World Oil Supply Set To Decline In Coming Decade? | Art Berman, Petroleum Geologist

geologically I would say that sometime in the next decade we should start to see a decline in World well we've already seen a decline in World production but it's uh we we should start to see you know what people would call people else begin in earn it now the I it's not going to be a collapse okay thank you [Applause] [Music] welcome to wealthyon I'm wealthy I'm founder Adam Taggart if you're watching this whether you're a fan of fossil fuels or not there's no denying that modern society is still immensely dependent on them particularly oil look around you practically everything you see required oil somewhere along the process of being mined manufactured or transported to get to where you are even the food you ate today oil is still the lifeblood of the global economy yet after hitting a hundred and twenty dollars a barrel a year ago its price has since dropped nearly in half for an update on what lies ahead with this essential fuel as well as the global energy markets in general we welcome petroleum geologists and energy industry analyst art Berman back to the program art it's a pleasure as always to see you thanks so much for joining us today I likewise Adam it's great to be here with you um art it's just it's super fun to have you on this program I've had a lot of people um of late asking for an update on oil so I know a lot of people have been um really looking forward to this conversation um I gave a nod to this in the introduction but just quickly as a just a quick grounding for those who haven't watched our previous videos together in the past can you just comment on how important oil remains to the global economy sure um it's you know something like uh 75 of the world's primary energy youth um and the headlines of course are you know full of renewable this and solar that and hydrogen and all kinds of stuff and I follow all that as carefully as I do oil I spent my life in oil so I'm not going to claim to be as much of an expert on that other kind of energy is as I am well but I'm I'm I'm pretty knowledgeable about it and just for the record um I'm all for most of it I mean we're going there anyway so nobody cares if I'm bored or against it but you know it it is uh you know it's a part of the the energy landscape and it's going to become more a part of it that said um we're just gonna have a heck of a time getting off of oil uh as somebody recently said uh uh oil's not just a hard act to follow it's impossible and and that I think you know really really kind of summarizes the predicament um that our society is in uh and it doesn't even matter if you think that climate change is or is not a problem I mean there are uh actually in my view far greater problems to face the globe than climate change um you know the we just exceeded every kind of planetary boundary there is and we're you know we're not doing the ecosystem any good and eventually that affects us humans and our prosperity so we should care about it not a matter of being a tree hugger if it's a matter about caring about your wealth so um anyway bottom line is we are hugely dependent on oil and other fossil fuels and there's just an awful lot of things that we absolutely require to keep our civilization going that we just don't know how to make without fossil fuels right now so that that is the situation and therein lies the predictions okay and there's a chart here um that you've shown in the past um and it's a chart of uh GDP the relationship between GDP and basically um energy consumption is measured in BTUs and it's a ridiculously linear uh relationship and so is it fairly fair to say that um you know sort of asgo's energy consumption as goes the economy yeah and and so the chart you're thinking about it you know it's it's a it's an instantaneous look so for any given year the correlation between energy consumption and GDP is got an r squared of something like 95 I mean it's just ridiculous it's it's as close to a statistically perfect calculation as you can get and and it makes sense because the countries that have the biggest economies use the most energy to make stuff and tip stuff and and buy stuff and and sell it you know energy as I often say energy is the economy and you know we we've discussed this before but I mean you know a lot of people think that money is is what the economy runs on and of course it is the the the you know the the thing that we're most comfortable with talking about but I mean money is really nothing but a claim on work and work is Just Energy you know so I mean money is really just uh it's a proxy it's the proxies are energy on some level or others so um energy of the economy and and as long as we're talking about uh economic growth we can't get there without energy growth and and so that that that's what the slide here the chart you're thinking of uh talks about and you know we can discuss later that they're actually you know some other components to that I mean there's there's uh GDP there's uh you know doing missions and there's populations and all four of those things lay down right on top of each other and so you know you can't have one without the other three and energy is primary in the other three are secondary GDP CO2 emissions in population so um you know the idea that we can uh decrease CO2 emissions but continue using as much energy uh just defies what defines empirical facts can't do it um you know you wanna you know you you want to degrow you know you want to somehow uh decrease GDP there's a bunch of people who think that's the solution to you know to our climate problems well you know okay but you also gotta say well that means that we have to do without the stuff you talked about the stuff that we depend on every day that come from fossil fuels and I'm not saying you know it's wrong I'm just saying most people just don't understand how all this stuff complexly interrelate and what I'm trying to say is it does and there are no you know Simple Solutions it's like the you know the Gango toy that my grandchildren play with you know you back up a bunch of blocks and and you start pulling pieces out and whoever collapses the thing first loses well you know that's what we're trying to do we're trying to pull out CO2 emissions and somehow expect the structure of our civilization isn't going to fall down and and and it will so you got to be careful about which piece you pull out next or at least you have to be careful about understanding how to pull that piece out affect other things that we don't want to lose and then you have to decide is this really where I want to go and that's a whole nother topic but you know my sense is that an awful lot of people who you know say they want climate change if you told them they had to give up economic growth they'd say whoa wait a minute I didn't sign up for that well I'm here to tell you you don't get one without the other uh sorry at least that's that's what the data tells me and it's pretty darn clear okay and and we might if there's time we can sort of talk about the promise of new technologies or new fuel sources or whatever that that might change the game but I know from many of our past discussions art um if we're trying to transition off of the current dependence that we have on oil um there isn't a clear bridge to a new Energy Future that doesn't require maybe having to make some really important sacrifices um along the way uh if we really are decreasing or oil consumption but but specifically around oil um you know you know price sends a signal right um