Hi, I'm Sarah Holder, host of The Big Take podcast. We wanted to share a special episode of our sister show, odd Lots. Today. They're discussing a big Bloomberg story on energy markets that's fascinating and we think you'll love the episode. Thanks for listening, and subscribe to odd Lots if you don't already.
Hello, and welcome to another episode of the Oddlocks podcast.
I'm Joe Wisenthal and.
I'm Tracy Alloway.
Tracy, remember a couple of years ago, you know, when like oil prices started booming, and there was this big story that like production wasn't coming back. All these oil companies had found discipline, They're all focusing on profits, et cetera, not just volume, and that the expectation would be that production would be depressed for a long time.
Wait, I don't think it wasn't that production was ever coming back. It was that production and would slow substantially. And the idea was that this is one part of the oil boom story of the sort of mid twenty tens. That always fascinated me was it was actually a capital market story. So it was all these investors who just poured money into shale oil basically and thought they were going to make millions and millions. Shale completely over expanded.
It became very very difficult for them to actually pump at a profit, and so they all started collapsing. They all started pulling back. All the investors got burned, and they were like, we're never going to touch this industry with a ten foot pole ever again.
And then lo and.
Behold in sort of the early twenty twenties, shale starts to become profitable again. It starts to expand. It says it's expanding at a more disciplined pace than previously. But I have questions about that. But yeah, it's all changed, it's all turned around.
Yeah, I'm glad. You know, you brought up that capital market aspect that did seem to be in this idea of depressed production, seemed to be all part and parcel of that that suddenly financial conditions were tightening, that the market was placing this premium in this new nonserp world of you know, cash flow today, et cetera. And so like, I'm stillly confused, like what exactly happened with that story. You know, there's lots of things. As production has come back,
it seems like investors are still into the space. Prices have come down, then there's all kinds of obviously geopolitical stuff going on. It seems like it's a time to sort of take stock of what's going on in.
The energy world.
Yeah, well, US oil production in particular, right, I mean, I think that's an all time high. I actually, if you look at domestic production in the US, I think it's something like thirteen million barrels of crude per day and twenty million including you know, energy and things like that. So an all time high. And it means that you oil basically accounts for one of every eight barrels of global output. So pretty big stuff there.
Yeah, pretty extraordinary. So what happened to all the narratives? Is production coming back? Why have prices falling? I'm very pleased to bring in the person we always love to turn to when it comes to oil and energy. We're going to be speaking to our colleague, Javier Blast, Bloomberg opinion columnists on oil and energy. How thank you so much for coming back on outlaws.
Thank you for having me again?
Have you what is the deal with that? So like we're back at records again in the US production we add.
Two record levels, and it's just an incredible number.
As Stracey said.
If you look just at what we say is crude oil, it's more than thirteen million dollars a day. But if you add on top of that number other things that they go into the oil liquids streams, so like condensates and NGLs or natural gas liquids, a bit of ethanol, et cetera, et cetera, we are well above million borrows a day of oil production on that compares to one hundred million worldwide. So you put everything together, the US
is producing one in five barrels of oil consumed. That is just an incredibly high number, and it doesn't seem to be about to stop. Probably it's gonna slow down a bit in twenty twenty four, but it's going to continue to go up.
Okay, where is all that new oil actually coming from? Because it's been a while since I've brought up the rig count chart, But if you look at the rigcount chart, I mean, this is such a fun one because you can see the big humps of the early twenty tens and then the big slide into twenty fifteen, and now it seems kind of flat. So there's been some increase
between twenty twenty and twenty twenty two. The number of new rigs being drilled has gone up, But it's not like it's not like we're seeing a boom in new gas rigs and new explorations. So where is all this oil coming from.
Well, it's coming from the very same places that it was coming about ten years ago, but it's coming in some way, and.
For lack of a better war better.
So it's coming from Texas, it's coming from New Mexico, and it's coming a bit from North Dakota, Oklahoma, et cetera, et cetera. It's coming from the shale regions of the United States. But if we were to say where in just one single or two or in this case three single wars is Texas and New Mexico. That's where the new oil is coming. And you're right, Tracy, the recount
is not significantly up. Actually, you look at from a long perspective, it's lower than it was during the previous booms of shale.
