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ENERGY REALITIES EPISODE #98 – The Energy markets from a real-world view – Physics and Fiscal Policies Matter
Highlights of the podcast:
01:09 – About Exxon fighting back
02:27 – the activist investors
15:52 – Why the low rig count is important
20:57 – A case that was brought against the Norwegian government and Ecuador
24:30 – About using competition law
30:13 – Why the energy industry should push back
35:33 – Big European fund sells €2.8 billion in oil holdings because of slow moves on climate
39:37 – What’s happening between India and Russia
The Podcast Hosts for The Energy Transition
Armondo Cavanha LinkedIn:
Irina Slav, Energy Writer LinkedIn:
David Blackmon, Consultant, Writer, speaker, podcaster, miner of absurdities LinkedIn:Tammy Nemeth, Energy Consulting Specialists LinkedIn: Stu Turley, CEO, Podcast Host, Legend in his own mind LinkedIn:
Blubrry Podcast:
ENERGY REALITIES EPISODE #98 – The Energy markets from a real-world view – Physics and Fiscal Policies Matter
Tammy Nemeth [00:00:00] Well. Okay. Hello, everybody. Welcome to the Energy Realities podcast, episode number 98. Good morning to David Blackmon, Stuart Turley, Irina Slav and myself Tammy Nameth.
Irina Slav [00:00:14] Good morning.
David Blackmon [00:00:15] Good morning.
Tammy Nemeth [00:00:17] Well, today and going forward, I’m sad to say that we’re going to be without the amazing and brilliant, phenomenal Armando Cavanha Armando who has a new commitment that conflicts with the podcast. So we’re going to carry on and, hopefully we’ll do as good a job as Armando has done. I just want to sincerely thank Armando for starting this podcast, being an amazing facilitator and bringing us all together.
David Blackmon [00:00:44] Yes, absolutely. He was the glue that held this all together for a long time. We will miss him.
Tammy Nemeth [00:00:50] Yes. Maybe we can have him as a as a guest later if he has time.
David Blackmon [00:00:57] Yeah. Yeah, absolutely.
Irina Slav [00:00:59] It’s a great idea.
Tammy Nemeth [00:01:02] Well, this week, as you can see. Well, I guess if you’re not watching, if you’re listening to the podcast today, we’re talking about Exxon fighting back. There’s been an interesting development in the corporate world. Exxon Mobil is suing activist investors to stop the repeated tabling of resolutions or proposals that have been previously defeated. David, why is this a significant move?
David Blackmon [00:01:28] Well, it’s it’s significant in that, you know, traditionally, all of this is governed by the SEC, Securities and Exchange Commission here in the United States, where shareholder shareholder resolutions are concerned and, and how these annual meetings are to be conducted. And in the past, SEC has a, an appeals process that has been set up and has been accessed by companies like Exxon Mobil and others whenever they have this problem arise with, activist investors. You know, just every year bringing the same resolution that gets voted down by 85, 90% of the vote, and bringing it up again next year just to be a nuisance. These are nuisance shareholder, proposals. And unfortunately, in this administration, with Joe Biden’s appointees now running the SEC, the appeals process has just become a rubber stamp, essentially for the activist investors. And, so Exxon Mobil has, you know, as it has a right to do, decided to bypass that appeals process at the SEC this time and filed a lawsuit directly in federal court, challenging the ability of this particular, these two shareholder groups to, bring these resolutions and nuisance resolutions. And, so that has, all the activist investors in a big tizzy, as you can imagine. They’re they’re really good at getting themselves into Tiss. Whether Exxon Mobil will win the lawsuit, I don’t know. Their, annual meeting is in April, I think. So there’s a couple of months, until probably, you know, we’ll get a decision at some point between now and then in the district court. And the problem there, of course, then becomes that whoever loses the district court decision then, of course, has the right to appeal to the appellate court level and could end up taking this all the way to the US Supreme Court, which would take years to reach a final resolution in our court system. So, it’s an interesting move by Exxon Mobil. They certainly have the right to do it. And, but that doesn’t necessarily mean they have a right to win it. And, we’ll just have to see how it all comes out. It’s just a really interesting, glitch in the process here caused by. Frankly, the, the, biasing of the process. I was going to say corruption of the process at the SEC by this administration, as we’ve seen them do, in so many other aspects of the government. So I just, I’m rooting for Exxon. I don’t know about anybody else.
Tammy Nemeth [00:04:18] Irina, do you think this is something other companies elsewhere might do, like in Europe?
