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Hello and welcome to another episode of the Authoughts podcast. I'm Tracy Alloway.
And I'm Joe Wasenthal.
Joe, you know what's weird.
Tell me what's weird.
There's a lot that's weird. Actually, But we seem to be living in this extremely high tech world where you can get a chat bot to write you an essay or create a video. Sure, you could buy a robot dog to play with all that stuff, and yet we still seem to be struggling somewhat to provide cheap and
affordable and abundant energy to power all these things. And in fact, because all this new technology guzzles so much energy, data centers you so much power, it feels like energy is becoming even more strategically important in many ways.
It definitely feels like we're in an age of sort of people remembering the deep constraints that energy, yeah imposes, whether it's data center, all kinds of things. Energy is not a solve problem by any stritch, although I would say that in my limited sort of reading of the history of energy, it's never a solved problem. I know, at the moment we find we're in a period of energy surplus, we quickly find something to do with that energy, and once again we are in a period of constraint.
But it does feel like we're in some sort of period of constraint right now.
When Caines was doing his whole abundance theory, did he mention energy at all? What do you say, Well, I'm just gonna assume that Kaines promised us all abundant energy as well as everything else, and it's not here. So we're all upset. Okay. So even though we've had all these breakthroughs in alternative energy technologies, you know, things like solar and wind, we're still using more coal, more oil
than ever. And in fact, there's sort of some old school energy behaviors going on with China stockpiling massive amounts of oil.
Yeah, as you said, coal is booming, China stockpiling oil. Electricity prices in the US on the rise, maybe perhaps due to some of this AI data centered demand. It feels like I would say pre COVID at least. I don't know if people got a little bit naive or optimistic or goldilocks, but this view is it's only a matter of time before energy is solved because we're gonna have all this wind and solar is gonna be cheap,
it's gonna be clean. We see all these cost curves coming down with like batteries and wind and so forth. It's only a matter of time before we don't need the dirty stuff. And right now it doesn't feel we're anywhere close to that. And I'm sort of curious what happened.
Yeah, well, everyone talked about the energy transition, but so far it's not really a transition. It's like a compliment to existing sources. Anyway, we could keep talking, but why not go to our guest, who is truly, truly the perfect guest. We're gonna be speaking with someone I wanted to speak with on the podcast for a very long time. Dan, you're he is, of course, the author of the Pulitzer Prize, winning the prize the Epic Quest for Oil, Money and Power.
He's also vice chairman of SMP Global, and he also has a new book out called The New Map, Energy, Climate and the Clash of Nations. So a lot to talk about, Dan, Thank you so much for coming on all thoughts, It's great to be on with you all. So does it feel like energy and security is still with us in many forms.
Yes, it goes through cycles. You know, you mentioned COVID. I think during COVID demand went down, prices went down, and people kind of forgot about energy, and there was a sense in twenty twenty one, International Energy Agency did this scenario about getting to basically a renewable world by twenty fifty. But now we're in twenty twenty five, going into twenty six, energy demand is going up wind and solar,
but also coal, oil, and natural gas. And this share of hydrocarbons and energy has gone from about eighty one percent to about eighty point five five percent roughly.
So it's going to take a while to get down to zero in a while.
You know, though you mentioned energy transition. I think it's time to do some rethinking about the energy transition.
Well good, That's what I was going to ask you about. So when people talk about the energy transition, this fantasy or you know, maybe fantasy is a little bit scenario scenario scenario of Okay, we're going to get to net zero, et cetera. Is this just a matter of the timeline has been pushed back, or is there a fundamental flaw with the premise.
I think certainly the timeline has been pushed back, the notion by twenty fifty the closer we get to twenty fifty, the farther way, it seems the goal of net zero by twenty fifty zero. And what Tracy said before energy transition has been energy addition.
And what happened.
What happened is I think the reality came back in that we live in a world that rests on an energy foundation, and that you just can't overnight take one hundred and fifteen trillion dollar world economy and change it from one thing to another.
Are there any scenarios you could see where I guess new technologies like AI, the data centers that are getting built encourage new players to come in and provide capital for energy, so you know, Google building their own gas port.