and and usually I mentioned in the introduction how the price of oil is has almost halved since June of last year and uh usually a price decline like that in oil is due to either lessening Demand right which if you're in a recession oftentimes you know oil prices go down in that um or it can be a reflective of a big increase in Supply um where are let me ask you sorry let me ask that question more generally why has have oil prices declined as severely as they have over the past year well let me count the ways but uh to keep it simple and in the framework that you've just described it's because the world has just exactly the right amount of oil that it needs right now and of course you can pick up you know any any newspaper or particularly if you're you know weighed in the something more financial you know like Bloomberg's or Wall Street Journal or whatever uh you'll find out in a hurry that there are all kinds of loud voices who are saying no no no you know we so badly under invested in oil that I mean there's going to be this huge shortage dust around the corner and we are you know we're going to be hurting and oil's going to a hundred dollars they're 120 dollars or whatever but what I'm saying Adam is that the market with its price signal is telling all of us including those bullish analysts uh you know what we're pretty happy with where things are right now uh we don't we don't or I don't or whatever the heck of the market is you know not really sharing your sense of urgency uh about throughout the future and and so there's there's always guys that say oh well the Market's wrong and well okay you know the market the market is what it is but uh markets just got a very different apparent opinion or perception a lot of those guys do so the simple answer is when prices are lower than some people think they ought to be it's probably because that's exactly where they want to be markets are cheap why should the market pay more for a barrel of oil than it thinks it needs to markets are efficient they're not always right they are ruthlessly effective and Market doesn't want to pay any more than thinks it has to it will if if it thinks it needs it but right now it's saying now don't think so okay um so rewarding what you said we're kind of in the price sweet spot for oil right now right where basically use your words the world is sort of saying hey we we've got pretty much just what we need right now we're we're good um and uh you know historically uh when oil has gotten far above seventy dollars a barrel it really starts constraining growth uh and when it gets too far below seventy dollars a barrel producers start having problems producing it profitably right so this is sort of a the Goldilocks range that we're in right now um you have a chart that uh you sent over before this conversation that that basically kind of indicates and I'm using I believe your words here um that we're we're now sort of seeing investor flight from the oil markets um talk about that and and if you can talk about what's causing it here let me see if I can share my screen with you um so what I'm showing here this is simply a representation of uh of a Time series of the commitment of Traders this is this is Trader movement on uh Us West Texas International crude oil and and and what's being shown here um in in light yellow that's just the price uh it's kind of dated back because it's interesting but it's not the main thing I want you to take a look at and then we've got uh two other curves the red one that is uh open interest that's how many oil contracts are out there that have not yet closed and the other one is the light blue curve and that are those are net long positions so that's simply the the difference between long positions and historic positions and what both of problem show is that if we go up here to the upper left hand uh part of the graph we see uh you know May June 2018 things were kind of at a high they were dropping down covet hit and the open interest went way up because you know when oil negative 37 dollars a barrel it isn't going to go down anymore but of course net long positions reached the low too so you know people were you know they were betting on the fact that well it's got to come back well the students that came back you know we we had the post covered rebound by June of 2021 and it's just been you know heading for the seller ever since so so this this chart says two really important things and that is you know think what you will or what you read but uh the people that actually put their money where their mouth is the Traders uh and this is this is hedge funds most or managed money so you know theoretically not so much speculative but that's another discussion altogether uh you know people are are generally daughter on oil than they are long and they're not interested in holding many contracts and so what this says or what it reflects to me is that um you know oil was riding pretty high from the great financial crisis until the first part of this draft I talked about in mid 2018 people were throwing money at the oil market and everybody not everybody but an awful lot of people said wait a minute you know you oil companies have been giving us lousy returns for a decade you know you suck we don't want we don't want to put our money in you anymore we're going somewhere else and they did and and so with a few you know anomalous uh resurgences that's where we're at what does this mean it means that oil companies just don't have a lot of credit or Capital available to them that they don't internally generate by cash flow so they don't have that blank Jack of going to the markets either for for credit or you know selling secondary fare offerings raising a couple of billion dollars in the morning and have it enough you know the drill baby drill for the next six months to 12 months or whatever and this is uh so this is uh this is a paradigm kit I mean this is something that the last time that we saw this for any length of time was you know in in the early 1980s and of course the oil was depressed for 12 or 13 years after that uh so this is kind of a big deal at least it is to me and if you don't understand the piece of it then everything else that's going on in oil markets and with oil prices is is confusing and and so that's uh that's not the only piece of this but this is this is you know like 101 if you want to understand you can pay the markets wrong but the market has spoken very clearly I believe in in this graphics you know we we do have a lot of people that have been on this channel saying uh hey we've underinvested in this sector for a long time um and even if economic growth sort of stays flat going forward we're going to have shortages because we've underinvested in capex um uh there's been a lot of people on the show recently too saying that they think the oil sectors it was a darling last year it's now kind of a dog so far at the beginning of this year um you know they're saying that oil prices are pretty attractive now at this point in terms of things like PE ratios and just you know historical fundamental valuations um so kind of both of those narratives would say investors should be probably looking you know attractively at at the uh the oil sector right now um but it seems like you're looking at something that's more secular here which is sort of you know an abandonment of the sector by a lot of the people that used to provide Capital to it in the past um I guess first question is from your own perspective um do you think these companies deserve more Capital than they're getting right now