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Hello and welcome to another episode of the Odd Lots Podcast.
I'm Jill Wisenthal and I'm Tracy Alloway.
Tracy, are we calling it a nuclear revival yet?
No?
I mean for real, like, is that a thing?
You know, what's going to happen? As soon as you start calling it that, it's gonna like peter out, Ugh, fizzle.
Don't say that. Don't say that. Some people would say, we saw the recent three Mile Island news, We've seen some other things of that nature. Some people would say that, at least in the US, there's something of a nuclear revival going on.
Yes, you know what I find kind of funny is if you look at one of the price impacts of a nuclear revival, it's uranium. Yeah, but uranium started to go up, I think right after the pandemic, and now it's come down a little bit from its heights, its recent heights. So it's kind of funny, like it's sort of acting like a meme stalk.
Yeah, there's literally what I was saying. I was gonna say that for a certain portion of the public, uranium is like bitcoin. There's certain assets out there that have these sort of cult like things where it's not just that people are bullish, but they think that like in the future, if they're smart and savvy enough to get in now, they're going to make this huge fortune. And I would put Crypto in there, and I would put the people who play those like stub Equity of Fanny
and Freddy in that category. And then there's like the uranium cult on social media, who thinks like, we're gonna buy uranium and one day everyone will wake up and realize that nuclear is the future of energy, that all electricity will be powered by nuclear, and those of us who are smart to get into uranium now will be the new inheritors.
Of the Earth.
You know.
The funniest thing I saw when this became a thing back in twenty twenty one. So there's a uranium market subreddit, of course there is, yeah, And someone posted on there that they're a broker for physical uranium. So if you're interested in buying physical uranium, you can buy it in like one hundred thousand pound increments. So I don't even know like who the target is for this, Who is the retail trader that is buying one hundred thousand pounds of uranium and presumably storing it somewhere.
One day that person will have the mandate of heaven. But the question is when will that be. Even if there is a nuclear revival, even if all across the rich world they like nuclear is the way to go, what does that actually mean for the price of uranium. I'm not really clear.
Yeah, me neither.
Well, I'm really excited to say because we do have the perfect guest. We're going to be speaking to someone who knows everything about every commodity in the world, as far as I could tell, at least related to energy commodities and maybe metal commodities. Two, he's someone on the cell side, you know, Tracy, there are a few people on the cell side, not many. Many people on the cell side are worth reading. There are some people who's writing.
I consider it to be a crime that they're locked up within cell side, because it's so good and so interesting that it just shouldn't be the type of thing that traders click on for five seconds. And we're going to be speaking to one of them.
Yes, actually, this analyst. I think their research does get published in a book. Oh yeah, every once in a while. I have some of those some old ones and they stand the test of time, which is something that you can't say for all cell side research.
No, you absolutely can't. So we are going to be speaking with the one and only Bob Brackett, literally the perfect guest. I've had him on the podcast before. He is the head of America's energy transition at Bernstein Research. But what's your deal, Because, like I.
Said, you do a deal.
You know, like when I read your report on uranium, you're going into the science of how it's mine. You're going into the science. You have a copy and paste of Einstein's letter to wrotell talk about how this uranium thing could be big for bombs and electricity and so forth. They don't really look like typical analyst reports.
Yeah, so I think the challenges I'm a geologist living in Manhattan. There You've got a handful of jobs, and I think I've had two of the best. I was working with HAS Corporation for many years. I've been at Bernstein now more than a dozen and so the answer is, my whole lens of this planet is a cyclical commodity investor.
And how do I think about cycles? And it's always depletion based, So anything that depletes naturally, other people run away from I tend to run towards, and uranium is right in that wheelhouse.
Okay, I have a really basic question what is uranium? And also what is enriched uranium? Because when I hear that, I always think are we adding B vitamins to it or something? And then also what is yellow cake? And why does it look so delicious?
Well, we'll start with yellow cake because that's where we start geologically. And the funny thing about uranium as a mind commodity is most it is drilled for, and most of it looks more like an oil and gas operation. So the majority of uranium yellow cake U three eight comes out of the ground through insituo leaching. Drill a well, pump fluids down to a sandstone reservoir, and pump up and treat the yellow cake. So yellow cake is U three eight. It's a uranium oxide. It looks nice and yellow.
