What So Many People Get Wrong About The Energy Transition

to happen have not happened. And be on that note, the energy transition is just a lot messier and a lot less linear than I think a lot of people expected. People expected, like you know, once evs became widely available, someone somewhere would flip a switch. Everyone would shift their dependency away from gas into electricity, and the problem would kind of be solved and all these dirty energy industries like coal, like oil would be resigned to the dustbin

of history. I guess yeah, And I think the twenty tens sort of lulled us into maybe this false sense of complacency about the future of fossil fuels or dirty, dirtier sources of energy. And I think, you know, we we had the especially starting this big drop in the price of oil combined with the boom and electric cars, and I think a lot of people sort of thought like, okay, well, this is like this is the final chapter of the

oil era, of the fossil fuels era. It's gonna fade over time, you know, people over a long time into oblivion, oblivion. But it's already of this linear down. And of course now oil is exploding, and not only that, these other you know, sort of coal has bounced back, and there's sort of this very intense impulse now to expand production, at least in the short to medium term, of energy

sources to bring prices down. Right, I think a couple of years ago, no one would have expected governments, you know, liberal governments from Europe to the US the Biden administration to basically say like, we need more energy, we need more oil to be drilled, we need more energy coming from somewhere, preferably cleaner energy, but if we have to, we will also look at dirtier forms of energy as well.

Like that was totally unexpected, right, And everyone long term is like, yeah, electrification of everything, and hopefully we're renewables, maybe even some nuclear and stuff like that. But in the short to medium term, suddenly there's just big, this big urge to get the price of energy down. So it raises the question if we were like lulled into this false sense of complacency last decade, like what are we getting wrong in our thinking? And what will of

the energy transition ultimately look like? Absolutely all right, So I am very excited about this guest, someone who has been talking for many years, long before the two cycle, who has been making this argument that people are wrong about how energy sources die or wrong about how commodities get replaced by something new. We are going to be speaking with Bob Brackett. He's a senior analyst covering natural resources at Bernstein and he's been covering the resource space

and various capacities for about thirty years. So, Bob, thank you so much for coming on odd lots, Thank you so much. Thank you Tracy for having me. So how is that that? Like there are people have been like wanting to kill cole forever, it seems like, and you know, there's been so little funding of coal, like all these banks got out of like financing call everyone's like this

is over. I remember, you know, big thing, and like last decade was like what are we gonna you know, let's train all the coal workers to learn to code and things like that, and yet here in the world is using more cold than it ever has in history, Like how did that happen? So it happened. That's sort of on the supply side, and that happened on the demand side, and on the demand side that the reality

is energy transitions just take time. If we think about coal, clearly, on the demand side, there is just an inherent demand for the utility that coal provides, or nobody actually wants to consume coal. No one wakes up and says I wish I had some coal people wake up and say I want to electricity, right, I want of the things

that lifestyle that electricity and genders. And so if we can't provide that electricity from other means, because we can't ramp renewable spending capital fast enough, if we can't tackle issues around intermittency and security of supply, then you fall back on what's available, and that's coal, and that that's the call of demand. On the supply side. If you're a coal miner and you're building assets that last decades, you were terrified about what the future, what the last

ten years of that asset could look like. They could have no terminal value. So as a result your your burden, your risk return, your cost of capital, however you want to call it, you just end up being afraid to sanction long term supply, and then you end up in

this sort of perpetual tightness. And Tracy, you know, I'm thinking about some of the conversations we've had with Jeff Curry, and you know, this is the vault trap, like this idea, It's like, Okay, prices are high right now, but if everyone is like talking about some peak in a few years in consumption, like lie invest how much does regulation

play into a story like coal? Because one of the interesting things about coal is it's I don't think it's ever really been considered a good source of energy, Like it's always had certain connotations. It's always been dirty to actually get out of the ground, dirty to store in your house, which I'm experiencing now because I just discovered we have a large pile of coal in the basement, um,

which is fun. Of course Tracy, of course Tracy has a basement full of coal, like that is a very Tracy thing and keep going all right, and you know, associations with child labor and things like that. It feels like Cole has sort of been vilified for most of its history. So how does that play into its life cycle? Yeah, it's funny. And I forget the King of England who attempted to ban Cole uh half a millennium ago and

