The Energy Question Episode 36 Anas Alhajii, PhD Economist, Advisor, Writer, Analyst

 

David Blackmon [00:00:10] Hey, welcome to the energy question with David Blackmon, I’m your host, David Blackmon. And my very special guest today is Anas Alhajji, Ph.D. economist, energy expert, writer and key note speaker, who is one of my very favorite follows on Twitter and Substack Anas how are you doing today?

Anas Alhajji [00:00:28] Thank you. I’m doing great. Thank you.

David Blackmon [00:00:30] Yeah, we were talking before we started recording, and I just. I really love your Twitter feed. It’s so.

Anas Alhajji [00:00:36] Thank you.

David Blackmon [00:00:37] Your commentary is so pointed and the information you share every day. It’s just this wealth of information that really tips me off to an awful lot of things happening in the energy markets. I really appreciate it.

Anas Alhajji [00:00:53] Thank you.

David Blackmon [00:00:54] I want to start actually with a tweet you published on April 2nd, because it covers so much in such a short little statement here. And it says, Four Groups, you should not waste your time with one oil price narrative pushers to all pickers, 3 Dollar Doomsayers, and 4 climate change extremists.

David Blackmon [00:01:17] So these are a lot of stuff right there. You know, a lot of it’s controversial, But I just want to start with the peak oil people, because I have I have spent so much time over the last ten, 15 years ridiculing them for being wrong about everything, whether it’s peak oil supply or peak oil demand. And so I wanted to give you a chance to talk about your views on peak oil theory and whether it’s supply or demand related.

Anas Alhajji [00:01:50] The reason why I wrote this tweet, because those are groups you are not going to find anyone, regardless of the evidence, regardless of the discussion. You are not going to find anyone even giving you the chance to present your case in full or to change position regardless of the evidence and one of them, though, are those who believe in peak oil production.

Anas Alhajji [00:02:14] And probably the best way to explain this is to tell a story because this story is extremely important. And it did really shape my thinking. I had the honor of having lunch with Colin Campbell. And it just happened by coincidence, by the way. It wasn’t by design and we started talking.

Anas Alhajji [00:02:36] And of course, Colin Campbell is the father of peak oil he wrote several books and he really mentored a lot of people and he made a career out of it after he retired. And almost everyone who are among the leaders of the peak oil movement made another career out of it after retirement.

Anas Alhajji [00:02:59] While we are discussing this, I told him, I said, okay, for 40 years you work for the oil industry and you kept your mouth shut. And now after you retired, you started talking about big oil. So which Colin Campbell, I’m going to believe the previous 40 years or that Colin Campbell, the guy in front of me.

Anas Alhajji [00:03:24] And he said, well, we couldn’t talk because you know. Shell If, you know, we feared that we would be fired. I said, Okay, here is the problem. And King Hubbert. Was not fired. And he is the one who came up with the ideas while he was working at Shell.

David Blackmon [00:03:43] Right.

Anas Alhajji [00:03:44] And we don’t have any evidence that a single person who talked about peak oil got fired. And then he started talking about conspiracy theories. And I said, okay, so you have all those secret information that no one has but between the Saudis and the CIA and the White House, etc.. But you don’t have any evidence to support it if it’s secret how did you get it? And he looked at me and he said, Well, you are still too young, son. I think that tells the whole story.

David Blackmon [00:04:21] It does it. And, you know, I just get so tired of it, it pops up periodically and in my view, anyway, I, I think the whole theory kind of thing got co-opted along about 2008, 2009 by the anti-fracking movement and the climate change folks.

David Blackmon [00:04:42] And it’s become this tool of trying to downplay the oil and gas industry and to convey an impression that it’s declining, you know, in the interests of moving forward with, you know, what we’re now calling an Energy Transition to renewable.

Anas Alhajji [00:05:02] I’m going to ask you a Question, David.

David Blackmon [00:05:04] Yeah.

Anas Alhajji [00:05:05] Do you know when was the first call about the end of oil?

David Blackmon [00:05:12] I did some research several years ago and traced peak statements all the way back to 1886. But you may even have an earlier year than that.

