Daily Energy Standup Episode #81-Government bonds are the new toxic Security – China to host major Middle East summit – Banking in an instant can impact runs

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Highlights of the Podcast

[2:33 PM] 00:00 – Intro
02:56 – The wave of new LNG export threatens to knock gas prices.
05:39 – Simon Black unraveling can happen at an instant.
06:57 – Wells Fargo. Government bonds are the new toxic Security
10:41 – U.S. President proposes more money for offshore wind activities and no tax subsidies for oil and gas in the 2024 budget
14:41 – Timeline of Iran, Saudi relations
17:24 – China to host major Middle East summit after the success of the Iran Saudi deal building off
21:56 – Delta bought Pennsylvania oil refinery ten years ago in order to save money on jet fuel cost
22:24 – Market Updates
23:34 – Outro

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

Daily Energy Standup Episode #81

Michael Tanner [00:00:14] What is going on? Everybody, welcome to another edition of
the Daily Energy News Beat. Stand up here on this gorgeous Wednesday, March 15th,
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, publisher of the world’s greatest website,
Energy News Beat.com, Stuart Turley, my man, how are we doing today?

Stuart Turley [00:00:39] Its a good day in the neighborhood. Wow, it’s been a brutal day.

Michael Tanner [00:00:42] It’s been a brutal day, but it’s been a good day. Kind of a slow
day, but also kind of night. We’ve got some interesting stories lined up. First one Stu’s got
for us in all capital letters, [00:00:51]Wave of new LNG export plants threatened to knock
gas prices. [3.7s] I’d be okay with this. I mean, I can’t lie and say I like high gas prices,
even if that does help the oil and gas business, which it really doesn’t do. Common
misconception that high gas prices actually help the oil business. I mean, yes, it usually
means crude oil prices are high. But I’m I’m okay with knocking gas prices down for the
consumer because this will cover in the CPI. It’s a huge part of their overall budget. So Stu
will dive into all of these new export plants.

Michael Tanner [00:01:20] Next up, we’ve got [00:01:21]US president proposes more
money for offshore wind activities and no tax subsidies for oil and gas in 2024 budget.
[7.3s] Dun dun dun. So Stu will dive into what this the 2024 Biden administration budget
looks like. And as that title goes up, it’s not good for oil and gas.

Michael Tanner [00:01:38] Next up, Stu is going to fly us geopolitically around the world.
We’re going to end up talking about [00:01:43]the timeline of Iran and Saudi relations.
[2.1s] He’s going to walk through this really good article and how the reestablishing of
relations between Saudi Arabia and Iran is has some pretty crazy geopolitical impacts. Stu
will time it all.

Michael Tanner [00:01:58] And then to follow up with that, [00:02:00]China to host major
Middle East summit after the success of the Iran Saudi deal building off [5.5s] what they
helped to broker in that article before. You know the interesting stuff will cover where this
Middle East summit and what it looks like held by China. He’ll kick it over to me. I’ll cover
what happened in [00:02:15]the oil and gas markets. [0.8s] You know, oil didn’t have a
great day specifically due to some of the CPI came out today and amongst other things,
specifically surrounding some of the banks. So I’ll dive into why prices are down and then
we’ll let you get on out of here and finish up your Wednesday and above.

Michael Tanner [00:02:30] Before we do that, guys, as always, all the articles that we’re
about to cover are available in the description below and courtesy of the world’s greatest
website. WWW.ENERGYNEWSBEAT.COM the best place for all of your oil and gas and
Energy News Dashboard.EnergyNewsBeat.com the best place for all your data
and finance. You could again hit the description below of the article that we are about to
cover are available there. I’m out of breath. Those Stu. Where do you want to begin?

Stuart Turley [00:02:55] Hey, let’s start with the wave of new LNG export threatens to
knock gas prices. This is really a very interesting article, Michael. It says one of the first
quotes in here is there’s $1,000,000,000,000 of natural gas infrastructure being built
around the world today.
Stuart Turley [00:03:15] There’s a set of spectacular shifts in natural gas that is here to
stay, said Jeff Vasco, CEO of LNG exporter Cheniere Energy. We love a tremendous
Cheniere. Qatar’s got some big one. They’ve got a 49 mtpa by 2027 and US projects could
add 125 M TPA that’s 16.4 billion cubic feet per day. Here’s the thing. You also have
nuclear rebounding. You have Japan aims to boost its nuclear by 20% and you need 7%.
France is proposing to build six nuclear reactors.