Well, exactly what we have now is the tech world meeting the energy world, and these two worlds have very different cultures. Tech world, things go happen pretty fast energy. You know, in your software engineer come out with new software. In the energy world, an engineer takes seven years to build something. And these cultures have come together, and I think one of the reasons that we're seeing kind of this called the easy or simple notions and transition pushed
out is what you've mentioned. It's going to take a lot more electricity, and some of that will come from windows solar. But what's come back into the picture is natural gas is an electric generation. If you wanted to go out and buy a gas turbine today, you could get it delivered in twenty thirty. If we back go back to twenty twenty two. I was talking to one of the big companies in the field and the guy said that year, all over the world, exactly one gas
turbine was sold and it wasn't one of ours. So we said, our market share that year was zero. Now they're all sold out.
Is there an increase in capacity? We talked about this recently and this has come up, the shortage of gas turbans. Is the scarcity being addressed or is there still this phenomenon where no one really wants to do the initial upfront investment in a say, factory that makes the gas turbans because there's still uncertainty about say twenty thirty.
What I you know, when I talked to the companies, those who are around in about two two and a half decades ago, remember there was a huge rush turbance and then it all collapsed.
And there were and that was coincidentally or incidentally that boom was also at a time of massive tech investment the late nineties. That was another period of the sort of marriage of tech and energy at the time.
Absolutely, that's right, and so I think they are expanding capacity, but they're not doing it helter skelter. Also, like so many other companies, the shortage of the talent that you need. I mean, these are not simple things to build.
One of the reasons we wanted to talk to you is because you do such a fantastic job of connecting the oil space with capital markets, and I've always maintained that oil is very much a capital market story. Can you talk about the difference between how capital is sourced for something like oil or gas versus clean energy, and whether attitudes towards the two have changed at all.
Well, I mean it was quite different with clean energy, and a lot of it, you know, had tax credits and ability to you know, to sell tax credits and things like that, and a lot of the oil and gas development may be funded by financial institutions, but a lot of it is funded by the companies themselves.
What is it like we see these lines on charts that show the collapsing price of solar production, or the collapsing price of wind production, or the improvements in battery technology. All true, all true, and yet there is still so much public money that goes into these areas, and so many tax credits and subsidies, etc. To kind of accelerate them along. Why is it that you have these lines going down and yet they don't undercut traditional sources in the way that maybe the tech mindset.
We yes so well.
First, remember the renewables, wind and solar. Really we're not competing with oil until you started to have electric cars coming onto the scene. But you know, it's interesting. I was talking to a company that's developing a big battery project in Europe I probably shouldn't say which country, and they're very excited about it. It's really big. They said, Oh, by the way, they couldn't do it on their own. They had to go to the government and get incentive
subsidies or a partnership with it. So the costs are still up there, and I think we're seeing a testing now for wind and solar. Everybody's rushing right now to get steel into the ground so they can get the tax credits which will expire in not very long time, so the testing will be how competitive will they be? And I think we'll still see wind and solar, particularly solar put in, but it won't be enough. And what they concern right now is about the reliability of the
electric power system. And you see prognostications about this area that stretches from Illinois, you know, as far as New Jersey, that by the end of this decade, which is not so far away now, we'll be looking at very tight markets with really great pressure on it. And I'll tell you the kind of regulators. The people looking at it
but are starting to get pretty alarmed. And that's why you see a lot of a lot of discussion and focus on can we get permitting reform so you can actually get something built?
Can you just what is the source of alarm? Is it about the generation of electrons or is it about the transmission and with the grid capacity to balance and take in all these things.
Well, it's both, and certainly the transmission is a very key part of it. But what we have been doing has been retiring coal plants. We thought, you know, we re mar going to have any more gas and electric generation, but that's coming back. And now you see kind of slow down and closing these coal plants. And also we see an election coming up in New Jersey where electricity
prices are an issue, and suddenly this whole issue. I was looking at our numbers, and electricity prices have been going up at twice the rate of inflation in the United States.