It is not terribly dangerous because it is mostly a very stable form of uranium. So uranium has isotopes if we go back and remember our nuclear chemistry, and so most of yellow cake is U two thirty eight. I send that to an enrichment facility I spin it up, I get rid of the oxygen and replace it with fluorine for chemical reasons, and then enrich it to power plant grade, and then I can keep enriching it to weapons grade. But hopefully we don't go that far.
Hopefully the person buying one hundred thousand pounds on Reddit isn't doing it. Earlier, you know, you mentioned depletion is being this core lens for which you maybe view the entire world. And I remember the one time we talked to you before was very eye opening conversation because I think the thing I took away from it is and I think the way we from it disruption does not exist within commodities the same way we think of in tech and commodities. Almost they basically never disappear and they
never go absolute. Maybe with the exception of whale blubber, which I don't think we use for lighting anymore, But by and large, this seems to be like a core gious of yours. I remember you wrote a great thing on the coexistence of I think it was synthetic rubber and regular rubber, but this idea like they just stay, They'll be with us here forever.
Yeah, we were using whale based lubricants in the space age.
There you go, we stopped.
Okay, yes, but yeah, So the answer is if you're in the depletions based business, imagine COVID, where everybody on the planet started hoarding things because they worried that it was going away and it couldn't be replenished, and we did it again with the most recent couple hurricanes. If you're in the natural resource business, you wake up every day knowing your business is going out of business and think how crazy behaviors were in a hoarding sort of world.
And that's the business model. And so in one, it creates this strong desire to go replace resource and if incentives are bad, that's kind of crazy. But two, it's this constant treadmill. If the industry stops, the market rebalances.
So what does the supply of uranium look like right now? How much is out there and how accessible is it?
So yeah, roughly there's about two hundred million pounds of uranium a year. And I do want to say that we didn't really talk about what we were going to discuss, and so I'm.
Oh, yeah, sorry, So I'm coming in a little cold, but perfectly happy because uranium is something that's been in my head and it's had this a lot of client interest in the last year, and that sort of inflected.
Up just in the last months.
Okay, So we were reading your clients and you sense the book. Okay, okay.
And so it is a small market. So it's two hundred million pounds, and when you ever hear a million, that sounds like a lot, but then you divide by two thousand pounds per ton, and it's one hundred thousand kilotons. And to put that into context, I'm going down next month to Escondida, the world's largest copper mine. It moves a million tons a year of just copper, and so you could fit ten of the entire uranium industry within a single copper mind. So it's a very small industry.
It's an industry that sells to one customer a lot of commodity. Like copper goes into all parts of the economy, uranium goes into nuclear power. But it's very small, it's very regulated. And there's been this challenge between local ESG and global ESG and the energy transition, which is to say, I'm going to go into your remote community in South America, and say, for the good of mankind, we need one hundred thousand tons a year of copper so that we
can electrify the economy and reduce emissions. In the middle of your backyard there's going to be a several thousand foot open pit mine, and that local community says, not a chance. I don't want that. That's hard enough to do with copper right now, Think about uranium. Think about trying to pitch a local community. This will be great for jobs, it'll be great for investment, it'll be great
for tourism. We're gonna mine for uranium, and so as a result, the ability to rapidly bring on uranium is pretty challenging, which kind of suggests market tightness.
Joe, I love that we didn't actually tell Bob that we're going to talk about uranium. But you've already given us so much interesting and knowledgeable stuff, so thank you for that.
I realized sometime this morning that we actually had never told what we're going to be talking about. But I also knew just from reading Bob that it wouldn't be an issue at all, and that he would have to be totally comfortable and keep him on his toes a little bit Now I realize we're working in the audio medium of podcasts, and so this is going to be
a little bit of a tricky question. But to the extent that you can, can you summarize essentially like you have a chart in your recent uranium note that I read, give us the sort of medium term history of the uranium price and why it went up and down over time.