Stuart Turley [00:04:03] A problem with France is on their nuclear reactors and how this
plays in that gas. Hang on. Here is France is proposing to build six new ones because
they’re repairs that they let go on. 25 are too expensive now. Now everybody is saying
nuclear will take away from LNG because nuclear power, we need more all the energy we
can get.

Stuart Turley [00:04:28] So no matter how many nuclear reactors we can build, that will
not impact natural gas or LNG. That’s what I want to make clear it. People are kind of
throwing that around. And here’s another one.but they’re only saying that it’s till 2027, but it
says big uncertainty in the industry is focused on how much damage the high price has
done to medium term gas demand.

Stuart Turley [00:04:53] But it also says in the long run, a little bit further down, they’re
saying, oh, how much is going to go to renewable, how fast? I think you’re ten years away
from being able to impact that. That is pretty interesting. What are your thoughts?

Michael Tanner [00:05:07] I agree. I think there’s a little bit more bark than bite with this
headline. I do think, you know, with all of these projects coming online over this timeline,
you’re right, it’s going to be a slow and steady drift. But again, we’ll see.

Michael Tanner [00:05:19] The market dynamics are bound to change between now and
when this eventual trillion dollar projects roll online. So, you know, I do think is headline
could be a little misleading. But what would you expect from a headline that’s in all caps,

Stuart Turley [00:05:30] I don’t know. But I’m going to talk to the other team on that one.
All right. Hey, Michael, let’s try this next article here. [00:05:39]Simon Black unraveling can
happen at an instant. [3.1s] And I thought this was interesting. The S&P fell roughly 50%.
Unemployment soared and more than a hundred banks failed over the subsequent 12
months. It was a total disaster.

Stuart Turley [00:05:56] This is talking about 28 September 14th, 2008, when hundreds of
employees of the financial giant Lehman Brothers walked out of the Bank bank’s
headquarters. Unbelievable. That was a tough time. Now, 15 years later, all these
investigations, stress test rules, and it could happen again. Michael, do you know why this
could happen again? And it’s a different circumstance?

Michael Tanner [00:06:24] Well, because this time it’s not a crisis of overleveraged banks.
I mean, it’s a little bit of that. I mean, it’s not a it’s not a subprime mortgage crisis. It’s a little
bit more of a addiction to cheap money, which was handed via the low interest rate set by
the Fed.

Stuart Turley [00:06:44] Exactly. But here’s a twist that could. I’m pretending to be you
know, I’ve got my hands here waving for our podcast listeners. It’s going to be a little bit
more technology than that in this article. [00:06:57]Wells Fargo. Government bonds are
the new toxic Security [3.7s] is one of the big headlines in here, Michael. But what this
really concern about as b b is the fact that banking has changed and people know things

Stuart Turley [00:07:15] The run on this bank happened within hours on SVB, everybody
was saying, hey, wait a minute, get your stuff out. Banking happens on your phones and
that’s one of the most critical pieces of banking in today versus 2008. Runs on banks can
happen quickly.

Stuart Turley [00:07:35] Now, the stress test on SVB did not happen because the stress
test had another 50 million that they had to be on or 20 million or whatever the number is
in order to do their stress test. So they were just big enough, but just under the regulations
that were there for stress testing.

Michael Tanner [00:07:55] Well, yes. And I think you also have to realize that, again, the
game that they were playing was the Treasury security bond arbitrage, which as inflation
and rates rise in your long term, government bonds rise.

Michael Tanner [00:08:09] When customers come in to withdraw deposits, you have to
sell those assets at a loss. They were sitting on an unrealized loss of $15 billion when their
entire balance sheet only showed a profit of $13 billion. So that’s where some of that stuff
comes in and then eventually you come into a cash crisis.

Stuart Turley [00:08:25] So let me ask let me ask this and that is in the article number
five, this is going to keep happening. When you take a look at your treasuries and you take
a look at the management that you just described, what do you think is going to keep
happening? Because the paradigm is changed. People do their banking on their hands. I
mean, on their hands. Yeah. It’s how I count 1 to 3. You know, you can tell I’m holding up
my hands for our podcast listeners, but Foreign bank, I mean, when you sit back and take
a look at this, do you think that it’s going to keep going on? Because I don’t know that
we’re out of the woods yet, do you?

