Daily Energy Standup Episode #157 – Inflation Ignites a Midstream Renaissance as Oil, EVs, and Big Tech Race Ahead: Russia’s Rusty Fleet Sets Sail with Newer Ships, while US Transmission Planning Falls Short

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:01:22] What is going on, everybody? Welcome into another edition of the Daily Energy News Beat Stand up here on this gorgeous Tuesday, July 4th, 2023. As always, I’m your humble correspondent Michael Tanner coming to you from an undisclosed location here in Dallas, Texas, joined by the Executive Producer of the show, the purveyor of the show and the Director and Publisher of the world’s greatest website, EnergyNewsBeat.com, Stuart Turley. Happy 4th of July, my man. [00:01:48][25.7]

Stuart Turley: [00:01:48] Happy 4th of July. I got to hand it the more I read, the more I’m impressed with our Founding Fathers declaring independence. There were some smart dudes. [00:01:59][10.3]

Michael Tanner: [00:02:00] Yeah, They were some smart dudes we hope you’re having a relaxing July 4th. Hopefully it was work free hopefully you’ve got some grilling, some hot dogs, some friends, some family. So we appreciate all of our listeners and we hope you have a happy Fourth. Nonetheless, though, we will always be working for you, The Fan we have a great Menu lined up today. The stories never sleep and neither do we. [00:02:22][22.0]

Michael Tanner: [00:02:22] So first up, Oil, EVs and big tech hit the ground running in the second half. Next up, 2022 Inflation has silver lining for Midstream and MLP is next up. Don’t forget about 1980, folks. Inflation is not gone we’ll fly over to Russia and talk about Russia’s rusty oil tanker fleet set sail with newer ships. Ooh, interesting. [00:02:44][22.4]

Michael Tanner: [00:02:45] And then finally, Most U.S. regions get D-plus or below for transmission planning development according to new benchmark report not good. Stu will then kick it over to me I’ll cover briefly what happened in today’s half day of trading at ten quickly cover what Saudis expected to do with their selling price to Asia and what they’re expecting out there. And then we’ll let you get out of here and continue to enjoy your forth, guys. [00:03:12][26.9]

Michael Tanner: [00:03:13] But first, all the stories you’re about to hear are courtesy the world’s greatest website www.EnergyNewsBeat.com The best place for all of your energy news. Stu does a great job of curating that website stays up to speed with all the stuff you need even on the fourth. Dashboard.EnergyNewsBeat.com The best place for all of your oil and gas data needs get that while you still can go email us Questions@EnergyNewsBeat.com Alright Stu Where do you want to begin today’s show? [00:03:41][27.8]

Stuart Turley: [00:03:42] Well, let’s start with Oil Evs big tech hit the ground running in the second half. Michael It’s got a lot of stuff you like in it and that’s financing numbers that’s where you just kind of like hang out. I know you read numbers and then go to bed. Most of us get our heads scramble but you love it. Okay, let’s start with Electric Vehicle. Rivian at up 2.1% and lucid up 1.7%. The crypto exposed stocks also rose in premarket as bitcoin hovers closely around the 30,000 level. I don’t own any Bitcoin, do you, Michael? [00:04:21][39.8]

Michael Tanner: [00:04:23] No, I have a little bit of Etherium, but not much. [00:04:26][3.2]

Stuart Turley: [00:04:28] Well, what I love this article when it says Investors are tempering expectations for stocks after unexpectedly strong first half. So the banks is a big sign in question are they going to fold? How do they react? How does the Fed react? Is stuff that’s not in this article. [00:04:48][19.9]

Stuart Turley: [00:04:49] And so stocks this is a quote from Nicholas, Why do we always have somebody whose name I can’t pronounce? This one is Pen Gets Gulu, a Market Street strategist for Jp morgan. J.P. Morgan and Chase Company. [00:05:09][20.4]

Stuart Turley: [00:05:10] Stocks have done well in the first half of the year because U.S. recession didn’t happen, said Nicholas. Moreover, he added, the tech trade has turned into a pain trade for institutional investors, causing them to capitulate. The first back half creates vulnerable for the second half as it means U.S. recession happens there would be an abrupt market repricing. What are you thinking on that one? [00:05:39][28.1]

Michael Tanner: [00:05:39] Well, I think I think what they’re saying is, considering what the Fed has done, continue, You know, we’ve raised rates over 110 basis points. [00:05:50][10.5]

Stuart Turley: [00:05:51] Right. [00:05:51][0.0]