Why can't clean energy seem to exist without subsidies? Given that electricity prices are going up, and we all agree that energy is strategically important, why can't it, you know, fund itself.
Well, it has to, you know, ultimately, it has to be that. But you know, obviously there's a lot of debate about what happened in this big beautiful bill where they you know, basically are cutting back and then eliminating the subsidies. And at least this administration says, well, wait, these were put in thirty two years ago for infant in industries, and now the prices come down, why are we were doing it? So I think these industries are going to have to stand on their own right now.
Would they be economical in their current form?
I think, you know, it depends on the circumstances and where they're built and whether they have access to transmission, because of course you can have solar, but then you need you need to connect it to the grid, and grid connection becomes a very important issue.
That's the expensive thing. That's why with my solar panels on my farm, I mooch off of the entire Connecticut system grid.
How is your solar panels working?
They're fantastic. Our energy bills are like maybe twenty dollars a month. Sometimes we get paid so you.
Put it back in the system. You didn't get any tax creditors.
Well, the house had it when we bought it. Oh, but I'm just very happy with the low electricity bill and not having to shoulder the costs of the grid.
Yeah, and somebody else will take care of it, that's right, somebody else's problem.
I want to talk a little bit more about the return of natural gas or LNG. What do you think the prospects are for the US as an LNG export powerhouse? Can you continue to grow well at the pace that it's been growing, especially given some of the bottlenecks and constraints.
Yeah, well, obviously you need pipes to get gas to the Gulf coast or to tide water in order to ship the gas, and that ability to build pipes is really difficult, or has been difficult. It's going to get easier now unless you're in Texas where you could build them anyway. But it's an amazing story. A decade ago, the US was not exporting any LNG in fact, and now it's the world's largest exporter of LNG. And our own numbers say that the next half decade or so,
global capacity will increase by over fifty percent. Half of that increase will be in the United States, you know, and people don't think about it this way, but we're not for USLNG. Putin might well have succeeded using the energy weapon cutting off gas to Europe and shouted the coalition supporting Ukraine. And what prevented him from doing that was USLNG, which he hadn't counted on. In the book
you mentioned the new Map. I have this story about where I had this interaction with Putin in twenty thirteen, and it was at the Saint Petersburg International Economic Forum, which was his version of Davos, was before he enexed Crimea, and he was up there on the platform with Chancellor Merkel, and you could see the ice between them, and they said to me, oh, you get to ask the first question.
So I thought I was just asking the question. Yeah, exactly, no pressure, the normal question about you know, what are you going to do? Your budget is over dependent on oil and gas. By accident, I mentioned shale and he started shouting at me in front of all these people and said, shale is barbaric, it's terrible, poisoned people. He went on and on like that, and I can tell you it was very unpleasant being shouted at by Vladimir Putin in front of three thousand people.
But it's a good story.
Yeah, but it's a good story, you know exactly it did at the time and think it's a good story. At the time, I wanted to get out of there, But afterwards I thought he was actually precient. He saw that shale gas in the form of then LNG would augment us influence in the world, which it certainly has, and it would compete with his jewels crown jewel gas problem, which has also happened because now Russian gas is being
pushed out of Europe. So I think, you know, people don't connect speaking of connecting the dots that the shale gas revolution there tied into the ability to support Ukraine in this war that's now gone on almost as long as World War One.
It sounds like you're saying, Aubrey McClinton was a great hero for the West and democracy and all of this stuff.
Well, i'd say a great entrepreneurial. Yes.
When it comes to old school energy sources, whether it's oil or your term old school, is there any low hanging fruit left in terms of making the technologies more efficient? I remember, maybe like almost ten years ago now, there was a big standardization push and all these you know, drills that used to have custom parts started to standardize them and that actually brought down prices quite a bit or helped ease some of the pressure at a time
when oil prices were quite low. Is there anything like that on the horizon.