like like is this investor strike for lack of a better word uh is it warranted is the right thing to do or are we perhaps setting ourselves up for a higher probability of some of these you know production and supply shortages that people are worried about right uh well that you know that's the million dollar question or maybe more I and and the answer is uh I certainly understand both sides of the argument Adam uh but having said that I think there's some there's some uh important elements that uh perhaps some of the guests he's had on on this channel don't fully understand so so when we say that there's under investment or lack of investment uh according to whom uh certainly not according to the oil company itself they have graphically scaled back their investment because that's what shareholders told them to do right okay and oh by the way uh cash flows from oil companies have never been higher in my in my career right and sorry Start interrupt but I just I just want you to address this in your answer so what you're talking about right there is is sort of um you know it's it's a financial uh reference right where the the company has made decisions for financial reasons and um I think part of the people that are concerned about the future are more just sort of the reality of like hey we're just not going out there and exploring and drilling as much as we were and and that regardless of what shareholders want in the future there may come a period where we're just not getting enough out of the ground or at least at the price we want to fuel the economic growth we want so start interject but I just wanted you to address that in your answer no I I I appreciate you you adding that in yeah it's important that so so let me just say a few things first of all um the oil industry is not a service Factor you know the oil industry um hopefully provides or has provided for the needs of society uh quite well over the many decades that I'm involved with it but I mean it's not like it's not a philanthropic organization I mean they've got shareholders that that they have to they have to satisfy so if there is under investment I mean whose fault is that I guess is the question and eventually it comes back to the the shareholders of the investors that have been sending this very strong message to to the oil companies but the second part of my answer though Adam is what are your assumptions and if your assumptions are well you know we're not spending the amount of money or we don't have the number of rigs or you know fill in the blank what I don't think some people understand at least on the financial side is that the the per well efficiency of an awful lot of the royal play or well has increased tremendously just you know like over the last two or three years and so it simply takes you a rig and left Cat-Back to get the same amount of oil out of the ground now we saw this right after the big oil collapse price collapsed in 2014 2015. we used to have I can't remember in the United States something like 1200 rig you know oil directed Rings running all the time and and that that number dropped down again I can't remember to what it was you know something like half everybody was saying oh my gosh you know we're screwed now I mean look what's gonna happen except that we weren't because what most of those rigs that were what we call Stacked um or old fast and rigged you know they they didn't have the you know the the high-powered diesel engines the top drives they weren't capable of drilling the horizontal Wells and all that kind of stuff and so the reality was is that we got rid of a whole lot of Ridge we spent a whole lot less money but we actually produced more oil and what I'm telling you is is that to my surprise like yeah right uh you know back in 2000 2021 I was fully expecting we were going to see a big drop in U.S production because I couldn't imagine that we're going to see another Paradigm Shift like 2014-15 but we did and whether that's sustainable is another question you know is that just accelerates rate you know accelerates in the rate or is that actually finding new reserves and we don't really want to get into that right now but but what I guess I'm saying is that this scary thing that everybody sees looming right around the corner uh has not appeared and does not seem to worry the market that pays a lot more attention than some people think to at least medium-term Supply all right that's that's a fascinating topic um particularly because over the years our you and I have sort of addressed concerns about peak oil and whatnot um but it sounds like you're saying that the technology has has really been changing the game even in even in just recent years too uh to make uh oil extraction a lot more efficient and presumably you know uh higher output lower cost um and I I just read a report of yours that was talking specifically about the Permian Basin and for those viewers who aren't super up to speed in the oil industry this is one of the US's big Shale oil plays and um again art you you and I have talked in past years about how Shale oil fields deplete much more quickly than conventional oil fields um and the belief for a long time was um yeah these fields are gonna they're gonna they're gonna yield a lot of oil in the short term but they're all going to just deplete very quickly after that and somebody it might even been yourself um said that America's Shale oil Revolution is basically like the the big retirement party for the oil industry right but your report that I just read today if I read it correctly basically says the Permian output is remaining surprisingly resilient and it is probably going to be at least that sort of looking at current trajectories probably going to be much more uh abundant for much longer than most people initially were expecting out of this play did I read that report right yeah you did and and here's the you know here here's the subtext uh that's based on the geology okay so uh the Permian geology and and for your you know your your audience who is not a hundred percent you know up to date on all this I mean the Permian Basin has provided pretty much all of the oil growth in the world for the last four or five years all right so it's massively important it's easily important you know it's critical for growth and and the other stale play um you know the Eagle Ford the Bakken Etc I mean that you know they're hardly going out of business but they're not growing anymore which is pretty much you know what I what I anticipated and so when I set a retirement party I mean just because somebody retires doesn't mean that they you know go off and you know turn into a vegetable and die a few years later I mean you could have you know a long active retirement and and so it's it always was I mean I I I said that because uh yeah it was kind of cute you know it caught people's attention they remember it and you know what the heck but and it is true but but the the reality is is that we've got we I mean the public has this funny idea about the policing you know they think that uh you know depletion's a real problem and and maybe you know maybe it had to do a little bit with the peak oil uh Vibe or or literature back in you know in the early 2000s but but the truth is that depletion is actually not yet a big problem it it will be believe me peak oil will come I promise you and I'm not invested in I mean and I'm talking not talking financially here but you know I don't really care if it comes or not I just know that it's a fundamentally found idea we have we live on a finite Planet you know