0:00 So I just, I just wrote my updates and I, I ranted on wind for the. So did you see where SPP won the appeal against the Wyoming, uh, solar farm, uh, wind farm? So the appeal, so they charge
0:14 them62 million to become based to either you have to install the base load or SPP. Southern Power Pool is going to have to go get base load. So they didn't do it. So they, they sued because they
0:26 were still going to charge them The Apple at court, not only awarded SPP 62 million, but they said that due to inflation and increasing instability in the grid, it was 102 million. And now it's
0:38 like people are starting to rethink their mathematics on, on what this is going to cost, because either you're going to have to pay the ISO for it, or you're going to have to install it, which is
0:48 inherently going to increase your price of construction, which is going to increase the amount of, uh, that you have to charge per megawatt hour Again, increase the rate base. Well, because once
1:01 you get, once you put in for the megawatt hour that you need, it then goes to auction. And then the auction is just gonna get like, just look at it on PJM. I mean, PJM, you had almost like a
1:11 400 increase. As a
1:16 miso, right pair. That's, that's right. So let's do this real quick, 'cause I say we like should include all this stuff. We just recorded in BD This has been like cool stuff. It's already on,
1:30 dude, we're recording, right? John, Mark in Special Gas, Mark Orsonos, C6 Capital, just flew in from New York. Thanks for joining us. Thanks for having me. Real quick, before we dig into
1:43 these issues, 'cause we just laid out our out wound for the show. That was a Josh Young thing. He was like, y'all should give an outline at the beginning, and he's probably right about that.
1:51 We've just never been organized enough. Real quick, y'all too.
1:57 back in the day, but I did on Chuck Yitzley's a job, the energy policy draft. And to have nine folks on, I made you, energy czar of the world. And I said, you get one pick of an energy policy.
2:10 Mark, you went first, would you change your, who did you pick and would you change that today?
2:18 I picked natural gas as the one one. Yes. You were, that might have been a little nepotism to give me the one one slot to make I did.
2:29 Yes, I'd still choose natural gas, but with lesser conviction, just giving all the momentum that's built around nuclear. You went four, right? You picked four or was it three? I think it was
2:40 three. Okay, you went three, who did you choose or would you retain that pick? Well, I just got told that I was right. So I went nuclear, SMR with a focus in building out halooth. Yeah, there
2:54 you go. That was so much fun. How about you? I was sewing the moderator with. I don't think Stacy and I actually made a pick. I still think the best pick of the day was DRW. DRW comes on and he
3:08 goes, he goes, I don't care if I'm choosing first or I'm choosing last. I'm taking coal because there's not much of it left and I'll be the only warm motherfucker on the planet. When y'all all run
3:20 out of energy. I was like, you see, Calgary's getting warmer, great Yeah, it might make this place bearable. Yeah, so, alrighty. So, Mark, kick us off on the floods. So, not a lot of
3:34 information other than, you know, some of the just devastating clips that we're seeing of, we just saw one from Chimney Rock, which is the downstream permanence of all the debris field that has
3:49 gotten hung up there but basically towns are gone or mostly decimated. This is in the, you know, most of the news, at least from a headline standpoint, is around Asheville, but the comms are
4:04 down. A lot of the roads are impossible. There's not yet a lot of information, still very much a search and rescue operation. They showed the the River District in Asheville, or someone was
4:18 talking about it, where the water had receded, and you know, it's it's basically gone It's an area that is built in floodplain. And I think, you know, something that I paid attention to last
4:32 night, there's a lot of gas lines showing up, people running out of fuel and spending hours and in lines to fill up. And gas buddy had a had a threat out yesterday talking about, you know, it's
4:48 not just a matter of having out of region haulers take fuel from just any random. wholesale distribution terminal, there's a whole process
5:00 that is based on a lot of regulatory layers where these tankers have to come in and be permitted and licensed into that particular facility. They have to actually go through training. They have to
5:14 be approved for not only the product producer's load, but also the customer. So it's a logistical nightmare that takes several days to sort out. And so this notion that we've got
5:30 this logistical overlay in an area that's got very little to no power and no fuel is pretty devastating. But the notion that something this catastrophic can get sorted out at least minimally
5:46 logistically within a few days is pretty stunning. But just the whole process of how the field distribution works, I was a bit of a neophyte. Yeah, we understand what that looks like. We'd be
5:59 remiss if we didn't say thoughts and prayers to everyone. I felt like this has been just incredibly nasty. Mark, would you see in New York about it? Because I kind of found it interesting that it
6:10 doesn't seem like this was a widely reported story as one, you know, as someone who's from Houston, close to New Orleans, Salka, Trina, et cetera. So there's a lot that's been said about just
6:25 how devastating and one of the reasons because a lot of people went from New York into this region over the last five years. So there's a lot of families. There's a lot of ties back to it. So there
6:37 has been some decent coverage, you know, and it's just a sheer amount of water that fell. I think there was something like 40 trillion
6:46 gallons fell over a five day period. When you think about just the sheer amount of water that came down, but then you look at the dams held up, you know, the ones that were trying to hold back
6:58 water where they could. I think it's really important to look at how can we manage this just like in 1916 when you had something similar happen in terms of the sheer devastation, there were things
7:10 that changed afterwards. You know, how can we learn from this, take what happened and really remediate. You know, one of the things that we've seen so far, there's, I think it's coming out of
7:20 Tennessee and several other states, they started creating a helicopter So people who own helicopters and other types of equipment have actively been running their own dime, their own fuel running
7:33 lines to try to come in. We're starting to see looting pick up, which is an inherent problem. And then obviously it gets politicized as everything else does because DeSantis said no to Sandy aid.
7:47 And that was a whole big thing. 'Cause it's like, oh, well, now you wanna tap the government. It's like, well, you pay taxes for a reason. to provide goods and services to you as a taxpayer.
7:59 And the fact that this can even remotely be said in terms of blue, red, in the sense of like, Oh, well, for red guys, for red states, this is communism. It's like, Well, no, because you had
8:10 an extreme eventthat you need help and support coming back into. That's why you pay in, you have that store of value, and then it comes down when something like this happens. It's not being
8:21 communistic or anything else. It's helping your fellow American What's the law? That is not always my thing, it is the system, you know, so. And there was, you know, opportunistic
8:33 politicization. I think the
8:36 most obvious example was AOC's tweet, linking it directly to fossil fuels and big oil. And it's just stunning the speed at which that occurs even before any kind of assessment can be made while the
8:52 disaster is unfolding.
