Daily Energy Standup Episode #219 – Weekly Recap: From Clean Energy Targets to Oil Auction Expansions: Exploring Crucial Energy

Oil is headed as high as $150 a barrel unless the US government does more to encourage exploration, according to Continental Resources Inc., the shale driller controlled by billionaire Harold Hamm. Oil is headed as […]

How The Transition Push Contributed To Higher Oil Prices

September 26, 2023 Mariel Alumit

Michael Tanner: [00:00:15] What is going on, everybody? Welcome into a special edition of the Daily Energy News Beat Standup weekly recap here on this gorgeous Saturday, September 30th, 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 premiere of the show and the director and publisher of the world’s greatest website, Energy News Beat Stuart Turley, My man. How are we doing today? [00:00:37][22.5]

Stuart Turley: [00:00:38] It’s a beautiful day in the neighborhood on a Saturday. I hope everybody’s kind of chillin with the family, hopefully. [00:00:44][6.4]

Michael Tanner: [00:00:45] And you’re about to get our top stories from the week. It is a busy week. Still a lot going on. [00:00:49][4.0]

Stuart Turley: [00:00:49] It will be. Michael. I keep sitting here thinking, I was thinking about our days when we were at the old regime. There were some days I had to look for an energy story. I ain’t got that problem right now. [00:01:00][10.8]

Michael Tanner: [00:01:01] But now we’re free. Free as we will ever be. Hi, folks. We got our top stories coming up. It was a really great week. You know, we had EIA, you know, oil jumped to 93 bucks. Got to love that pebble at Shell EPA doing power moves. I’m turning it over to the weekly recap. We’ll see you Monday, folks. [00:01:21][19.6]

Stuart Turley: [00:01:21] Hey, let’s have a little bit of fun. Boy, that almost sounded like Putin. Hey. [00:01:24][3.3]

Michael Tanner: [00:01:25] Hey. [00:01:25][0.0]

Stuart Turley: [00:01:26] Okay. Recent grid reforms might not be enough for Virginia to hit its clean energy targets. Advocates say, You know, Michael, this is a common theme. And when you sit back and take a look at job creation, wind, solar capacity in the Q and then you take a look, Virginia is on track to meet short term carbon free targets laid out in the sweeping Clean Economy Act of 2020. It’s remarkable considering that 44,000 megawatts of wind in solar energy storage projects proposed across the state are still waiting in PJM Interconnection. Q Which is, Michael, what is that? That is a regulations from the Biden administration holding this up. Oops. Now, here’s another quote in here from Ammon. He says, Even though Virginia is in good shape for the immediate future, more proactive transmission planning would really help. Really? Yeah. Michael you cannot put renewables on a grid without planning ahead. It does not work. You cannot do it in their 180%, 180% higher in order to get it done. [00:02:51][85.2]

Michael Tanner: [00:02:51] It’s dumb. It’s the pork barrel call calling the kettle black. This Ammon Dana Ammon you know, you know this is there a policy analyst at the Natural Resources Defense Council who I’m pretty sure was involved in writing the Inflation Reduction Act. So the policy analyst didn’t think originally when they wrote the bill that maybe if we’re going to inject all of this money into the economy via clean energy, we should at least have the ability for somebody to approve the permit. They’re absolutely stupid. So this policy analyst should probably go work. It’s probably out of the straight out of the IEA, straight from the White House over here. And they’re getting hired by the Natural Resources Defense Council because clearly, if you had seen this coming, you would have addressed this in the Clean Economy Act. [00:03:38][46.3]

Stuart Turley: [00:03:38] Absolutely. The Clary’s further down here, it says 5200 megawatts of offshore wind. While she is cheered by the progress, though, so far, she’s faced many hurdles, Michael, on 5200 megawatts. Let’s talk about what that means to the grid. 5200 megawatts may be the tag on that wind turbine for their capability as a generation. But for a grid balancing authority, being able to do that, that’s divide that by 180, you’re not going to be able to count on that wind in order to remain all the time. [00:04:19][41.2]