Well, I think you're right. I mean shale. The development of shale revolution is to kind of continue your memory, it really became a manufacturing process. It's a very repetitive manufacturing process. And you know, no one back then when days of you mentioned Ay mcclennan was one of the pioneers could have possibly envisioned the US being the world's largest oil producer, the largest natural gas producer. I think right now you know about maybe ten percent of the
oil has recovered from shale. So one thing companies are working on, can we increase that output? Can we increase it be more efficient? But there is the sense now which you wasn't even had a year ago, that maybe shale has peaked out, peaked out at a very high number, but peaked doubt And people I start to see are starting to talk about what's known as exploration, going out and finding new oil sources in parts of the world where nobody really looked for them.
Does it make you nervous to use the word peak in an oil conversation.
Now that you mentioned it at times? What should I say? Plateau? How's plateau?
Ok?
Yeah? Peak oil. I remember when when people were talking about peak oil back in you know, decade and a half ago, and that the world was going to run out of oil. I remember I said, I better go back and look in the prize and went back and said, oh, the world's actually run out of oil five times, and every time it's where you pointed before. It's new technologies and new geographies, that changed the game.
Tell us a little bit more about some of those times were, so, I guess probably the seventies, when else have there been well, right at the air of peak oil running out.
World War One turned out to be a war that really sort of elevated oil because it started with people on horses and cavalry, it ended up with banks and airplanes and trucks and all of that. And there was this great fear after World War One that the US had what was it, nine years worth supply left, and so what happened as American companies started to go out and it went out to the Middle East and of course found lots of oil. So that was a period.
Then after World War Two there was that concern because oil had been so important there had been an oil war within the larger war, and then of course the seventies. But it even happened in the nineteenth century that you know, people start ringing the bell saying, you know, it's all over, and technology keeps expanding the frontier.
So, speaking of oil supplies and stockpiles, one of the big stories in energy markets has been China buying enormous amounts of oil and stockpiling them for reasons that we don't know for certain how important has that dynamic been to you know, a fairly resilient oil price. Crewd has come down a little bit, but it's still, you know, around sixty dollars a barrel, I think, and why are they doing it?
In your rod, that is always the question of why they're Chinese stockpiling. I've we've been working on minerals too, and looking at the stockpile minerals too. It's what they do. Is it because they think there may be a conflict? Is there a problem? Are they worried about the South China Sea which I write about in the new map? And they know that during World War Two the US cut off the oil line to Japan, and so they
want to be sure they have supplies. Or is it just because it's cheap and they're expecting it to go up. We don't know. I'll be there in a couple months and I'll ask them again. I'm not sure I'll get an answer. But they're doing it. But the role of China's changed because for two decades the growth in oil demand worldwide, half of it was in China. And now the view, I won't use the word peak I'll use the word plateau. That demand in China is plateauing at
a high level. But they're importing seventy five percent of their oil and they don't want to continue to do that. That's why they've been pushing one of the reasons they've been pushing electric cars. The other reason is because I see it as a way to an export market, so you don't have the growth engine of China. And so you know, there's a fair amount of debate today at what rate at oil de Man will grow, but is
it how how much will grow? Will be a million barrels a day, a million and a half barrels a day, And that is a subject within oil circles of a great deal of vigorous debate.
We obviously don't know what chision ping strategic plans are, potential military plans in the future. But for all of the EVY adoption in China, which has of course been huge military conflict, whatever the source, will still be an incredibly oil intensive process.
Yes, I think exactly. I mean, that's right. All you're not going to have battleships, you know, you know, solar power times yeah, yeah, yeah, I mean you do mention, I mean what is we know some things that are ensoes Youping's mind, because he said it, and he does talk about the dominating the new indust supply chains, which means evs, which means solar panels, which means when and of increasingly critical importance batteries, which is another issue that's
going to actually is percolating up about here. We have regulations against batteries that come from foreign entities of concern and you say, what's a foreign entity of concern? And it tends to be mean parentheses China in the energy discussion, could.
You ever envision a time where where earths are more important strategically than oil?