8:55 You know, it cuts both ways on both sides of the aisle.
9:00 It's just an inability to constrain or resist the impulse. Yeah, just score points. And to that point, you know, when you look at 1916, you look at today and you look at how that's gone back and
9:14 forth, it's like, well, it happens. You know, when you look at how wrong they were on the hurricane side, and it's because the Atlantic cooled rapidly And that was so we did not have a very
9:26 aggressive hurricane season, but yet, you know, to your point, it's immediately, oh, it's climate change. It's like, well, what was 1916? It's just, it's unfortunate that you're having
9:36 these events, but it is common to get something like this, especially something so fast-moving that didn't lose any power once it got, and then it just sat there and just dumped all this rain.
9:48 It's unfortunate, look at Harvey. You know, Harvey just stopped. And it just created this cap. you have a clay, you have caps, and then it just fills up like a bathtub, you know, you had
9:57 something very similar in terms of the way it structured over that area. And Asheville sits at 2, 000 feet. I mean, it's got a lot of elevation and slope, and so you've got the whole suddenness
10:09 and velocity. Contrast that with, I guess, the worst flood in US. history. It was the 1927 Mississippi River flood, multi-state event, impacted 27, 000 square miles. But if you live down in
10:23 this region on the flat plains in the Delta of the Mississippi River or any other river that has literally no elevation chains, there's much more time to monitoring button.
10:40 I think it's one of those things that now that we have 24-hour news cycles, if your camera's on everything, it's easy to say, Well, that's climate change, even though you look at data Well, I
10:52 think most of the. kids that carry cell phones around that were native to social media, they don't even know what life was like
11:02 beforeclimate change and they didn't know what life was like before social media. So, of course, everything that comes out of their mouth is it's climate change, so we've been taught it's climate
11:11 change. What does that mean? I don't know. But it's bad. Weather events are bad and that's just the narrative and it's unfortunate because both sides of the aisle, but particularly one side has
11:23 politicized it in a way that has put oil and gas as evil. It's bad, except damn, you better give me oil and gas when I'm cold or I'm hot because you guys are price gouging me. I mean, it just
11:36 goes on both ways and it's unfortunate and sad. We've ceased it for the more in words matter here. There's a nice distinction made by the controversial Chris Mards between natural hazards and
11:49 natural disasters and if you look at as measured by central pressure at landfall since 1851. I forget what the hundreds of category three plus storms were, there's no discernible trend or
12:04 correlation in terms of the increasing intensity or frequency. It's like a point zero, zero, nine or a square. That's probably around 19 to five. But the fact is we're making elective decisions
12:16 to live in these areas that do have some nonzero probability of a natural hazard impacting you. And there's a lot more value in terms of human life and assets in areas that are at least in line over
12:34 a hundred, 500 year period. There's four things that the dollar amounts are just much lower. And there's four things that I'm curious why people are not talking about. One is when fire ants were
12:45 introduced to the United States, that's the number one. That's a big problem. Came in on a fruit boat or whatever. Number two, the fucking cedar trees. Pain in the ass, can't get rid of them.
12:56 Threward, carp. Damn, those carp in the oceans. I mean, in the rivers, fuck everything up. And for us, we're gonna get to it. It's called offshore wind, but we're gonna move out. Yeah, but
13:06 let's do this on the exit question. Does this in any way shape or form impact
13:31 the election? Absolutely, and in a swing state, it probably will Depending on who acts, who gets stuff done, we don't know yet, it's too early to tell. And if that governor or people were
13:31 Republicans, it'll help them, if they're Democrats, it's gonna help the Democrats. So I think it will, actually. What do you think? Yeah, I think as close as North Carolina is, is there a
13:39 chunk of meaningful chunk of voters that just will be unable to cast their votes? And what is the makeup of that region because they're so displaced. Yeah, Trump's arguably stronger. The early
13:55 voting starts what here next weekend, weekend after night. Yeah. All right, what do you think, Mark? I think it will. I think it's similar to your point about that if you were already
14:08 Republican, you're just gonna look at this in action, say if a Republican was here, it'd be different. If you're a Democrat, you're gonna say, Well, we need help, we need something else. So
14:17 it's just gonna be a matter of access So one point that I thought was important in terms of the climate change. So as somebody who buys and owns dams, hydroelectric assets, I think it's important
14:28 because people were blaming them for not pre-releasing water. Yeah, that's a big issue. And so they tried to say, when
14:38 you look at your water base in terms of where you're feeding from, they talked about, we had no idea that you were gonna get that much water that there wasn't a lot of pre-release, it changed so
14:49 rapidly, so quickly, so you couldn't do it. But then they did, and we knew how to build things a hundred years ago. Some of these dams started topping, and nothing happened. And it's like,
14:60 well, how about we take some of that money from the infrastructure bill, and look at these dams, look at these assets that are a hundred years old, because as someone who's buying them and
15:08 hydrating them, there's a lot of opportunity there. And I think there's ways that you could use that as a better flood control, especially as these events tend to get obviously bigger You want to
15:18 make sure that you can protect life. Interesting, interesting. This does impact the election. Remember Katrina Bush waited two days to come back and was eviscerated? I do believe that was the
15:33 moment in history when the media went from just kind of citing liberal to actually activist liberal. They figured out the power of narratives there. It's interesting, we haven't heard a peep took
15:49 the hair ski and paid him four days to comment on what's been going on. She put out a picture this morning where her ear pods aren't, you know, plugged in to her enters. Oh, but she's supposedly
16:03 on a call taking notes, but there's nothing written on the page. She have the Bluetooth earrings and they don't know about that. But I do think I do think it's going to be used as a weapon,
16:15 probably on both sides of just getting to the standstill. So, you know, we're blessed to have Mr. Rosano on, because we have been fumbling around, I say we, I have been fumbling around talking
16:27 about oil for the last, what have we done at four weeks straight now?
16:33 And all that, and I basically have been long historically throughout my career on oil prices. So, how did you get a jet then?