we're not making any more oil and we're using a heck of a lot of it but you know I mean and and I've got you know I've got a slide here I'll be glad to show you but this is the United States and it begins 50 years ago in 1981 and the blue are proved reserved and the orange at the bottom is production okay so if you want to think about it uh the right way depletion is reserved minus production okay and so if you're worried about depletion without having to do the arithmetic the the productive wedge at the bottom is a real tiny little thing compared to the uh the reserved wedge and blue on top of it isn't it and if you just divide those two if you divide reserves by production rate you end up with this black thing which are the years of supply how much do we have divided by how much are we using every year and what to find out is that in 2021 or 2022 whatever the last date on this graph was we had just about exactly 11 years of supply and somebody might say well gee that's not very much uh I hope I'm alive more than 11 years and so do I by the way but the reality is that that 11 years has been the average years of supply for the United States for the last 50 years why is that because you don't want to over drill you don't want to spend too much money money finding something that you don't need so you get the price signal and that Spurs more Drilling and that means more reserves and so we look at what happens you know the peak oil period is kind of right here in the middle we get to 2008 the great financial crisis oil price jumps up to a hundred dollars a barrel in money of the day it stayed there for like four years guess what people did a lot of drilling and we added a heck of a lot of reserves most of that were sale so as long as you're finding more then you're producing this ratio this you know reserves divided by production in the years of supply pretty much stays the same and and and again don't don't misunderstand me I'm not being a cornucopia here I'm not saying that because it's been that way for 50 years means that it's always going to be that way of course it won't and at what price is another question uh clearly it took some pretty high prices to kick this thing into gear after the great financial crisis but nonetheless I mean I think that people people confuse depletion with decline so a well-declines or a modern well declines really fast that doesn't mean that that it's depleted or that doesn't mean the field is bleeding so you know it's important to kind of you know every once in a while get calibrated with someone who actually knows the the the you know the truth on the ground and say well you know um I some of these concerns they're real and I take them seriously but they're you know it's not a problem yet that's all I can say Okay um sorry bring that chart back up again for a sec yester so is it is it safe to say that the the dramatic rise in blue Supply after the great financial crisis was really tapping into these Shale Fields mostly yeah okay uh now a lot of it was uh putting the deep water Gulf of Mexico on production which I mean that that that period of exploration lagged way back into the into the 1990s but you know clearly well clearly to Me Maybe not so much our audience but I mean those are just phenomenally expensive Wells and production platforms you know or a billion two billion dollars you've got a late pipeline the door I mean it was a big a big investment so it takes a long time get from Explorations and Discovery to first oil and so you know a piece certainly of this big wedge was off door Gulf of Mexico but stale would be I'd say it's probably you know 70 percent okay so mostly Shale uh that some like the the Gulf of Mexico and that's kind of where I was going with this question was did the reserves that are shown here are those is that all the oil we know of or is that sort of reasonably economically uh extractable reserves um okay so Reserve is discovered oil at a price okay so in order to book a reserve in the United States with the Securities and Exchange Commission you have to approve that that means it's not something you think is there you've drilled it or you've drilled something close enough that you could demonstrate that you know a very high probability that it's it's there and it's commercial at whatever the the SEC price was for the year it was booked so an awful lot of these Reserves were booked at you know fifty dollars a barrel fifty dollars a barrel forty dollars a barrel now when for the for the the odd years where they were booked at ninety dollars a barrel when the SEC price goes down the next year the company has to take a right there okay they have to say well we're you know we're not going to take those approved reserves off the book but we're going to take uh you know we're going to take a financial hit on our quarterly earnings because that you know those reserves the stop being commercial for so in the U.S I mean it's not a perfect system don't get me wrong but we've got a uh you know a much more uh rigorous way of of uh monitoring the how real these reserves are and you know let's say Saudi Arabia which has zero and many countries in between so that's part of the reason that I often rely on U.S Centric data it's not because I ignore the rest of the world it's just the U.S beta is for whatever reason uh it's awfully good and it's awfully current I mean you want to know something about European production or european consumption you're lucky to get a monthly piece of data that's worth anything whereas with the US you get it all weekly much more frequency whatever was going with that here is and I think you're corroborating this but please clarify is uh the reserves we're looking at here are are relatively economically recoverable uh oil reserves you know at or around the current price right now they are they absolutely are they absolutely are so my point here is is and let me add that not to interrupt well I will interrupt at a 10 return oh wow okay okay they have to be economically attractive yeah okay so where I'm going with this is as should the price of oil March higher from here we may then have additional Reserve Fields come on into the picture here growing The the Reserve volume here because all of a sudden a play that's not economical or can't give a 10 return at 70 oil well maybe can at ninety dollar a barrel oil right there you go no exactly right so there are approved Reserves I mean they're proved that they exist but they're not proved that they can be produced commercially at a 10 return so they don't make they don't make this the talent okay all right so um you know the reason why I'm kind of sticking on this is uh if what I hear you saying art is there are people that that have some very big concerns about resource depletion in general but oil being a critical one for all the reasons we talked about at the beginning of this interview um and I hear you saying um hey in the long scope yes um we probably will have peak oil related issues but it does not seem to be a an immediate or near-term concern of yours and uh don't even put those words in your mouth but one of the reasons why I'm bringing this up too is you and I have spoken for years before I started wealthyon and you know I was working with people that wrote about the peak oil concern so I don't want to say that you're unringing the Bell but I maybe what you're doing is you're you're turning down the volume with which you're ringing it saying yes it's going to be a a big problem at some future decade but probably not going to be in the driver's seat much at least in the