utterly failed. Cole has an externality. In the old days, the externality around Cole was the was the soot and the emissions and the socks and the knox, and we mostly as a planet cleaned that up, and today the externality is carbon dioxide. It's kind of always had an externality, and despite that, it is always had a utility that's that's overcome that, and so it is just an incredibly geologically unique store of energy and it's just very hard

to find a substitute. And the other aspect, even today, what we're seeing is politicians, regulators they don't like coal for its externalities, but they also like cheap electricity for the voting population. And so we're even seeing in the US, we're seeing in Europe, we're seeing softening of taxes against hydro carbon's and that's sort of short termism. I've got to keep the penalty of inflation against my my voting population, even though in the long term I really have to

tackle this thing. The king who tried to ban cole

in twelve eighty five, King Edward the First. I only know that because I read it in your note wrote so the whole you know, we wanted to talk to you because you wrote this amazing sort of this long piece at Bernstein in twenty seven and team basically talking about what people get wrong about the energy transition and what the theme seems to be that in our heads, you know, when we think about transition or we think about disruption, we think the iPhone comes along and then

like two years later there's no palm pilots, or one year later there's no flip phones like it. Just something better comes along and then the old thing is over. And sort of the thrust of your note is that no, like energy just doesn't work like that, and having this sort of like tech framework of disruption leads you to some bad paths when thinking about the future of commodities,

of the future of energy exactly. And the genesis of this book that I wrote was effectively a debate with the ever so popular tech analysts here at Bernstein, where the metaphors they were using for the energy transition were digital cameras displacing analog cameras, and flat screens displacing crt s,

and smartphones displacing dumb phone. And my caution, for my rather lengthy caution, was in in natural resources industries, in depletion based industries where you need just a lot of capital not only to grow but just to stay flat, that that dynamic is different. And in those sorts of environments where it's not a consumer electronic device, transitions can

take decades and decades and decades. So that was that was ultimately the genesis of why I wrote describe Well, could you go into that in a little bit more detail, like why is energy different from a consumer good? Why does the transition seem to be more complex, and why does it definitely take longer? It comes to the supply

side being afraid of the future. And the term I've coined for oil is this green wolf at the door that if you're investing in hydrocarbons know someday that green wolf at the door is going to come in and you're just afraid to to not earn a return on your capital, not strand your asset. My favorite analog, and I've got a couple, is the mercury industry. So the US Geological Survey posts the annual volumes, price, and revenues for the mercury industry over the last hundred years and

store to say, well, mercury is terrible. Talk about a bad product. I think, think mad hatters, think insanity, I think of all of the terrible things mercury does. But the mercury industry has never had higher revenues. And the reason is is there is sticky demand for mercury in a bunch of niche abuses that are very hard to displace, and only a full would open a mercury mind today

right just to think about what that would take. So the supply side that requires capital to keep going has said, I just can't deploy capital here, and the demand side says, well, but I really don't have a substitute yet. And so the mercury in this is going to end someday in a time measured in decades, but it's going to go out at high prices and a lack of supply, not with the shelves full of products the way of consumer electronic device that's that's defunct would. So how should investors

actually think about that? Because I feel like this is where things get really tricky, especially when it comes to oil. So everyone, I think pretty much agrees that oil is

going to go away someday. The question is just how long it's going to take, and then whether or not there are these sort of big peaks and troughs in oil use in the meantime during the transition, And as we've seen in recent years, it just feels really difficult for investors and also the energy businesses themselves to get a handle on because how do you plan for the future if you're expected not to have one and the

question is just how long it's going to take. The one misconception out there is this concept with the demand for a product starts to fall, the price for the product starts to fall. But you know, ultimately, if you think back to your classic economics one oh one, the price of something is where marginal cost meets marginal supply. And if the marginal supply is running away from you and there's no requirement that price fall. And so if you believe the Mercury analogy that I shared with you.

If you believe the asbestos analogy, if you kind of believe call right we're trying to get rid of call and prices at all time high, then the answer is the oil and gas companies are afraid to deploy long cycle asset right ten twent thirty year types of projects. They're generating record cash flows, certainly as we go into earnings in the next week or two. And the response for the typical U, S, E. N P that I follow is I'm just gonna return that cash to shareholders

and let them decide what to do with it. Right, So, I don't know when my industry is over. It's a twilight. But in the meantime, investors, you take the cash and you decide how to read a ploy, and I will manage my best short term high return investments as that happens. So obviously we're going to have to do a Mercury episode at some point in the future. But actually I do have. I want to go back to Mercury real quickly.