Irina Slav [00:04:24] If they’ve had enough. Yes. After all, TotalEnergies is suing Greenpeace. For, you know, wrong data. Yeah, I think. Yeah. The French led the way there because. They just had enough. You know, I see these activist investors and environmental groups, in the case of TotalEnergies, as a school bullies that have never met. One of the opponents. So they’re used for having their way, and they don’t even consider the possibility that someone might do something about it. And I think this is precisely the case here, because I was very, very amused by the reactions to this last year. More specifically, the fact that even after those two activist investors dropped the proposal, Exxon didn’t drop the lawsuit. It said it will pursue it. We had the Norway, sovereign wealth fund, which is popularly known as Norway Oil Fund. So it’s had. Called the lawsuit aggressive. And a rule. That will undermine shareholder trust in Exxon or something like this because it undermines shareholder rights or really sole shareholders have rights. Do companies have rights to defend their strategy? Apparently they do. Has the lawsuit. And then there was a group of religious investors in Exxon, and the group called on the company to, you know, pull the lawsuit out because it’s not nice to investors. Yeah, it was a group of religious investors. Junior capital, one of the activist investors that is being sued so totally and by is totally, you know, depends and call for Exxon to to let go. But but it’s it’s not going to do this and like like David rooting for the company even though I’m not a fan of big oil or any big business because, you know, the larger corporations draw, the more inhumane they become, which is a normal process, I expect. Yeah. And I certainly not. We can vulnerable and you know, plural Exxon or anyone else. But I think they’re in the right this time. They have the right to, you know, make their case and stop succumbing to activist pressure. What do you think?
Tammy Nemeth [00:07:06] Yes. Because yeah, it’s like they’re abusing the system, right? The system was set up in order to ensure that there was fairness there, but they’re abusing it. At least from my perspective. Stu, do you see this as a positive action for Exxon? Do you think this this is something that would be good?
Stuart Turley [00:07:26] Excuse me. I got all choked up there for a moment. I do. Yes, absolutely. And I think that there’s a couple of things. Irina, I loved your comment. I don’t like big oil because there’s probably bad things going on. I, however you phrase.
Irina Slav [00:07:42] Anything.
Stuart Turley [00:07:42] Yeah. Thank you. So I think but the oil companies have not done a great job in articulating the goodness that they have done in the past. And I couldn’t be more proud of the fact that the, elevation of humanity out of poverty is because of low cost fossil fuels getting it there. Now, we have been improving how to not have such a big impact on the environment over all these years? Are we there yet? Heck no. Do we have a long way to go? Absolutely. Do we need, how many billions of people need low cost, sustainable, energy? A lot. I’m a humanitarian first and a huge environmental fan. So we got to protect the environment. Now we have to defend ourselves against chowder heads. So I think that we should have a Go Fund Me page for this podcast. To defend against chowder heads. I think that’s right. Yeah.
David Blackmon [00:08:52] I think that’s a great idea. Absolutely. Absolutely. You don’t want to, charge membership on YouTube because YouTube steals 30% off the top, when people become paying customers on YouTube. And if they do it with an Apple iPhone, Apple takes 30% before YouTube takes it’s 30%. So you end up with less than half.
Irina Slav [00:09:14] And that is why, I don’t like big business.
David Blackmon [00:09:16] Yeah. So what about big business? There they are.
Stuart Turley [00:09:19] Irina, I knew I liked you. Holy smokes.
David Blackmon [00:09:25] One last point about this Irina brought it up. You know, the shareholders, the activist investors dropped their their.
Stuart Turley [00:09:34] All very quickly.
David Blackmon [00:09:36] Right very quickly after Exxon filed suit, anticipating that Exxon would pull the lawsuit. But Exxon didn’t pull the lawsuit. And that’s very important, because part of what I think Exxon is doing is, is showing that there’s going to be a penalty to be paid in terms of lawyers fees, because now these these investor groups are going to have to spend a lot of money defending themselves in that lawsuit. And, you know, that’s something they wouldn’t necessarily have had to do had they gone up through the SEC. So there’s a punitive portion of this. And I think it’s important for people to understand that the court system and the laws in the United States are set up to protect not just the rights of the activist groups and the people on the political left, but to protect every person’s and every entity’s rights in our process. And and that’s an important principle, I think. And I’m I’m really glad Exxon is going to see this all the way through because of that aspect of it. You know, whatever you think about Exxon, another big corporations, they have a right to conduct their business in this country as long as they do it within the the letter, in the spirit of the laws and regulations that they operate under. And this, you know, nuisance, activist, investor, these two activist investor groups, were were just trying to game the system in order to waste their time and their money and diminish the value of the company to the rest of the shareholders in it. And so I just think it’s an important legal principle for Exxon Mobil to pursue, and I’m glad they’re doing it.
Irina Slav [00:11:22] Absolutely. It’s a case of rules for them, but not for me. The activist investors and the, environmentalists, thinking they can do absolutely anything they want. They can sue anyone. They can, you know, be a nuisance to companies with such proposals. But, you know, the enemy can not react.
David Blackmon [00:11:48] Right?
Irina Slav [00:11:49] That’s not supposed to happen.
Tammy Nemeth [00:11:50] Well, now. Yeah, they’re not allowed to.
Irina Slav [00:11:52] Yeah. Yeah. They’re not allowed. So it’s not lies or whatever.
David Blackmon [00:11:56] Right.
Irina Slav [00:11:57] It’s happening. And that’s a good thing.
