I think 605 00:37:22,040 --> 00:37:25,320 Speaker 1: the answer is when we come out of this recession, 606 00:37:25,480 --> 00:37:27,960 Speaker 1: we're going to go back to a world of lower rates. 607 00:37:28,239 --> 00:37:31,360 Speaker 1: Right in the long run, our our strategist has a 608 00:37:31,440 --> 00:37:34,000 Speaker 1: chart showing interest rates for thousands of years. They all 609 00:37:34,040 --> 00:37:38,160 Speaker 1: trend towards zero. So someday rates will fall again and 610 00:37:38,440 --> 00:37:42,799 Speaker 1: someday that will incentivize investment. But that investment, right, we 611 00:37:42,880 --> 00:37:46,120 Speaker 1: need to spend a lot of money, not in the metaverse, 612 00:37:46,160 --> 00:37:48,840 Speaker 1: but back in the physical world, and it's going to 613 00:37:48,920 --> 00:37:54,120 Speaker 1: be rebuilding our energy systems, maybe building redundant energy systems, 614 00:37:54,160 --> 00:37:58,719 Speaker 1: given how geopolitics has has caught everybody up this year, 615 00:37:59,360 --> 00:38:03,640 Speaker 1: and we've only got to underpin our old energy systems, 616 00:38:03,640 --> 00:38:08,640 Speaker 1: the hydrocarbon based ones. We've got to build electrical based systems. 617 00:38:08,719 --> 00:38:11,680 Speaker 1: And so there's just gonna be a lot of activity 618 00:38:11,719 --> 00:38:15,440 Speaker 1: in the physical world once we get out of the 619 00:38:15,480 --> 00:38:17,880 Speaker 1: time we're in now. This metaverse thing is proving to 620 00:38:17,920 --> 00:38:20,920 Speaker 1: be a real distraction. I mean, it's like we have 621 00:38:21,040 --> 00:38:22,880 Speaker 1: a lot of work to do in the in the 622 00:38:22,920 --> 00:38:27,760 Speaker 1: real world. Yeah, of like actual molecules instead of pixels. 623 00:38:27,760 --> 00:38:29,880 Speaker 1: Like we gotta get we gotta get people focused on 624 00:38:29,880 --> 00:38:32,239 Speaker 1: the real world again, don't I I feel like that's 625 00:38:32,239 --> 00:38:34,920 Speaker 1: what we've been doing for the past two years. I 626 00:38:35,080 --> 00:38:38,239 Speaker 1: was last week in eastern Namibia at a site visit 627 00:38:38,320 --> 00:38:41,360 Speaker 1: for an oil and gas explorer out there, and to 628 00:38:41,440 --> 00:38:45,680 Speaker 1: see a local Namibian collecting seismic data dressed like Iron 629 00:38:45,719 --> 00:38:48,600 Speaker 1: Man with these nodes that he's pushing into the ground 630 00:38:48,640 --> 00:38:53,000 Speaker 1: that are GPS linked and he's collecting data truck and 631 00:38:53,040 --> 00:38:55,800 Speaker 1: you look and say, that is so much more sophisticated 632 00:38:55,840 --> 00:38:59,720 Speaker 1: and interesting than the next app that gets me my burger, 633 00:39:00,120 --> 00:39:01,719 Speaker 1: you know. And we talked about this, We did a 634 00:39:01,719 --> 00:39:05,640 Speaker 1: recent episode with Peter church Sack in about like this 635 00:39:05,719 --> 00:39:08,640 Speaker 1: idea of like how much the sort of talent drain 636 00:39:09,080 --> 00:39:12,600 Speaker 1: that the that the extract of industries have seen, especially 637 00:39:12,600 --> 00:39:14,360 Speaker 1: over the last decade, and for all kinds of reasons 638 00:39:14,360 --> 00:39:17,719 Speaker 1: do people not appreciate, like how much tech is involved 639 00:39:17,760 --> 00:39:20,319 Speaker 1: with extraction these days? And like is there a lot 640 00:39:20,360 --> 00:39:23,400 Speaker 1: of exciting tech on the horizon, even if it's just 641 00:39:23,440 --> 00:39:26,400 