16:44 Good boy! I've never wired up. It's early. Yeah, exactly. There you go. The old Matt Simmons. I might try the clock fight twice a day, American clock. Mark Wevel said us on oil, we've kind
16:58 of talked about it, we've talked about the age of volatility, et cetera, the last few weeks, but chat about us because I know you've been just had opinions on China for a while now. Yeah. So
17:11 when you look at where we are on the Brent side, you know, especially when you turn to the physical, I think you're starting to see that there's
17:19 no real support for how deep some of this correction is gone on the Brent side. I think you will start to see some of this come back up in terms of the range. So we've been saying that Brent was
17:30 going to sit between the 73 and 77. So I would be a buyer down here just because of where we are. When you look at where the market sits at this point, you know, distillate is or diesel gas oil,
17:43 middle distillate of your anasia. You know, those are things where you're starting to see some movement back up, which is a good thing in terms of some of the crack spreads in the US. There's a
17:54 huge oversupply in Asia. And the problem is right now is the Middle East is the swing producer of refined products. A lot of people that, you know, if when you're early or when you're late,
18:04 depending on how you're looking at the crude market, a lot of times everybody just wants to talk oil, supply demand, just you, but you have to talk for fine products You have to look at your
18:13 largest buyer, which is the refiner. And what are the refiners doing? So you've had South Korea, which is cut runs by 5. You've had another 17 of
18:23 runs come down in China. And you have guys trying to protect cracks spreads. So because of that, you've seen a little bit of stability in the DISTI. Gasoline is still my biggest concern. I would
18:34 not, I would not want to be long gasoline at this point, especially given the amount that's sitting in Europe that's going to hit the east So you really have to look at what is DISTI doing because
18:45 that's the one that's going to drive everything going forward. We are coming out of turnarounds out of summer burn so that we'll put more crude on the water. We had said that Libya, for those that
18:57 don't know, there was some disagreement on how the money was being spent at the central bank. So that individual has since left, but they did agree in
19:09 broad strokes what should happen at the beginning of September. So obviously, as we know, broad strokes is one thing, you know, who you're bringing in? How are you structuring it is another? So
19:19 they did bring in someone. Our view was that you were going to have crude flowing by October 15th. It looks like it's going to be about a week earlier. There were already VLCCs and ships heading to
19:30 the Libyan coast. But at the same time, you have CPC going into turnaround. So you're going to have less flow coming out of CPC A rock typically takes this time. do some of their turnarounds, UAE
19:43 is going to be, take advantage of this, and let's just say if you look at Dubai crude and you look at Brent, there's a competition there, West Africa's struggling, and I think that leads back to
19:55 China. There's always been this obsession that China is going to stimulate, China's going to do all these things. It's like they will, but they've been stimulating since 2008, and there's a thing
20:07 called law of diminishing returns, and eventually, every new dollar has a negative new tail, and you've hit that here, where the
20:16 consumer is so over-levered,
20:20 the customers, the corporations are so over-levered, you're not going to get exports back, so realistically,
20:28 you had three bankruptcies, Sam Kim had three bankruptcies, you had a new mega-refiner turning on, so that's going to change the balance I was expecting to see a much bigger bigger. export quota,
20:41 instead they kept it lower. But right now, I think you have to look at where product is going from the Middle East. It's pushing to the Atlantic Basin. So over the next six weeks, we should see
20:52 builds start to increase for distillate in PED3, because right now we have the most space in terms of storage. But realistically, the physical market does not jive with the futures market. The
21:05 futures market is overshot to the downside. I think you're gonna see that get pulled back up and you're gonna see this balancing act. Everyone's like, oh, Russia is gonna make up their cuts. No,
21:14 nobody wants their crude. It's all tapped out, which is why it went back below the cap. So realistically, you're seeing this balancing. And I think the biggest issue at this point is gonna be
21:25 Russia is an exporting as much crude. The US is gonna struggle to export above 38. You're gonna get build and pad three. So I think you will get a range-bound Brent, and I think you're gonna get a
21:37 lot of pressure to the distillate market. as we head into November. Damn, that was good. So what is this for, 10 for what? OPEC Plus's decision relatives, yeah. Starting to further cuts back
21:50 in. Great question. So the
21:53 moment they announced those cuts, I said that OPEC Plus is gonna have to sit on those cuts for at least five years or accept a15 price correction. So the moment they started doing what we like to
22:07 call tape bombs in terms of let's test the market. How are they gonna take this? I could have told you immediately how they were gonna take it. It was terrible and that's where the only, I think
22:18 the earliest they can bring back crude at this point is mortgage of next year. So when you look at and you start doing the barrel counting, 2024 is a little bit tighter, which is a good thing.
22:29 2025 sucks and 2025 is going to get really sloppy. And the last thing you wanna do is bring crude back 'cause Q1 is your worst quarter for crude demand, why would you start in front of that? You'd
22:43 start on the back end of it to really help your pricing. However, it's not to throw my soul out there, but I'd be happy to help them 'cause whoever told them to go with production and not manage
22:55 official selling prices and OSPs, it needs to be fired because OSPs is how you manage this, not by increasing, decreasing production because people hear it and they immediately think, Oh, you're
23:09 cutting production, good thing, but production and exports are two separate pieces. They're bringing back and they've been building petrochemicals, they've been building refiners. So they're just
23:17 essentially re-jiggering what things look like and they're increasing their exports of distillate, gasoline, kerosene, and trying to manage the
23:29 market in terms of crude, but I think right now the Atlantic Basin is gonna be the one to set the price. Would you say Russia's got the most acute price sensitivity just because the ongoing grand to
23:42 fund a hot war? Yeah, so when you look at them, you have to look at the URLs in ESPO. So URLs is the one that is where they're gonna get the most value from. And URLs is below
23:56 the cap, not that the cap ever mattered, but it just gives you an idea that everybody's tapped out. So India was your typical big buyer India refused to buy from Iran, because let's just say India
24:07 wasn't quite happy that the Houthis were shooting at their ships. So they've been turning to the euro side. The one thing that Saudi did get right is they went after Arab light
24:20 into Asia, which essentially pulled all of the US demand out of Asia. So that was a good thing, which then supported ESPO going into the coast, because the Chinese are they're price sensitive
24:35 those price benefits, you're gonna see some buying and that's what you saw. You did get a nice little increase in purchasing and some of that's gonna go to the SPR. But people need to appreciate a
24:46 physical barrel of crude and some of the, I won't name names, but some people that like to be very active on Twitter like to think that if I buy a barrel of crude today, it's product tomorrow.