The most important thing about uranium when we think about commodity prices in general, I'm pretty good about picking the middle of the cycle. It's the marginal cost of commodity, and I can find the bottom of a cycle very well. Miners refuse to give metals away for free. So when the ebitdah of a marginal zinc mine or nickel mind goes to zero, that mind goes to care and maintenance and stops producing and price recovers from there. It's the top of the cycle where pricing is the hardest to
figure out. But historically what happens for other commodity sector is it's demand destruction and or substitution. So those are the two things you look for. So when copper price flies up, then aluminum becomes substitutable. And if aluminum price doesn't move, well, I'll just use aluminum wiring in this transmission with uranium one that power plant. The cost of uranium into the power plant is a rounding error once I've spent the billions and something.
This is really key because we talk all the time about the cost of nuclear and construction. Uranium itself basically never comes up.
It's under one hundred bucks a pound, okay. And if you think about running a coal fired power plant, you are moving millions of tons of material into that plant every year. With uranium, it's thousands, right, So it's a remarkably dense, obviously source of fuel. And so once that plant is built, there is very little evidence that that plant ever shuts in on uranium price. And then you
combine that with the structure of the industry. If it's a utility and it can pass price onto the rate base, well then it's not taking the full brunt to that price straight to the head. So we don't see substitution on fly ups for uranium. We don't really see demand destruction. And it's also one of these markets that is very difficult physically short or commercially short. And so those are the three Boogeyman's at the top of the cycle.
They don't seem to be obvious who are the actual players in the uranium market because I remember, again, like going back to twenty twenty two, I think people were talking about the price going up because there was a new physical ETF that came out and was buying a lot of it. And to your point, it's a relatively small market, so presumably that kind of action could also push prices.
Yeah, so two thoughts there. So there was this investment vehicles, there was a spot uranium physical trust that is. But I always go back to eight nine where the price of oil shoots to one hundred and forty bucks a barrel, and there were investigations from Congress and was it the speculators?
Was it Wall Street that caused the price to skyrocket? So, and there was never a Purp walk, And I figure even if there was half an excuse for a Purp walk, they would have found somebody to walk out of a building somewhere in our neighborhood all those years years ago. And so in my head that I don't believe that the speculators can move for any sustained period of time in the commodity. Sometimes they can see the trend and get into it before it takes off. I think they
just saw a fairly obvious trend. I should say. The fourth thing that can kill uranium prices, and it is the one out there that if you're kind of long uranium uranium stocks you have to be aware of are nuclear disasters or nuclear accidents. And so if we look historically, yeah, the price corrections down on uranium always came on the back of Fukushima, or they came on the back of Three Mile Island.
So when were the big peaks in uranium prices? What was going on in the world. I mean, even setting aside, we know what caused them to go down, what was going on in the world at the time, and which years that there was a real uranium bull run.
They just kind of drift up, and so in real terms they never get much above where we are now.
So our price decks about one hundred bucks a pound, so you never see thousands or two hundreds of pound, and you just have a market that absorbs uranium regularly at a price that doesn't care and then recorrects on disasters where shut ins and fear of future plants causes the market to go and then you'll typically fall to twenty thirty forty pounds, which is the cash cost where somebody says, I'm just going to leave it in the ground.
How is it actually stored? If I'm that redditor who's interested in buying one hundred pounds of physical or I'm sprought, what am I actually doing with this uranium?
So once it's enriched, there are extremely strict guidelines on the types of organizations and the type of regulators that watch you store it. In theory, yellow cake is stored at mind mouths and can be stored in the supply chain, but enriched uranium is extremely heavily regulated. So companies like Camiico, for example, might have regulatory authority, but not Joe uranium wall Street on Reddit.
What causes demand to change in the short term, So I imagine if the US was like, we're going to really go nuclear crazy and we're gonna and we'll get to all that about your prospect for nuclear but I imagine demand would go up. But in the course of a year twenty twenty four, where we see what's out there and we see the utilities and what they need, and we know there's not suddenly going to be a new nuclear plant tomorrow. What does the demand picture look like?