David Blackmon [00:11:59] It is a good thing. Yeah.
Tammy Nemeth [00:12:00] And I, I really hope that the that the Exxon lawsuit is an inspiration. To other companies to maybe do the same thing. And even if it’s not just with respect to the shareholder motions, which are important, but a lot of the climate groups have taken, this new strategy where they use the the advertising bureaus or competition bureaus in order to do what’s really quite malicious, litigation in a way, through the regulatory system. And that’s been the case in the UK, the EU and now Canada, where I think in the last year there’s been at least six complaints made to the Competition Bureau, over supposedly false advertising or misleading advertising, because the oil and gas companies in Canada, when they when they’re doing advertisements to say, we’re working towards net zero and this is what we’re doing, the activists are saying they’re greenwashing, that they’re lying, they’re misleading the public because they’re not explaining what percentage of their operations is in the transition and what percentage is still their traditional business. So when they do those complaints, the the companies end up having to spend a lot of money on lawyers and whatnot in order to respond to the questions that are put forward by the competition bureaus. And they they did this in the UK, I think, a couple of years ago, and they managed to go after and won against shell, BP, Repsol and maybe total where they were. They were told that they were misleading the public because they weren’t explaining precisely what percentage of their operations are climate related. And, you know, even though they’re talking facts, the facts apparently are misleading.
Irina Slav [00:13:49] There was a recent case in the UK, the advertising whatever authority bands. It started with Equinor, I think, and now it’s banned a couple of other oil companies from advertising anything really, because, well, they’re not saying that while they’re doing, for example, wind, they’re also doing oil and gas. And that’s apparently misleading and greenwashing.
Tammy Nemeth [00:14:14] Right. Exactly. That’s that was the determination. So you get activists in putting forward the complaints, and you have activists in the in the regulatory bodies. And so then they just kind of, support each other, which is why, you know, I think it’s could be a problem in the United States, depending on what jurisdiction the, the court proceedings take place. You know, you get the, the wrong judge or something like that. And it can be an issue these days. And now there’s a new group that’s going around educating judges on climate issues. So.
Irina Slav [00:14:49] Sorry.
Tammy Nemeth [00:14:51] There’s there’s a, an environmental group that helps, educate judges on climate issues.
Irina Slav [00:14:57] Is it voluntary or is it mandatory?
Tammy Nemeth [00:15:00] It’s voluntary right now but recommended through the various bar associations?
David Blackmon [00:15:06] Of course. Yeah. The bar associations have been completely taken over and corrupted by the .
Stuart Turley [00:15:12] So.
David Blackmon [00:15:12] Corrupt
Stuart Turley [00:15:13] In in the words of my wife, it’s voluntold.
David Blackmon [00:15:18] Volun command, I guess.
[00:15:20] Volun, command
Tammy Nemeth [00:15:24] Well, I thought maybe we could move on to the headlines and listen to someone. Want to add a little more about that Exxon issue?
David Blackmon [00:15:33] I’ve got nothing.
Irina Slav [00:15:35] We’re all rooting for Exxon.
Tammy Nemeth [00:15:41] So that was that was David’s main, headline today.
David Blackmon [00:15:46] We just covered that.
Tammy Nemeth [00:15:49] So, Right. And so the next one, David, do you want to tell us why the low rig count is important?
David Blackmon [00:15:56] Yeah. This was an interesting aspect. You know, the Baker Hughes rig count, of course, has been the one that most people rely on. I also like to keep up with the embarrass rig count. They do a daily rig count update, but they basically mirrored one another over the past few years. And over the last two weeks, the Baker Hughes count, fell below 500. It’s a count of active drilling rigs in the United States for only the fourth time in the last 27 years. This count fell below 500 here in the United States. And it it was interesting to me that that happened at a time when our industry here in the U.S. continues to set, new record highs for overall oil production and natural gas production each month, almost on a monthly basis. So what? I went back and did a little research, and the previous three times the count has dropped below 500, in the US, we have been in the midst of a major price bust and a depression in. The industry in 1999. We were in a major price depression. All fell below $20. Due to, a struggling global economy that had cut into, demand globally. And then in, I think 2006, it fell below 500 again and we were in a major price drop. And then in 2016, it dropped, way down. No. 2020. It dropped to 275 in September of 2020 during the Covid bust. And of course, we were in, you know, I mean, in that year we even had negative pricing for WTI. So it’s fascinating to me that that trend in the industry that has been pretty much unshakable over the years has now been broken. And it’s because, of course, these companies in the shale sector in the United States have, deployed new technologies and processes and become, you know, much, much more accurate in identifying the sweet parts of the underground rock formations that they’re accessing and staging their frack jobs and all that. And it has dramatically increased the per well recoveries in the Permian Basin, back and shale, Marcellus, Haynesville, all the big shale plays in the United States. And so we continue to set these new records even while the rig count is very low. And, and that’s just a new thing in our industry. And so what it really means is. Where the active rig count was always kind of a key indicator of the health of the oil and gas industry in the US. Those days are gone. You can’t just look at the rig count and determine, you know what? What else might be happening in terms of price and global demand for the commodity. And and that’s just an interesting development I thought was worth mentioning here.