next couple years Fair way to put it I I would say okay so now we're with it there's two there's two separate things we have to talk about geologically and financing theologically we're in 2023 theologically I would say that sometime in the next decade we should start to see a decline in World well we've already seen the decline in World production but it's uh we should start to see you know what people would call peak oil begin in earn it now the I it's not going to be a collapse okay it's a long slow uh you know slide downward but if all we were talking about you got plenty of money is just theology I mean what I told you before is most of the US jail plays are just on maintenance right now they're they're not declining but they're not growing it's just the Permian that's holding everything up all right and even though I did say and you correctly interpreted my report to say you know there's plenty of locations left to drill in the Permian more than plenty there's a lot um but it takes a lot to keep the production level up so I'm saying in the short term in the next couple of years I agree with you completely you know get out towards the end of the 2020s um I'm starting to get a little bit more concerned you know I might come back and you know revive what I'm saying then the other thing I want to say and I say this with with the greatest respect uh is that so many of the people involved in the peak oil movement is that the right word I had absolutely no experience in Earth science I mean they were smart people I you know I I knew a lot of them I was involved in that okay but very few of them actually understood or could make the kind of charts that I'm showing you right now you know I mean the whole Matt Simmons kind of uh Twilight in the desert thing I mean if you go back and look at me and he was you know really the most eloquent spokesman I think for peak oil um but you know his hypothesis was well what a thought he reserves aren't as big as they say they are and we got no way to know right and if they're not whoops then we're in big trouble and and he was not wrong to say that but you know we subsequently got an audit of Saudi reserves that was put out in 2019 when they wanted IPO a piece of Saudi aramco and a very reputable Reserve auditor Netherland and duel um I think it was Netherlands well it might not have been take that back but somebody liked them said well you know basically what they said is pretty much the case so you know that hypothesis sort of went out the window uh and there's still many to question it and there's always people that say well you know Reserve audits are corrupt and okay whatever but um my point my point is is that there were there were a lot of well-meaning very smart people who were speculating about things that they really had very little personal ethereum in doing and if you go back to the beginning not so much M King Hubbard as uh uh you know uh Campbell and La Herrera I mean those are the guys who wrote the the 1994 or five scientific American article that was titled the end of cheap oil so their whole concept of peak oil wasn't that we're running out of it it's that we're running out of cheap ones and they were 100 right about that and if only you know all of these other guys who were so vocal in the peak oil movement and stuck to the you know the right Playbook and didn't get all spun off on trying to say well is the peak going to be in 2007 or 2011. you know they they got they they got distracted the humans often do I often do but the bottom line is that you know if you look at the price of oil in 1995 or in 2000 or 2005 and and compare it to the price of oil today particularly in real dollars there's no question that oil is hugely more expensive today that was true the end of deep oil and that's an issue but before I completely lose the thread the geology is one thing but what if there's no no credit no capital or not enough to grow production I think that's more of a concern based on the first chart I showed you and therefore we may have plenty of oil left in the ground and just not the appetite the financial appetite to go drill it and get it out until until perhaps they're there there is some kind of Crisis okay and and that that's that's good from the peak oil standpoint meaning we're leaving more in the ground longer um but it's probably bad for a society standpoint where we want to grow and we can't because we're not able to get enough at least economically uh out to fund the growth that we want right and I guess that's I'm going to revisit that earlier question I asked one more time which is a how much of a concern is it for you that we may be creating that event with today's approach um where you know historically or recently these companies are exploring less and and just returning uh their High cash flows in the form of dividends to shareholders um and I'm going to couple that with my understanding of the tension between the oil industry and the current Administration here in the U.S that's basically telling them um we don't want you around in the future and therefore there's a real disincentive to make big Capital Investments because you're just not sure you're going to be allowed to enjoy the the Returns on them because the government is basically giving you signs we don't we don't want your industry to be in business still yeah well uh fair point I I I I take the second part of that with uh several teaspoons or tablespoons or truckloads of salt because in my and this is a completely apolitical comment by the way but and my question was intended to be a problem too it's just what I a lot of people will take it differently but I mean the the truth is is that this Administration or any other Administration is unable to to stop oil companies from Drilling in fact say on Federal Land I mean if you own a leaf somewhere in New Mexico or Texas in the Permian Basin and you've got a lease agreement with whoever the mineral owner is I mean the federal government does not have any Authority to come in and say well you can't drill here unless they are the mineral owner unless they're contracted with them right regulations in front of you and you know they can take away certain tax credits and you know or or impose taxes too they can do all kinds of stuff okay but and and and the oil companies the industry will green bloody murder about that but you know I mean I've been in this industry for more than 40 years and when things are good this industry makes a lot of money it's making a lot of money right now so um that doesn't mean that that that that makes up for the bad times but I'm a little bit I'm I'm more skeptical about what the U.S government can do versus what the great momentum of of government and policy makers around the world which in some way reflects their constituency I'm more worried about that momentum because when you get right down to it uh you know for those who you know who pound the table about you know darn it we we just gotta stay on fossil fuels I mean you know it's renewable stuff is nuts you know for one reason or another well you know I don't want to argue the the pros and cons of that but on some level it kind of doesn't matter I mean that's trained less space to you guys I mean you know the I mean the world the government leaders of the world are preparing for a much more renewable world like it or not whether it's right or wrong I can't say but that's where we're going I mean you ask the average person in the United States whether they think climate change is a problem and something like 65 percent will say yeah I think