24:58 It's like, no, there's a four month lag between, you know, it has to get on a boat, it has to get shipped, has to go into a tank, has to go to a refiner, has to go into another tank, has to
25:07 go into the blender. So it's like, guys, there's a lag here. And there's also a natural hedge that's been built into that in terms of the time spreads. But when you're loading up the SPR, there
25:19 is no time spread, not making anything on the back end. So that's where China gets, they get very good at taking their spots. And that's where they've been going in and taking advantage of Angolan
25:31 when it's available Dubai and then your roles in ESPN. So, Mark, I just want to drill down into China itself and from the economy, the central banks trying to push lower mortgage rates. What do
25:45 you see from an economic perspective over the next year in China? So the problem is it's a structural problem. And I'm going to ask part B of that question, do we see a negative growth rate out of
25:57 China in the future on GDP? So short answers, yes to that, you will see it. It won't be actually published, but it will be negative. Okay. And the reason why is because of the question on the
26:12 consumer and what the PBOC is doing. To credit the PBOC, I think they've actually handled this quite well. They have been very reluctant to do additional stimulus. They've been trying to manage
26:24 liquidity. And that's when you have to look at credit impulse Yeah, we can talk about the different M1 through M4 or M0 through M4,
26:32 but you really want to focus on M2, M3, especially in China. And so when you look at credit impulses, what they've been trying to do is keep up below zero, which means that you're pulling
26:40 liquidity out of the market and you're trying to manage that loan growth increase. So they've been trying to take some of that liquidity out, take some of those loans out just because you have weak
26:52 assets. The problem is specifically in Asia, so the most exposed the US ever was to real estate at any one given time was in 2007 and it was 38. In China, prior to the collapse in 2021, it was 64.
27:10 So when you look at how much the consumer had exposed to this real estate correction, because people will say, Oh, there's a ton of money in savings. It's like, Well, what are the losses on the
27:21 real estate side? And a lot of these buildings were never even built. So it's not like you can go to the market and liquidate, because what are you liquidating? It's air in the sky. There's
27:30 nothing there to sell. So you have individuals that are taking it on the chin, you had these SPVs or the special purpose vehicles, special purpose bonds that were structured by the municipalities
27:44 and on the provincial side that are going towards essentially negative yielding infrastructure plans. So the big focus has been we have to protect exports, we have to protect infrastructure, but at
27:57 what cost? So you have a multiplier effect of how effective is your dollar versus that's invested that's what is a generating. If we think of the US, you have the highway system, for every dollar
28:09 spent into the highway system, you had5 a GDP growth when it was initially built. So for every dollar invested, you made five. Easily cover inflation, interest principle. There, you're closer
28:22 to about. 87, which means that for every dollar you're investing, you're only making 87 cents. So forget interest,
28:31 you can't even cover principles. So now you have this structure where they're gonna try to bring the consumer along, but Asian culture is very much a saving culture. They're not gonna look to go
28:42 out there and overspend. You were relying on corporations, and if you look - Except they're Hermes bags, but that's essential. Yes, yes. But then if you look at the only people that have been
28:52 taking loans, or state owned, or government owned, which they're just cycling that through. So when you look at the actual movement, I think you are seeing negative growth. You are seeing a
29:03 slowdown in FDI. That's our foreign direct investment. That's not going to pick up. Way down. And so you were oversold. So everyone's like, oh, look at the stocks. It's like, yeah, well,
29:14 you've been oversold for the last three years. Of course, you're going to have a short squeeze. But in terms of actually being a movement, and I think that leads to your point, the consumer's not
29:24 going to drive it. Infrastructure's already showing some weakness You were relying on exports, and as the global economy slows, it at a greater clip, exports is gonna slow down. So I think it's
29:37 less gonna be negative, it's just gonna be no growth. And my whole comment during this whole time, it's not, are we having a hard landing or soft landing, it's the duration of the landing. And I
29:49 think that's where people get it wrong. Good point. Now, China is air mass number one country in the world in terms of buyers. That's gonna be interesting to watch. But let's go, since we're
29:60 talking about long lead times, I mean, we're building a coal plant we've talked about. It's one a week or one, two a week or whatever the real metric is. Those are long-term decisions. I mean,
30:10 those were made years ago and they're getting green-lighted. What do you see happening on this sort of infrastructure build in China now that we're seeing pressure really kind of at its peak? So the
30:23 thing that's beautiful about China and you're watching the failure of a planned economy in real time, they wanted splashy. So you have all this power gen, but they also have a lot of these high
30:36 powered wire lines. Now the problem is when you have a high voltage wire line, the amount of step downs you have to create in order to pull that off the wire is extensive. And if you look at what
30:48 they've done, they've created generation and they've created all these splashy high voltage lines, but look at the step downs. So there's huge pockets where electricity is plentiful and more
31:00 positive area. Vast up down. There's nothing. So it's like, yeah, okay, I built this really cool thing. It's really fast and it's the most technologically advanced that you have, it's like,
31:11 but what about the mom and pop that needs 240 volts and they can't get it because what's going overhead would blow up their facility. Right. And you need to see a more structured breakdown with more
31:26 step downs in order to actually make all of this infrastructure viable. So there's not enough industrial, incremental industrial demand to incentivize those step downs, correct, essentially. So
31:38 then they're just passing over, and that's where they're trying to do this rural redevelopment, because they're finally recognizing their failure, but to create a step down into an already
31:49 constructed, utilized high voltage line is very dangerous, very expensive. I stuck my finger in the socket when I was young That hurt me, that hurt me. I kite one of those things. It wouldn't
32:04 more than hurt, but it's funny when you look at just how they've constructed it, and I think that's gonna be the biggest, but I don't, not to say that you guys are calling GE or Siemens anytime
32:15 soon, but call up Siemens or GE for a transformer. They'll be like, oh, when do you want it in 2030? Yeah, absolutely, I know. And to the point on natural gas. Centerpoint serves us. You
32:29 don't have to tell us that story. Yeah, we know it all too well. It's funny because back to the point on natural gas, it's interesting because people are finally recognizing we need more natural
32:39 gas turbines. But Siemens and GE went so hard into the wind side that now if you want a gas turbine, they're like sure. Do we like it in 2032 or
32:54 2033? You're like, wait, what? Excuse me, isn't it your main business? But then
32:59 you have China who's trying to fix this and they're buying up as much as they can and staying in the queue. Last thing on oil price, 'cause then we'll go to wind and our resident wind expert over
33:13 here. Two-part question. Number one, what's going on with US supply?