Michael Tanner: [00:04:20] And I use about 5.2 megawatts of electricity every month to power all my screens. So I don’t even buy. It’s that much. I just think it’s hilarious. Everyone now is talking about permitting for permitting. We going to affirm regulations like you dummies. Think of that beforehand. Did the regulations right before you start dumping all of this money in or else it’s just a cash grab and nothing’s going to happen? [00:04:41][21.0]

Stuart Turley: [00:04:42] Personally, I think it’s a cash grab, but we’ll leave that alone. Federal judge orders the Biden administration to expand the Gulf of Mexico oil auction. I’m not sure who picked this picture, but it looks like diaper. Dan there biden is all grump down on her. So the Louisiana based judge concluded that the Interior Department probably moved wrongly at the alleged. An hour to yank roughly 6 million acres off the auction block. Wu Ocean. The Department of the Interior. Department of Bureau of Ocean Energy Management. Boy, that sounds like a rat cave of what do you want to call that one? Bureaucracy. [00:05:31][48.8]

Michael Tanner: [00:05:32] Yeah, yeah, yeah. It’s. Yeah. [00:05:34][2.5]

Stuart Turley: [00:05:35] Good. No, not not good. Rats get lost in there, and then they have to finally come out. Never mind. Okay. The decision is a win for Louisiana, which it argued it stood to lose as much as 2.2 million in royalties. Followed the money. Louisiana has not done. You know. [00:05:57][22.1]

Michael Tanner: [00:05:58] It’s. How else do these counties make money if you have oil in your county the way I mean, there’s a reason why Midland we could get into it for a year. We we could we could go down this rabbit hole. But I think it’s it’s crazy that people don’t think of second order effects. Why do all of the people who live around oil and gas love oil and gas? I don’t know. Because of the amount of economic stability and uplift it brings to the region, I don’t know. Maybe, you know, it’s you know, it it’s I was one of the people I well. [00:06:30][31.8]

Stuart Turley: [00:06:30] Most people in need in Louisiana. I’m like, I don’t know. [00:06:33][2.5]

Michael Tanner: [00:06:33] They’re great places to live. [00:06:34][1.2]

Stuart Turley: [00:06:35] Now, Michael, you have to remember in Louisiana is also home to the Haynesville, the that oil field. I mean, the oil and gas field that we have Cheniere coming out of all of that natural gas going to Cheniere and then being exported out. You know how much money the U.S. government is making out of the Haynesville and Louisiana. [00:06:56][21.6]

Michael Tanner: [00:06:57] Now in the grand scheme of things, $2.2 million is really not that much considering the amount of debt we’re in. The problem is this is. [00:07:05][8.1]

Stuart Turley: [00:07:06] Not. [00:07:06][0.0]

Michael Tanner: [00:07:06] About the money in Louisiana, about the supply of oil. We’re already in a point where we are going to be under supply. What is the one few things that an American oil company can do that can move the needle realistically in terms of oil production offshore? There’s not much onshore that’s going to really move the needle. I mean, outside of ExxonMobil saying we’re going to double our Permian spending, you know, Chevron and Pioneer all coming out say we’re all going to double our capital expenditure in the Permian. Okay. That maybe moves the needle. What does move the needle? You know, a $2 billion CapEx spent drilling 4 to 5 wells out in Louisiana, out in the offshore, that’s, you know, 100, 150,000 barrels a day. Now you start seeing the needle get moved and you start seeing that gap closing. So while, yes, $2.2 million, the counter argument is that’s not that margin. Look, they’re saving the wells. We know where I stand on the whales, kill them all. But what I do stand for is if we’re if you’re actually talking about lowering oil prices, you’ve got to put more supply. It is basic economics. So I think this is a short term pool, looks good for the administration. They strike this down, but in the long run, it’s going to kill them. You know, this this judge overruled it. It’ll be interesting to see if it actually takes place. This auction is supposed to take place on the 27th. So on Wednesday, it’ll be interesting to see if that actually goes through. [00:08:30][84.0]