When you say the Mercury will come to an end, is there a substitute like what that exists for Mercury? Like is there a reason that at some point there won't be a future mercury demand. So it gets to the end uses. So luckily, like mercury gets used in the mining sector for example, certainly by artisanal miners, it can be displaced with cyanide, which you know, there's a

whole bag of works there. Um, the there are medical uses as well, there are some industrial uses, and yeah, I mean yeah, there have to be workarounds, but yes, and then at some point, like we see with other medals, we can get to a world where there's enough efficient recycling of mercury that the and can get a messed that way, but which is not quite there yet. Let me ask you another question, and I guess it's about coal and the failure of the sort of typical tech

disruption frame. Seems to me that there is a way to view this is like coal is the disruptive technology. I mean, again, all these things sort of breakdown because cole has been around forever. But if you think, like here's a really cheap form of energy, it's like really powerful form of energy, like you get a lot of electricity out of it and it's cheap, then you know, you could probably make the argument that you know, if you're willing to tolerate the externalities. Yes, it's worse for

the air. Yes, it emits a lot of carbon that on a sort of like strictly like like for like basis that one might consider coal the disruptor of natural a gas or the disruptor of oil. Should all the tech ETFs get into coal, is that's what you're saying. You can very quickly see how some of the like tech thinking could like really break down or lead you astray. It's like, well, which one is the real disruptor here?

If the planet had over invested in l n G and other sources of natural gas, and if you're getting all of our energy from windmills, then I'm sure coal would be a massive disruptor to that. So if we started in the reverse and if everything was a wind turbine, we would have this issue of intermittency. The wind patterns changed daily and seasonally and sometimes not at all. And

if someone came and said, I've got this product. It's very dense, it has a lot of energy, and look at it can burn twenty four seven and be a baseload of power, Yeah, it would be a remarkable disruption. So I have maybe a strange question. You know, we're talking about disruption and new technologies and things come in to replace other types of commodities in history, has there been like a good example of a commodity just going

completely away? Because it feels like even the really questionable stuff like mercury still finds some sort of use, and even things that have been vilified, like coal as we've been discussing, or like tobacco or instance, those are all you know, they're still around. There's still big industries, and they're still in the case of tobacco, still quite profitable. That is a strange question, and it's one that I went to answer, and so I good, okay, not the

only Yeah. I looked at eighty four different commodities and over the last hundred and twenty years, said which one of them went away? A category of them that are deadly on average declined single digits a year. So even the deadliest, the caesiums of the world, the asbestos, the mercury, even though things tend to go away slowly, I didn't find a commodity that was radically displaced on any short

term time horizon. I believe the closest you could come with strontium, where the biggest source of demand for strontium was in in c rt s, the old TVs we used to use, and so when flat screens came in, strontium demand fell. But that was the exception for that's that was kind of the one percent club. The reality and it goes back to Jevan's paradox, which which was again a guy looking at cold at the end of

the eight hundreds. Generally, just commodity demand rises. It's it's hard to find commodities that we use less of remind us what paradox is. So the Japan's paradox was that the more efficient you got that producing cold, the more you use. And it works for road systems, it works

for a number of things. But the classic example is, hey, I've got a four lane highway, I'll make it an eight lane highway, and then congestion will fall, right, And then every time we build an eight lane highway, congestion rises. And so it was kind of as you try to improve the efficiency of something, you actually increase the consumption

of it. So going back to oil for a second, because as you've said, like you actually do think there will be an end date for oil or at least oil as a source of maybe fuel for automobiles, Like what does that look like and what is how are you thinking about the long term time frame of when the oil age comes to an end and how is it replaced? And you know, like what what do you tell people when they say, like how long is the future of all? How long do we have here? Part

of it is just a mentality shift. So through most of my career looking at oil and gas investment, people believed in peak oil supply, right, it was Harbard's peak, It was the association for the society peak oil. It was twilight in the desert, and we all fall in hindsight incorrectly that we would run out of supply. And in that world, give sanctional project and you say, maybe it's over budget, maybe it's late, maybe it's not quite up to stuff on deliverability, but price will bail me out.