So two ways to create uranium demand one and we've seen a bit of both. One is to build new power plants and the second is to turn the old ones back on. And so if you think about three Mile Island being reactivated to support and Microsoft, imagine the junior strategist that went to Microsoft's board and says, you know what, aipower demand is huge. We need a cheap, ratable, dispatchable, flat base load of power to supply it. We should invest in nuclear power. And I imagine somebody higher above
that person said, are you an idiot? Have you ever heard of three Mile Island? And this junior strategy said, yeah, that's the one. We should turn that one back on. And the fact that it vetted through and it's not just Microsoft now every big tech company is associated with nuclear investment, and they have all gone through this process of what do they need based electricity of an unknowable
demand growth and where can they get it? And so whether it's funding new SMRs, small modular reactors, or reactivating the existing ones, it's been a remarkable inflection point.
And then when all these headlines come and suddenly everyone wakes up that all these tech companies are going to want some nuclear play. What's happening on the producer side, because I imagine they can't just turn a switch right away and have more what's happening on the supply side when these headlines hit.
So on the producer side, the good news is again it's a smallish market and it'll move relatively slowly. So the real inflection would be around small modular reactors because reactivating closed reactors. You know, we've got one up the Hudson, you could reactivate theory.
I guess I'm on the mining side.
So on the mining side, I think the miners need a price signal, which they have, They need regulatory approval, and then they'll start to go out and reactivate some of these mines. They'll start in the US and Canada. Right the Canada already it's certainly the Athabasca region. There's plentiful uranium resource there, and there's a range of places in the US you can find uranium along the Gulf Texas. You can go find it out in kind of four
corners out in the west. So the resources there you don't need huge amounts of capital, and we're starting to get a signal for a response, and then you go further remote on the cost further remote, I should say, not on the cost curve. Namibia's got a fantastic endowment. Russia, Kazakhstan have endowments, and that's where this supply is ultimately going to come from. From a security of supply, clearly the US and the Canadian stuff is closer to home.
What's the time frame for this? Like, on average, how quickly can supply ramp up?
Forever? In two years? So roughly we are measuring copper mine life cycles in a decade now, right from a maiden resource to first production. So even the easy stuff is really measured in half a decade to a decade. And so yeah, uranium, if it's quick, I'd be stunned. If there's a big supply response in less than five years, that seems hard to see. If five to ten you start to get a response, and again, because the volumes are small, we could start to balance the market them.
So the price of uranium is obviously tied to the prospects of nuclear energy, but nuclear doesn't exist in a vacuum. When it comes to the energy transition, and there are other options out there, like solar or wind. How do you kind of evaluate the cost for nuclear versus wind and solar.
And there's two end members. In reality, it always sits in between. So the primary end member that everyone talks about in the energy space is the levelized cost of energy. And Blizard, for example, has been studying this for decades and putting out great work. And the idea of levelized cost of energy is I need an electron, I need to charge my phone. I don't need to charge it all year. I just need to charge it now, and that would be levelized cost of energy, and wind and
solar are remarkably good from that standpoint. Then there's the other end member, which is, hey, I need to power a remote Antarctic field station right something way off the grid, and I need it base load twenty four to seven for a year. And if I don't have baseload, if I have intermittency, if the sun shines doesn't shine, then I need batteries to support the rest of the time. And so if my sun shines one percent and I need the other ninety nine on batteries, I got to buy a lot of batteries.
So ELCO wouldn't take that into account, right, so.
ELCO wouldn't be a levelized full cycle or full system cost of energy. Adding adding letters to the acronym does, and then nuclear starts to shine because it is just it's built to be baseload.
We've done episodes. We've done a lot of episodes on renewables and some on batteries and the intermittency issues that arise with renewables. We've done episodes on nuclear. And you know, there are people who think it's going to be an all Like I was at a conference last week, and a day at that conference, I was like, I'm convinced the future is all solar. And then I'll talk to someone else and like, the future is all nuclear. And my gut would be that the future is not going
to be all of one energy source. But how would you go about thinking what will determine what that ultimate mix looks like? Imagine a fully electrified economy. What is it policy decisions, is it technological breakthroughs? What ultimately been your view will determine the share that will be nuclear vers solar versus maybe some wind.