No, but I can tell you that they're really important, and I would say in the last six months there has been, if you are here in Washington, a crisis mentality about them, because I think that was a shock when Trump was rolling out all of his tariffs and the country that they were going to be most aimed at, which was China. Suddenly China said, well, you know, to complay this game. And then that is, of course, in recent days is once again come up the Chinese, whether
for strategic reasons, but again new supply chains. You know, they produce process ninety percent of the rarers and they know it. And when you hear an automobile maker saying, you know, we have a week and a half supply, you realize how urgent it is, and so you know it's really come up and trying to grapple with it. It's not something you can solve overnight, because it takes a long time to open a mind, put up a
processing a thing. And the Chinese are putting not only controls on rareers, they put controls on the machinery and equipment for processing rarers, and they put controls on the people who have to know how that they may not be able to have passports anymore.
Let's talk about US energy policy. It seems a little unfocused to me.
Or we might say variable, okay.
Go on, Like how would you characterize it? Or like when you say, let's say it's variable, how would you characterize what's going on? I think there was a US energy security or energy policy.
And under Biden, of course, it was all about basically renewables, climate change, the goal that have no gas, natural gas or coal and electric generation. By twenty thirty five, half the new cars in America were to be electric by twenty thirty. That was then, this is now. It's just pretty much in the opposite direction.
Can the US, you know, I think Trump would like powerful dominant US energy industry.
He uses that word.
Yeah, is that realistic? Can you get there? I mean, there's wanting to expand drilling, but with the price of oil, actually it's a below fifty blow six and now it's fifteen seventy five today. For like, can these things hang together? Can we have prices at these levels and booming domestic oil coustrut No.
I think that's one reason we get into not the peaking, but the plateauing for that reason. And you know, you look at the survey from the Dallas Federal Reserve that came out, and you know, below sixty, people don't you know, they just pull back and they husband capital. And you know, it certainly seemed that it was possible that we would see oil prices below sixty in the latter part of
the year. And it's come. Maybe it's come earlier than people might have expected, and very much affected by the trade war between the US and China, among other things. But the US is the dominant player right now and energy you know, the new trade deal the Europe supposed to have with the US, They're supposed to buy more natural gas from US and so forth, and they set up something called the National Energy Dominance Council, which is you know, kind of the view of the US in
this position. But it is tough to both want to have a very vibrant domestic industry and have low prices at the same time.
I know you just mentioned that Europe is still going to be getting US oil, But do you foresee a more I guess autaric energy future for the world, because it does feel like, at least with manufacturing goods and some strategically important goods, people are stockpiling and people are focused on building out their own capacity. Is that going to be the case in energy or will it be that energy is just so geographically specific and expertise oriented that not everyone will well do.
We've already seen a partitioning of the global oil market in terms of Russian oil not going to its natural market Europe, but going to China, which was a market before, in India, which was not a market before. We see that in natural gas. So I think call it economic nationalism or economic sovereignty. I think that the you, and in a sense, that's what all the teriff policies are about.
I think Europe is in a very difficult position because they would like to continue to pursue zero as it's called, since by twenty fifty, but now they have this other problem, which is called being competitive, or rather not being competitive and losing industry. And on the other hand, they're now supposed to spend not one and a half percent, but five percent of GDP on defense. So I think Europe is in a very tough position.
And I know you speak to a lot of experts in the energy industry, but what's your sense of the mood on the ground among I guess oil and gas workers specifically, because on the one hand, Trump has been a friend of oil and gas and has said that he wants oil and gas to be dominant. But on the other hand, a lot of the policies that he's actually put in place, you see people in like the Dallas Fed survey complaining about them, and the mood seems to be kind of bad.
Well, I think it's both. I mean, I remember CEO of one Oil Companies saying that he was actually too surprise was invited to I don't know if he's joking or not to the Biden White House, but he said he had to go in through the basement door. And now, of course they're very you know, accepted, and you know, in part of the dialogue, you know, I think it's
a mixed message. They're glad to see a reduction in all these new regulations that have been imposed and kind of just the general hostility to an important US industry. But on the other hand, they at low prices. You've seen, you know, layoffs in the industry, you see people putting down drilling rigs, you know, at this prices, I think if they persist, we'll see more of a negative impact.
So the US is producing massive amounts of oil and gas. How does this sort of change the geography or the energy industry.