Michael Tanner: [00:05:52] Considering that the market has held up fairly strong in considering companies like you mentioned, Rivian and Lucid Electric Car Companies, you basically don’t have a product when you don’t have a car. You can’t really it’s hard to go out and buy those cars they’re not affordable. You know, give you Elon Musk this you and buy a Tesla you can go on the website right now and in a market as quick as you can say Tesla you can buy a car. [00:06:14][22.7]

Stuart Turley: [00:06:15] And boy they jammed them out for over 460,000 they set a record. [00:06:20][4.3]

Michael Tanner: [00:06:20] Yeah yeah, exactly that. You know, Tesla’s over $900 a share. I think it really it comes down to and I believe and I believe this and I believe this is exactly what, you know, our buddy over at Jp morgan is saying is that. That doesn’t necessarily give us good. You know, it does that that sentiment of, hey, it was supposed to be bad, but it was actually good. [00:06:48][27.6]

Michael Tanner: [00:06:48] That’s going to lead us to whatever your sentiment was for a second half, 2023 it’s probably it should probably use by temper them a little bit because the pain that was expected, was it necessarily here? Exactly. [00:07:01][12.3]

Michael Tanner: [00:07:01] If there’s this repricing that’s due and it was supposed to happen in the first half. Well, guess what that means It should be coming in the second half. So it would be interesting to see how some of these larger institutions decide to play. Again, coming back, tying this back into oil. Oil stocks are going to go as oil prices go I mean, that’s fairly clear now sitting here at $70. I think that bodes well for the lot for. [00:07:24][23.1]

Stuart Turley: [00:07:25] For for for. [00:07:25][0.6]

Michael Tanner: [00:07:26] The larger oil and gas community, I do think if you could see that move, 75,80, you might be able to see you continue to see those stocks rise. But those stocks are continue to set. You know, those EV stocks, the big tech stocks, you know, those high leveraged, high debt stocks, you know, they’re going to go as the economy goes. So it’ll be very interesting to see how things play out. [00:07:47][20.9]

Stuart Turley: [00:07:47] All right. Let me throw these at you here. Here’s some numbers in the lower in this article I love Let’s see here, Brant currently, WTI and Brant, get those numbers for me as we’re doing this? Saudi press agency reports that Saudi will extend the voluntary cut of 1 million barrels per day for an additional month through August. Russian Deputy Minister Novak says that he will reduce the oil supply in August by 500,000 barrels a day, cutting exports to the global market. Iraq’s June oil experts exports averaged 3.3 million barrels per day. Remember, we had an article a little while ago their target, 6.2. Holy Smokes. Kuwait has put out the fire at the AL-ZOR. Boy, that’s kind of nice there’s a little bit of pollution going on. That’s not good. [00:08:51][63.8]

Michael Tanner: [00:08:52] Yeah, well, well. [00:08:53][1.1]

Stuart Turley: [00:08:54] All right. So what do you think? Oil. You got some more cuts coming, do you think that that’s going to help increase the price there? [00:09:01][7.0]

Michael Tanner: [00:09:02] Yeah, but I need also to think you missed read the next bullet point down to Stu. [00:09:06][4.9]

Stuart Turley: [00:09:07] Gold? [00:09:07][0.0]

Michael Tanner: [00:09:08] No! the next big one on Indian refiners. [00:09:09][1.0]

Stuart Turley: [00:09:10] Oh, yeah, yeah, yeah, yeah. [00:09:11][1.0]

Michael Tanner: [00:09:12] Indian refiners have reported they began Pang Juan for some Russian crude imports via our friends over at routers. The the IOC was the first state refiner to use Yuan for such payments. So that I think is the most important thing out of all these bullet points is you’re seeing the transition from the dollar to other forms of payment. [00:09:35][23.1]

Michael Tanner: [00:09:36] As we talked about yesterday, BRICS will be meeting to decide what’s next. So, I mean, it’s scary stuff around the more. But I do think that oil stocks, if there’s if you’re bullish on oil, you should be bullish on oil stocks. It doesn’t take a genius to tell you that. But that’s the whole thing that. Yeah, I mean, it is what it is sue me. What’s next? Okay. [00:09:56][20.2]

Stuart Turley: [00:09:57] Let’s see. 2022 is inflation has a silver lining for Midstream MLPs. You got some funny things on this one. Oil pipeline index sees highest rate increase ever. Most pro pipeline companies have some exposure to the F E R C index. Companies could generate incremental margin, but windfall profits are unlikely. [00:10:27][29.4]