So I sort of dismiss these all or non hypotheses. Because of the world we live in, you can barely We don't have a single type of telephone, we don't have a single type of carbonated beverage, we don't have a single beer in the market, etc. So you kind of go down and there's no obvious reason why modern
economy needs one form of electricity. So it's it's going to be a big balance, and the way to solve for intermittency, there's kind of three ways to do it, you know, One is nuclear create energy that's baseload on all the time. The other is batteries where I can sort of offset the intermittency. And the third is sophisticated grids. Right if my grid is big enough, Right, if I've got a cross European grid and it's windy and Norway, but I need my AC in Spain, the grid can
solve it. And so there's this sort of competition between I mean, investing in the grid, which we're not doing enough of globally, investing in cigs.
Just to be clear, when you think about what share of the electrified economy will be powered on nuclear, what things will go into that determination.
So we expect that if it grows it's going to be less than ten percent, right, it's going to be it's not going to be a dominant form of energy simply because we would have to build so many reactors so quickly and so generally. The way we get at our long term view of what electricity demand from uranium is is you can take an iea net zero pathway, or you can take the sustainable pathway and it gets you something like gdp ish growth from a base of ten ish percent, and it's always going to be there.
So it's always going to be part of the mix. What you're seeing is a customer base that really really wants it and has deep pockets. And so if you've got big tech throwing research and development funds, then you can start and say, well, well maybe it inflects high and maybe small modular reactors come quicker.
And what's the higher is at fifteen?
Yeah, it'd be that sort of tune. Right, It's never going to be there's no obvious reason it has to be the majority.
So since we mentioned batteries and we're talking about uranium, I wanted to bring up a sort of another MEMI type thing, which is lithium. So if you look at a chart of the lithium price. I mean, it looks like a bubble, a bubble that burst. What's been going on there?
So on this l side on Wall Street, they are perma bulls, and there's perma bears, and then I'm something of a perma cycle. And so my general response is this two shall pass. And so lithium prices were high two years ago, and I would have said, and we
did say this two shall pass. They're low today, measured in ten bucks a kilogram, sorts of levels in this two shell pass, and we would say not returning to that eighty dollars a kilogram from the whipsaw effects of the post COVID and but really think about building back from ten to maybe fifteen dollars a kilogram in the near term towards twenty. It's not a terribly hard commodity to extract, it's not terribly scarce, and we've terribly over capitalized it for the next couple of years.
I imagine that within lithium, and I'm just imagine, like I said, I'm just imagining that there is a lot booming demand from the electrification and the batteries and literally everything, and that is a bullish force, and that batteries are getting better and better and better and more efficient, and that that is a bearish force for lithium. Tell me, Ave, that's right. But more importantly, how do you think about these two headwinds and tail.
Yeah, so for a period of time, I always want to be a copper bowl and I want to be an oil bowl. The two things that undermined the combined thesis are hybrid electric vehicles. Because hybrids they're fuel efficient, right, and they carry very small, at fifteen kilowater batteries, whereas a big battery electric could have a fifty or one hundred watt kill a wat battery. Lithium into those batteries
is linearly proportional to the kilowatt hours. And so what we see now globally is for the last two ish years, battery electric vehicle sales year on your growth is plummeted and is kind of getting toward flat year on year. Hybrid vehicle sales have been growing fifty percent year after year after year. So we're seeing a world where hybrids are winning the growth. They're still the minority of the vehicles,
and that's bad for lithium. It's bad for copper because copper scales as well, and it's kind of bad for oil. And we were told for years that hybrids are complicated, they carry two independent modes of travel. We need batteries electric because they're so simple, and we're kind of coming to a world where people are moving back ish towards the hybrids. So at a time where a lot of capital went into lithium mining and lithium brining, we woke up and saw ev adoption break fifty percent in China.
So the majority of vehicles sold in China now are electric vehicles. But the challenge is the sizes and the styles are not as lithium hungry as we would have thought.
Joe, should I just keep throwing out commodities and Bob can talk to them. Okay, let's do gold. Speaking of you know, there we go. But I mean, the price action in gold has been just kind of crazy recently and record highs, So I feel like I'm asking the same question over and over. But what's going on there?
So that this is one of the ones Most of the time, this too shall pass. If it's high, it goes down, if it's low, it goes up. If it's in the middle, it'll stay in the middle. I'm still in the view we have burnste here, still in the view that gold works from here and a couple ways to think about it, which is always kind of the supply and demand. We've gone back and looked at every rate cut cycle, and we've looked at every individual rate cut.