Michael Tanner [00:09:04] Yeah, I think what’s really going to happen is you’re going to
see a consolidation of banks. It’s going to the regulations are going to get so strict, they’re
going to get so stringent that your local bank, your regional bank, they’re not going to be
able to supply.

Michael Tanner [00:09:18] I mean, if the if the FDIC really does go in what everyone
thinks they’re going to do, which is basically guarantee all deposits anywhere.

Stuart Turley [00:09:25] Right.

Michael Tanner [00:09:26] They’re going to have to increase the fees that banks pay in to
the FDIC in order to have enough capital to supply that, because now, you know, instead
of having a 1%, DAX is going to need five seven.

Michael Tanner [00:09:38] That mean only banks that can do that are the JPMorgan’s the
Citigroup’s. I mean you’re seeing articles I saw tweets flying by and articles flying across
the desk talking about how all three of those companies, Credit Suisse, JPMorgan Chase
and Citigroup, have all seen a huge influx of new accounts trying to be open in deposits
because people just consider the biggest banks safe. And I mean, if if that’s what we all
want, we want JPMorgan Chase to everyone just have a corporate account with them like,
I guess, you know, let’s see.

Stuart Turley [00:10:07] So Brian Sullivan from CNBC had an. Tweet out their asking
questions. And I do like Brian Sullivan. He is he is a good cat.

Michael Tanner [00:10:19] He’s their commodities guy, too, which I really like.

Stuart Turley [00:10:21] Oh, but he also knows energy. So just and enough of a shout out
for him because I do like him. I love to get him on the podcast, but we’ll leave that alone.

Michael Tanner [00:10:30] Yeah. What do you got next?

Stuart Turley [00:10:31] Okay, let’s go up here. President proposes. He proposes to find
some ice cream. No, The title of the thing is [00:10:41]U.S. President proposes more
money for offshore wind activities and no tax subsidies for oil and gas in the 2024 budget.
[9.3s] All right, this one, chaps, my chicken. And I’ll tell you what. When you get a chap
chicken, it gets all kind of grumpy around here.

Stuart Turley [00:10:57] Tax subsidies and subsidies are not happening for the oil and
gas. You and I have had this conversation before. Tax deductions for investing is not tax
subsidies. I mean, not subsidies. And and that’s what they’re referring into in here that if
why 2024 budget is saying that there is 64.5 million for the renewable energy program of
the Department of the Interior, Bureau of Energy, Ocean Energy Management, 21.6 million
more than to 2023.

Stuart Turley [00:11:37] That doesn’t include the revenue from the leases. That does not
include the revenue from the leases. So this is just absolutely bonkers. Listen to this one. It
also proposes 92.8 million for bio IAMS environmental programs, an increase of 10.4

Stuart Turley [00:12:02] This is like holding things with a gigantic. Anyway, I’m getting
worked up on this. You can’t print this kind of money without having low cost power being
provided. This is going to just increase inflation. It’s going to increase the cost to the
consumer. Your thoughts?

Michael Tanner [00:12:25] Well, I mean, I think this quote was in one of the fact sheets
that the White House issued says it all says the president is committed to ending tens of
billions of dollars of federal tax subsidies for oil and gas companies, even as they benefit
from billions of dollars in special tax breaks. Oil companies have failed to invest in

Michael Tanner [00:12:42] I mean, that tells you all you need to know about this current
budget. Do. That’s what they really think about you. That’s what they want you to think.
They think now, on one hand, they’ll approve the Willow Project the day before they
announce this.

Michael Tanner [00:12:54] So it is not, you know, what is it, the pot calling the kettle black.
You know, don’t worry. Yesterday we just approved the Willow project, which is putting
80,000 barrels a day in Alaska. You know, I’m I’m I’m sure a couple of deer might die.
Michael Tanner [00:13:08] News flash. I’m sorry. There are trade offs. As an economist,
everything is a trade off. You know, your iPhone, I’m probably someone, you know,
jumped out of a sweat shop and committed suicide in the process of trying to get your
phone mate. I’m sorry. Tweet, tweet at me on the phone made by slaves and make fun of

Michael Tanner [00:13:24] But so we could play this game all the way down the line. I
think it’s interesting that there is still 72.3 million are committed for their conventional
energy program, under which that federal agency is developing kind of a national oil and
gas leasing program, which is going to be a little bit different than what the Bureau of Land
Management does and what they do with these offshore oil and gas leases through the
Department of Interior.