Speaker 1: to get better like you know, finding natural gas or 642 00:39:26,400 --> 00:39:30,680 Speaker 1: finding other resources. Yeah, it's a completely missed story. And 643 00:39:30,760 --> 00:39:33,759 Speaker 1: if you think about g p US, before Crypto needed 644 00:39:33,840 --> 00:39:38,160 Speaker 1: GPUs for minding the oil and gas industry was buying 645 00:39:38,200 --> 00:39:42,360 Speaker 1: everyone they could for doing seismic processing and interpretation and 646 00:39:42,520 --> 00:39:48,120 Speaker 1: three D reservoir modeling. And so it's an extremely data 647 00:39:48,200 --> 00:39:54,760 Speaker 1: intensive industry, software intensive industry, tech intensive industry. The capital 648 00:39:54,800 --> 00:39:58,200 Speaker 1: projects are bigger than anything we do short of mood launches, 649 00:39:58,800 --> 00:40:01,319 Speaker 1: and it's just sort of assumed to be part of 650 00:40:01,360 --> 00:40:04,719 Speaker 1: the old economy. So, yeah, I'm a huge proselytizer for 651 00:40:04,719 --> 00:40:07,400 Speaker 1: for how cool oil and gas tech is. I was 652 00:40:07,400 --> 00:40:09,480 Speaker 1: going to ask. This kind of raises the question of 653 00:40:09,520 --> 00:40:13,640 Speaker 1: why venture capital doesn't get more involved in this space. 654 00:40:13,800 --> 00:40:17,759 Speaker 1: Is it just it's easier to go into software with 655 00:40:17,920 --> 00:40:22,320 Speaker 1: you know, lower startup costs and less capital actually needed 656 00:40:22,440 --> 00:40:25,840 Speaker 1: versus big, you know projects in the real world. Yeah, 657 00:40:26,120 --> 00:40:29,719 Speaker 1: part of it might just be that sort of capital 658 00:40:29,920 --> 00:40:34,200 Speaker 1: is the riskiest taking capital, and so maybe they're looking 659 00:40:34,880 --> 00:40:38,000 Speaker 1: an oil and gas field once it's in development. Yeah, 660 00:40:38,000 --> 00:40:41,279 Speaker 1: it's reasonably well understood what the economics could be, and 661 00:40:41,320 --> 00:40:44,880 Speaker 1: maybe venture capital is looking for things that could massively 662 00:40:44,960 --> 00:40:48,440 Speaker 1: disrupt the future of the World's not clear to me. 663 00:40:48,840 --> 00:40:52,239 Speaker 1: Well this was such only for the value Oh sorry, 664 00:40:52,239 --> 00:40:54,520 Speaker 1: I'm just gonna say, yeah, for lateral thinking. I would 665 00:40:54,600 --> 00:40:58,040 Speaker 1: encourage any investor to spend as much time thinking laterally 666 00:40:58,239 --> 00:41:02,840 Speaker 1: as they can, even if it's an obscure think laterally, 667 00:41:03,239 --> 00:41:05,720 Speaker 1: what does that man? Just you know, stepping out of 668 00:41:06,000 --> 00:41:11,400 Speaker 1: your sector of the market and just looking across the market, 669 00:41:11,480 --> 00:41:16,520 Speaker 1: looking across history, just saying you know, what does this resemble, 670 00:41:16,920 --> 00:41:22,319 Speaker 1: what does this feel like? What sort of interesting angles 671 00:41:22,400 --> 00:41:25,120 Speaker 1: that other sectors have taken that could be applicable here. 672 00:41:26,600 --> 00:41:30,160 Speaker 1: Bob Brackett, this is a real treat, very interesting thinker 673 00:41:30,280 --> 00:41:33,440 Speaker 1: on these questions and sort of like kind of mind expanding. 