But it's just that the oil.
Companies in Texas and New Mexico have got very good at distracting more oil from those rigs, from those wells that they are drilling, and they're also doing much longer well. See, if you think about how an oil shale were looks like it first goes down vertically and then it just turns around ninety degrees and he goes horizontal for a while. At the beginning, those horizontal wells were relatively short, perhaps you know, a quarter of a mile, half a mile
at most. Now they're going as much as three miles horizontally, and that they can get a lot more oil that they were able to do a few years back.
So it's important.
We're going to talk a lot about the capital markets an investor aspect, but it's important just like ongoing technological improvements as well. What else is happening on this sort of Oh.
Oh, can I read? Sorry, I never get a chance to do this. Can I read one of my all time favorite leads from a story that is all about technological improvements?
Oil? Joy?
Okay, okay, Javier, Joe, you guys are ready, I'm gonna read it.
Okay.
This is a story from twenty sixteen. Last spring, stat Oil announced it had used the same oil well design and components to drill three reservoirs for the price of one. While the specs for Norwegian sy drilling might provoke reactions akin to the oil field's name, the snore, such standardized pipes and casings could hold the key to a pervasive mystery about today's energy market. Why is everyone still drilling
when prices are in the basement? Snore? Get it? Oh that's good, Maybe you have to read it.
So that really held up?
Well?
So what changed twenty sixteen?
Have you?
Well?
Technologically? Why we can driad longer, particularly the laterals. We can pump fracking fluids at the higher pressure, and companies are also very good at doing these super quick. Previously a well could have taken thirty days. Now it takes ten. They just companies and their crews have got very good at doing it, and that means that they can do
it cheaply. And that's the funny part of the whole boom of twenty twenty three and twenty twenty four, at difference of the previous ones, companies are made making money and investors are making money, so everyone is loving it. This is the first time, and this is what really terrorized or PEG. This is the first time that shale oil is growing and making money at the same time, and that's a big problem in you are Saudi Arabia.
I definitely want to get to the possible response from OPEK, but just in terms of technology, I mean one of the things and the reason I brought up that story, it was the idea of standardization. So before you used to have all these bespoke custom fittings for oil rigs
or platforms or whatever. But then I think there was actually like an industry wide effort or attempt to start standardizing some of these things so you didn't have to order a bespoke component for every single oil project that you were doing, and that seems to have helped make things go faster to Havier's point, and also brought down costs. How much of a big deal is that in the industry.
It is a big deal. I mean it has happened everywhere in the oil industry. Let me give you my fabord Anne though, of a standardization in the oil industry. So you are working on a norsea oil platform. This is offshore outside Norway and and the United Kingdom. You need to paint a lot of the stuff yello kind of you know, yellow Dungeier, very busybll et cetera, et cetera, very stormy areas of the world.
The Norsea folk.
You get the kind of it's not the kind of place that you really want to spend an evening in winter there. So every company have their own shade of yello. They were nineteen different kinds of yello to paint things in the Norseea. Each company have their own shade with their own specification, and it was just ridiculous. So at one point a few engineers in the industry got together
and said, well, this is a bit ridiculous. I mean, can we not just doing like a Yello Norsea And so they got together and everyone decided this is the shade of jello that we're gonna use. And now everyone is painting everything that they need to paint in yello with the same shade that at a much bigger scale has happened across the oil industry. Everything has got a standard and companies within themselves.
They like it to do everything best spoke.
They really in some ways gold plated a lot of projecs, so each well was a bit different to the other one. Now companies are designing one single design and when they have really thought Okay.
This is it.
This really works very well now copy and paste for the next twenty five to fifty one hundred wells, and that has cut costs significantly.
I love the fact that, like, just something as simple as the color painting of.
I'm imagining a room full of oil executives looking at different swatches of yellow and being like, no, that one's too orange. Can we get something a little bit more buttermilk?
Maybe I would love to be the competition lawyers who has to stop it on the meeting to make sure that no one is saying anything inappropriate that the Department of Justice could get us, like there was a conspiracy for the yellow color look.