33:20 I don't get it. How are we producing this much oil? I've been chicken little for the last seven years. The sky's falling and we produce more. And then two, I'm, I'm Ed and I remember in my
33:33 career whenever bombs go off in the Middle East. Well, prices go up. And why is it that happening? 'Cause it feels like we're on the verge of World War III. So it's funny. I think we're, and
33:46 this is gonna sound crazy. And I have written about this in 2021 I actually think we're closer to long-term peace in the Middle East than we've ever been in our history. Well,
33:58 and that's gonna be a climb. That's gonna be on the AI. No, both. Most surf-term peace in the Middle East. But that's always been the thing about the Middle East is when it's the darkest is right
34:09 before the dawn. You know, you got to get to that bad point and then agree, Matt's good stuff. Well, for this, I'll be pointing out, you know,
34:18 Just like, one of
34:21 the last few weeks of shows, you know, guys, you're gonna get us yanked off YouTube because you're sending
34:29 a copyrighted song. And basically that, you know, we've had pockets of these events, attacks, bombings, whatever. And if you think back to, I forget when Abcake out of Yemen was, that was
34:43 2018,
34:46 maybe Yeah, 2017, '28. Same type of reaction. So it's kind of chicken little from the other side. We've got, you know, resilient US production. We've got a whole bunch behind the valve with
34:59 OPEC. We've got, there's just so much that, you know, these headline events just never materialized. And now you have the added fundamental overhang that's growing that you just, I talked about
35:13 in China, which is,
35:16 Yeah, and it's interesting that you said, 'cause the demand is gonna be your cap. And to your point, when you look at what has happened, people get fatigued, and that's why geopolitical risk
35:26 goes up and that it fades, because when you, and I think to your point, when Iran didn't respond to the assassination in Tehran, to essentially everything that has happened to date and Lebanon,
35:43 people are starting to look at this and they're like, wait, can Iran respond? And my answer has been no, they can't. Any response would be tepid, any response would show that there's underlying
35:53 weakness, and it comes to the drain on Russian resources, 'cause Russia was supplying a lot of that to Iran. The Kurds have had significant issues. The IRGC has had significant supply chain
36:07 disruptions because of bombings, and what Israel has been willing to do, which we have been unwilling to do, it's changed the rules of engagement. as the engagement changes from the other side.
36:19 And they've been very quick to do it and one of our biggest mistakes. And you can blame whoever you want on this in terms of how we've handled the Red Sea. We just let it happen. We shoot them out
36:31 of the sky. But at some point, you really have to change the rules of engagement because if we can know people's color of their eyes from indoors, from space, we know where these things are
36:43 getting launched from before they launched. Right There's no reason we can't go in there and do it ahead of time. And I think that Israel is willing to go in there. This is my overarching theme.
36:56 The GCC is going to sit back. They're gonna let Israel go through. They're gonna get rid of Hamas. They're gonna get rid of Hezbollah. Then I believe that Israel will then turn to Saudi Arabia and
37:09 say, here's the case of the kingdom. We'll be the military supporting you you set up whatever Sunni government you want in place. it'll be linked to the GCC. India has a huge amount of interest in
37:21 this because India and the Persians have been friends for thousands of years. The Persians were the ones that brought the Jewish population to this region on the Israelis because Cyrus the Great is
37:33 great for a lot of reasons as well as the sun, bringing them from Egypt into this region. Persians, Indians, you know, you know, Hindus and Western Europeans have been friends for 2500 years,
37:47 you know, 45 years of a hiccup, if you will, is not going to change the way the people view us. It's not gonna change the way the people view India. They do not like the Chinese. They are, they
37:58 distrust them in terms of how they are. So it's really, they would rather go back to the Indian side of the equation. India has structured deals with the GCC, specifically UAE and Kuwait. Qatar
38:10 has been on the losing side of every decision they've made they're now sitting backwards israel is now gone from going after the Hezbollah. They're now going after the Muslim Brotherhood, which
38:22 makes Egypt happy, which is why I think they're gonna be able to go to
38:28 the port. They're gonna be able to go to the crossing. And I think that there's gonna be a lot of
38:34 long-term benefits. And I believe wholeheartedly, that the regime will fall in Iran by 2030, and we will be doing business in Iran by 2035. Mark, I wanna believe you, but that seems way too
38:46 logical. Where can your idea go sideways due to Migos, anger, politics? So, good question. And it's how much it does MBS and Saudi Arabia control versus the UAE? That's good question. 'Cause
39:03 the UAE has really been the testing ground, but so Saudi and the UAE were friends for a long time and it things started to fracture during Yemen. when they were going in and trying to go after the
39:17 Houthis because each one had their own proxies on the ground. Some of their proxies started fighting each other, obviously an issue. The UAE also spent15 billion to increase their spare capacity,
39:31 and Saudi was trying to keep it on the sidelines. And that created a lot of friction. So I think at this point, to your point, there was a big focus on money and power and influence I think both
39:44 sides are starting to recognize that a peaceful Yemen, well, a peaceful Iran, a peaceful Yemen, and a peaceful Lebanon, everybody makes everyone wins. And I think the question is, to your point,
39:59 can they maintain that when the money starts to flow, the influence starts to happen? And I like to think that it can, because the GCC so far has been very much united in terms of Kuwait, UAE,
40:14 and Saudi. Being the main drivers behind that the question is do they start to fracture as? cash flows okay more more important question This is the most important question on the region You know
40:28 the salaries are building their own airline Do you think it's be better or worse in Emirates? As someone who's been on it. I can tell you it's worse. They lost my luggage. It was sitting in France
40:39 It took them three days to get it to me So Emirates is a whole whatever whatever they if they try to do it They should go to the Emirates sit there watch how they do things go to Qantas watch how they
40:51 do things And then created because it's not it has admitted positive some of the best investing experience Just go and watching how they do that small things even though an airline is not a small
41:01 thing But this is interesting It'll be interesting to see how that plays out It's been it's been terrible like the and it's funny that you that you bring that up because it's a cultural thing Right