Stuart Turley: [00:08:31] Hey, let me do a little bit of a shout out. When you’re doing a you’re going to be killing the whales in the Gulf of Mexico. A It’s not a major thoroughfare for whales. B The sounding and all of the geo work that has to be done with oil and gas rigs is nothing like what has to be done in the wind and offshore wind up on the East Coast. And that’s a major contributor to the dead whales that you so aptly want to drop in and kill all the whales. And then I want to go ahead and drop them in the White House lawn. I think that would be great. [00:09:11][40.4]

Michael Tanner: [00:09:13] Oh, that’s a that’s a great way to leave it. [00:09:17][3.1]

Stuart Turley: [00:09:17] So let’s go to David Blackmon. And again, last week we talked about it, but he asserted himself last week signaling the his predecessor, Boris Johnson, that last week proposing to delay and modify some of the worst of them in a major address to the nation. So he had to do that because they were about to leak. I talked to David about that. He proposed a revisions to include delaying the ban on the sale of new diesel and gasoline cars from 2030 to 2035. So that’s only a five year slip. But yet, did you hear the heads popping? POW, pow, pow, pow, pow. I mean, they did not like that. But when you take a look at EVs, their affordability and being able to get everything, there’s another. Your article on energy news beat today that the used car TV market is just deteriorating. People can’t even afford the used eaves and the expense is between 5020 $2,000 to replace the batteries at the time they start becoming used. So I applaud the Prime Minister that the political motive, the motivation that he had for making the policy changes was to put some space between his Conservative party and the Socialist Britain, British Labor Party. As if on cue, the late Labor leaders quickly obliged him, announcing less than 24 hours after his speech. If elected to a majority in upcoming elections, their party would quickly to bat the tennis ball back over the net and restore Johnson’s unattainable goals. It’s pretty sad when the consumers are at the they’re going to get hit with the bat. And it’s not the political parties, it’s the consumers. Oil was added as high as at $150 a barrel unless the U.S. government does more. Harold Hamm I want to just give a brief outing or comment. I’m at Harold probably five years ago, maybe six years ago. And back then he was saying we are going to be down to 400 rigs. And we were like a thousand rigs, Michael. And everybody was sitting there kind of going, there’s no way. Sure enough. So The Man Herald knows what he’s talking about. So pay attention when he does talk and his continental resources he bought back is I think they’re providing 2 million barrels a day. They’re a player. So let’s talk about Harold’s crude output in the Permian will at one day peak, as it already has, and rival shale fields as the other Balkan region and North Dakota in the Eagle Ford in Texas. Continental chief executive Doug Lawler said in an interview with Bloomberg. Without exploration, you’re going to see 120 to 150, he said. I guarantee it’s going to send a shock through the system. Now, how come? It’s because the ESG model is falling. Investors want their money back. They’re quit investing in things. We’re seeing the renewable. Nobody’s bidding on wind farms now. [00:12:51][214.0]

Michael Tanner: [00:12:53] They can’t know I’m with you. I just find it funny. The title Harold Hamm asking the U.S. government to do more to control oil prices. Man, I would have not put that in my genie bottle of things. I would have guessed would have happened two years ago. I’d see Harold Hamm at an event saying we need more government intervention to lower oil prices. It’s kind of it’s a weird twilight zone we’re living in. [00:13:17][23.9]

Stuart Turley: [00:13:17] Well, in his book I have right over here, he’s probably talking about in this Ed talent just telling by the articles. The author of the article. He definitely is. He’s referring to regulatory issues. So he he gets hammered by regulation. So I have a feeling that’s what he was targeting. [00:13:38][20.9]

Michael Tanner: [00:13:39] To say without more policies encouraging new drilling. You’re going to see more pressure. I agree with you. We should have more. I mean, I’m not against new policies. We should be you know, for every policy we enact, we should get rid of two older policies. Again, I’m just pointing out the fact that it is interesting. I didn’t see that on my bingo card when I walked in the game beginning of the year. Harold Hamm screaming for government regulation. [00:14:04][25.8]

Stuart Turley: [00:14:05] I think there’s a difference between policy and regulations. He is saying policy which says drill, baby, drill. Regulatory issue, say avoid the salamander. [00:14:16][11.1]