Stuart Turley: [00:10:28] Let’s get into some of this stuff here, Michael, and I want to ask your stuff on midstream. Midstream companies in Lincoln and others actually are a good, solid, hard because that’s hard currency having that pipe in the ground. I mean, those are but the limited master, limited partners, that’s a different kind of Beast that you don’t like. [00:10:53][24.5]

Michael Tanner: [00:10:54] Well, I mean, I think master limited partnerships are crime syndicates, but we’re not necessarily getting into that. I think they’re scams. I think they’re. [00:11:07][12.2]

Stuart Turley: [00:11:08] Why would you say that? [00:11:09][0.8]

Michael Tanner: [00:11:09] Well, because you have a general partner and then all your investors are limited partners. And so you can you can basically the general partner has very little equity in the business and has all the control. It’s a tax haven so everybody who’s getting entered into it is just interested in tax deductions. I mean, we like tax deductions, but this is on a different scale. [00:11:31][21.4]

Michael Tanner: [00:11:32] And distributions are you know, it’s very similar to how like a imagine a real estate or an oil and gas syndication. Imagine the way those operate where you invest money, you’re a limited partner and then you get distribution that’s how MLPs work. [00:11:48][15.7]

Michael Tanner: [00:11:48] Now imagine that on a thousand 100,000 times scale of your classic $5 million real estate syndication. Now your general partner has basically zero stake in the game, has an it has a fee structure that will make you want to puke your brains out. [00:12:06][17.9]

Michael Tanner: [00:12:08] And there’s very little upside, especially in a public company, because what are you going to do if you’re Enbridge? Who are you going to sell to? Who are you going to merge do? No one’s going to do that. [00:12:16][8.0]

Michael Tanner: [00:12:16] So again, I think I would avoid MLPs if you’re an investor going out on the open market, we don’t give an investment advice here, but I would avoid them like the plague MLPs or I call them crime syndicates but tell me about them. We got here the oil price index, which is what is tell me what this oil price index is. [00:12:36][20.1]

Stuart Turley: [00:12:36] Yeah, let me read the bottom line here. The inflation protection built into midstream contracts and their fee mechanisms which you love is beneficial for the space companies can potentially enjoy incremental margin if the higher revenues more than offset rising cost. But the record high ceiling rate increase this year is not likely to result in windfall profits. So it sounds like a said steady investment with very little upside is that what that described? [00:13:11][35.0]

Michael Tanner: [00:13:12] Yes. I mean, it looks like this oil pipeline index is basically the annual maximum rate increase for select pipeline. So you can’t just absolutely slaughter your people that you’re buying from, which is interesting because the reason why you give all the reason why these crime syndicates exist is because it’s so hard to build new pipelines. Stu point it out before the before the show I mean, these people have they’ve got physical infrastructure they own pipelines of at least you. There’s something tangible there. [00:13:44][31.4]

Michael Tanner: [00:13:45] Now, the problem is we need more of these pipelines we need more non MLP midstream companies. You know, we need and the problem is they’re all in bed with each other. It’s it’s really the midstream business is the cartel of companies attempting to drive the price and the fee structure up in order to choke. I mean, go ask anybody in West Texas, they’ll tell you, well, everyone hates midstream. [00:14:08][23.7]

Stuart Turley: [00:14:11] Got to love it. Let’s go get us a midstream company. [00:14:14][2.2]

Michael Tanner: [00:14:15] Yeah, I’m good. I’m good. I’m out of the crime syndicate. What’s next? Let’s talk about inflation. Great. [00:14:20][5.0]

Stuart Turley: [00:14:20] Oh, yeah. Let’s go to inflation and the picture on the article is a bomb you got to love it. Do not forget 1980. Inflation is not gone. I quite honestly, the Biden administration could not sell themselves out of a paper bag full of poo there. I mean, they couldn’t even set it on fire and throw it on somebody’s doorstep. You know how that old joke goes, You know? [00:14:45][24.1]

Michael Tanner: [00:14:45] You like that? [00:14:45][0.6]

Stuart Turley: [00:14:46] Yeah. Yeah. Nobody would step it out because they’d realize it was from the Biden administration. The economic and financial puzzle has far more pieces to it than people think. It’s difficult to understand the market short term, let alone any kind of picture for the long term. Here’s where it gets a little funny, this is why forgetting 1980 could be a big mistake. [00:15:09][23.1]

Stuart Turley: [00:15:10] Higher interest rates are a key tool, or what shall we say, weapon in controlling inflation if needed to fight inflation. I picked this article because there’s a lot of information in here, Michael, and I firmly believe that the Fed is incompetent and is not capable of curbing inflation. What are your thoughts? [00:15:35][25.4]