Anas Alhajji [00:05:21] Yes. Oil, as you know, was discovered in Pennsylvania in 1859, the first of the first calls for the end of war, not peak end of oil. 1860.

David Blackmon [00:05:37] That doesn’t surprise me. You know, it just I first really started following the oil and gas business when I was in college in the late 1970s during the Jimmy Carter administration. You know, when when the experts at the Department of Energy, which had just been created, were telling us, we’re going to run out of oil by 1990 or 1995, and, you know, and so it’s always been kind of a comical source of entertainment for me. And I’m glad I’m glad we feel the same way about it, apparently.

Anas Alhajji [00:06:12] Well, there is one thing basically I would like to mention for the audience, because I think this is very important regarding the delayed measurements.

David Blackmon [00:06:22] Yes.

Anas Alhajji [00:06:23] I’ve seen the first draft of the book, which was written three years earlier than the publication.

David Blackmon [00:06:28] Twilight in the Desert

Anas Alhajji [00:06:29] And it was it was a horrible piece that they will not accept even from my students. And I did urge him. I met him at a hotel in Mexico City, and I did urge him, I said, what you are doing? I know you have the money. I know you can publish the book, but this is unpublishable.

Anas Alhajji [00:06:49] And then, of course, he ended up talking to the Saudis, and the Saudis met with him at the CSIS in Washington, D.C. That was a big problem there because I wrote an article that angered a lot of people at Aramco because I in a sense, told them to think about it in this picture that don’t be to him what Khomeini was to solidarity. Salman Rushdie was completely unknown until Khomeini issued the Death Sentence and all of a sudden, you know, President Clinton would receive him at the White House.

Anas Alhajji [00:07:25] So I said, don’t be to him like Khomeini, to Salman Rushdie they get angry they said, this is not your business, etc.. and then I got apologies a few years later from some of the VPs. But the issue here is when they met that this CSIS and what the Aramco group did not pay attention to is that he was speaking fear.

David Blackmon [00:07:51] Right.

Anas Alhajji [00:07:51] While they were coming up with all the numbers and all the geology things and all the science and all. It doesn’t matter when you have fear versus something else fear will always win. So based on that, they lost.

Anas Alhajji [00:08:09] So after they left the meeting, journalists mostly they were signing with Matt Simmons. So a journalist was talking to the head of the Saudi delegation and he said. Well, you know, you guys are lying and this and this and and the guy looked at them and said, okay, so why do you believe them? He said he read 200 papers.

Anas Alhajji [00:08:31] You are accusing him that he is not an expert because he is not a geologist, he is not a petroleum engineer. He’s a businessperson, he said. But he read 200 papers and he said, okay, that’s that’s easy. Now I’m going to read 200 papers in Europe and in neurology and let me operate on your grandmother.

David Blackmon [00:08:52] Well, you know, Simmons could be very persuasive. I actually interacted with him during that period of time when he was researching that book, and we were working on a National Petroleum Council study on natural gas.

David Blackmon [00:09:06] And at dinner one night, he had a table full of executives from the industry, just held their rapt attention as he explained to them how the Saudis were running out of oil and all the wells were going to play out and there were watering up. And uh…

Anas Alhajji [00:09:20] Do you know why? Because one of the main criticisms I told them, I told him and I was frank with him, I told him, if you go with this, I’m going to talk about it publicly, because he chose 1976 as a base year.

David Blackmon [00:09:33] Yeah.

Anas Alhajji [00:09:34] Okay. That’s the whole idea is based on 1976. If he if you change that base, the whole thing collapses.

David Blackmon [00:09:41] Right. And climate change theory. Right. If you change one.

Anas Alhajji [00:09:44] Why? Correct. So why is it 1976? Because OPEC in 1968 advised its members, Look, you got to own some of that oil that you are contracting to the foreigners. So we’ve seen Libya in Iraq, Michigan, in nationalizing their assets and the Saudis and the UAE and others asking the companies to buy shares from them. And the companies have the feeling that, as some experts said at that time, there is no tomorrow, so get out.