In a world where rates are being cut, check and where the FED succeeds in bringing long term interest rates down, gold has always gone up. And so our view is if you think the FED succeeds, then gold goes up. Where we struggle is to what level. One The speed at which gold has moved this year surprised even us,
and to the level is a bit tricky. On the supply side mining companies, gold mining companies will brag about or grades that are a gram per ton, one per ton, that's one part per million, And so to make money in gold mining, you have to take a ton of rock, blast it out of the earth, grind it to flour, find the one part out of that million, and that is worth ninety bucks today. Right a gram of gold.
I've got to make a business of finding a needle in a haystack, and I got to do it for forty or fifty bucks a ton, and I've got to safely disposed of that deposit and then move on and find the next one. So it's a tough business.
Has the cost of blasting out that ton and finding that graham come down with technology.
Long term, Absolutely, it is stunning the ability. I mean, the fact that you can make money pulling one parts per million out of anything is remarkable. So the scale at which the mining industry is efficient boggles the mine. Come to iron ore. Iron ore is almost all iron. I can move a ton of iron ore from the Amazon rainforest safely to China for forty bucks a ton. I can't get someone to deliver most dinners in midtown for forty dollars, And so the efficiencies of the mining
industry boggle the mines. Now, having said that, it appears is if geology is fighting back, right, it is getting harder and harder. The average copper mind gets deeper and deeper every year. We're moving to higher elevations, we're moving just more difficult regions. So geology is always in this fight against technology and innovation. The fact that most every commodity you buy from the earth mind metals are like ten bucks a kilogram is a testament to how well
the industry's done. But it should grind. Costs of metals should grow faster than inflation.
You know what else has been going up and this is very exciting for me personally. Here's my disclaimer of firstwes Well, no silver. For some reason. My dad every year for my birthday sends me one silver dollar from his collection, and because I'm getting old, I have quite a few of them now. So silver has been going up. It's not quite at a record, but you know, it's sort of been following the path of gold. Is that just an echo of the gold player? Is there something more fundamental going on?
For most of this year, there's been this funny split between the precious metals platinum, gold, and silver. Were the more useful the metal the less it went off, and gold is the least useful of the metals. Right, there's very little real utility for industry, and silver is actually quite useful, especially if we think about the future of solar energy and so on the silver front, we like silver. And finally silver's beating gold this year, so silver's kind of broken out a bit.
Oh, I didn't realize that.
Yeah, just in the last few weeks. And what's interesting is if you went through the list of the forty largest mines that produce silver, one or two of them are silver mines. The rest are lead zinc mines, or gold mines or copper minds.
So I was gonna say, and I've brought this up on the podcast before, but this reminded me a couple of years ago. I was taking an uber into work, you know, and I used to put it. The uber drivers would see that I was going to Bloomberg, like Bloomberg and like, what do you think about bitcoin? Or Dogeklin And then there was this guy who said, oh,
you work for Bloomberg. I'm really bullish on silver because there's less copper mining going on in the world, and silver is a byproduct of copper, and there's a lot of solar demand, and so there's going to be the supplied demand mismatch. Was he onto something.
It might have been me driving, Yeah, that's pretty well aligned. He was reading the Bracket novel. Yes, And so the answer is yes, if silver were to double overnight, there is no mine that would say, well, now we should go chase silver. So the largest silver mine in the world was. I think it still could be kghm and Poland, and it's a giant copper mind with a lot of silver byproduct and a lot of the big gold mines
in Mexico. Silver is a byproduct, which means they love to see that revenue stream go up from silver, but it isn't the primary driver of capital decisions, investment decisions, or supply response, and so it would take a big price signal from silver to convince much of the world's supply to do much more than they're doing already. But we will mop it up with solar panels over time, plus the other industrial uses.
Joe, when are we going to interview your uber driver?
Our producer Call is supposedly working on that, so yeah, yeah, we're in touch with him. I think he's going to come at some point. We're going to make that episode happen.