Michael Tanner: [00:15:37] Well, because they only have they’re so limited by the tools they have. All they can do is is adjust the federal funds rate. They can’t really do I mean, they’ve obviously they’ve created this mess by quantitative easing so let’s let’s just remember that they did give us here. But that’s really the only you know, they have to invent tools. [00:15:54][17.5]

Michael Tanner: [00:15:55] So, I mean, yes, the Fed is killing us you know, it’s going to take some pretty intense financial engineering to figure out how to get out of this mess. But the first the first step is the Fed has to be disincentivized from wanting to pound the economy because that’s what they want to do. They see rates in order to increase the unemployment rate, it should it be one of their mandates, in my opinion. [00:16:17][22.2]

Stuart Turley: [00:16:19] You’re dead on right. And I have said this before on this podcast, the only way that you’re going to solve inflation in the U.S. to get money back in is solve the energy policies. If you solve the energy policies, lower the interest rate, you’ll stimulate businesses. [00:16:38][19.4]

Stuart Turley: [00:16:40] Get out of the way of our great oil and gas, Get out of the way of our Nuclear, Get out of the way of our Renewables. I mean, even the permitting for renewables is crazy, I mean, they’re killing the energy industry. Michael, what does it take to make anything? [00:16:56][16.1]

Michael Tanner: [00:16:58] I mean, years. It takes years to get any sort of project permit so I’m with you. There’s you know, when you are right, when you talk about inflation, it does a large chunk of it does come back to they want to make our current energy production much more expensive to try to force us into something that doesn’t exist. So of course, we’re going to experience inflation. [00:17:19][21.3]

Stuart Turley: [00:17:20] Oh, I. I agree but, you know, if anybody understands economics, I want to talk to you. If anybody has a better idea in a way that I can articulate it, really simply contact us. I want you on the podcast, I want somebody to tell me if there’s a better way to stop inflation. Thanks. [00:17:42][21.6]

Michael Tanner: [00:17:43] Quantitative easing. [00:17:43][0.7]

Stuart Turley: [00:17:44] Quantitative easing. Just so. Okay. We solved that problem. [00:17:47][3.0]

Michael Tanner: [00:17:48] Solved that problem. What’s next? [00:17:49][1.0]

Stuart Turley: [00:17:49] Okay. Russia’s rusty oil tanker fleet set sail with newer ships. Oh, great the Dark Fleet is getting upgraded. [00:17:58][8.8]

Michael Tanner: [00:18:01] We can’t go. It’s been about two weeks, and we’ve talked about the Dark Fleet. [00:18:04][3.2]

Stuart Turley: [00:18:06] Okay. In our in all of our discussions and both of our fans are out there and they’re tired of me talking about the Dark Fleet. But the Dark Fleet has got some things going on for it. They sold off a lot of companies have sold off their older tankers. [00:18:22][15.9]

Stuart Turley: [00:18:23] There are some ESG not so friendly old tankers cruising around the world right now, going between Russia, China, India there’s they are a Exxon-Valdez waiting to happen. And and so now they’re buying some new ones. [00:18:41][18.0]

Stuart Turley: [00:18:41] Safety concerns this is out of the article, said Rebecca Guan, a Lupus Jones, a senior analyst at vessels value. Safety concern surrounding our older vessels is one of the reasons that buyers are opting for newer vessels. Boy, that sure makes a difference. One characteristic of a ship being part of the Dark fleet fell the 15 years as recently as October. It was 19 years. That’s huge. Five years makes a difference on an old ready boat. [00:19:16][34.4]

Michael Tanner: [00:19:17] Oh, yeah and I mean from the technology, from the safety, from everything. So, hey, if we’re gonna have a Dark fleet, they might as well be advanced. [00:19:24][7.7]

Stuart Turley: [00:19:26] I thought you had. Oh, hell, yeah. I figured you would love this quote Anoop Singh, he is a global head of shipping research at oil brokerage brokerage Limited. Some ship owners are getting more comfortable with handling restricted crude, such as Russian flows, as they see that this trade is here to stay. Oh, I could have told them that. [00:19:52][26.6]

Stuart Turley: [00:19:53] So they’re now more willing to invest in younger ships that will meet wider industry standards for too long. Michael we have, can I call you Mike? It’s okay. Instead of Michael. Michael for three years and it’s like I called you Mike. [00:20:09][16.2]

Stuart Turley: [00:20:10] Okay, now. You have the sanctions weaponized against Russia that caused the Dark Fleet, then the weaponization against the dollar has then caused BRICS. So then you’re now spinning around this whole thing is permanent. There is permanent damage to the oil market that we’re about to see some crazy crap coming around the corner. [00:20:36][25.9]