And so as long as the mentality of scarcity existed in my sector, we as an industry kept growing oil and gas supply. And in the last five ish years that mentality has pivoted to this world of the end of oil demand. So we're going to run out of oil demand before supply, and that's where all the capital allocation mentality completely flips from sort of i'll lean into it into fear. That's what's driving kind of what could be perpetual tightness now in terms of windes the oil

age end. The way we think about oil, we we divide oil into six big buckets, and reality, oil into a refinery produces dozens and hundreds of products. We think about gasoline for passenger travel, diesel for think rail trucks, trains, vessels, marine vessels, and then pet cams for plastics, jet fuel for air travel, and then into more obscure buckets. The obvious bucket that gets disrupted is gasoline, right, So e v s attack gasoline demand to some degree, the hydrogen

economy attacks diesel demand. But even under a range of reasonable assumptions, oil demands should rise into the twenty thirties, perhaps it's ten percent higher than it is today, and then it enters kind of this gradual plateau. We as a planet are still looking for ways to substitute jet

fuel air travel. Air travel grows with GDP, So if GDP not this year, but if GDP grows three percent a year, then jet fuel demands growing three percent a year and compounds in the next ten twenty years, how do we substitute air travel in any meaningful time frame. So so the answer is, think of a plateau. Think of the thirties is where that plateau starts to be visible, and think of the supply side of the equation being much more afraid of that plateau than the demand side.

This is a tough question, I think, but in your opinion, when it comes to encouraging that transition from gas and oil to a more electrified future, what's the best way or the most effective way of doing that. Is it something on the demand side. Is it trying to you know, encourage a better or a larger supply side response, or is it you know, government intervention coming in and subsidizing things like electric cars? Like what is most effective here?

So the subsidies have been the past. People have accepted Norway is the perfect experiment meant for the energy transition for e vs, But we have yet to see, for example, Norwegian oil demand roll over significantly. And so I think the answer is, and what Norway has done is through subsidies. And of course it's a well developed economy, it's a wealthy economy, and they can afford those sorts of tools

that a broader adoption just can't afford. And so if you can't really tackle it on the demand side, you have to tackle it on the supply side. Now, selfishly, I would argue that the mining side, which I also cover, is the obvious bottleneck. And so in theory, supporting mining in your home country, in your home region, we're supporting mining in general the industry. If you think about I spent a lot of time thinking about shale, right, So shale was a massive disruptor to to what I did

for a living for a long period of time. And shale was a manufacturing process that we did a hundred thousand times, and we drove the cost of it down massively just through that classic learning curve. As we look at building e vs, we're going to go from a planet that's sold ten tho ev s and then a hundred thousand and now north of a million, will get to ten million someday, and those learning curves will just reduce the cost of all the manufacturing parts of the

e V supply chain. But you know, mining the extractive industries just following a different drummer and those get tougher over time. We drill the best wells first, we find the best copper minds first, we mind the best grades first, and so to me, encouraging the supply side, the metal side of the battery revolution, would be something policymakers could do. And frankly, that's the toughest part because it's the one place where local s G issues are fighting full force

against global E s G issues. I'm really fascinated by this idea that there's a shift in mentality when everyone went from talking about peak supply and I think, you know, we all remember I used to read the Oil Drum that blog years ago where everyone talked about like peak oil and we're going to run out of oil, and that was a great resource. I'd love to have them back now because the people on that site would be

great contributors to sort of the current discussion. But I remember, you know, peak it was like this huge thing, and now, as you mentioned, now it's all about the concerns over peak oil demand, and that's really changed this sort of

mentality and calculus of the industry. Is there anything that could flip it back in terms of the industry really wanting to ramp up investment again, or do you think this is going to be a long term I don't know if permanent, but a very long term persisting thing where even with soaring prices and actual oils come down a bit lately, but even with highly elevated prices, that impulse to really expand production just isn't going to come back.

It takes some fairly sci fi scenarios. During the pandemic that we were spending as a plan at roughly three billion dollars a year on on upstream oil and gas. Pre pandemic, it was half a trillion, five billion, and then back in the glory days of too much capics, it started to approach a trillion. So the idea that it ever gets back to those levels it's just hard. We know the typical USC and P doesn't plan to

grow more than three. We know the typical European integrated energy company is ex oil growth and is reallocating capital to the energy transition from mobility, solution, renewables, etcetera. And so you're kind of left with OPEC plus to not only increase their capital, but increase it enough to offset the following capex in these other buckets and for them to do that would be sort of willingly flood the market to take control. So that seems that first blush blush, irrational.