Michael Tanner: [00:14:18] He appointed Chesapeake’s old CEO as their new CEO, Doug Lawler. So we know exactly where this train’s headed. [00:14:24][6.0]

Stuart Turley: [00:14:24] Oops. How the transition push contributed to higher oil prices. This one just kind of writes itself. There’s three bullet points that the author brings up. And fossil fuel policies in the U.S. and Europe have led to lower investments and new project. Wow. We saw that one coming, Michael. $4 trillion is what we need to invest just to meet the decline curves. Oh, okay. ExxonMobil, CEO Woods. If we don’t maintain some level of investment in the industry, you can end up running short of supply. All right. Only lowering global energy demand may lead to a. Asian, which prices will remain under control. What does that mean? [00:15:13][48.7]

Michael Tanner: [00:15:13] I think what you’re what you’re seeing is I mean, that’s a fancy word of saying stop driving. Do that’s a fancy way of saying stay inside. Turn off your AC. Shut down your electricity at night. I mean, it’s that coded language that they’re throwing in there. Do you see last a couple days ago, Bloomberg or somebody had an article about why bugs have more protein than you think. I mean, they’re trying to goad us in order to to use less energy, to eat less meat and ultimately die earlier because we’re costing us so much money. [00:15:45][31.7]

Stuart Turley: [00:15:46] Well, I want to throw this ugly squirrel instead of an ugly baby. I want to make sure I don’t upset any mothers. So unless your kid looks like a squirrel. Okay, so let’s throw this ugly squirrel to this mix. You know, Michael, when we take a look at this, Reuters reported this week citing Rice dad, we love it over there. Rice dead investment in oil and gas on a global scale would only grow moderately this year to 579 billion. That compared to an annual investment rate of 521 between 2015 and 2022 after the 2014, which stood at 887 billion. Now, if we need 4 trillion in investment, all you can see is a very big bull sitting around the corner for the oil and gas market. [00:16:41][55.1]

Michael Tanner: [00:16:42] Yeah, and I thought this quote was interesting. The secretary general of the African Petroleum Producers organization, Omar Farouk Ibrahim. This is still he doesn’t pull any punches. We are being intimidated into running away from fossil fuel investment. [00:16:56][14.8]

Stuart Turley: [00:16:57] Mm hmm. Right. Well, here’s the thing. We have the ESG movement that is falling. We had Lego, Michael. We had rag. Well, that had gone to oil free Lego bricks. They just came out and said that they’re going back to oil based products because the ESG movement is failing. I mean, even if you have toy manufacturers realizing that they can’t use straw to build Legos, you’re you’re realizing that you’re going to have to make a change. So you’re going to have let’s go to the EPA’s illegal power play. Michael, can you believe the audacity of the EPA? They come up with an illegal power play. [00:17:42][45.0]

Michael Tanner: [00:17:43] Michael I didn’t see it coming. [00:17:44][1.6]

Stuart Turley: [00:17:45] I didn’t see that one coming. The US Supreme Court ruling in West Virginia versus EPA last year. Boy, everybody was just shouting around on that bad dog. A historic defeat for the EPA ruled that the 2015 Clean Power Plan by President Obama’s. That was his big time climate agenda, you remember, that was unconstitutional and dramatically limited the EPA’s power to regulate. All right. The article is fantastic, Michael. It says you could either have two outcomes, you could either take its lumps and then go work on real regulatory issues, or it could throw everything into the boat and try to go for one last attempt to hit a home run with no bet. What do you think they’re going to do? [00:18:33][48.6]

Michael Tanner: [00:18:34] They’re going to take the home run and try to try to force their way down our throat. [00:18:37][3.7]