Tammy Nemeth [00:19:02] Yeah. That’s fascinating.
Irina Slav [00:19:04] Yeah. That’s how everyone got surprised by last year’s production growth rate. Because the rig count Wilson rising.
David Blackmon [00:19:13] All right.
Irina Slav [00:19:13] Well, much of the year. And then suddenly it’s plus a million or so. Even the Energy Information Administration was, you know, misled
David Blackmon [00:19:25] And I think it killed everyone off guard. EIA in the first of last year predicted U.S. total oil production would rise by maybe 300 barrels, 300,000 barrels a day during 2023. And like you said, it went up by almost a million barrels a day during the year. So really amazing.
Tammy Nemeth [00:19:44] Yeah, yeah. That’s amazing that they could do that such efficiency that there’s been those significant changes in in how they operate that they can reduce the number of rigs.
David Blackmon [00:19:55] Yeah. You know, a lot of it has to do with the length of the horizontals. You know, they’re drilling three three mile horizontals now in some of these wells. It’s crazy. Gas companies were burned by excess investments before. Not positive what that’s referring to. Certainly, in the early stage of the shale boom in the United States, gas companies were investing, you know, very, very heavily in drilling programs. We had a 2000 rig rig count in the US in 2014, before Saudi Arabia flooded the market with oil to boost the price, and that ended that. But, yeah, you know, the industry took a lot of criticism for investing too heavily in drilling programs back during that time.
Tammy Nemeth [00:20:44] Okay, okay. The next headline. oh. This is mine. Okay, so this is kind of related to, to some of this stuff we’ve been talking about. This is a case that was brought against the Norwegian government and Ecuador because Ecuador is the company that that drills on, on these, in these areas offshore and in Norway. And, so that the, a couple of activist groups sued the Norwegian government in Ecuador, and the activists want to challenge in a lower court that if if they actually carry out the the ruling, Ecuador would have to take future climate change effects into account. in applying to to drill offshore. And so what they mean by future climate change effects is the use of their products. So it’s like scope three emissions. And the company would have to take into account.
Irina Slav [00:21:41] Emissions.
Tammy Nemeth [00:21:42] Right. I mean it’s it’s outrageous. And and when you think about it with what including scope three emissions means is that you’re actually saying, I will reduce the amount of my product on the market. It’s that’s what scopes two accounting for scope three means is that you reduce what you’re producing. Because how on earth are you going to tell your consumer, you can’t use as much of this product that I’m selling you? It’s it’s bizarre. So they won this case. The Norwegian government says they’re appealing it. And of course, the environmental groups are like, oh, this is so bad. Why are you appealing this? It’s bad for the earth. Blah blah blah. And I what I think is so interesting is that it doesn’t really matter in some respects that the ruling is being appealed. Who knows how long that process takes, but I believe it’s going to be used as a precedent, for other jurisdictions to say, oh, well, this court ruled this, and we think that we should maybe apply some of those principles in our jurisdiction. And I think Canada’s probably going to be one of those. And yeah, so that’s that story that just came out, I think, a couple of weeks ago. And then
David Blackmon [00:22:54] That’s a big deal.
Tammy Nemeth [00:22:56] It is a big deal. And what’s so fascinating is that here’s Norway, that and the Norwegian government position was that the EU, needs their natural gas and they need its oil. And so to carry out what the court has said, then there will be putting jeopardizing energy security in the EU. So it’s interesting that the climate is now competing with energy security for the attention of policymakers. And maybe that’s a good thing.
Irina Slav [00:23:27] And the EU is not saying anything against Equinor. And then, you know, drilling for gas.
Tammy Nemeth [00:23:33] Right? Because they need it, right?
Irina Slav [00:23:35] Yeah. Funny thing.
Tammy Nemeth [00:23:38] Yeah. So I think somebody said here, buy more offsets. Well okay. But the problem is when you’re filing that application to be able to, do exploration and development on, on that piece of land, what this ruling says is that you can’t you have to look at the, the larger, climate effect without offsets. So even if you wanted to buy offsets, it really it wouldn’t be.
Irina Slav [00:24:08] It’s not enough if you’re an oil company, apparently.
Tammy Nemeth [00:24:11] Right.
David Blackmon [00:24:11] Does Taylor Swift have to do that with her project?
Stuart Turley [00:24:18] Oh, she sold three of her five years, I think.
David Blackmon [00:24:21] Oh, yeah. Okay, cool. Yeah, that’s.
Tammy Nemeth [00:24:23] Really downsizing.
Stuart Turley [00:24:25] Yeah, I got one of them.