So yeah, except for a world where a sequestration techn leques direct direct their capture worked, and we could flip a switch for next to nothing and put all the CEO two that we needed away, then you'd say, well, we solved the externality. Now let's go produce more hydrocarbons. But that's decades and that's more than decades away. This is also an extreme question, but it isn't. I feel like you you have these like deep thoughts on the industry,

so we can ask you these questions. But is nationalization a possibility here? Like we have seen some instances of that in or at least one instance of that in Europe. And if you think of an industry that you know it's responding rationally to what the market is telling it. But the other hand, you know this is a vital resource. People need oil at reasonable prices in order to live their lives, at least at the moment. Would something like

that makes sense. I spent years as a management consultant serving a huge host of national oil companies and there is a spectrum of extremely high quality national oil companies and extremely low quality ones. It's a bit of a philosophical view, right, can can the state be a better deliverer of volumes than the private market? Clearly on the choice of utilities, most nations have decided that utilities need to be heavily regulated but still stay in private hands

with a very strong government overprint. And that's more or less worked, sometimes less so than others. But the wholesale nationalization by and large is not succeed e did for the typical oil company. And part of it is if you think about an oil company, that their core capabilities are taking risk, managing contractors, and allocating capital, and putting those three, especially risk taking into political hands generally just

the the incentives to start alive. I want to ask about another niche commodity because you wrote about it and it seems instructive. The first chapter of your big paper is about rubber and how we actually have a superior technology that exists today to rubber, and yet rubber hasn't gone away. What's the story there? I found that really interesting. It goes back to the days where if you were

smuggling rubber seeds or saplings out of Brazil. The penalty was the death penalty, right this This was a commodity that made parts of Zil extremely wealthy. It was a commodity that during wartime was it such high demand that we launched effectively in Manhattan project to try to find synthetic alternatives. And so, by and large, the old approach to rubber was a plantation. If you grow rubber plants, you harvest them and you make natural rubber, and then

synthetic rubber. Petrochemical pathways were determined that could make synthetic rubber, and they each have slightly different properties and they exist, they coexist and kind of a share even today. And so rubber, if the analogy is electric vehicles, I think a lot of people that follow sperbs and think about adoption, think about buyin ay or zero percent. You know, if if e vs turn out to be like rubber, you

get to a penetration. There's lots of internal combustion engines, lots of e vs, and rubber tells you that that's a plausible path. Since we're throwing out random commodities, can I ask, can we make a game show now to fertilize it like commodity. Commodities with Bob, commodities with bracket for the audience, just throw. Let's do a live event with Bob and the audio. I think commodity out and he can tell the history gets to throw commodities at me.

Let's do it. Okay, we'll plan this. I think it'll be a fun event. Nothing unsafe though, like mercury, that would be bad. Okay, Uh, random commodity, it's not really random. But can we talk about copper for a little bit, because I think this is one instance where again the short term versus long term trajectory, or the tension there

comes into play. Because we've had people on the show, notably the analysts over at Goldman Sacks, talking about how they are extreme dreamely bullish on copper over the longer term, and I think most people would agree that if we are moving to a more electronic future, we will need a lot of copper in order to make that possible. But on the other hand, if you look at a chart of the copper price right now, it's down a lot. It's down a lot. Yeah, scientific term, it's down quite

a lot. So clearly like there's a mismatch there between the long run expectations and the short run expectations. So how are you thinking about copper? So the nickname that Copper earns is Dr Copper. Copper has a PhD in economics. And in the short run, we have tools where we from Bloomberg pulled every macro indicator you can think of and see what correlates best with copper, and copper can smell the economy better than just about any other commodity.

And so in the short run it's extremely rational what copper is doing. It's smelling some level of recession and it's responding. In the long run, it's phenomenal. But so in the short run, the good news is we know as far as copper can fall. So, for example, when copper minds get to zero ev to when the cost of that worst ton of copper in the market equals the revenue of that ton of copper, those minds go

to care and maintenance. And that's a great way to sort of prevent the free fall in all but the worst recessions. And so you know where your downside is on copper. On the upside, you know, the very simple way to think about it is the planet uses about twenty million tons of copper a year. Of mind copper, each e V we add is about point one tons

hundred kilograms. So if we get to a world where every vehicle is an e V, that's a hundred million rounding up vehicles a year, that's ten million tons of copper.