At the different pan turner shape, but gotta do so in a legal way. All right, Let's talk about the capital markets aspect, because you know, it did seem like the way people thought about it was that the industry face had to face a choice. Would it be pursuing volume or would it be pursuing profitability? And as you've just said, like there seems to be this very weird situation in which volume is ramping and productivity is sustained. How is that happening?
And how sustainable is that well to the question of how long how sustainable. I'm gonna be honest either know, I thought that production on growth will have a slow down in twenty twenty three, and it never happened. It did the opposite. They accelerated. You look to every oil executive, if you look at the forecasters of the industry, everyone is saying it's gonna sloan in twenty twenty four. But also they said the same for twenty twenty three and
they were wrong. So we'll see what happens really. But yes, I mean, the industry went into this new era thinking about profitability, so everyone cut kapex, everyone tried to get more fee, and everyone thought that production growth was going to slow down because the focus was profitability. The fact that they were able to grow quite strongly came a bit of a surprise to the industry and then everyone kind of, you know, celebrated it. But here there is
a very important question. If opeck have not cut production to make room for all these new shale oil from the United States, prices will have come down, and then the industry will have faced the same kind of dilemma of the past. You are producing too much, then the prices come down, your profitability comes down, and then you have a problem. So a lot of these that we
are putting based on efficiency, It's true. But if not for OPEC cuting production and keeping prices about seventy dollars a power, then shale companies will be in trouble.
One thing I'm really curious about is who is actually funding production now versus say, in the early twenty tens.
And just to air on to that a little bit, is there any difference between private and publicly traded domestic US players?
Okay, so let's go from pars on Tracy's question, who is founding this well? Back ten years ago, five years ago, it was Waller Street. It was a mix of equity and credit markets which were founding or all of these growth through different instruments. I mean sometimes it was just issuing of fresh equity. Sometimes it was bond high till bonds. Researchs lending where a bank is lending to an oil company based on the research underground, more or less like
a mortgage rather than a house. You mortgage the oil research that they are underground, and a lot of that is still there, but a lot of the money now needed for the espansion and to financing all these new growth is coming from cash flow generation, is the internal cash flow of these companies. They generate enough cash to pay for all the new drilling that they're doing, to pay for all the capital investment that they need to do alongside new pipelines, et cetera, et cetera, and to
pay the shareholders. These companies now for the very first time, are paying dividends and that sounds like well companies publicly listed companies would be paying dividends, that that's like normal. Well, that was not the case a few years back. But now they generate enough cash to do all of the boat And in terms of the is there a difference, Yes,
publicly listed companies have been a bit more caustios. They have been trying to they have the shareholders, they have wall strips on top of them, and they have to really try to focus as much as possible on paying dividends and buying back shares. Probably on they don't have that pressure, that super strong pressure, so they have done a bit more of growing, and there is a suspicion in the industry that a lot of that growth was to try to maximize the amount of production that you
are doing. So you can sell yourself to a big player, say Exomobile or Chevron, and perhaps that's not as sustainable as he looks like.
Talk more about Opek, because you mentioned that USHL has benefited from OPEC cutting production.
You know, I remember, I.
Guess it was twenty fifty fifteen. I think when OPEK did that huge increase in production to try to kneecap US Shew, why are they sort of I guess in alignment these days, where OPEC's impulse to maintain production is good for OPEC, but also I guess clearly as you say, benefiting US production.
Well, Opek is trying to keep oil prices as close as he can to one hundred dollars. It's not as successful as they will hope. Prices have been between seventy and eighty despite a lot of geopolitical tension that you will,
in mind, will have pushed prices even higher. I think that they The key question here is that OPEK is convinced that this is a bit of a blip, that at some point the growth in US production slows down, the demand remains there, the annual demand growth remains there, and then they have room to expand their production to bring some of the production that they have taken off the market.
Now they will able to bring it back.
And I was, to be honest, the same kind of bet that Opek made in twenty eleven, twenty twelve.
You know, this is a blip.