Tammy Nemeth [00:24:28] And and the next headline was about, using competition law, which is what I mentioned in the discussion of Exxon. And as I mentioned, in Canada, there’s been at least six, cases brought to the Competition Bureau about false advertising or misleading advertising. And one of the big ones that was, I think, launched last fall was, the Pathways Alliance, which is Canada’s biggest oil sands companies, formed this Pathways Alliance in order to work together to have technological innovation to reduce emissions to net zero by 2050. And so nobody knew what, that they were actually doing anything. And they thought, well, okay, we’ll put out some ads and tell people we this is the these are the steps that we’re taking in order to get to net zero the way the government wants us to. So the environmental groups immediately launched a competition complaint, and it’s really easy to do it in Canada. You need six people to make some accusation that they were felt misled or something. And then they it triggers it triggers this review. So the environmental groups said, oh my gosh, this is misleading. They’re not taking into account the emissions of the people who use their product. So it’s the same argument that was used in Norway, that the Pathways Alliance are misleading people by by not providing that information to the public in their advertisements about their net zero plants. So, and then what I found so interesting about the use of the litigation and use of these regulations and so on, especially with respect to advertising, is that that last week, the Socialist MP in Canada that helps prop up the current government in a coalition as Brian’s in charge here is is saying he said, don’t forget, the NDP wants to make it illegal to advertise in favor of Yes. Oil and gas in Canada. I think he meant oil. It’s a.
David Blackmon [00:26:28] Yeah
Tammy Nemeth [00:26:31] So there’s bill, which is absolutely something straight out of the Soviet Union where it would be illegal to speak the truth. So if a company or somebody wanted to write a story about the things that oil sands companies are doing, or natural gas companies are doing, that it’s a benefit to the environment or to the economy, even that the indigenous people are participating and it helps in reconciliation. That would be illegal. And you’d be fined anywhere from $500,000 to $1 million with two years in jail. I mean, it’s it’s crazy. And so they’re trying to say, well, we only meant corporate leaders can’t can’t talk about that. But if you read the bill, that’s not what it says. So yeah.
David Blackmon [00:27:18] So I mean, it would make it illegal for Chevron to run its ads bragging about the gas additive tech run that it puts in its gasoline. You know, you wouldn’t even be able to advertise that as a selling point for your product. It’s insane.
Tammy Nemeth [00:27:32] Yeah.
Stuart Turley [00:27:33] Oh, what about Tony the Tiger? You know, put a tiger in your tank. Where’s Peta when you.
Tammy Nemeth [00:27:38] Oh, yeah.
David Blackmon [00:27:40] I think Tony tiger went.
Tammy Nemeth [00:27:41] On for sure.
David Blackmon [00:27:42] Went Extinct. You know.
Tammy Nemeth [00:27:44] Because they think, like one of the arguments is that they want to. They want to treat it like that, like the tobacco companies. And so in Canada, it’s illegal for tobacco firms to advertise. And they passed this a long time ago, went to the Supreme Court, and eventually they won. And they said, this is the tobacco moment for oil and gas. So if you had something like Tony the Tiger, that would immediately be like, oh my gosh, you’re trying to poison the minds of the youth.
Stuart Turley [00:28:17] So I’d like to see somebody if this is the tobacco moment for the oil and gas industry, I’d like to see somebody smoke some gas.
Tammy Nemeth [00:28:29] Explosive.
Irina Slav [00:28:31] Interestingly, some of the, vaping devices. Vaping? No, I think all of the vaping liquids that are replacing tobacco products contain propylene glycol. Which is.
Tammy Nemeth [00:28:46] Oh. Gosh,
Stuart Turley [00:28:49] I’m too old. I, I don’t know anything like that.
Tammy Nemeth [00:28:56] Mihai has a commentary, said nothing of value is lost. There’s no need to advertise the path to net zero. Just deliver cheap energy. You know, in a rational world, that would make complete sense. But if you understood the politicization of the energy conversation in Canada that the oil and gas companies need to advertise to explain to people, because all anybody hears is how terrible they are that the oil and gas companies are poisoning the world, and they’re killing people and all this kind of stuff. And so they, why shouldn’t they have an opportunity to advertise what it is that they’re actually doing instead of these other, sort of amplifiers out there of the negative? So
Irina Slav [00:29:39] It’s an information war. So.
Tammy Nemeth [00:29:41] It is an information war.
Irina Slav [00:29:42] Only one side is being heard and the other side is being blocked.
David Blackmon [00:29:46] And they want to keep it that way. You’re right.
Irina Slav [00:29:50] Anyway.
Tammy Nemeth [00:29:51] Which is I mean, that’s what’s so important about the the Exxon case, right. Because it’s, it’s finally this little thing that maybe we should push back a little bit and. Yeah,
Irina Slav [00:30:02] yeah, maybe we should push back a lot.
Tammy Nemeth [00:30:05] Okay.
Irina Slav [00:30:06] No.
Tammy Nemeth [00:30:07] So Irina, I think this is.