it's a problem now is it as big a problem for them as the economy no but do they think that it's right for the government to be doing things to protect the climate they absolutely do so I mean that's and that's a whole other whole another discussion is that right and and I think you know uh from you know the post that I put out today that I mean I think Net Zero is you know the it is an absolute pipe dream I think it's not I mean it's it's uh it doesn't mean that its intention is is is nuts uh but you know it it it's absolutely it's a fantasy it's an absolute fantasy so let me let me jump in here um and and I know we're treading into sensitive territory where we probably will inflame certain viewers on one side of the spectrum or the other um and so we'll try to navigate this as as uh you know uh diplomatically and as um impartially as we can um and we don't have a ton of time left either so this is a tall order and then in the last couple of minutes we got going on here but um uh yeah I think you said it well where where we can we can separate the intention from the approach right or you know from the path that's being charted I I think most people around the world would say look if we could if we can make energy in a more environmentally um or in a less environmentally impactful way um hey we should do that right I mean who who wouldn't want to do that right and like there are many people who are on the pro-environmental destruction for its own sake train right um so then you just have to ask yourself okay you know well how how wise once we've identified the mission how wise are we creating the process for pursuing it and uh you know I nothing's perfect in the world but but we can certainly point to elements where it has been handled quite inelegantly I'm going to mention Germany is an example of this right where you know they they they really Advanced their transition probably you know got ahead of their skis and as a result they ended up burning more coal you know in the past year and a half and then I think they'd burned in any equivalent period in their history right um so so there's one thing which is like are we just coming up with sort of unrealistic um paths here and it sounds like you think Net Zero isn't being pursued uh in an intelligent way um the other thing I want to tack onto this before I let you respond is you know this happens almost in any kind of real movement where a lot of money goes into the way that money's been going into green energy and ESG and all that stuff right now where what happens is people uh who who benefit from those flows of money they end up kind of running the movements uh for their advantage because there's just so much darn money for them to be to be made I'll let me make a An Elegant equivalent here um Michael schoenberger's work in the the with the homeless situation in San Francisco out in the Bay Area San Francisco Bay area where I live you know he's really said that there are a lot of people uh in positions of power um who are running a lot of sort of these these you know homeless advocacy groups or you know the the they're involved in making policy partnering with the state to come up with policy to deal with homelessness and he said basically a lot of them aren't incented to solve the Homeless Problem uh because they make so much money from the homeless problem that and oftentimes they thwart a lot of what might be actually pretty good proposals that could make a difference because it's become this self-fulfilling uh you know money geyser for them right so you you get this perversion I guess is what I'm saying uh where you know a lot of people actually get incented to not solve the problem so I'm just curious um I guess I'll just let you respond to that word salad I I Disappeared there but but it seems like you know we can have a really good Mission but we can have a problem of both strategy and human talent that keep us from executing on that mission well right so let me just try to reel right into the center of that problem and my opinion my studied view is that most people in the world through no fault of their own and this includes world leaders are energy blocks they have absolutely no idea about how energy works where it comes from where it goes what can be done with it and again that's not a it's not a criticism this uh it's an empirical observation and so um the situation is as follows for the enlightenment of our audience renewable energy including nuclear including you know solar wind geothermal Hydro everything is good for one thing only and that's to generate Electric Power Electric Power account for less than 20 percent of total energy consumption in the world today okay so we can do all the wonderful and Noble and cool things we want with renewable energy of all flavors and we have not yet attacked the 80 percent elephant in the room the rest of all the energy we need who somebody will say but wait a minute electric vehicle will take a huge proportion of Transport fuel off the table right so you're wrong all right you know you're missing a really well so the first question is you know how long is that going to take and you can look at all kinds of figures about you know what percent of new car sales are EVs and it's an impressive number but the bottom line truth is is that in the United States the number of EDS out there are something like one and a half percent of all vehicles in the United States and so we're not going to get to enough EVS no matter how impressive the new car sales are to take very much gasoline and Diesel off the market in decades is my guess in the most aggressive and and if you're in favor of that optimistic case that's just the way human beings work you know I've got a perfectly good gasoline or diesel powered car that I bought three years ago it'll probably last 15 or 20 years I'll be damned if I'm just going to throw it on the junkie so I can get an expensive easy that's piece number one the other piece is this idea of clean energy it's an absolutely ridiculous idea okay it's the predictive and I say that not to disparage the people who use the phrase it's like my stale is the retirement party it's a good phrase you know it gives people's attention all energy is Lily white squeaky clean until you use it there is no such thing as clean or dirty energy it's all clean when you convert it into work it creates to byproducts one is emissions and the other is heat every form of energy does it there's no exception this is physics okay this is the law these are the laws of thermodynamics okay and so if Society is going to continue to consume energy let's say it's the same or nearly the same level that we are right now it really doesn't matter what your sources of energy input are you're gonna produce weight and heat as part of that process and by the way CO2 is nothing more than weight okay it's pale pipe for the whole human Enterprise all right it's one of many and so you just can't get there from here you can't keep consuming what we're consuming in terms of end use with any kind of renewable non-renewable clean dirty technology without producing pretty much the same amount of waste and Heat that you are right now and that's because your EV or your solar panel or you know your wind turbine you have a whole supply chain and life cycle of work involved I mean you gotta extract the minerals from the ground you've got to put them on a boat and send it somewhere manufacture it into something you gotta send it on a boat somewhere else get picked up on a truck it gets taken to Amazon's Warehouse it comes to you and and