Well, it really has changed it dramatically. It was really brought home in twenty nineteen when the Iranians attacked the most important infrastructure in the entire world oil industry in Saudi Arabia, and the price went up for a day or two and then went down. And I think that's because of the existence of shale and just as it kept growing and growing and it gave a sense of security that wasn't there before.
I totally forgot about that, but I think I was actually in the Middle East when that happened. Does Opek matter anymore? U?
Yes, Well, it's really OPEK plus that matters right now. And they took a lot of oil off the market, basically giving room market share to the US. They're now begun the process of taking back their market share, and that's partly what's reflected in price.
One of the things that is a constant theme on the podcast, and it comes up in numerous industries, whether we're talking about housing or lumber or anything else, is that, you know, periods of surplus or periods of slack, you end up paying for it at the end. You end up maybe paying for it five ten years down the road because you get this declined in production. The talent leaves the industry, the labor moves the industry, the parts run, and you can't just take them out of the warehouse,
et cetera and start drilling or whatever. Again, when you look at the declining price of oil today, are we going to pay for this?
I so yeah, I think it's interesting because you know, I had to write this new epilogue for the new edition, thirtieth edition of the Prize, and I was thinking about what are the lessons And one of the lessons to me is, among the hundreds of characters in the book, there are only two who really matter. One is supply and one is demand, and they're always fluctuating between the
two of them. And I could see that today. Let me give you an exact because there's a natural decline that goes on in oil, which is people now saying and gas maybe it's five percent a year. So in twenty twenty one you had the International Energy Agency come out with a scenario for net zero by twenty fifty in terms of emissions, and all these steps to get there made it look rather easy. Because the demand was
down and price was down. They just came out with a new study saying the world needs five hundred and forty billion dollars of investment every year between now and twenty fifty just to kind of stay where we are with oil. So it is that cycle that people forget. There's a whole decline there, and I think if you have a period of slack, you pay for it down the road in terms of the tight market, because investment leaves and I think you made a really important point.
People leave too, They say, I don't want to be in this industry.
Did some episodes a couple of years ago, like actually, when oil is much higher about one of the constraints that's been well, a bunch of like the petroleum schools, they didn't have the same pipeline of engineering talent because in twenty nineteen or whatever those years were, who was going into majoring in petroleum engineering?
Right here exactly Now it's actually looks like it's a more attractive industry, but it's.
A competition from geothermal as well. If you want to go drilling some rocks somewhere, you don't have options.
Well, actually we didn't talk about geothermal, but in fact there is now the notion can you apply shale technology and drilling to geos?
Are you optimistic about that?
I don't go through optimist or pessimism. I'd just say, but it's promising. Let's see how it plays out.
I want to talk more about Europe. You mentioned the industrial economies getting clobbord. I mean German. Let's just talk about just Germany. Maybe they were able to substitute LNG imported from the US from some of its Russian sources, but the price is up and industrial production in Germany has been terrible. Do you think at some point European leaders will sort of cry on goal or cave on the net zero ambition because it feels like the politics of that have been running on fumes first.
Well, you know, it's interesting because of course they're it's so entrenched that it's hard for them. I mean, you could say, okay, we're for net zero, but maybe not by twenty fifty. But Europe continues to you know, it's not just energy costs, it's this incredible weight and burden of regulations that are designed without any connection to the markets. I was talking to one company on Sunday and they
said they just closed one facillit plant in Europe. They had another one that was eighty percent built that they've decided not to go ahead with. Talking to another company that's also closing. I mean, they impose these policies with no connection to the marketplace or to technology, saying seventy percent of jet fuel has to be so called sustainable aviation fuel. Well it's less than one percent now, and so it's just if you say it, it's going to happen.
So I think maybe in Germany we're starting to see some of that easing up, But I think that those economic realities are weighing down with them and if they don't step back, and as I say, it's not just climate policies, but it's this whole regulatory straight jacket that helps people go invest. In the United States, I.
Do feel like even before Russia invaded Ukraine, there was a sense that I guess ESG in general was kind of failing. You know, inflation started to.