41:10 because they don't have an appreciation at least my experience in terms of timeliness and customer service. And that has been the biggest linchpin in terms of doing that. And they brought Delta in
41:24 to try to fix it. And so far it has not gone as planned. So if the
41:32 UAE actually had more control over the GCC, let's say they do, which I don't think they do. I think the South is to always sort of be powerful. That would probably change everything that happens
41:43 in Israel and the surrounding region. Yeah, in a good way. Right. 'Cause the Jordanians and what it's interesting and I think the tell for me was how this was changing, was when the Saudis looked
41:58 up in the sky and like, So you're flying suicide drones and missilesover my landscape, not anymore. And that was the dividing line. And that was when you saw the Saudis starting shooting them down,
42:10 the Jordanians, 'Cause when you look at the topography, of Israel, you actually want to come over the mountains. So the way you hide a missile is you keep it low, slow, and you use the mountains
42:22 terrain to confuse the systems. So you have to get it when it's flat and you can actually distinguish between. So by the
42:30 Saudis taking and actually going after these missiles, that was a clear indication they were supporting Israel because if they did nothing, a lot of those, I mean, the US was there, Israel was
42:43 there, but they had to be on other people's airspace in order to do it. And the fact that there was a lot of openness between that and I think people underestimate how much the Israelis did in the
42:53 Sinai Peninsula for Egypt, that there's a lot there. The Lebanese people for the most part do not want Hezbollah. Like they are tired. I mean, everyone forgets the Beirut explosion. I mean,
43:05 that was Hezbollah that killed hundreds and damage the yo - I mean, you used to be like a Paris. I mean, it was a place to go. It was the
43:17 cheaper bierras, what they called, dinner's what they're called. That's right. I mean, and it was, but I think that they - You know, my Persian friends that talk about, you know, how great
43:25 the country was back in the '70s, how people were - Oh, really? Beautiful and work and extravagant clothing. The food, there was amazing, the formula. The oldest cuisine on the planet, yeah I
43:38 mean, if I - That was pizza.
43:42 Lamb, I'm telling you, you want to go and have some of the Lebanese lamb - Love it. Best lamb out there. And then, you know, forming a lot of things. So, I do think that there is a, and just,
43:53 I do a lot of generational cycles, and when you look at it generationally, people are just tired of it. And I think that's how you get to it. So, last question while we're there. First, I'm a
44:04 tube man in horn just so it's in collide and I can look this up at 2015.
44:10 At the University of Texas lost in Poseum. They said, Make a forecast. And as said, The regime will be overthrown in Iran, and Iran will be our strongest allyin the Middle East by 2025. So I
44:24 still got a year, I still got a year, so I'm in there, you're five years, but I did say that. And of course, somebody came up and said, Why do you think that? Oh, I just made it up. I wanted
44:35 to say something controversial, but given everything you just laid out about the Middle East fascinating, I don't want to get overly political on it, but does it matter who gets elected president
44:49 in the United States this time? And the interesting fact I heard is that Jared Kushner and the MBS supposedly truly bonded and it was over Call of Duty. Those guys would sit there and play Call of
45:03 Duty just hours on end and they actually bonded. Yeah, the building, honestly, the game. So the short answer is yes. I think it matters more that Trump wins than Kamala 'cause Trump is seen as
45:17 someone who won't listen to the UN, will go quote unquote rogue, and that keeps him kind of a guessing game. He was also willing to, so not to go too into it. I did geopolitical analysis and I
45:30 worked with the military back in Jordan, but the S 400s have issues So we have THAAD, which is what we use as our anti-missile defense. THAAD is a hive. So the moment something is launched, every
45:44 computer starts to calculate trajectory. The S 400s live within themselves. So if you have to line up S 400s, which are the Russian anti-missile anti-aircraft defense, and you can have gaps. So
45:57 what did Trump do when things were starting to get heated? He sensed about, you know, was it 250 Patriot missiles? The point of it was to show we know the weaknesses and we can destroy them at
46:11 will. And I think that that was a very much, you know, carry a big stick, but walk softly. I'm gonna show you, no one's gonna die, but I'm gonna show you what I can do. And I think that that
46:23 helped. And I think that keeps him honest and other people honest. If Kamala wins, I think that it will happen still in terms of that peace because Israel has shown they're willing to go at it
46:38 alone. And they don't care if they get UN condemnation. They don't care if they get support. So I think that is the big divide, but I do think Trump would accelerate that because I think he made
46:50 the right move in removing the Iran nuclear treaty.
46:58 And how do I know that that? How do I think that's the case is because it hasn't come back. And if it came back then, And I think this is what is missed with US. foreign policy. But I didn't kept
47:10 a lot of the same policies. When you look at Iran, when you look at China, there wasn't a huge change. And I think that there has been some consistency. And from Obama, when, and I think the
47:21 turning point was what I call the Rose Garden lie when President Xi was sitting there and saying, oh, no, no, we're just doing oceanography. And we're just, don't even look at those shawls.
47:33 Don't even look at those islands And then within six months, you had battery anti-ship batteries and advanced radar. So I think that was the pivot for both sides. And I think that that's something
47:45 that would actually be a very bipartisan piece in terms of the Middle East and the way we addressed the Middle East and China. So very much like Trump allegedly showing the Taliban leader his house.
47:58 That was a Reagan thing where, oh, lock or be? Oh, you want lock or be? Where's your daughter's sleep? Oh yeah, I'm gonna send a Patriot missile through her window. And then all of a sudden
48:08 Gaddafi didn't say much for what, 30 years? Yeah, right. Well, I think what the IDF has demonstrated is that bunkers 90 feet underground aren't deep enough. Jay dams, nothing like a bunker
48:21 buster. Those, and that was
48:26 my favorite. I underrated twice 90 feet. Not to go down a rabbit hole, but have you seen how they put like a tracker when they shook hands with them? And that was how they found out. After, you
48:36 know, you want to say that it's not possible, but I guarantee you that somebody in the James Bond novel wrote about blowing up beepers. And then the editors script like just scratched it, saying
48:50 that's not believable and it happened. So I think all things are possible with the way and how deep some of these Mossad CIA operatives really go Crazy. Kirk, you want to hit us on offshore wind?