Usl growth is going to slow down at some point, and after a few years, by twenty fifteen, twenty sixteen, they knnot discovered actually, no, this is not working at seventy five eighty one hundred dollars oil. These guys can grow and they can grow forever. We need to change the strategy. And that's when Opek decided to float the market,
kill prices. The price of West Texas and a brand crew the two global benchmark collapsed to thirty dollars a barrel, and that's what really brought down shale growth for a few years. The jury is out whether they are making the same mistake or not, and I think that we are going to see it by the middle of this year, at most Q three of this year, we are gonna see whether US shale really is slowing down or not, and whether demand is either sustaining the growth or we're
beginning to see a slowdown in demand. Because you know, electric vehicles and more energy efficiency, et cetera, et cetera. So this is this is a very important year for OPEK because if it doesn't really go as planned, OPEK really needs to change the strategy completely.
What can it do in that scenario, Well.
They can only do two things.
One is to accept that, you know, the one current prices of seventy five dollars plus they need to cut even more production, giving shale more share of the market. Or they accept that they need to bring prices down because shale can grow at seventy five dollars and perhaps cannot grow at say fifty or four. And then OPEK and that's Saudi Arabia puts a lot more production into the market and triggers a crash. But that means lower prices for OPEK.
Yeah, and it didn't really work the last time because it just incentivized everyone to cut costs and streamline and become more efficient.
Indeed, you're absolutely right, and on both options means lower revenue, either because you are producing less or because you are accepting lower oil prices. But if the strategy of OPEC doesn't work, and I am not really one hundred percent sure that OPEK really has much of a strategy of the next six months. I think that they are holding the line for the next six months and then they will see.
What they do.
But if they are wrong, it means a period of low revenues for OPEC countries and that will be very painful. Just in mind lower revenues when you have experienced a significant increase in inflation. That means that the purchasing power of your barrel goes even lower. That's very painful for Saudi Arabia.
This is a slightly off topic question, but shale producers in the US cannot join OPEK right because we do not like price fixing cartels.
I think that the Department of Justice may have one.
Or two yea and might have something to say.
Yeah, you know, like no, I mean, it's not a completely you know, it's not a crazy question.
Tracy Texas, I know it's come up every once in a while.
The State of Texas sent observice to OPEK meetings in the eighties. They never joined, but actually they send observice and the State of Alaska so send observers to the OPENK meetings. I mean they will be you know, an American gentleman sit down during the open meeting as an observer.
I think at some.
Point cool heads and some legal advice decided that I was not very cool.
It's funny the things that like one remembers from like the sort of fever swamp days of spring twenty twenty during the peak of the pandemic. But I just remember there was like some like railroad commissioner in Texas, and of course the Railroad commission in Texas is the oil regulator.
There was some oil.
There was some railroad commissioner who was like trying to like do diplomacy with Opek in the middle of I can't remember his name, but he was like some guy on Twitter. Do you guys remember that.
Yes, there was someone I cannot remember one hundred percent, but I will come back.
Yeah, there was some random guy.
Let's not forget that.
When Opek and an Opek plash with this this alliance between Opek and and other oil producers, including Russia, they were negotiating how to respond to the pandemic and just basically trying to agree how to split a ten million bowles that they got. Ten percent of global oil production was taken out of the market by Opek and his allies. A lot of the negotiations Donald Trump that that point,
President Donald Trump was heavily involved. I mean, the whole final deal was effectively cook on a three way phone conversation between President Donald Trump, President Bloody Meat Putting, which was still, you know, negotiating these things with the White House face to face effectively on and King Salmon of
Saudi Arabia. So the US in some ways it was not part of the cartel or anything like that, but it was participating in the conversations, and Trump got actually acquired a sweet deal because he got the Saudist and the Russians to agree to cut production while the US industry got absolutely nothing.
I think his name. He even wrote a Bloomberg opinion column in March March twentieth, twenty twenty. Ryan Sitton was his name. The railroad commissioner who called on OPEK to coordinate with the US in constraining supply. I want to pivot for a second and talk about the Red Sea, and we talked about it a couple of weeks ago at the context of container freight. What is the rising tensions there? We recently saw the US strike at UTI assets.
What does the rising tension there mean from an oil perspective.
Well, it's more or less a binary situation.
As long as the straight up Hormos, which is big outlet from the Persian Golf for countries like Kubey or Saudi Arabia into the open markets. As long as that remains open, what's happening on the Red Sea is of less importance. Yes, it's gonna mean an increasing cost because a lot of the oil tankers and also the leg carriers, this is liquefied natural gas carriers, they're gonna have to divert about the Red Sea and go around Africa that ads from the Persian Golf into Europe.