That'll be fun. So I hesitate to ask this question because you know, politics are everywhere and inescapable at the moment, But we do have a presidential election coming up, and we have two candidates who seem to be, you know, in different positions when it comes to the energy transition. What are you watching out for there?
There's three events that have kept a lot of institutional energy and oil investors on the sidelines over the last several months. And the idea is, broadly speaking, if I go to Las Vegas and go to any game of the casino, on average, I'm going to lose, right, So I shouldn't go. If I throw money at the stockmore blindly, over time, it's going to compound high single digits, and so I can kind of throw money in and so therefore to make money, it's like, well, I think markets
go up, and let me find some ideas. And in oil markets right now, you have to get three independent variables or decisions or outcomes right in order to figure it out. And if you're as good at figuring out geopolitics, that you get one out of two and then one out of two and there's a one in eight chance you're going to get it all right. So those are so one has been this constant, this de escalatory escalation between Iran and Israel. Right what is the geopolitical premium
in the oil price? And we woke up Monday with oil down five percent because the latest Israeli response was extremely measured and disciplined and not the attacking of nuclear or the attacking of oil infrastructure that the people had worried about, and we've been seeing that all fall, this sort of measured escalation, and so you had to get that right. And then you have to get the election right in terms of oil price, and then you have to get the OPEC Thanksgiving meeting right in terms of
oil price. And then you wake up in January and you have to decide what is China oil demand going to do next year? This year has been stunningly poor for Chinese oil demand growth, So you got to get like fourth geopolitical things right. That's tough. Flipping coins on him would be tough, and so most investors are simply waiting.
The way I'd frame it, at least in terms of the election is, if it is a Trump presidency, you can sort of believe he will do things like he did last time, and then you have to separate it into micro things he'll do around oil and the macro things he'll do, like tariffs. Right, so somebody will have a view on what his tariff policy is. But if I just look at the oil sector, we know under the Trump administration, sanctions on Iran were much more severe than they are today, and so you could take a
million or two barrels off the market from Iran. And he's no huge fan of Iran, so you could imagine that decision wouldn't be that difficult for him. That would strengthen oil price. Under Harris administration, you sort of assume, for lack of clarity, more business as usual continuity with Biden and so no radical reaction to Iranian sanctions. And
so I've been arguing for most of this year. I think, starting in January, that Trump would be good for oil price in that regard, and I've had a majority of investors push back and worry about drill, baby drill. Where he would be bad for oil price. Well, time will tell, but ultimately it's much easier to put sanctions in place on Venezuela or Iran than it is to convince an oil and gas industry that's pretty mature, pretty grown up, pretty disciplined to drill, baby drill.
I think I just have one last question. But since I like hearing you talk geology and science, I like the price stuff, but most you know, there are other people in the world who could talk price stuff. Can you talk about lithium brining and what that means and how that'll work.
So broadly speaking, two places define lithium mines and brines, and up until now the brines have been Let me go to the most remote places on the planet. I'm going to go to high altitudes and to these ancient lake beds, these salars, these salty, dried up lake beds, and the Atacama has this lithium triangle that spreads between Bolivia,
Argentina and Chile, the world's hugest endowsment. You go up into the highlands of Tibet and you can find similar so in Tibet, for example, Chinese companies are drilling wells right again, which is kind of funny where we've come full circle from my oil and gas roots. You drill for uranium, you drill for oil, you drill for gas, you drill for lithium brines. You pump this very salty brine to the surface, and historically you let it evaporate.