Anas Alhajji [00:10:15] So what they did is they did not invest a penny all they did basically is how much I can extract until the last moment. And three or four years without any investment. Just extraction. Extraction. Extraction. Okay.

Anas Alhajji [00:10:32] And then in 1976, that’s what the bottom one day, when they completely left and there was nothing else. And Chevron basically got the information from Chevron. He got the information from 1976 after all those years in decline.

Anas Alhajji [00:10:47] If you looked at 1980 or start from 1981 or 1982, we will get a completely different picture.

David Blackmon [00:10:52] Completely Different.

Anas Alhajji [00:10:52]  if he starts from the 60s, for example, or something like this. That’s why in the literature we call it the change in property rights. At that period we have this change in property rights that affected the numbers, but you cannot use them to claim that we are at the peak of oil is going to be in this year because of those numbers.

David Blackmon [00:11:16] Yeah. Well, we could talk about this all day, but I’m sure I could get into the petrodollar. You know this, which is another part of that tweet. You say don’t pay attention to the dollar doomsayers. And of course, we’re seeing all these stories in the media here in recent weeks about Saudi Arabia, China, Russia.

Anas Alhajji [00:11:39] Yeah. Let me let me go over those stories one by one, because I think it’s very important to clarify those stories. The last story we had was yesterday, which we covered in our Daily Energy Report yesterday, and.

David Blackmon [00:11:52] Give the Web address for that, right? Correct.

Anas Alhajji [00:11:54] So it is on Substack. It is on Substack. They can just search my name or go over my Twitter feed and they will see all the links. We have a weekly substack and we have the daily energy report, which is like for a dollar 15 a day or something like were really kind of cheap for the whole year. But we covered this yesterday and the idea here that this.

Anas Alhajji [00:12:17] There’s was a news about ten days ago that Kenya is ditching the dollar and buying oil from Saudi Arabia and the United Arab Emirates in their own currency, the Kenya shillings. Okay. No one paid attention to all of a sudden yesterday morning, the social media went crazy over it. So we decided to respond to that because it became kind of faux global news.

Anas Alhajji [00:12:46] The story goes like this No one wants to to to supply Kenya with with gasoline and diesel because they don’t pay. They have no money. But they need the gasoline and diesel. So what happened is they were able to find a Saudi company to supply them with that and the payment will take place after six months.

Anas Alhajji [00:13:10] There are two facts about this. First of all, it’s not crude. Because a lot of people were saying, oh, Saudis are selling their oil for Kenya. No, this is not crude. This is gasoline and diesel which could be sourced from any other country in Africa that’s number one.

Anas Alhajji [00:13:28] Number two, the deal is in U.S. dollars. All what happened basically is the president of Kenya was giving a talk at the stock exchange in Nairobi, and he said, we are trying to convince the sellers to accept the shillings that’s all he said. But through translation, through whatever, all of a sudden the news is they are paying as you know, there is no agreement, period so the news is fake so that’s the last news.

Anas Alhajji [00:14:00] The one before that, the one before that SeaNote the Chinese company and total the French company, Total Energy or Total energy’s signed basically a deal. It’s for the first time deal in LNG in Yuan in the Shanghai Stock Exchange. And people said, look, you know, they’re not paying in Yuan. Well, the question is, the media did not report the beginning of the story they reported only the end of it.

Anas Alhajji [00:14:31] How did that LNG get to China in the first place? Who supplied it and what they paid? Well, it was supplied by the UAE and got they got paid in U.S. dollars. And then once it entered the China, they converted that to Yuan.

Anas Alhajji [00:14:46] Well, Everything in international trade, that’s what happens. You go to any country the trade out overseas is in U.S. dollars and then once you arrive to the country, they change it to their own currency. It’s not even a news. The point of the news.

David Blackmon [00:15:01] Is that it’s Fake News, right?

Anas Alhajji [00:15:04] I mean, the only news about it is being done on the exchange.

David Blackmon [00:15:08] Right.