Pick up, er bureau phenomenon.
Yeah, well, inflation started to pick up, and suddenly there was what I thought was an inevitable backlash against East and targets net zero and things like that. Do you think that ever comes back or how would you characterize I guess the helpfulness of ESG when it comes to building out clean energy, well.
I think it was clearly that all is a package together. I think now really the clean energy argument, the argument for solar now is less about that, and it's about that you can do it quickly and lay it down quickly and get those electrons into the grid. So it's more about the economics are working economics rather than virtue and ESG clearly is faded away. I can't see it coming back with the full force that it did because it has a built in backlash, which we're seeing now.
So I think it means that these things have to be more market driven.
Does the boom and energy exports from the US raised prices for American households?
That is, of course a very critical question was raised at the end of the Biden administration. We did a study on that, you know, we being S ANDP and the Commodity Insight team there and concluded that we have a lot of natural gas so that it's not a threat in terms of prices. Natural gas is not as constrained as oil.
What about nuclear? We've gone this entire conversation without talking about nuclear, but nuclear, you know, could solve all these problems well.
And it's also interesting because that circles back to one of the points we talked about before, because you say, well, what's brought nuclear back? Partly it's you know, just time, Partly its need, but I think it's also the entry of the tech companies from being just consumers, you know, for software, to really worrying about data centers. And you look at it last time I looked, there's been six billion dollars of venture capital infusion. Nobody ever used to
do venture capital in fusion. That was what the government did because it was fifty years away. And we had an event at our SERRAH conference in Houston this year where we had Commonwealth Fusion, which came out of MIT. The head of the largest, the main utility in Virginia and the governor of Virginia saying, you know, we think we're going to have fusion here by twenty thirty two. So nuclear is definitely back. Small modular reactors are a
hot topic. I think the first ones will be deployed around twenty thirty.
So you think they're actually going to happen because this seems like another technology that's always five or ten years old.
Well, I think it's going to happen, But I think the test will be then can you bring down the cost and is it a more flexible way to add nuclear? But it is. I think that it's really the tech companies who I mean there you had Amazon investing in one of the SMR companies with the notion that they will then buy successive reactors with the idea that each one the cost will come down. Now that will still
be tested. It still has to go through a regulatory process at the Nuclear Regulatory Commission and all of that, but there's certainly you have the sort of entrepreneurial Silicon Valley spirit now imbued into nuclear, which of course is not an overnight thing, but it is back on the agenda, and I think history will go back and say, in Germany Chancellor Mercles one of her two biggest mistakes was
shutting down the nuclear basically in a weekend. Well was the other and that was and that was twenty five percent of her electricityke The other mistake was saying, you know, immigration, the door is open.
This might be a dumb question, but you know, if it's.
Not such any dumb there's not such a thing. I better watch out now.
Okay, But if Amazon or someone invests in a small nuclear reactor or some other type of energy plant, how are those agreements actually structured in terms of the off take? Because I assume they get priority, and then does whatever is left over get sent into the grid?
Well, I guess it depends if it is a reactor that's owned by a utility, or is it possible that these would be like merchant nuclear reactors. You have seen examples already where some of the I guess we used to call them big tech. Now we call them hyperscalers.
When did that happen? We just all started using that term.
Yeah, exactly. I think it's about a year. Yeah, I mean for the first time you had to think, what's a hyperscale? Is like an elephant, But it's scaling. But where they've signed where they will take the entire off take of nuclear power plant. So they are very these companies are very concerned about power because it's so electricity intensive. The other day there was a story saying that the two data centers that that Elon muskis building in Memphis
will use more electricity than all the households. So this is a big issue for regulators of what are you going back to the question you raised before about who pays for this? How do these costs get disaggregated?
Right now, you mentioned electricity costs having gone up faster than inflation. Right now, can we draw a line between these prices and the data enter boom or is this two things that happened to be happening. Well, I've seen different views on how directly data centers are right now.