So we've got to not only keep the copper demand in the broader economy at that, we've got to add ten And in a world where we have watched copper grades fall for a hundred years, in a world where e s G issues around local community saying, wait a minute, why do I have to bear the brunt of mining to help the EV market some electric vehicle in the O E C D for example, right there really is a strong mismatch between where that demand could be in that supply. So we similarly look at are very bullish

long term copper. There's some people that look at the high price of oil right now, the high price of natural gas, and they say, like, good, this will accelerate the transition, This will encourage more market forces to you know, invest in battery technology or people to buy e v s, etcetera. On the flip side, though, tens and particularly the second half of the times, even after oil crashed, like is essentially when the ev industry grew up or it really

started to become a thing. And obviously Tesla had a phenomenal decade, basically invented the modern industry, and now all these other car players are scrambling to catch up. The twenty tens were also a really big decade for installed wind and solar capacity around the world. So even in a period of low commodity prices, it didn't seem to be an impediment towards a rapid expansion of renewables and alternatives.

And so I guess my question is do high prices actually proved to be an accelerant of transition or new technologies or is the price mechanism or the short term price mechanism kind of irrelevant for the longer term transition. So I think the jury is out, but I'll throw out So one thought is what you mentioned is almost a second order thinking, which is, hey, the price of oil is high, that will hasten substitute shouldn't let me

invest in the substitutes. The first order thinking is the price of oil is high, let me invest in oil, right that's kind of the simply yeah or coal or so um. You know. The other thing I'll throw into the mix is high stable prices are much more likely to drive substitution than the incredibly volatile prices that we've seen. So to some degree, the fact that oil was negative two years ago, was okay last year is great right now, doesn't provide a stable competitor against which to plan the

energy transition. What about here, like the role of government, so sitting aside nationalization, Are there other things governments could theoretically do to de risk production? You know, you mentioned every resource player is worried that the last ten years of the life of this mind will actually be a zero because the transition is coming. Are there other things that policymakers could do too? Do you risk some of

these decisions? What policy makers should do is reduced the demand for the things they want to get rid of and not subsidize that demand, even though in the short run that's quite painful, and it almost harkens back to Jimmy Carter where President Carter told the nation were a sweater, reduce speed limits to fifty. So there's lots of things you can do to reduce demand we have not seen the political will to do that, and in fact, some

of those efforts get mocked. Right, So instead of reducing speed limits this time around, we've reduced taxes on gas right, right, And so that's counterproductive if your goal is to reduce the price of something. Subsidizing the price of something doesn't reduce its demand. But but telling Americans, for example, hey COVID. During COVID, we were very effective at reducing oil demand. So we'd ask all of you to stay home for another year to reduce oil demand feels like a nonstarter.

I would be very favor of that policy at any mention of more reasons to work from home. I like commands to the office, but I like recording in the same studios. Thank you, thank you. Yeah. So, certainly, in in the short run, markets will do what they're going to do, and a lot of what we've talked about is kind of that long run. But yeah, I think the answer is when we come out of this recession, we're going to go back to a world of lower rates. Right in the long run, our our strategist has a

chart showing interest rates for thousands of years. They all trend towards zero. So someday rates will fall again and someday that will incentivize investment. But that investment, right, we need to spend a lot of money, not in the metaverse, but back in the physical world, and it's going to be rebuilding our energy systems, maybe building redundant energy systems, given how geopolitics has has caught everybody up this year, and we've only got to underpin our old energy systems,

the hydrocarbon based ones. We've got to build electrical based systems. And so there's just gonna be a lot of activity in the physical world once we get out of the time we're in now. This metaverse thing is proving to be a real distraction. I mean, it's like we have a lot of work to do in the in the real world. Yeah, of like actual molecules instead of pixels. Like we gotta get we gotta get people focused on the real world again, don't I I feel like that's

what we've been doing for the past two years. I was last week in eastern Namibia at a site visit for an oil and gas explorer out there, and to see a local Namibian collecting seismic data dressed like Iron Man with these nodes that he's pushing into the ground that are GPS linked and he's collecting data truck and you look and say, that is so much more sophisticated and interesting than the next app that gets me my burger,

you know. And we talked about this, We did a recent episode with Peter church Sack in about like this idea of like how much the sort of talent drain that the that the extract of industries have seen, especially over the last decade, and for all kinds of reasons do people not appreciate, like how much tech is involved with extraction these days? And like is there a lot of exciting tech on the horizon, even if it's just to get better like you know, finding natural gas or