Anas Alhajji [00:15:09] That’s really the news but the idea of Yuan is basically this is just a joke because they paid for it in an US dollar. The other piece of news, the headline that we had at the beginning of last week, the headline says, China and Brazil signed a deal to to deal in national currencies and some of the doomsday ers, basically. So, look, you know, things are changing.

Anas Alhajji [00:15:41] Well, I already posted in our Substack newsletter. I pushed it to headline news exactly the same wording, the same headline from 2009 and from 2013 and nothing happened since then. So why this one is different? Okay.

Anas Alhajji [00:15:59] And not only that, basically, when you talk about Brazil and China, when they say currency, why the Chinese will hold a Brazilian real. A country that is marred by all kind of politics. Yeah, an old kind of corruption. So that means it could be only a one sided story in this case if it happens.

Anas Alhajji [00:16:24] Now, let’s go back to the Saudis. The President of China visits Saudi Arabia and there were certain things they talked about, of course. And then in his speech, basically, he mentioned that I call on the Arab nations to use our own currency. That’s it. That’s all he said and nothing else.

Anas Alhajji [00:16:47] Some people took that. Look, they are talking about this and this and this. I can tell you the issue of currency never came up in the negotiations, Never came up in any meeting this came up in the press conference at the end but it never came up during his two day visit to the region and meeting the other nations.

Anas Alhajji [00:17:07] Before that, there were there was a report by the Wall Street Journal saying that the Saudis want to use the yuan that was a false report. And it does not make sense in the first place. Why? Because the Saudi real is back to the dollar.

David Blackmon [00:17:21] Right.

Anas Alhajji [00:17:21] Why? They need to destroy the dollar and should themselves in the foot.

David Blackmon [00:17:26] Yeah, that’s the part that really doesn’t make sense really for China either, right? That because China is a big holder of U.S. debt right now.

Anas Alhajji [00:17:34] Correct. Correct. So and then if you want to go farther than that, there was an article. That’s absolutely true there was a prominent journalist who wrote an article about, look, if the United States does this to us, we can do this. Okay, so there was an article, but guess what? No one said that this guy got fired the second day and disappeared.

Anas Alhajji [00:17:59] Anyway, the whole idea here and this is I know we don’t have enough time. The dollar is still a king. If you look and I posted some charts on Twitter and on the some stock one chart basically showing what the central banks around the world are holding 60% today this is up to last month. 60% of the holdings of the central banks around the world is U.S. dollar. How much you and Chinese currency, they are holding 2.5%, and most of it in the Russian central bank.

David Blackmon [00:18:36] And so isn’t that a key point? Right. I mean, if the dollar were to if people were to suddenly stop using the U.S. dollar in international trade, the impacts wouldn’t just be on the United States and its economy. The impacts would be felt by every institution in country that’s holding a very significant amount of U.S. dollars right now, wouldn’t it? I mean.

Anas Alhajji [00:19:02] Think about that idea. Basically, every time you provide data, they will say, well, look, if we have a change to other currency, everything else will change with it. The idea in theory, what they are saying is absolutely correct.

Anas Alhajji [00:19:15] But here is the issue, if you study the history of currencies worldwide and the international currency, you will find out that the world reserve currency that we call it reserve is tied to the power of the empire, not tied to the existence of other currencies.

Anas Alhajji [00:19:35] So the sterling loss is power when we have a Great Britain and now it is Brexit that the great has gone. When Britain came back to be an island, not a global power. So this currency is tied to the empire and its power, not to the existence of other currencies because even when the Sterling lost something around the world, there were other currencies all over. And no one said, well, the Sterling is losing power. So even if you go through art history, it is tied to the empire, not tied to the existence of other currencies.

Anas Alhajji [00:20:16] The final point is about the BRICS But when you talk about protection, they say, well, now they are going to create their own currencies. Here is the argument. European countries where developed countries in the forties and fifties that were really developed, they were on top of the world. And it took them 40 years to create the euro.

Anas Alhajji [00:20:38] They are on the same continent,  they are neighbors, they have almost in a sense, yeah. They have different ethnicities and different languages. But in terms of culture, the Western culture is almost the same. Okay. And they have democracies, etc., etc., etc.. Yet it took them 40 years to get the currency. And yet the UK left and Italy is threatening to leave.