674 00:41:33,880 --> 00:41:36,920 Speaker 1: So appreciate you so much for coming out online. My pleasure, Joe, 675 00:41:37,000 --> 00:41:40,040 Speaker 1: my pleasure tracing so much. Thanks so much. That was great. Yeah, 676 00:41:40,040 --> 00:41:56,160 Speaker 1: that was like, that was really good. Uh. That was 677 00:41:56,280 --> 00:42:00,279 Speaker 1: this idea that like, commodities just don't get disrupt dude, 678 00:42:00,560 --> 00:42:03,160 Speaker 1: that they live on forever. The fact that there's been 679 00:42:03,160 --> 00:42:07,040 Speaker 1: a war on coal since the since the thirteenth century. 680 00:42:07,160 --> 00:42:10,359 Speaker 1: It's like really useful stuff I think to appreciate when 681 00:42:10,440 --> 00:42:13,680 Speaker 1: thinking about these problems totally. I love looking at historic 682 00:42:13,760 --> 00:42:17,000 Speaker 1: parallels for these types of things. And the one thing 683 00:42:17,000 --> 00:42:21,880 Speaker 1: that struck me like, yes, absolutely, energy transitions or transitions 684 00:42:21,880 --> 00:42:24,799 Speaker 1: away from commodities never seemed to be linear and they 685 00:42:24,840 --> 00:42:27,560 Speaker 1: never seem to happen completely going by history. But the 686 00:42:27,600 --> 00:42:30,120 Speaker 1: other thing that I thought was really interesting that Bob 687 00:42:30,160 --> 00:42:32,440 Speaker 1: pointed out was this idea that there is an assumption 688 00:42:32,440 --> 00:42:34,799 Speaker 1: that as people start moving away from a commodity, the 689 00:42:34,800 --> 00:42:38,880 Speaker 1: price will go down, but demand is only one half 690 00:42:38,920 --> 00:42:41,920 Speaker 1: of these supply demand equation and so if you have 691 00:42:42,000 --> 00:42:44,440 Speaker 1: capacity cut at the same time, then prices can actually 692 00:42:44,480 --> 00:42:47,400 Speaker 1: go up. Yeah, that's a that's a really important idea. 693 00:42:47,440 --> 00:42:50,200 Speaker 1: And again I think we sort of got lulled into, 694 00:42:50,480 --> 00:42:53,040 Speaker 1: you know one is again we think in the frame 695 00:42:53,080 --> 00:42:55,280 Speaker 1: of consumer tech and like a new you know, flat 696 00:42:55,320 --> 00:42:58,400 Speaker 1: screen TVs come along, and then whoever still holds the 697 00:42:58,560 --> 00:43:01,759 Speaker 1: stock of you know, normal TV, it's like sells them 698 00:43:01,800 --> 00:43:04,200 Speaker 1: super cheap just to get rid of the inventory. Right. 699 00:43:04,560 --> 00:43:06,920 Speaker 1: And so that is the frame that we think demand 700 00:43:06,920 --> 00:43:08,920 Speaker 1: for something goes down and then whoever has it just 701 00:43:08,960 --> 00:43:11,560 Speaker 1: sells it for very little. But in the case of 702 00:43:11,800 --> 00:43:15,880 Speaker 1: Capex heavy extractive industry is everyone could see those charts. 703 00:43:15,920 --> 00:43:21,000 Speaker 1: I don't know whether it's gonna be that like oil peaks, 704 00:43:21,000 --> 00:43:24,000 Speaker 1: but everyone's looking at those charts, and you could have 705 00:43:24,040 --> 00:43:27,600 Speaker 1: a situation where because demand is going down, supply contracts 706 00:43:27,640 --> 00:43:30,880 Speaker 1: even faster. Right. And the other thing that struck me, 707 00:43:31,040 --> 00:43:33,840 Speaker 1: I really like the phrase Bob used was a local 708 00:43:34,000 --> 00:43:36,680 Speaker 1: E s T versus global E S G. Because this 709 00:43:36,760 --> 00:43:40,000 Speaker 1: is something that you know, we recorded an episode on 710 00:43:40,120 --> 00:43:43,279 Speaker 1: this recently when it comes to Chile and deserts and 711 00:43:43,320 --> 00:43:46,120 Speaker 1: things like that. But it does seem like there is 712 00:43:46,160 --> 00:43:49,640 Speaker 1: a tension here