Michael Tanner [00:13:48] So that I think is interesting. But I mean, still got a lot of power.
What did you expect to be in this budget? We’ll never get past. This is just they’re they’re
show and tell of here’s what we would like to have happen. It won’t happen. So it’s not
going to. But this is a hey, here’s here’s what everyone wants to think. We like.

Stuart Turley [00:14:05] Don’t ever say in our political world right now it will never happen
there’s so many there is so much bull hockey going on in Washington right now, whether
you’re Republican or Democrat or.

Michael Tanner [00:14:19] But it’s just statistics. When’s the last time a president has
actually put together a budget? Was it Clinton? I mean, it goes back multiple presidents
that haven’t had got their budgets approved. This isn’t just a.

Stuart Turley [00:14:31] Put this together. He know you know the thing. You know the

Michael Tanner [00:14:36] Yeah, I know. Okay, let’s move on now.

Stuart Turley [00:14:40] Let’s go to the next one here. [00:14:41]Timeline of Iran, Saudi
relations. [2.3s] This is really critical because it goes right along with the next story,
Michael. And the next story is [00:14:51]China to host major Middle East summit after the
success of Saudi Iran. [6.7s] And let me go in to this relationship back in 1979, that was
before you were born on it.

Michael Tanner [00:15:07] That was,.

Stuart Turley [00:15:08] Oh, shush. Oh, my younger. The Saudi monarchy based on its
legitimacy back then on on Islam. It was really bad back then when you’re talking about at
Oklahoma State, when I was there, it was always the Iranians protesting the Shah and it
was bad on the campus. I mean, it was you know, it was just a whole nother thing.
Stuart Turley [00:15:36] So then you take a look at coming around the corner and 1980,
1988, Iraq invaded Iran, an eight year war. And Saudi Arabia remain neutral. But it caused
a real problem with the gas going on and the chemical weapons and all that kind of stuff.
Stuart Turley [00:15:57] 1982 Saudi Arabia supplies Iraq with 1 billion in money in aid
retro. So they even got on the other side. And it was partly because back then they had lob
some chemical weapons over on that and it was getting ugly on both sides so Saudi was
afraid they were next on the chemical weapons list.
Stuart Turley [00:16:24] So 2001, I’m dropping down and here is the next one. Iran and
Saudi sign a security pact agreement. This is this was like, holy smokes.

Stuart Turley [00:16:37] Now, when you come down here, July 2015, Iran and the world’s
six major powers each reach a deal over Iran’s controversial nuclear program. Saudi
officials publicly endorse the deal despite their past reservations. So it’s kind of cool. They
started coming around in 2015 and let’s come down here again. Then that ended. It turned
out that it did.

Michael Tanner [00:17:06] It is a long article, man. They go through this this detail they’re
talking about multiple quotes per month.

Stuart Turley [00:17:13] Oh, absolutely. And and it but it was you need to go read this to
understand the whole process in order to understand how important China’s brokering of
this deal is because of the success of this deal is so good.

Stuart Turley [00:17:31] You have I think 60% of all the countries in the Middle East are
going to China to go to this summit so China can broker deals. I’m serious. When was the
when was the last time that deals were brokered in the Middle East in order to make

Michael Tanner [00:17:53] And it has it been in my lifetime.

Stuart Turley [00:17:55] It was under the Trump administration, the Abraham Accords and
then that was the first time that they started it.

Michael Tanner [00:18:01] You’re right. I forgot about the Abraham Accords.
Stuart Turley [00:18:03] Many, many years that is a trial and then Biden administration
comes in and it goes off and gone. China comes in because this is all a slap in the face to
the Biden administration. So we’re going to go ahead and table the rest of the article on
China, because I got a bunch more stuff coming up on this and it’s using its economic ties
to influence Iran’s behavior. Cina understand the way to Iran’s heart is through money.
They need it badly right now.

Michael Tanner [00:18:37] Yeah, and I think this later on down in this article, it says Saudi
officials hopes that Beijing can use its economic ties to influence Iran’s behavior as China
remains the biggest importer of Iranian crude. The who buy oil gain the power.

Stuart Turley [00:18:51] And they are also this is what this all this article means. Both
these articles means it’s going to speed up the getting rid of the petro dollar. The United
States dollar is going to move away, not be the world standard even faster now. Anyway,
that’s it for my time after you.

Michael Tanner [00:19:12] Make absolutely no I mean for having no news today. There
was a lot of news people. So we appreciate we’re still keeping us up on all things
geopolitical related.