Irina Slav [00:30:09] Yeah, that’s one of the and this is the example of why the energy industry should push back, because shifting climate scenarios muddied the picture for investors. It’s a misleading headline from Bloomberg. And basically the stories about banks, that have to adjust the net zero targets and plants. Because guess what? The forecasts on which these plans were based did not come true. And the story mentioned specifically, that’s what the IEA’s. Roadmap to net zero from 2021 from May 2021. The document, the first of its kind in which the International Energy Agency said that. We can get to net zero by 2050, and we can stop investing in new oil and gas exploration as of 2021. If you. Move up,.
David Blackmon [00:31:12] Oh yes.
Irina Slav [00:31:13] Later in November, in its monthly oil market report, that same International Energy Agency. I will never tire of repeating this golden oil companies to invest in more oil and gas production because there was a shortage on the horizon. But this is not the only thing they were wrong about, because as banks tell Bloomberg, and I’m reading from the story here, for example, the forecast for coal demand in 2030 was increased by 32% in the 2023 scenario. That’s date on the original document. So what we have is what we already know the AI is doing. It makes insane forecasts about demand, including its recent forecast that oil, gas and coal demand will all peak before 2030. Then, a couple of years later, it has to go back on these forecasts because reality is proving that it’s insane. But in the meantime, banks of all people, not the people, but banks of all industries have bought the original forecast and think it is actually reflecting reality. And they make the, you know, their targets and their plans in accordance with that deranged sort of, you know, forecasting. It’s wishful thinking. This is what banks are doing. Banks are basing their strategies, their investment strategies and funding strategies. On wishful thinking. And now this is starting to crack. Which is great. Muddying the picture. Yeah, right.
David Blackmon [00:32:58] How is it that you know, the people who run these big banks are smart people, right? How have they not figured out yet?
Irina Slav [00:33:06] I don’t know
David Blackmon [00:33:08] Completely politically motivated bunch.
Irina Slav [00:33:11] I think they just buy, they believe it, then some make the effort of, you know, researching it. I think. But not enough.
David Blackmon [00:33:24] It’s just, well, mind
Tammy Nemeth [00:33:25] The thing with this scenario analysis, like you mentioned, I mean the with the the banks are trying to get the companies to use the same ones and they want to mandate it. And so for example, in Canada, they had a call just before Christmas to have input on, a scenario analysis that will be done by the office of the superintendent for Financial Institutions. It will mandate every financial institution that’s federally regulated in Canada to use the one that they make, and the one that they make will be based on the IEA scenario analyzes. And so can you imagine like, well, you know, what’s funny is that insurance companies have their own they have their own risk analyzes. They have their own scenario analyzes. They pay really smart companies to come up with them. But now, of course, in this whole centralization move is that they want one to for everybody to use. Are you telling me the Bank of America uses the same scenario, analyzes that JPMorgan does? I don’t think so. They probably have their own in-house things, but now they want to make it all the same. And what’s interesting, like with the sustainability standards, they require companies to have, to update their scenario analysis every two years. So are the banks now saying we don’t need to update? We’re we’re just going to use this one for how long? I mean, the thing with scenario analysis Irina as you point out, is like their predictions and a lot of them are based on really bad assumptions, really hopeful wishful assumptions.
Irina Slav [00:35:06] Exactly.
Tammy Nemeth [00:35:07] Right. So then it’s like, why? Why are you mandating the use of faulty and bad information? It’s it seems to want to put the banks into, a terrible state if they base their decisions on this, inappropriate information.
Irina Slav [00:35:26] Yeah.
David Blackmon [00:35:27] Wow.
Tammy Nemeth [00:35:31] Okay. Irina. Is this the next one?
Irina Slav [00:35:33] Big European fund sales €2.8 billion euro in oil holdings because of slow moves on climate. Now that news story comes from the Netherlands, where they are crazy about the transition. But not all of them. As we’ve seen, the farmers are fine and the people who support their farm farmers, just fine. But this, pension fund, which has about €240 billion euro in assets, has sold its holdings in shell, BP and Total Energies. Because, and I quote, they were not doing enough to produce credible plans for the clean energy transition. Translated this means that these ratio pages. Not, you know, they have not pledged to commit suicide. So apparently God has divested from them. And I very, wondered, might this divestment have anything to do with the recently very strong financial results of the super major’s? My dad that something to do that assuming this fund. I haven’t looked at its holdings. But assuming this fund has holdings in Orsted, for example, or Vestas or, I don’t know, Siemens Energy, it has a cold tail. I’m just speculating here, but this is a big move and it’s a stupid move because this is a pension fund. This is a fund where people workers pooled their pension money.
David Blackmon [00:37:13] Yeah.
Irina Slav [00:37:14] We that move, which is virtue signaling of the highest order. They are potentially depriving their clients. Of Bigger. I’m not sure how, but yeah, I’m sure actually they are depriving them of bigger, pension checks or whatever down the line. Because imagine this if they’re divesting from three big oil majors, they still have seven listed oil companies in their portfolio because apparently those seven listed companies have credible plans. But if they, you know, pull out of big oil and, go in. More significantly into so-called alternatives. The clients are going to be in trouble before too long.