That had probably a good.
Ten to fifteen days extra, so you know, it's not as small and it could really increase the cost of shipping, but it's not the end of the world. And that's what the oil market is taking it quite relaxed. I mean, prices has barely increased over the last few days.
But then you could think.
Well, okay, so that is basically on a scale of one to ten, probably that's a two, maybe a three. What is the other scenario? Where the other scenario is the you know open five with Iran, not with his proxies the hoodies in Germen, but actually with Iran and the straight of hormones from somehow gets in trouble. Shipping is more difficult through it probably is not completely close, but things get really bad, and that on a scale of one to ten, that's probably twenty five. And that's
the problem. That's what I say. It's a bit of a binary situation at the moment. Are we well so so far not so bad?
Could it mean that more LNG gets exported from the US to Europe. That seems to be the obvious solution, right.
Yeah, the obvious solution is that all the Atlantic LENG goes into euro So that's the US, but also in Nigeria trily that that's gonna go as much as possible to Europe.
And then all the non Atlantic basin LENG goes to Asia.
So Gutar will try to radiorect as much of the leg that they can into intu Asia. I could provide some training opportunities for LNG exporters in the United States, and let's not forget that means also more Russian LENG is gonna remain in Europe rather than going into Asia. Because Europe continues buying LG from Rascia. I mean, we stopped buying Rascia and gas through pipeline bat lngs real quickly.
Just going back to the OPEC conversation, I just remembered one of the other things that we talked about a lot, I think in like twenty twenty two was just that, you know, setting aside what was going on with US show production, that there were various structural impediments to OPEC supply or non OPEC supply or OPEC plus supply, that a number of countries had let their own infrastructure slowly get into disarray with the low prices of twenty tens,
that that was constraining the ability to expand. What is happening with sort of non US OPEK related capacity, what is.
True in part?
I mean you look at so particularly the African producers of OPEK, the likes of Nigeria, well, they have been in travel and they have been struggling to meet their own production targets. Recently, Angola left OPEK because it was not happy with the fact that OPEK was pointing to Angola, you cannot produce as much as we even allowed you to produce, so we are going to bring your production
level officially to what you are able to do. Well, don Goola didn't take that very well and then decided that, well, we don't want to be part of this club anymore. Then we have two other countries that they have been producing far less than in the past but due to sanctions, as Venezuela and Iran. The sanctions are still there, but the US is enforcing them while the US is not
really enforcing them anymore. It's particularly in the case of Iran, has started a blind eye because you know, the priorities get oil prices under control. So Iranian and Venezuelan production has increased significantly last year, to the point in twenty twenty three the biggest source of extra oil into the market was the ushail industry. The US was the kind of the big number into the oil market put in
extra oil. The second source of extra oil in twenty twenty three compared to twenty twenty two was Iranian oil production. And that's just incredible to me that Iran added so much oil into the market to the tune of how half a million borrowers to day. So the story of Opek struggling is not as true as it was three four, five years ago. And then you have the UE which is adding a lot of production and not happy that
it cannot produce more. And we are beginning to see also the Southeast starting to try to increase the production capacity. Some of that will come on a stream next year and then in twenty twenty six and twenty twenty seven. So the story within OPEK is starting to change from one of struggling to keep production to one where it
and Venezuela are adding a lot of burrowers. But also we have this new production capacity expansion plants of the UIE and Saudi Arabia really about to hear the market potentially because we don't know if they will translate that capacity into actual products or not. That's a political that's a political decision.
Yeah, Saudi Arabia needs to pump more in order to afford Rinaldo's contract, I guess. But you know, hearing you weigh all this out, Havevier, it sounds almost as if we're watching like a slow motion reconfiguration of the world's energy sources or energy trade, one where the US is far more prominent, Iran is more prominent than it used to be. Is that a fair way of putting it, Like, is this a reordering of the system in some respects?
I think that you're putting it absolutely right. I mean, the fact that the US is exporting so much oil, and when you count crude and refined products many weeks, the US on a growth basis is sporting more than ten million borrows a day. Obviously, at the same time it's important in a bit so on a net basis about two million borrowers a day.