Michael Tanner [00:19:23] Very interesting day for the markets, really soaking in the
aftermath of the SVB, the bank collapse and the kind of the fallout from that bank stocks
were down, but we actually saw the S&P 500 rally up 1.6 percentage points. NASDAQ
actually jumped 2.3 percentage points. Facebook came out and said they’re going to lay
off 10,000 people and eliminate 5000 job openings.

Michael Tanner [00:19:43] So even after laying off last quarter, Mark Zuckerberg comes
in, lays more people off. Still. Does that hurt? Tech stocks? Are bank stocks all around
were down and we did see funds become available both at SVB and its signature bank.
Charles Schwab was was down fairly heavy. There was a couple other local regional
banks that were down,.

Michael Tanner [00:20:00] But really that had an impact on oil currently trading as we
record this about 708 here on the 14th, 7180. Again, a lot of that’s due. To the uncertainty
surrounding what that crude oil demand might look like, both at home and in China.
Michael Tanner [00:20:15] But again, today, the big reason why is our dollar was down,
interest rates up with that, with the fact that we’re entering a peril in which the Fed has
come out and already said we’re going to continue to raise rates and if continuing to raise
rates will hurt and cause banks to continue to fail. It’s a cycle that the Fed started.
Michael Tanner [00:20:34] And in order to correct, they have to make banks. I mean, it’s
really a sick cycle that has to happen. They created a problem and to fix the problem, they
have to wipe out companies who took advantage of the policy that they created in the first

Stuart Turley [00:20:45] And it’s because they took too long to take any action being I’m
going to college, stupid.

Michael Tanner [00:20:51] Yeah. So and and right now that that will hamper oil prices I
think you know in in in the short term you know do I think we stay above 70? Man, I hope
so. But could I see a dip below 70?

Stuart Turley [00:21:03] Can I interject here? I did see on on Squawk Box this morning
the CEO of Delta and he is a sharp cookie. I’m not a Delta fan, but on the other hand, he is
extremely sharp. And he did say that they had their largest sale or second largest day of
sales last week.

Stuart Turley [00:21:25] And with that, he said what they’re seeing is that consultants are
hitting the road again and people are really traveling and they’re expecting their volumes to
go up. And when they ask him then about that, I did not know that Delta owned their own

Stuart Turley [00:21:44] And I was like, wow, that’s pretty smart. They they he says that
that helps us out. But if that is systemic, lots of demand that may help us.
Michael Tanner [00:21:54] Let’s see, because I don’t know if I believe that Delta bought
Pennsylvania oil refinery ten years ago in order to save money on jet fuel cost. Wow. He

Stuart Turley [00:22:03] You know,.

Michael Tanner [00:22:03] That’s interesting.

Stuart Turley [00:22:04] Yeah. Thanks a lot, Michael.
Michael Tanner [00:22:06] I believe you. I don’t believe that. I believe that that guy said
that. Do I believe that what that guy was saying was true? Maybe. Maybe not.
Stuart Turley [00:22:13] Well, the CEO of a company, right?
Michael Tanner [00:22:16] Self right. CEOs never lie. CEOs never come out and say
things that are false in public. You’re right, Stu. I’m the idiot. Yes, you are. Gas prices,
Nothing. Oh, before I jump, guys. API, as you listen to this, on Wednesday, we’ll know the
crude oil inventory that comes out 10 a.m. or 930 Central Time. 830 Mt. at 1030 if you’re.
Yeah, 10 to 30 if you are in Eastern time zone.

Michael Tanner [00:22:44] O’m API though dropped yesterday. I’m 1.1 million or 1.15
million barrel build. So we’ll look to see if the EIA crude oil draw confirms or denies that. So
that’s a game of a factor and weigh on the bear side natural gas again weather on the
horizon is really the only thing drawing it right now.

Michael Tanner [00:23:04] We did see a little bit of a steadiness, $2.58, really not much
on that side again, as weather goes so well that it is. So I don’t think there’s much point
spending time on us. Do you got anything else for these guys now?

Stuart Turley [00:23:15] It’s going to be a beautiful day in the neighborhood tomorrow.

Michael Tanner [00:23:17] Yes, it will. So with that, guys, we’ll let you get out of here, 
Finish up your day. We appreciate you guys checking us out here at the Energy News
Beat Daily Stand Up for Stuart Turley. I’m Michael Tanner. We’ll see you tomorrow.