the sort of like everyone agrees that 713 00:43:49,760 --> 00:43:52,240 Speaker 1: we need to get more metals out of the earth 714 00:43:52,360 --> 00:43:56,799 Speaker 1: in order to electrify our future, but no one really 715 00:43:56,840 --> 00:43:59,799 Speaker 1: wants to be the place that's actually doing the mining. Yeah, 716 00:44:00,160 --> 00:44:02,360 Speaker 1: it's a real big tension because as we know, like 717 00:44:02,520 --> 00:44:08,719 Speaker 1: rich countries more e vis large corporate interests in decarbonization, 718 00:44:08,880 --> 00:44:13,200 Speaker 1: and everyone has their like climate goals they're zero or whatever, 719 00:44:13,320 --> 00:44:16,919 Speaker 1: and every company wants to tout it green credentials, they're 720 00:44:16,920 --> 00:44:20,120 Speaker 1: offsetting all their emissions or whatever. But on the other hand, 721 00:44:20,320 --> 00:44:24,840 Speaker 1: these industries like copper, like lithium, etcetera. They damage the 722 00:44:24,880 --> 00:44:27,200 Speaker 1: water supply, they may damage the air supply. Like these 723 00:44:27,200 --> 00:44:30,960 Speaker 1: are like really dirty industries on a local basis. And 724 00:44:31,239 --> 00:44:33,560 Speaker 1: this tension, I'm sure it's only going to increase. And 725 00:44:33,640 --> 00:44:36,080 Speaker 1: the math that Bob laid out about copper demanded like 726 00:44:36,160 --> 00:44:38,879 Speaker 1: this can be a huge burden. Yeah. And the other 727 00:44:38,920 --> 00:44:41,880 Speaker 1: thing that strikes me is like it doesn't really seem 728 00:44:41,920 --> 00:44:44,600 Speaker 1: like there is a role for the government to play 729 00:44:44,640 --> 00:44:47,400 Speaker 1: here in trying to smooth some of these cycles or 730 00:44:47,480 --> 00:44:51,000 Speaker 1: offset some of these like longer term motivations and concerns, 731 00:44:51,280 --> 00:44:55,439 Speaker 1: maybe not as extreme as outright nationalism, which I don't 732 00:44:55,440 --> 00:44:58,360 Speaker 1: think would happen in the US at least, but other ways, 733 00:44:58,400 --> 00:45:01,040 Speaker 1: as he outlined, Yeah, and of course we you know, 734 00:45:01,040 --> 00:45:04,520 Speaker 1: we had that recent conversation with Sconda and Rory about 735 00:45:04,840 --> 00:45:07,160 Speaker 1: could the spr be used to smooth the booms and 736 00:45:07,200 --> 00:45:10,040 Speaker 1: bus And in theory, that's a model that could be 737 00:45:10,080 --> 00:45:13,759 Speaker 1: applied to other commodities, etcetera, to create that guarantee of 738 00:45:13,840 --> 00:45:17,799 Speaker 1: demand so that people aren't terrified by demand curves that uh, 739 00:45:18,040 --> 00:45:20,160 Speaker 1: you know, eventually start turning down. But it's gonna be 740 00:45:20,160 --> 00:45:23,120 Speaker 1: really tricky, all those scary demand curves. All right, shall 741 00:45:23,160 --> 00:45:24,960 Speaker 1: we leave it there. Let's leave it there. This has 742 00:45:25,000 --> 00:45:28,320 Speaker 1: been another episode of the All Thoughts podcast. I'm Tracy Alloway. 743 00:45:28,400 --> 00:45:30,759 Speaker 1: You can follow me on Twitter at Tracy Alloway. And 744 00:45:30,800 --> 00:45:33,719 Speaker 1: I'm Joe Wisenthal. You can follow me on Twitter at 745 00:45:33,760 --> 00:45:38,239 Speaker 1: The Stalwart, follow our producer Carmen Rodriguez at Kerman Arman, 746 00:45:38,600 --> 00:45:41,600 Speaker 1: and check out all of our podcasts Bloomberg under the 747 00:45:41,640 --> 00:46:10,440 Speaker 1: handle at podcasts. Thanks for listening year to