Tammy Nemeth [00:38:07] Yeah,
Irina Slav [00:38:07] They just.
David Blackmon [00:38:09] about it.
Irina Slav [00:38:10] If about because the climate narrative trumps everything else such as you the security of investment returns, which so many investors have seen. That, you know, the returns from so-called dream funds. Have nothing on returns from all funds.
Tammy Nemeth [00:38:30] So, Irina, would you say then that maybe these institutional investors and other ones like like those ones, that seem to be really inordinately influenced by green activist? Do you think they’re maybe like a threat to energy security?
Irina Slav [00:38:47] I think they’re a threat to people’s retirement money security.
Tammy Nemeth [00:38:54] Yeah. Good point.
Irina Slav [00:38:54] Don’t know about energy security because luckily, you know, the oil companies still have a lot of other institutional and other shareholders to keep them going. But, if our clients of this fund, would’ve pulled my money out of it. Definitely.
Tammy Nemeth [00:39:14] Mihai, think it says maybe they plan to go big on nuclear, and that’s why they divested.
Irina Slav [00:39:20] Yeah, maybe. I’m just not sure. I don’t think that thinking clearly. The thinking green.
Tammy Nemeth [00:39:27] Yeah. Short sighted. green.
Irina Slav [00:39:30] Very, very short sighted.
Tammy Nemeth [00:39:33] All right. Stu, I think these are your headlines. What’s happening between India and Russia?
Stuart Turley [00:39:39] I’ll tell you what. I’m, I’d like to thank our staff for finding Bill Murray and in in imitating that he was out there in. Looks like
David Blackmon [00:39:48] Look like Bill Murray.
Stuart Turley [00:39:48] He. I don’t know how they found a guy that looks like Bill Murray’s long lost twin brother. I want to give a shout out to Reuben here. Hey, Reuben. Thank you. His his is. Thank God for education based content like this. Which explains what oil and gas companies are really doing. Maybe more education dollars versus advertising dollars will tip the scales. Reuben, I’m not sure what you’re smoking, but I sure appreciate it. Yeah.
David Blackmon [00:40:17] I sure wish the oil and gas companies would support what we’re doing here. But anyway, that’s another topic.
Stuart Turley [00:40:25] Well, I, I think we’ll go back into that here in a second, but, I think that, when you take a look at, Bill Murray standing there, I’m just blown away by that. Indian Oil has a contract with Roosevelt from 2020, which the refiner was to import 2 million tons of Urals grade crude. The deal was extended in 2023. And, last year, Russia exported an average of 1.7, 5 million barrels to of crude of India per day. So India is the third largest importer of crude. And we also had Novatek reporting, I believe, this morning that, about, one point, three 7 trillion rubles or 15.05 billion, in net cash. That’s not bad. So sanctions don’t work as intended. This great lady, Irina Slav, has always been saying, take a look at India, and India and Russia have been bonding together, selling in rubles. David and I have talked about this a lot that the U.S. dollar is, is, us petrodollars going away. And then you take a look at Exxon and Mobil, Exxon Mobil, and their shuttered shuttle tanker, new builds, the amount of tankers that are being ordered around the world. The shuttle tankers are becoming more and more important because of how the, the, the Jones act in having to get things offloaded around in there. So that survival that Exxon is having to do. So.
David Blackmon [00:42:19] Where’s said Exxon Mobil tanker story? We’re in that clip from what publication?
Stuart Turley [00:42:25] I’ll have to go find it.
David Blackmon [00:42:26] Okay, I’ll find it. I’ll find it.
Stuart Turley [00:42:28] Okay.
Tammy Nemeth [00:42:31] So I think I have it, but go ahead.
Stuart Turley [00:42:38] Yeah. So when we take a look at what was that was my point. Besides Bill Murray. I’m sorry. It is Monday morning, guys, and I am still tired. So.
Tammy Nemeth [00:42:48] I noticed in that shuttle, article, though, they were talking about with the destination for them, that it wasn’t just for, say, the Gulf of Mexico or whatever, but for Guyana.
Stuart Turley [00:43:01] Oh, yes.
Tammy Nemeth [00:43:02] For their actions and for their drilling around Guyana.
David Blackmon [00:43:05] Yeah, that makes sense.
Stuart Turley [00:43:07] And and Exxon is and I thought that that was interesting on the Guyana, Venezuela issue is that all the reports that were coming in from Exxon and Chevron saying we’re not going anywhere. So no matter what was going on, basically what I took from all of those articles that I was reading over the weekend, Tammy, was the fact that, Exxon and Chevron were saying, no matter who wins, the poorer, Guyanese. Is that how you say it? Guyanese? Yeah. Guyana is.
Irina Slav [00:43:41] Guyanese. You’re right.