Michael Tanner: [00:20:37] Yeah, I mean, you’re talking about, you know, earnings for these for these new tankers up over 100 grand a day, and that’s up from 23,000 in 2017 but you have to talk about it’s been a while these ships have been upgraded and slowly but surely so. [00:20:53][16.6]

Stuart Turley: [00:20:54] And this is all around insurance and insurance is a huge part of the oil trade. We’ve talked about on the show before. A lot of the insurance for markets is in the U.K. And so in the U.K., everybody is going to the Dark Fleet. [00:21:15][20.5]

Stuart Turley: [00:21:16] There’s a lot of new markets for insurance companies and then you have the China and India that are starting to ensure their own boats. Wow! The whole insurance thing has changed. None of that is in these kind of, I love this one, The old part of old bangers is running dry so a natural progression to that newer ships will be taken, What’s an old pot banger? Okay. [00:21:42][26.2]

Michael Tanner: [00:21:42] I don’t know. That sounds like it sounds like somebody exactly a tanker broker would say that. What’s next? [00:21:47][4.3]

Stuart Turley: [00:21:48] Let’s let’s go to the next one here. Most Michael, this one is kind of frightening a little bit. Most U.S. restrictions get a D plus or below for transmission planning, development and benchmark. In the report. Congestion is rising, delays and cost for interconnecting new project are increasing and very little new high capacity transmission is being built. The report released Wednesday said,. [00:22:19][31.6]

Michael Tanner: [00:22:22] Oh,. [00:22:22][0.0]

Stuart Turley: [00:22:23] Read this one, California and Midwest are leading the U.S. regions for transmission planning and development, partly because they consider future generation and load in their plans. The South West received an F the worst rate. [00:22:37][14.4]

Stuart Turley: [00:22:39] Hey, producer, could you fly in that flag for our video there’s a map of the U.S. and you could see the northwest through the northern grid. Is D southwest connect? Is it D minus California? Got a B? I wonder who paid off what gas. [00:23:02][22.6]

Michael Tanner: [00:23:03] I was going to say as you say, somebody where is Americans for Clean Energy? They’ve got to be based in California. Oh, yeah lets go find out. I’m going to keep track. [00:23:11][8.8]

Stuart Turley: [00:23:12] Gavin Newsom took a shower, got all the oil out of his hair, and they’re burning that for fuel for the summer. So that’s how they got to that. Okay. Texas ERCOT got a D plus. Are you surprised? [00:23:26][13.2]

Michael Tanner: [00:23:27] Yeah, I’m not a DC. Okay, go ahead. [00:23:29][2.4]

Stuart Turley: [00:23:29] And then Plains. I got a C plus Midwest Miso got a B, New England got a D plus and that’s where our national treasure Meredith Angwin is. She’s up there and they got that one nuke up there that those people are nuts trying to manage their place. New York got a C plus. I know for a fact that that should be a D minus. So now here’s one that’s funny. Florida, the southwest, southeast region F. [00:24:04][34.7]

Michael Tanner: [00:24:05] I don’t know. What does that mean? [00:24:07][2.1]

Stuart Turley: [00:24:08] It means runaway. [00:24:09][0.9]

Michael Tanner: [00:24:11] Don’t we literally can’t plug anything in. [00:24:14][2.8]

Stuart Turley: [00:24:14] Oh, no, it’s it’s a disaster. Here’s part of the problem with that, Michael, is because the number of people moving to that area from the rest of the country is causing problems. You can’t have that big of a roll through on that congestion is rising delays and cost for interconnecting new projects or increasing. That goes back to our previous conversation about two and a half seconds ago. Harmony. Oh, yeah. Okay, great. I just said it. [00:24:48][34.0]

Michael Tanner: [00:24:48] No, no, but it’s permanent. [00:24:51][2.5]

Stuart Turley: [00:24:52] Well, that’s it for me, dude we’re going to get everybody out on a 4th of July we’re going to go blow something up, and we’re not going to smoke any firecracker. [00:25:01][9.4]

Michael Tanner: [00:25:02] No, I don’t trust people who copy smoke and firecrackers. We had a half day of trading here today. We’re sitting about 7012 nothing really happened those natural gas drop the $2.70. [00:25:12][9.6]

Michael Tanner: [00:25:14] We will be back at it tomorrow, guys. So we appreciate you checking his out, we hope everybody has a great 4th of July. Don’t smoke any firecrackers, as do said and we’ll see you guys tomorrow thanks for checking us out. [00:25:14][0.0]

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