49:07 I mean, it's just more of the same, and we're going to come back to something that Mark said earlier, but Tina Kotek, who's the governor of Oregon, she's seen as a considered a progressive
49:17 Democrat. She is for, you know, affordable housing, raising minimum wage, healthcare reform, and she's been a big advocate for sort of clean energy, for climate action, renewable energy. Well,
49:28 she has been protesting Biden's auction off Oregon Coast for offshore wind. There was really only one bidder, so it actually had very little interest, just like in the Gulf of Mexico. But the fact
49:42 that she stood up as an advocate, saying, Wait a minute, we need to, actually, part of her statement was, we need to plan better. We're just throwing this shit up, which is interesting,
49:52 because having a home in and tuck it, as you know, and a surfer being pulled out of the water for three weeks of summer because of one blade. falling into the ocean and creating fucking debris
50:05 everywhere on our coast. And, and having heard the actual communications from the company saying, we never believe that this would happen. Number one, but number two, we never believe that the
50:17 water would throw these broken debris on Antucket the
50:22 seems like an entire smokescreen here. Having followed a lot of the whale, save the whale people out of New Jersey and Antucket and others, this has been an issue for a long time. People are very
50:34 concerned about offshore wind, but people have said, let's just push it, let's push it. What's interesting here about Oregon is that you have a progressive saying, wait a minute. And I think
50:46 it's beyond the economics, because offshore wind economically just doesn't make sense. It's got to make other sense, which is we're going to ruin the planet But when you see a progressive saying
50:57 and of Oregon of all places, which is probably one of the more pristine states. in the entire union, it's beautiful. Them saying, hell no, in my backyard, I think since it's a very strong
51:09 signal, I'd love to hear Mark, what was your take? I 100 agree. And it's interesting 'cause when someone is in New York, they, the recent wind farm had, was gonna sell power at, I think it
51:23 was81 a megawatt hour. They then had to cancel and rebook it at182
51:29 a megawatt hour because the economic shifted It's like, no, your economics were always wrong. And now it's a much bigger problem. And one of the things that, in my insights coming out for C6,
51:40 it's in a five minute period. A wind farm can go from 3 utilization rate to 77 utilization rate. There is not a system in this world that can handle that level of volatility coming on. And the
51:55 problem is these transformers are physical. Like things are physically moving up and down to manage your voltage, to manage your hurts. you're wearing down your systems, not only just at the
52:06 windform itself, but also the interconnection, the grid itself. And now I think the ISOs are getting what are the independent system operators, which are supposed to be agnostic and trying to just
52:17 balance the grid, are coming out and saying, if you build wind, if you build solar, that's fine. But I have to go out and get my base load to talk
52:28 about you. We can't handle it, right? Because we can't handle it Yeah, and over the lifecycle, all those, you know, the volatility causes higher frequency, maintenance, replacement, et
52:34 cetera. Quote the police, synchronous identity. The way I've looked at it, you know, we've talked about the handful of
52:43 cancellations or shelving of projects on the East Coast.
52:48 You're talking about kind of changing the framework of the economics, because reality sits in, and I don't care what factor has caused you to do that. That's just the physical reality of it. I
53:00 think we're seeing. blinding insight here. The PUC is ultimately saying, we've reached a point of tolerance with what we're going to, you know, what, what added burden we're going to put on the
53:12 rate payer base. Absolutely. And to the point that when you look at the, so my wife is from Rhode Island. So I'm up in that area quite, quite often and the Nantucket red was, was on purpose.
53:23 That's why you bring up the Nantucket side. So the, the, the problem that you have is these, the QC failures now. So when you look at this, that the blade that failed, they went back and they
53:34 said, Oh, that should have been caught. And we estimate there's at least 150 blades that are currently out there, either in transit or installed that could, that have the same failure. So now
53:46 they have to go up or, or if it's on the ground and do a, a essentially an ultrasound on all of these assets in order to find if the epoxy was, was put on appropriately. Then Siemens had the same
54:01 thing happen. in, was it Oslo, where they had another failure and it was something similar. And if you look at how many failures there's been, how there hasn't been
54:14 a focus on quality and just this rush to market, because it's like, we have to do this now. And now people are saying, okay, we went too far. We went too far too fast, time to back up and
54:26 actually look at this in a structural way. Unfortunately, there's a lot of damage that's happened to date There's a lot of damage that has to be fixed. The thing that killed me, though, is when
54:35 they came back and said that it's safe for animals to eat the fiberglass. I was like, okay, if that's true, I want my plastic straws back. Because if they can eat the plastic straw and they can
54:46 eat fiberglass, they can eat the straw. Because what, what are we being absurd here? So. You know, a friend of mine, when I was years ago, he was buying properties He had about 75 properties,
55:00 and we're in this little forum, and I'm like,
55:04 we're named, we're remained nameless. It's like, you know, this is really bothering me. I love your strategy. If the real estate appreciates, you're gonna be, you're gonna make so much money.
55:14 I was like, but let me ask you a question. Operationally, I'm like, you're low income housing. You've got 75 of these. I don't believe you can actually make money because of the cost to, people
55:28 will not take care of your asset. They're gonna throw semen in your toilets. You're gonna have to upgrade shit. I'm like, I just don't think, I think you're underestimating the operational cost.