Stuart Turley: [00:18:38] Oh, yeah. And so what they’re going to try to do is put these through before next summer so that they can at least be in the court system as a political win for Mr. Biden under the proposed rule. This is just, Michael, what they’re saying is it’s called a new social performance standard in NSP s and they’re talking about new performance standards for the grid, natural gas and coal for retrofitting. They didn’t even make any rules because they said we’re not building any more, so we’re not going to need them. And so they’re not giving the power companies any directions. Okay. Larger, new modified, combined natural gas plants that 30% of the nation’s electricity would be required achieve close to zero carbon emissions by either implementing carbon capture and storage, which is cc s and not if you had the utilization, it’d be utilization in the U.S. if they can store sell it. [00:19:47][69.2]

Michael Tanner: [00:19:47] But you’ve got to drop the utilization because trust me, we don’t know what we don’t know how to utilize it yet. [00:19:51][3.8]

Stuart Turley: [00:19:52] There’s a lot of Diet Cokes that people are going to have to drink in order to get that. And so let’s see what was ever captured. 90% of the carbon emissions by 2035 or by switching from natural gas to 98% green. Hydrogen by 2038. [00:20:10][18.7]

Michael Tanner: [00:20:12] Is green hydrogen even ready. [00:20:13][1.2]

Stuart Turley: [00:20:14] Though it probably won’t be ready until 2040. I mean, holy smokes, Batman. No, this is like somebody had a bad dream. They woke up and said, hey, let’s get electric busses. We’ll cover that here in a sec. It is absolutely ludicrous. I mean, okay, I love Oklahoma and I love OSU and I love Oklahoma University, but this is so dumb. Even nobody from Oklahoma University could have had anything to do with this. This is so dumb. It’s even below them below. [00:20:50][36.4]

Michael Tanner: [00:20:51] See? You know it’s stupid again. You said it all in the beginning. It’s all for political winds. They don’t really care if it passes. They just need something for President Biden to campaign on. And unfortunately, it it it comes at the expense of forcing a lot of extra. Yeah, a lot of extra stuff going on that doesn’t need to happen in terms of, you know, all of this new looking at regulation get everybody stirred up for ultimately nothing’s going to happen. Super annoying. [00:21:18][27.7]

Stuart Turley: [00:21:19] Oh, it’s just pathetic. And what’s happening, Michael, is we’re seeing around the world this push, this gigantic it started with the prime minister of England and then it got into a shell. This one shell is now under the pressure because they’re now saying, hey, wait a minute, since the prime minister of England said, hey, we had to push it out five more years, all of a sudden, all the big boys, big oil and every energy, total energy is already said it and Shell while Swan, that’s a funny name, has already come under pressure. In an open letter posted this month. Let’s see where is it? Quote, For a long time, this guy was Thomas Brostrom. After less than two years, he was out. He quit. He said, quote, For a long time, it has been Shell’s ambition to be a leader in the energy transition. It’s the reason we work here. The recent announcements at and after the capital markets that they deeply concern us and we can only hope the optics of the CMT announcements are deceiving and that Shell continues its path as a leader in the energy transition, you know, how can they pay for the energy transition if there’s no profits? The taxpayers are now not bidding on offshore wind. And there’s a whole money paradigm shift changing right now in in the renewables. So I thought this was pretty interesting when we you and I talked to believe two weeks ago Michael Shell, BP and all these other started following the U.S. big oil companies and backing away from renewables. I thought this is a pretty good article. Yeah. [00:23:10][111.5]

Michael Tanner: [00:23:11] And I mean, one thing it’s it’s it’s nice to see a company be able to take criticism from internally and turn it into a positive. And I love the quote from from the CEO For an organization with the crux of the energy transition, there are no easy answers and no shortages of dilemmas or challenges. Ailes’s spokesman has come out said, We appreciate our staff that are engaged in a passion for the energy transition and sell that a bunch of goodwill. He got up after that. But I love that they’re standing behind this guy and these two people are not completely throwing them under the bus because he’s right. There is some you know, something’s got to go here if you’re going to lean more, You know, they say Shell keep saying they’re going to lean more into operational efficiency. Well, you know what that means. Oil and gas projects. [00:23:52][41.7]

Stuart Turley: [00:23:53] Drill more wells. [00:23:54][0.4]

Michael Tanner: [00:23:55] Exactly right. Get more oil so we know exactly what that stands for. [00:23:55][0.0][1388.1]

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