But the fact that the US has.
Oil to sport on a net basis that you know, more than he consumes and it can esport it. It's just mind blowing, and particularly for you know, I have been writing about this industry for twenty five years. If even ten years ago you have told me that the US was going to be exporting the amount of crude that is doing today, I would have said absolutely not.
And you know, no way, I mean, no way, this is happening.
And you know the fact that Iran and Sancians is back producing quite a little oil is also quite surprising. And the fact that Saudi Arabia has accepted again to cut unilaterally his production without the help of other production countries, something that if promise, will never do again. That is also very surprising.
Yeah, where does the Biden administration set in all of this? And we've sort of touched on it in a few episodes at this point, but Biden came on on a very oil unfriendly campaign, basically talking about transitioning to green energy, and yet here we are a few years later and US domestic production is that a record around is pumping again, which is a whole other political situation. But you talk to people in the industry, how are they feeling about the Biden administration at the moment.
Well, I think that the Biden administrations say it has a narrative in public just very climate change green transition, and in practice what you see has been they have not really done much to limit the US industry ability to expand. Yes, people in the oil industry will say, oh my god, you know, we have all these problems with the White House and you know they are really
anti oil and anti fossil fuels and so on. But you really sit down with them and told privately and relaxed, they will admit, Look, they leave us alone, we can produce as much as we can. Their focus is on keeping energy prices down and we are all happy. Can we get more things from them?
Yeah?
Probably without Republican administration, we will get it more. But to be honest, we're getting more than enough. And actually we do not really produce too much oil the same prices crashing. So yeah, I mean, I think that everyone in the industry privately at least it's pretty happy with the Biden administration. In public, of course, the lobbies and so on, they have to say, oh my gosh, President Biden is threatening an energy crisis in America.
That's just completely utter nonsense.
Let's pivot real quickly. You have a new big piece out, I know, not all related, but about the changes happening in European energy market. What's the story about.
Well, it's particularly about how we trade electricity.
And you think about a few years back, and by that I mean five six years ago. A lot of the electricity market in Europe was controlled by the typical names that we all knew, the utilities that have been privatized but used to be stay owned companies, big names like you know, eedf Electricity of the France, r WUE, et cetera, et cetera. And the market was quite sedated prices were not really moving much. There was not much volatility.
There were very few of the independent trade that's really making money trading electricity.
And a few years back.
In the middle of nowhere in Denmark, in a town called Ark, who's the big, big university town in rural Denmark, a group of companies kind of started to plot how we can make out of money out of this market. And they were really driven by two things that were
happening in Europe. Was the liberalization of the market. It was a lot more of cross border electricity trading in Europe, and there was also a lot more volatility in the supply of electricity in Europe because win and solar you cannot predate how much win and solar power you're gonna
get more than five days, perhaps ten days. But you know, meteorologists have a limit of you know, how strongly the win is gonna blow, or whether it's gonna be you know, cloud covered in one area of the continent or not for solar et cetera, et cetera. So that variability created a lot of price polatility, particularly in the very short of the short term market. I mean, electricity used to be traded one year in advance, one month in advance, and this company is kind of specialized in trading the
next thirty minutes of the electricity market. But it's going to be you know, what is mid morning, what is going to be the demand for electricity by lunchtime.
That's what they specialized.
But it was you know, the five or six top of these companies were making perhaps one hundred million dollars combined, so not a lot, and you know, they were in the rather of the industry, but all that in twenty twenty two they made five billion dollars.
Their return on equity on.
Many names of the industry went well above one hundred percent, in some cases well about two hundred and fifty percent. So let me put it this way. The companies that were making a couple of million dollars were making ten twenty five thirty million. The guys who were making twenty five thirty million before were making a couple of one hundred million dollars, and the guys who were making one hundred all the way, they just.
Went to a billion.
It was just one of the biggest booms in commodity trading profitability I have ever seen. And that the piece is about these names, which outside the industry basically no one really knows about.
Wait, how much of a parallel is there with the sort of old school commodities traders like a Glencore or a traffic Era. To the point where as we saw after the pandemic, you had sort of systemic issues among those commodities traders that became a headache or problem for everyone in Europe at one point in time. Could something like that happen with this new breed of electricity trader.