there are four things that Society civilization cannot stand stand up without deal cement plastic and fertilizer all four we we have no idea how to make any of those four without fossil fuels so people say I saw recently the city of Amsterdam recently said no more fossil fuel by 2030. okay great guys now um did you include in that statement that there will be no more seal no more cement no more plastic and no more fertilizer which means there will be no construction there'll be no computers there will be no hospitals and health care which are one of the principal consumers of plastic and there won't be any fertilizer in the countryside to produce food well no we didn't say that well that's what you mean isn't it now again I'm not I'm not disparaging the you know the you know the good people of Amsterdam I'm saying they're energy blind they don't get it they don't understand that this is a complex web you can't take out one piece of the Jenga puzzle without eventually it's going to fall down we do not know how to smelt Steel out of iron ore in any any kind of scale without coal dirty stinking cold we just don't know how to do it and I don't know when we ever will and by the way nuclear fusion will not solve the problem we'll leave it there um but you know we we as human beings you know just think there must be some box of Hope somewhere somebody's gonna figure it out there's some technology I'm here to tell you I share your hopefulness but it ain't gonna happen it's not going to happen in my lifetime it's not going to happen in your lifetime if we believe that there is a predicament with the ecosystem and climate change then we don't have the time it takes to figure those things out and so we cannot our society will collapse without feel demand plastic and fertilize and so if you want to pull out that piece you want to pull out that gender piece of fossil fuels go ahead and do it you're going to lose the game I'm not advocating that you know we go the other direction and go berserk on fossil fuels I'm just trying to describe the problem it's a big problem it's a big problem what's interesting to me about this conversation artist we've talked for like I said you know many many years yeah and I I feel like I've gotten from this conversation that you're actually a little less worried in the short term and maybe a little more worried in the long term you have absolutely nailed it Adam yeah I'm I'm I'm I'm real worried in the long term I'm real worried in the median term in the short term I'm a whole lot more worried about a collapse of the financial system a nuclear war than I am any of the things that we're talking about right now I mean yeah you know those things could put everything into you know an absolute Tail Spin you know anytime between next week and the next couple of years now you know I hope that's not the case but realistically I mean those are those are real risks that are out there and you certainly know about them as well as I do yeah so uh uh hopefully uh those crises don't arise or at least hopefully definitely the the nuclear one doesn't arise right um but they're not they're not dismissable by any stretch and uh and and they do Merit our full attention um but but almost kind of like um you know whenever I talk to Lacey hunt on the economic side he says look the FED has to kill the inflation dragon that is its immediate foe it's kind of Vanquish but don't forget the second it does kill that Dragon it's then going to turn around and start attacking the much bigger deflation dragon that it was fighting before and had to put its sword down to kill the inflation so in other words we have this this multiple nested set of of you know crises many of them existential and you know I think one we're talking about here it's it's largely an existential crisis certainly at least far away of life um again not on tomorrow's doorstep but but you know in a decade or so yeah maybe actually it starts really getting real he also doesn't sound that doesn't sound like you've got a ton of hope that we've got like the Brain Trust on the problem here as you categorize most of the politicians that are driving regulation around this right now or initiatives around this right now as being energy blind um so that's not super confidence inspiring so I'm gonna have to wrap it up here art but but maybe this is such a big and important question and I know that they're going to be many viewers here who each have their individual questions that have been raised by the last sort of 15 minutes of discussion here uh that are going to be frustrated that we're closing things off here so I love it if at some point you might be open to coming on and doing a live session with me where I I can largely be just Fielding questions from the audience around this energy transition topic that we've been talking about is that something you'd be open to I'd love to do it Adam and let me just say for the benefit of you know those people that are freaking out on the others by to this conversation you know I'm not I'm not depressed I'm not pessimistic I'm not bummed out I mean you know I'm I'm just I mean I'm a scientist you know my my job is to describe the current situation that doesn't mean that it's gonna you know it's gonna make me uh you know want to go kill myself or anything I mean I think life is pretty darn good and I think it will be you know it'll be surprisingly good for those that are psychologically prepared for some kind of change and and we're going I mean what I'm saying is is there will be an adjustment in in our standards of living over some period in the future hopefully it'll be slower than it will be longer but you know that doesn't understanding what what's in front of me doesn't suppress me it's getting surprised by something that I didn't expect it really bums me out so uh you know I I don't want people to take from what I'm saying oh my God you know I'd give up no uh what I like to do is learn more and understand better but I can tell you that the path that we are on is everybody's just so darn focused on one thing you know we gotta solve the submission problem well you know we're just going to push the problem somewhere else that's that that that that may be what a politician has to do but that's not going to work that's all I'm saying so uh hopefully some people that are listening will endeavor to be to become a little bit less energy blind so that they can they can understand where I'm coming from and maybe feel a little better about things all right great well I appreciate that that intent to calm folks a little bit to say hey look you're not putting your head in the oven after this conversation yeah um although just to reiterate your point there about you know what we're doing as a society right now it seems like we're we're real intent on solving the less than 20 part of our energy consumption which hey maybe that's something we should do but we should also be really dedicating a lot of energy to the 80 part of the challenge as well which you're saying we're we're maybe not looking at nearly as closely so very unfairly before I get to my last question can you just give us 60 second two minute short answer on where if anywhere do you see the opportunity right now um and again we have investors and mostly people who are you know they're they're not crazy speculators who are going to be investing in like wildcatting but um you know are are looking for you know opportunities to invest at least a prudent portion of their portfolio um in things that make sense are there particular sectors or or types of companies