David Blackmon [00:21:03] Right.

Anas Alhajji [00:21:03] How in the world you are going to bring countries like India and Asia and Brazil to Latin America? We know their status of development. We know they are completely different cultures, different thinking, different, different, different. And they are going to come up with a currency tomorrow. And apply it. Okay.

Anas Alhajji [00:21:24] And I mentioned something on on Twitter space the other day, and some people got angry, although I did not name any countries. Those countries in BRICS, some of them 40% of the population, do not have toilets in their homes.

David Blackmon [00:21:42] Right.

Anas Alhajji [00:21:44] So compare that to Europe in the fifties when they started talking about the euro. Where they where and where those guys are. And yet we are going to get a currency that’s going to kill the dollar tomorrow aside from that and this is a true story. Go on Twitter and and write something people can have even the misconception that it is it is negative about India. Since India is one of the leaders of BRICS.

David Blackmon [00:22:21] Right.

Anas Alhajji [00:22:21] Okay. Just. All right. Write a negative tweet about the government of India right now. You will see that thousands of people are going to attack you viciously. Why? Because they are extremely nationalistic. And now those nationalist who rule India today are going to accept the order of a bank of a central bank based in Brazil or Saudi Arabia or others. I mean, for God’s sake, the British refused to get it.

David Blackmon [00:22:57] Well, so. But that brings me to another topic. Okay. So Saudi Arabia and the relationship with the United States. And I have to say that I do see and feel that our country’s relationship with Saudi Arabia is kind of fraying at the edges here in recent years. But, of course, it’s always ebbed and flowed over time, depending on circumstances.

David Blackmon [00:23:26] But do you have any any real concerns about, you know, Chinese influence and in the Middle East? I mean, we just had this this announcement that Saudi and Iran are reestablishing diplomatic relations and this deal brokered not by our country, but by China.

David Blackmon [00:23:45] And it does seem that going back to the fist bump last summer and the president’s refusal to shake the hand of the crown prince, that insult has seemed to have had some ramifications in terms of a weakening in our country’s America’s influence ability to influence Saudi Arabia’s you know this this latest well.

Anas Alhajji [00:24:14] The fact the fact is that the fact is that the moment I mean, this started as President Trump and of course, there were some roots in the Obama administration, too, when they start withdrawing from the global power.

David Blackmon [00:24:29] Right.

Anas Alhajji [00:24:30] Create a vacuum. And because you create a vacuum, regional powers basically are going to take over. So there were two forces here that led to the rise of Saudi Arabia. And no one can deny that they are part of the G20.

Anas Alhajji [00:24:44] And the rise of Saudi Arabia, basically. It came from both sides they were trying they have a new vision and new leadership, etc. that they want to raise. At the same time, we have the withdrawal of the United States from the region so they expand it.

Anas Alhajji [00:25:02] And of course, with their expansion, there were other expansion on the other side of the Gulf from Iran I mean, almost the conflict was natural in this case. The role of China basically remains limited because it is really limited to the economics of it.

[00:25:22] But when it comes to economics, don’t believe for a moment that China is going to stand up for human rights or morality or anything else to sacrifice money for it. They are not going to do that money first.

David Blackmon [00:25:37] Right.

Anas Alhajji [00:25:37] But they have no military power the military power is still for the United States. So the best way, in my view, to understand the Saudi America relationship of this, the bond is very strong. And old and the roots are all over the place. It’s not only with the Republicans, basically, even with Democrats.

Anas Alhajji [00:25:58] So the best way to understand it is think about it as within the United States, we have the deep state and then we have whoever in the White House, The Deep State, will always have this big influence and they will always deal with Saudi Arabia no matter what. Okay.

Anas Alhajji [00:26:18] Those guys on top, they can kind of color that relationship in various ways, etc., for the Saudis they can wait for 40 years for a change in presidency they can wait eight years for a change in presidency.

Anas Alhajji [00:26:30] But if you look at the leadership in Saudi Arabia, they are, as you know, absolute monarchs and they can stay in power for 30 and 40 or 50 years. So they can see several presidents.