I think it's it's part of it, but it's just the general increase of demand, including you know, evs, although not on the scale that had been envisioned, So all those things and just having I mean, we had gone for twenty five years with flat demand in electricity the United States then and now it's just recently that it
started to grow again. And so you have a whole generation of utilities who've grown up in flat demand and now figuring out how do you get things built, how do you get into the regulatory process, and even when you get it approved and you end up in court because somebody challenges it.
Are we ever going to solve the energy problem?
No? I think it will just I mean, it will always be there as long as industrial society will be one form or another. Maybe fusion, the dream.
Of ah fusion. Yes, I used to play some city and that was all was the ultimate goal. You work out from the gas plant to nuclear and then to.
Confusion solves everything. But it's also striking to me what I've noticed, you know, having studied the energy for you know, some time that you get a consensus about energy and it lasts about three years and then something new comes along and just changes the view.
Are past periods we actually talked, we talked a little bit about the late nineties when there's the gas boom. Then are there any other past periods that people should study right now that might help them form the current environment.
Well, I think that what we have to remember, which to me is absolutely critical, is energy security, and that it gets forgotten. And for me, I have this story and the prize about Winston Churchill converting the Royal Navy from coal to oil before the First World War, which to me is that is what made oil a strategic commodity, that transition.
Why do you do that?
He did it because he gained speed, flexibility, you didn't need to have all these guys shoving coal on board, and you gained thirty percent extra cargo space.
That's the very start of the book, right, that's opening exactly.
And I've always thought that phrase. He said safety in oil, but we could say an energy lies in variety and rite alone that you don't want to be overdependent on anything. You want variety, whether in terms of your suppliers, in terms of your sources.
We're never going to bring whale oil back, you know.
I said there's not a single energy source that has not increased, even wood has increased. The only one that hasn't increased is whale oil.
All right, joke and dream, I guess Dan Jurgen, author of the probably I'm pretty sure, the best book on the oil market ever, thank you so much for coming on all thoughts.
Thank you.
It's great, Joe, that was so much fun. I'm so glad we finally got to take You can't.
Believe it took us that long to talk to Dan, but that was great.
I know, well, fortuitous meeting in Washington, DC. I gotta say his point about the sort of interconnection between energy and technology, Definitely, it does seem to be a driving force, right, And as soon as you get new advancements in weaponry or transport or in this case software, you do tend to get a sudden like rethinking of what your energy needs actually are or some sort of transition.
And then on the flip side, like if you ever are in an era of energy surplus, you're gonna find something to do with it. Yeah, Like you never just sit around it, like here's a bunch of cheap energy, let's not do anything.
With Although China is stockpiling successfully, right.
Well, they are stockpiling. We don't know for what exactly, but yes.
They haven't spent it yet.
They haven't spent it yet, although they're spending I guess sense to acquire all the oil. It does feel to me, And it's not like this is that new, but there was a phase in probably the US and Europe in the late twenty tens, and maybe it extended through twenty twenty magical thinking with respect to energy being solved. We're you know that there is just like this, like clear path towards cheap, clean, abundant energy and some sort of realities clearly smacked a lot of policymakers in the face.
And I guess the question is how locked into current plans are they? What has to give? It does feel like in Europe specifically, the constraints when it comes to industry, energy, climate security are pretty real.
It seems to me like the big problem is the cyclicality of the industry, Like you're constantly going through booms and bus and as soon as you get a boom in oil production, it inevitably leads to a collapse in oil prices, and then you struggle to build out capacity for years and years, and then there's not enough oil, and then prices start to rise and everyone goes back in again. If we could find some way to moderate that, I don't know how you would do it, but that might be a way forward.
I feel like an underrated element of the Chinese economic story over the last however many decades has just been this like sustained boom without major downturn, et cetera. And so then you don't get these like big periods of people leaving an industry or whatever that are really hard to escape out of. It's like I sort of think the cure for the boom bus cycle is just perpetual boom, Like that's the answer. Just always be booming, always be booming, booming.
I like that, But I also have to say China as a source of energy demand. You know, they're buying for stockpiles right now, but they're using so many electric vehicles that their gas consumption is actually going down. Gasoline very impressive. All right, shall we leave it there.
Let's leave it there.
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
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