right now or certain energy related Commodities uh that you're sanguine on sure well let's talk quickly about oil um well-managed oil company or um you know they are good Investments or should be good investments in times of high prices low prices EST whatever and um you know I I don't want a quick particular name but uh you know certain major well I mean certain companies like Chevron like you know like Exxon like like oxy that have you know really well-managed portfolios uh mostly around the world but also in the Permian Basin where growth is um you know those those have been consistent or well exxon's been up and down a little bit but you know it was a few years ago but I mean those are always I think very sound Investments the other thing is is that we're we're going to see consolidation you know mergers and Acquisitions and so uh you know there's there's been a persistent rumor that you know Exxon or Chevron or somebody's going to buy Pioneer Natural Resources which by the way is also a very strong company uh but you know if you if you look carefully at who are the strong smaller companies somewhat smaller companies that are likely to get acquired I mean you can make a ton of money you may lose money on whoever buys them at least in the short term but you make a ton of money on whoever whoever gets bought you know the Canadian oil companies are can I mean they've had the labor under you know much more difficult uh physical structure and price structure than the US and there are companies up there that you know just consistently deliver strong returns now on the the Alternative Energy side all you really need to do you know don't get beguiled by all the Techno vs okay just just look at where the money's going you know look at where the U.S government you know the uh you know the the latest bit of legislation you know huge windfall for all these renewable companies I mean that is that's just money in the bank at least in the short term just find out you know where the I mean there was an article on the you know in in uh in in Wall Street was the Wall Street Journal Wall Street Journal uh Monday talking about uh deegar Shaw who personally run 400 billion dollars worth of government money in a couple of his companies you know I mean it's just going to be really hard and I don't know a thing about or company so I'm you know and I'm never given Financial advice because that's not my job but you know I mean follow the money the government is guaranteeing that those companies are going to make money that that's just like it or not you know right or wrong that's what's happening so I mean I and I think is I think as people get less energy blind a lot of what I'm saying is going to start to change and if you're ahead of that game you're gonna make some money and I'm curious on that part um we we started this conversation with sort of the investor strike going on in the oil markets as people become less energy blind do you see more Capital than flowing back into the fossil fuel space a different class of investors I don't expect very many of those who left in 2018 to come back I may be wrong but there will be a new class of investor that recognizes what perhaps they didn't or don't somebody's going to move into the space okay and and and and the space is not vacant by any means it just doesn't have the same access to the capital and credit that it did several years ago okay but but again don't let me put words in your mouth as you see the the world waking back up to the essentiality of fossil fuels and the difficulties in moving off of them in any Speedy way given that they are responsible for the vast majority of the energy consumption mix Capital that otherwise maybe today is saying well that's not green I don't want to be there it may say all right you know what that stuff's going to need to be around it's going to give off good returns for the Long Haul I'm going to put some more Capital to work in that space exactly right that's my right um all right well as always art I hate to wrap these up because you and I can and have many times talked for hours um for folks that have enjoyed this conversation and would like to follow you and your work from here where should they go if you go to artberman.com uh everything on my website today is free um I have ended all my subscription Services because they're too much of a pain in the neck to manage uh so everything new that goes out there just about everything new for six months has been free go to artberman.com if you want the a more uh you know uh Moment by moment brain dump uh at AE Berman 12 on Twitter I'm on LinkedIn as well uh those are places where you can find me and uh you know you can interact with me or you can send me a note on my website but that's that's where I am and uh as I say I'm I'm not in this for the money uh I'm in the I love doing it and uh for people that want to know more maybe they'll say you know you're full of it man but you know if if you if you think what I have the offer is is useful it's out there and it's great all right well um I think folks should be able to know by now but I absolutely think it's incredibly useful I think the fact that you're now just giving it to the World um son's subscription is a true gift and uh I love your mission art how I interpret it is just trying to make the world a little less energy blind um so super appreciative that you are out there doing that um uh so anyways art um if folks if there's enough interest like I said in a doing a live event with art if you're interested in that let me know in the comments section below if indeed there is enough interest art will reach back out to you and hopefully we'll be able to schedule one of those relatively soon um all right folks uh if you want to take advantage of of you know applying some of the insights that aren't shared here in terms of putting that to work in your Investment Portfolio as always highly recommend you do that uh under the experience of a professional financial advisor in general but specifically one that takes into account all the issues that art has talked with us about here um to be honest there aren't that many that really understand all that um but uh if you've got a good one who's doing that for you great you should really stick with them if you don't though or if you'd like a second opinion from one who does uh feel free to talk to one of the financial advisors that wealthyon endorses and just set up a free consultation with them to do that uh just go to wealthion.com fill out the short form there these consultations totally free they don't cost you anything there's no commitment to work with these guys just a public service they offer to help people prudently position and hopefully in advance for some of the things that are talked about here um and if you'd like to see art come back on this channel again soon whether it's in the live format or just coming back on when he lets me know he's got something important he wants to share please do me a favor and voice your support for that by hitting the like button then clicking on the red subscribe button below as well as that little bell icon right next to it art can't thank you enough thanks so much for joining us today and giving us so much of your time and expertise always a pleasure to talk to you Adam thanks for having me back all right thanks so much all right everyone else thanks so much for watching

Channel: Wealthion

Views: 61,640

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Id: t1URKfULArI

Length: 75min 27sec (4527 seconds)

Published: Tue Jul 25 2023