You did the same thing the French have done on their coasts for years, and you create seldom are the beautiful sea salts. But you don't want the sodium chloride, you don't want the table salt. You want the lithium, and so we've been doing that for a very long time. It's economic even doing it in these remote areas, and then slowly and now quickly over time there is a technology disruption. And so one of the reasons I have to cover all of these various commodities is the shale
industry destroyed the oil patch. And the reason that shale was such a disruptive technology was threefold. First, it's small little units of capex ten million dollars a well, not a billion dollar platform. Second, you get a quick response. I get oil two quarters later, not five years later. And third, we drilled one hundred thousand shale wells and we got smarter and smarter and smarter. So Wright's law that natural learning curve mattered. So why am I talking
about this in dlee? Well lithium is now being commercialized with a new technology it's been around well dl E direct lithium extraction, where instead of laying that briny liquid out in the sun and letting mother nature evaporate it,
I'll do it in a tank. And so if you're about a year ago, is when X Mobile announced their plans to go to old oil field areas They're going up into Arkansas and they are drilling wells to pump out brinds from the Smackover formation, and they're going to put it in a facility that doesn't look any different than an Amazon fulfillment center, and they're going to extract that lithium and by twenty thirty they want to have a million cars worth of lithium. An equanor next door
in Arkansas wants to do the same thing. That technology works. We saw Rio Tinto in my coverage spend paying almost one hundred percent premium on a company that is leading the industry in terms of direct lithium extraction. So there's a disruptive technology that comes into the bottom of the cost of on lithium. So that's the future of lithium is will the industry get more lithium from old oil fields or will they get it from the slars of the high altitude andies.
Joe and I learned the hard way that commodities can in fact evaporate when they're in container because I had a small glass jar of crude oil and I left it in the office when I moved to Abu Dhabi because I figured I couldn't take a jar of oil on a plane and it's slowly evaporated in the office, for which I apologized, Joe.
That's okay. I don't as far as I know, I didn't get sick. Wait, I have one tiny, tiny question, and I just want to end it. Back on uranium. What is the role of nuclear weapons decommissioning in the uranium supply?
That's an excellent question, and so as a geologist, I can go by mine by mine and add up all of the uranium supply. There are three other places that you can get uranium from. I can go to old uranium tailings and enrich those. That's never going to be the bottom of the cost curve. They wouldn't be sitting there.
The other is government stockpiles can release uranium. And the third is I can accelerate the conversion literally almost literally swords to plowshares and start moving decommissioning warheads and using that as a supply. What I would say is the government is not in the business of making money, So I don't really worry that there's some government bureaucrat that says, oh, uraniums at one hundred and town bucks, let's put some of our volumes into the market. It will almost be
like gold. Right, as gold price goes up, governments actually buy more. It's almost the reverse of what you'd expect. And so if uranium price goes up, it's highly unlikely that governments are like, let's make a quick buck. Instead, they will see that as a strategic stockpile.
Bob Brackett, I can't think of any other guest where we would go from the highlands and Tibet to a random place in Arkansas. It's nuclear weapons decommissioning and it's effect on the uranium price, but there's no doubt we could do it to you. Thank you so much for coming back on online.
Absolutely my pleasure. Thanks Joe, thanks gas seeing.
I love talking to Bob. They're so fun.
Yeah, he's one of those rare guests where you can just sort of throw out anything and literally answer expertly.
Ohmercaief is kind of like that, And he's another one where, yeah, you just have there was just no doubt that if you throw something out, he's going to have some extremely granular knowledge of what he's talking about.
Yeah.
Brad Setzer as well is one that sticks in my mind. No, that was fascinating I do wonder. First of all, I feel like there's this weird, like overarching theme when it comes to these commodities where people get really like emotionally attached to a lot of them. You know, I don't think anyone treats like US treasuries in the same way they treat like the same uranium or gold or something like that. So that's kind of interesting why that happens.
And then secondly, I was thinking about the prospects for nuclear energy, and it does. I take Bob's point about how you're actually measuring the cost and that things like Elco aren't going to take into a out the stability of nuclear power, but I do wonder as the cost curve comes down for stuff like solar, if you know, maybe some of the appetite for nuclear kind of ebbs.
Yeah, we'll have to see. I mean, to my mind, there's still just so much incredible uncertainty about what the energy mix looks like in five years, ten years, twenty years and beyond. You know, Bob said something that was like this major light bulb moment for me in that conversation. I've always thought commodity people are a little bit screw loose. Many of them, not Bob, but you know, like especially that people get really culty about commodities and stuff like that.
And then he said, all commodity people are aware that their business is disappearing. And it's like, you know what, if I were in a business like that where every day I woke up.
And knew it, you'd be a little weird too.
Yeah, It's like, Okay, I get it. I forgive you. You're in a business where every day like there's less and less of it in the world and people are trying to substitute away from it. I get it, all right.
Shall we leave it there?
Let's leave it there.
This has been another episode of the Odd Loots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
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