David Blackmon [00:26:43] Yes, Al is a crown prince right now, 35.

Anas Alhajji [00:26:47] I think about that. Correct. Correct. But the idea is they can wait. Literally. They can wait and all the problems that are being caused because of that. I’m not defending them, but I’m just explaining their behavior and how they are reacting. The other issue.

[00:27:07] I understand that they’re rational is I mean, it’s very rational actors. I actually kind of view China in the same way. I mean, they can play out long term they can outwait any United States administration, and they’re rational actors in their own national.

Anas Alhajji [00:27:22] And that brings us back to the dollar.

David Blackmon [00:27:24] Right.

Anas Alhajji [00:27:24] You don’t tell me. Okay, Bring your investment here and invest here so you can be as part of our or whatever. And then the second day you have something in Congress basically to sue me for, okay,. I am not going to bring my investment.

David Blackmon [00:27:41] Right.

Anas Alhajji [00:27:41] I mean, you have JASTA that was passed by the Congress and the Senate by majority and President Obama refused to sign it, but it became law anyway. And now we have an OPEC. So you cannot tell them, you know, bring the petrodollars here to the United States, etc., etc., while you are going to sue them and confiscate their money.

David Blackmon [00:28:07] Yes, obviously, obviously. But but in your view, the petrodollar is not going anywhere?

Anas Alhajji [00:28:13] Correct? It is. I mean, the dollar would remain king no matter what oil we did not have time to talk about oil and the dollar. Shortly, oil is priced in U.S. dollar no matter what. And those who claim that, well, look, we have Shanghai Exchange and they use the yuan. That’s absolutely correct.

Anas Alhajji [00:28:31] But if you do the statistical analysis, whatever happened on daily basis in the Shanghai Stock Exchange in the yuan is a mirror image of what happened in the dollar trading in Dubai. It just a mirror image once you adjust for the quality and the timing. So oil is priced in U.S. dollars.

Anas Alhajji [00:28:51] However, the oil producers can price their oil in U.S. dollars, but they can receive revenues in other currencies. So what we share here is and that’s what happened historically countries that suffered from sanctions are switching and their switch is rational because if there are sanctions and they cannot trade with the United States, why do they need the dollar?

David Blackmon [00:29:17] Right.

Anas Alhajji [00:29:19] But the idea here is I’m am speaking academically here, and this is an academic point that we need to see completely independent countries with no trade wars, with no sanctions on their own, ditching the dollar and moving somewhere else you are not going to find a single country doing that.

David Blackmon [00:29:40] Right? Right. And I completely agree with that. I you know, I do think there are some issues, but, you know, most of them have to do with very temporary considerations, temporary politics and. Hard feet.

Anas Alhajji [00:29:56] May I tell you something? Because the audience, I think, would laugh about this.

David Blackmon [00:30:00] Okay this is thought we imposed.

Anas Alhajji [00:30:04] We imposed we, the United States, impose sanctions on Iran then we give them exemption to supply Iraq with gasoline, natural gas and electricity. And what Iran gets gets U.S. dollars from the Iraqi oil sales that’s been sold for U.S. dollars that’s number one. Number two, until today. Until today, the EU and the United States still import. Enriched uranium from Putin. Until today. And what a what what then gets euro and dollar?

David Blackmon [00:30:46] Yep. Yep. And nobody wants to talk about that. We’re not supposed to talk about that on us.

Anas Alhajji [00:30:52] What, are we just dead, right?

David Blackmon [00:30:53] Yeah, we just did it. We just did not talk about all sorts of things on this show that I’m not supposed to talk about. Oh, listen, this has been fantastic. We are up against time we need to do this again and make it any time.

Anas Alhajji [00:31:06] Any time. Let’s do it for a while we are all together.

David Blackmon [00:31:10] Yeah. Hey, that’d be a great thing. That would be awesome, actually. Hey, thank you so much.

Anas Alhajji [00:31:14] You’re Welcome. Have a good day.

David Blackmon [00:31:17] And that’s all for today, folks we’ll see you next time.

 

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