It's the results are different, but there are very significant races with this new breed of electricity traders. A lot of what they are doing is computer driven. Some of the desks where this happening they are called automated electricity trading desk. I mean everything is done by the computer.
I have been on their trading floors and in some cases eighty percent of the volume is run by computers, with the traders and the meteorologies just sitting in front of the computers making sure that everything is fine, but just the computers deciding where to buy and sell. To the point that the kind of the umbrella of the regulators in U that look at the electricity market reported that in twenty twenty two they monitor four point four
billion transactions in the electricity market in Europe. That's one hundred and forty transactions every second.
For the whole year. And how do you monitor that that.
I don't think that the regulators really have the capacity. And then that a significant chunk of the market now is traded by firms that they have relatively small capital bases, that they are all trading from the same place in the middle of nowhere in them market, using the same banks and the same brokers. Well, it's when you know,
the worst systemic risks kind of come to mind. And I'm not saying that there is a problem, but I am concerned that regulators, some policy makers in Europe don't really.
Know much about them. And I was.
I was recently, as I was reporting for this column, I was talking to one of the top people in the European Commission that looks at, you know, these kind of situations, and I said, well, what do you know about XY said the names of these companies and this person told me, honestly, havevier.
I know that they.
Exist and that's about it. I have never met. Then I don't really know much about them. When I said, oh, do you know that you know, this company made a billion dollars, you know, in twenty twenty two, and the person was utterly surprised.
About the level of profitability.
And the fact is kind of the I think that a lot of European policy makers they don't know what they don't.
Know high policymakers all around the world. That could be said Javier Blast, thank you so much for coming back on odd louds and I guess describing across many different realms the massive changes that are happening in the energy boards.
It's great to have you back, my blessed Thank you.
Thanks, that was fun.
Yeah, thank you.
Just real quickly, Tracy, we should do more on electricity trading. I've had some requests, and I have to say, like, I still don't totally understand like the basics of electricity trading in the sense that when I think about trading shops, whether it's commodities or even just the traditional financial instruments, you know, I think about like entities that are able to wear house or absorb some sort of risk in exchange for but you can't wear house electricity because it's.
I suddenly have this vision of like these electricity traders on a trading for with tool belts filled with batteries and they're like, I'm buying electricity and then someone comes and like charge their battery and then they like hold on to it and sell it two days later. It's not how it works.
I don't think so.
But for real, like there's not much electricity storage or it's pretty small, so like I want to do more.
It does seem Yeah, it does seem like it's a unique commodity in the sense that, like the timeframe is so short and you don't have a good line of sight into electricity availability, you know, beyond a few days, because you don't know what the wind's going to be like or what how strong the sunlight's going to be and things like that. So it is really interesting from that perspective.
Yeah, we should do more just on like the basics of what electricity traders do and where they they're sort of how they harvest profits. But on the oil question, I mean it's pretty wild that, at least for the moment and who knows how long it lasts, the US industry hasn't had to choose between volume and profitability. Yeah, it was like why not both.
Yeah, and I think that story about technology. I mean, shale was always a technology story and a capital market story and investors getting excited about the new technology that made all this possible. But it feels like people think about technology and they think some like really cool new way of drilling. And Okay, yes, the horizontal drills are getting more horizontal and more powerful, but horizontal at horizontal AERT.
That's right.
But we can also talk about like just really small incremental changes, like standardizing the types of bolts that you're using in a rig, standardizing the color yellow on your North Sea platforms. That was pretty fun.
I love that example. But no, it's like you just don't know where you are in the tech cycle. And the fact while you were talking, I looked up your old article from twenty fifteen that you mentioned and seem to have nailed it perfectly. We should do more on standardization. Standardization bodies are really interesting organizations too.
Yeah, standardization is kind of like what drives the world and also causes problems a lot. It's really interesting. Yes, let's do a standardization series. I really want to speak to the guys that make the c the barcodes, the bar code Association.
What are they up to?
Love the idea of a standardization series?
Yeah, all right, okay, well this is one of those episodes where we've kind of come away with five other things to discuss. Shall we leave it there?
Let's leave it there. Okay.
This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
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