finding other resources. Yeah, it's a completely missed story. And if you think about g p US, before Crypto needed GPUs for minding the oil and gas industry was buying everyone they could for doing seismic processing and interpretation and three D reservoir modeling. And so it's an extremely data intensive industry, software intensive industry, tech intensive industry. The capital projects are bigger than anything we do short of mood launches, and it's just sort of assumed to be part of

the old economy. So, yeah, I'm a huge proselytizer for for how cool oil and gas tech is. I was going to ask. This kind of raises the question of why venture capital doesn't get more involved in this space. Is it just it's easier to go into software with you know, lower startup costs and less capital actually needed versus big, you know projects in the real world. Yeah, part of it might just be that sort of capital is the riskiest taking capital, and so maybe they're looking

an oil and gas field once it's in development. Yeah, it's reasonably well understood what the economics could be, and maybe venture capital is looking for things that could massively disrupt the future of the World's not clear to me. Well this was such only for the value Oh sorry, I'm just gonna say, yeah, for lateral thinking. I would encourage any investor to spend as much time thinking laterally as they can, even if it's an obscure think laterally,

what does that man? Just you know, stepping out of your sector of the market and just looking across the market, looking across history, just saying you know, what does this resemble, what does this feel like? What sort of interesting angles that other sectors have taken that could be applicable here. Bob Brackett, this is a real treat, very interesting thinker on these questions and sort of like kind of mind expanding. So appreciate you so much for coming out online. My pleasure, Joe,

my pleasure tracing so much. Thanks so much. That was great. Yeah, that was like, that was really good. Uh. That was this idea that like, commodities just don't get disrupt dude, that they live on forever. The fact that there's been a war on coal since the since the thirteenth century. It's like really useful stuff I think to appreciate when thinking about these problems totally. I love looking at historic

parallels for these types of things. And the one thing that struck me like, yes, absolutely, energy transitions or transitions away from commodities never seemed to be linear and they

never seem to happen completely going by history. But the other thing that I thought was really interesting that Bob pointed out was this idea that there is an assumption that as people start moving away from a commodity, the price will go down, but demand is only one half of these supply demand equation and so if you have capacity cut at the same time, then prices can actually go up. Yeah, that's a that's a really important idea.

And again I think we sort of got lulled into, you know one is again we think in the frame of consumer tech and like a new you know, flat screen TVs come along, and then whoever still holds the stock of you know, normal TV, it's like sells them super cheap just to get rid of the inventory. Right. And so that is the frame that we think demand for something goes down and then whoever has it just

sells it for very little. But in the case of Capex heavy extractive industry is everyone could see those charts. I don't know whether it's gonna be that like oil peaks, but everyone's looking at those charts, and you could have a situation where because demand is going down, supply contracts

even faster. Right. And the other thing that struck me, I really like the phrase Bob used was a local E s T versus global E S G. Because this is something that you know, we recorded an episode on this recently when it comes to Chile and deserts and things like that. But it does seem like there is a tension here the sort of like everyone agrees that we need to get more metals out of the earth in order to electrify our future, but no one really

wants to be the place that's actually doing the mining. Yeah, it's a real big tension because as we know, like rich countries more e vis large corporate interests in decarbonization, and everyone has their like climate goals they're zero or whatever, and every company wants to tout it green credentials, they're offsetting all their emissions or whatever. But on the other hand, these industries like copper, like lithium, etcetera. They damage the

water supply, they may damage the air supply. Like these are like really dirty industries on a local basis. And this tension, I'm sure it's only going to increase. And the math that Bob laid out about copper demanded like

this can be a huge burden. Yeah. And the other thing that strikes me is like it doesn't really seem like there is a role for the government to play here in trying to smooth some of these cycles or offset some of these like longer term motivations and concerns, maybe not as extreme as outright nationalism, which I don't think would happen in the US at least, but other ways, as he outlined, Yeah, and of course we you know, we had that recent conversation with Sconda and Rory about

could the spr be used to smooth the booms and bus And in theory, that's a model that could be applied to other commodities, etcetera, to create that guarantee of demand so that people aren't terrified by demand curves that uh, you know, eventually start turning down. But it's gonna be really tricky, all those scary demand curves. 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 on Twitter at Tracy Alloway. And I'm Joe Wisenthal. You can follow me on Twitter at The Stalwart, follow our producer Carmen Rodriguez at Kerman Arman, and check out all of our podcasts Bloomberg under the handle at podcasts. Thanks for listening year to