Stuart Turley [00:43:42] Okay. Wow. Are basically being thrown out with the bathwater again. And this is so sad because the big oil is going to stand there and say, I don’t care who’s paying the bill. And so I think that insurance is the big reason these smaller tankers are going to be shuttling. So, I think insurance companies are going to be the one. I can’t remember where we talked about that before, but.
David Blackmon [00:44:13] Very interesting, very interesting.
Stuart Turley [00:44:17] There it is.
Tammy Nemeth [00:44:18] That’s the link to the.
Stuart Turley [00:44:19] Yeah, I found it, I found it, thank you. Yeah. Cool.
Tammy Nemeth [00:44:23] Awesome.
David Blackmon [00:44:24] That’s a good story. good story.
Tammy Nemeth [00:44:28] I think what what a fascinating element of the increased trade between India and Russia that that’s included in that Bloomberg article was that India’s oil trade has increased from 0.2% of imports in India to 30 to 34% since the Ukraine invasion in 2022. So it’s not like it’s just a small increase in in the oil trade between India and Russia. It’s actually pretty pretty big.
Stuart Turley [00:44:57] Yeah.
Irina Slav [00:44:58] And then Russia’s economy is surprisingly resilient. Really genuinely surprised. They need to be fired. Seriously?
Tammy Nemeth [00:45:09] Well, I mean, is it the same people coming up with those scenario analysis?
Irina Slav [00:45:15] It’s like whatever the case.
David Blackmon [00:45:17] Might well be. Is
Irina Slav [00:45:18] Very, very, very likely.
David Blackmon [00:45:22] Hey, I’ve got another story that’s just breaking. If we’re done there.
Tammy Nemeth [00:45:26] Sure.
Stuart Turley [00:45:27] You bet.
David Blackmon [00:45:28] I’m in back energy. Big Permian independent producer is entering into a $26 billion cash and stock deal. For privately held Endeavor Energy Partners, one of the most active drilling companies, in the Permian Basin over the past few years, $26 billion acquisition for Diamondback continues the rapid consolidation of the Permian Basin. Anyway, I just thought that was interesting.
Irina Slav [00:45:59] It’s starting to sound a bit like. Hi. I’m sorry. I don’t know why I had this thought when I read this. Actually.
David Blackmon [00:46:10] There we go. Look at that. You’re so quick, Stu.
Stuart Turley [00:46:13] I don’t know about being quick.
David Blackmon [00:46:16] This. This will mean Diamondback. Once this deal is, consolidate is going to be producing eight and 65,000 barrels of oil by themselves out of the Permian Basin, in the United States 15 years ago. That’s more than was being produced across the entire Permian Basin. Okay. Wow. One producer. Well, an ExxonMobil, once they finished the pioneer deal, is going to be producing 1.13 million barrels of oil per day. Just Exxon.
Stuart Turley [00:46:53] Brian, you’re a hoot. Thank you so much.
Tammy Nemeth [00:46:56] Okay.
David Blackmon [00:46:57] Yeah.
Tammy Nemeth [00:46:58] Yeah.
David Blackmon [00:46:59] We’ll take the advertising anyway. Anything for a buck?
Tammy Nemeth [00:47:02] Actually, if it’s a Canadian company, even if they’re advertising outside the country, it would be illegal or something.
David Blackmon [00:47:09] No, of course. Of course,.
Tammy Nemeth [00:47:10] Of course.
Stuart Turley [00:47:11] I would absolutely love to thank all of the folks that are, commenting. And I would also like to give a shout out to Armando again. And he was the one running all of this. So Tammy and I are playing, War or Battleship back here with the comments. So any comments that you all make, please give us feedback. Reach out to us. We want to hear from all of the listeners. We’ve gotten great feedback on all this. And, Tammy, please, push your. Thank you. Push. Push me out of the way, please.
David Blackmon [00:47:56] I listen to that kind comment. That’s. Nice. Thank you.
Tammy Nemeth [00:48:01] So Ruben writes here for for people who are listening on audio and not video. Ruben writes he’s out checking. Lisa’s listening to the show. Thanks for the shout out. Thanks for being a voice of reason that supports our industry.
Irina Slav [00:48:14] Thank you.
David Blackmon [00:48:16] Thank you for all the work you’re doing in the industry.
Tammy Nemeth [00:48:21] You guys have anything else you want to add today, or should we wrap it up?
Irina Slav [00:48:27] Lets wrap. Start preparing next week.
David Blackmon [00:48:29] We have covered the landscape today, haven’t we? This has been great. This has been wonderful. We miss you, Armando. Wish you all the best in the future. And, you know, it won’t be the same without you, but we’re going to keep plugging along.
Irina Slav [00:48:45] Yeah. Thanks for bringing us together.
David Blackmon [00:48:48] And thank you, Tammy, for doing a great job today. Appreciate it.
Tammy Nemeth [00:48:53] you get to do it next week.
David Blackmon [00:48:55] I go for Irina.
Irina Slav [00:48:56] Turn next week. Have a great week everyone.
Tammy Nemeth [00:49:04] Bye. Everybody
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