55:38 And I was taught by a very brilliant millionaire how to do everything from the ground up. Michael Dell, thank you very much. But
55:47 this never made sense to me because when I came into Shell for the first time, one of our big investments that I had to manage was we invested with Google into a cool wind idea. It's a floating, we
56:00 launch it. It's a kite that floats high in the sky and generates, and I'm thinking a kite. I'm like, the wind doesn't always blow up there. Maybe it does, and it's floating, and it's a kite
56:12 that's just sort of flying around in the air. And it's gonna generate power for, I'm like, what? I'm like, we made this investment. I'm like, yeah, it's a great idea. I'm like, okay, that's
56:23 a shitty idea. And I know that's venture investment, but let's go to your, our wind business. I was like, let's talk through this And I'm like, yeah, this is how we're gonna make money. And I
56:29 was looking at the economics going, there is no fucking way to make money in this business. And finally, YL came in going, this is bullshit. We're cutting the shit out. But I'm like, there must
56:41 be crazy people. I mean, Siemens, GE, Shell, you name it. I mean, think about dong energy that's, or Sted. what a dong though. They probably are regretting now that they've rebranded because
56:56 Orsted at the time was like, this is the most amazing company ever. And when things are too good to be true, they're good to good to be true. I mean, this is what we're seeing playing on. It's
57:05 finally coming home to wrist. That doesn't make any sense. Well, and when you look at BP, Orsted, Equinor, they're looking at it where they're going to do this and they're assuming 6 margins.
57:16 And that was with subsidies. It's like with subsidies. Yeah, and everything going right. We've all built models, right? And a little cost capital. And that was so it's funny that you bring that
57:28 up because 28 COP at was I when, one of the things that I spoke about was that rates were wrong and that you were going to see the 10 year get back to 4, 45. Even with what Powell did, I think
57:40 people forget that Powell says the overnight rate, the market sets the yield curve. And people like to think that that's not true. Unless we start doing yield control curve, which we saw how that
57:49 ends in Japan. but the thing that I brought up is it's not that rates are wrong, it's that your hurdle rate is wrong. Absolutely. And I think people need to reassess their hurdle rates because
58:02 everyone at COP20 was like, We need cheap rates. It's like, Why? You had 2 rates for how long and how much infrastructure did you build? Yeah, should you have been building infrastructure 2?
58:12 Absolutely. How much did you build that was worthwhile? And now that rates are at 4, which at the time I was at COP28, they were, so the 10 year was below the long-term running average. The
58:24 long-term running average is 428 and the 10 year was at 423. So it's like, so let me get this straight. We could build, we could go from the vacuum tube to the microprocessor at 17. We can build
58:37 the internet at 2, at 6,
58:44 but at 2, that's too high. At 4, that's too high. No, that's not too high. Your hurdle rate is wrong and you need to reassess to everyone's point here. 6 margins. What? Like, you could, if
58:55 you miss a cement delivery, 6. It's gone. I mean, it's like, what are you, what are we talking about here? Windblows 30 miles an hour and boom, these, these offshore wind farms are blowing up,
59:07 you know, he can't even handle the governors. When the governors fail, that's when it gets real scary. Yeah. That's, that's, that's amazing. Well, Mark, it's been awesome having you, having
59:19 you on, standing invite anytime you want to come back. Absolutely. I do want to end on a little bit of a sad note here. And Jacob, let's cut in Colin's tribute to Scott Gail. I don't know if you
59:34 guys knew Scott Gail, but just a great dude stood up Halliburton Labs and was just a big huge bull for our industry and Colin says it way more eloquently than I do. So watch. Watch Collins clip of
59:51 it. I wanna start off the night with giving a
59:55 tribute to a good friend of mine. And Jesus Christ, this light is right in my eyes. A good friend of mine, Scott Gale. A lot of y'all probably know Scott. Scott is a long time oil field guy, a
1:00:07 long time Halliburton and was responsible for standing up Halliburton Labs. And Scott's been battling colon cancer for the last four years And
1:00:18 I visited him this weekend. And sorry, I get a little tripped up when I'm talking about him, but visited him in a hospice this weekend and had a really deep conversation with him. And I want to
1:00:30 give a tribute to him because one, I respect the hell out of Scott. During this entire process, you know, he's a young guy, 40 years old, has several young kids and he's held his head up high
1:00:41 during this entire process. I've never seen him mope about having cancer. He's never been down He's just continued building the entire time, was able to stand up Halliburton Labs, how to - deal
1:00:50 with the corporate antibodies that come out and all the resistance of trying to stand that up. And then he was a primary driver for this week for the Houston Energy and Climate Startup Week. I mean,
1:01:03 was a huge contributor to it. And in my conversation with them this weekend, you know, one was a very difficult conversation. I've never had to tell a friend goodbye before. And so we were able
1:01:12 to, you know, just get really deep when we're talking about, you know, the meaning of life. And, you know, Scott lived his life with so much intention and purpose. And he's talking about how
1:01:21 grateful he was to work in the energy industry and do good and power the world and make society better and just kind of really open up my eyes to how important the work is that we do. And Scott has a
1:01:34 saying that everyone, everyone knows his, Scott saying it's onward, onward. And that was the last thing that he told me. He's like, it's been a hell of a ride onward. And so I just want to
1:01:43 encourage everyone tonight to walk away with, with a message here of the, the work and you should wake up every day, knowing that you have purpose in your life and wake up with intention and
1:01:56 provide the world with a service that is very much needed. So, wanted to say that. Everyone be thinking about Scott tonight. I wish he could be here with us. We miss him dearly. I do want to
1:02:07 share one thing, and I'm usually a big fan of like, if somebody texts me something, I won't share it. I'm pretty good at keeping my mouth shut, but I thought this was too priceless Scott was in a
1:02:20 hospice kind of, you know, the last, let's call it, couple of months, and we were texting back and forth, and I was talking about coming to see him, and the quote was, It would be my nightmare
1:02:33 to need mouth to mouthand only have Chuck Yates by my side. And so a man that can, you know, keep that level of sense of humor was just a great guy. And so anyway, I got a text from his dad,
1:02:45 when he passed and said that Scott considered you one of his good friends. I was like, man, what? I mean, I didn't know Scott that well, but it was awesome to hear that, you know, as those of
1:02:55 us that have been trying to stand up and be part of the community here in Houston, I mean, that was something that Scott didn't need to tell his dad to do, but it really set me backs. And, you
1:03:07 know, Scott was one of the good guys that worked really hard to try to make others successful and, you know, God rest his soul, for sure Yeah, no, it will not surprise me if I drank too much
1:03:18 wine one night here, sometime soon to listen to the podcast we did, 'cause that was great fun, so. Anyway. Awesome. Thanks, everybody, for joining us. If you liked the show, please forward
1:03:32 it to a friend, subscribe, make comments, not comments about my girth, 'cause the camera's in bounds.