Top Stories of the week
Renewable energy investors squeezed by higher interest rates, costs
While Silicon Valley Bank collapsed, top executive pushed ‘woke’ programs
China To Host Major Middle East Summit After ‘Success’ Of Iran-Saudi Deal
Biden’s 30% Crypto Electricity Tax May Be Too Blunt A Solution
Highlights of the Podcast
00:00 – Intro
00:48 – Renewable energy investors squeezed by higher interest rates and cost
03:01 – How Germany plans to phase out oil and gas heating
04:47 – While Silicon Valley Bank collapsed, top executive pushed ‘woke’ programs
09:29 – China to Host Major Middle East summit after the success of Saudi Iran
13:48 – Biden’s 30% crypto electricity tax may be too blunt of a solution
17:09 – Outro
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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.
Michael Tanner: [00:00:15] What’s going on Everybody, Welcome to a special edition of the Daily Energy News Beat Stand Up here on this gorgeous Friday, March 17th, 2023. We’ve got a great weekly recap show where we are bringing you the top segments from the week. It was a huge week. [00:00:28][13.3]
Michael Tanner: [00:00:28] We got SVP Bank collapsing, robbed European banks in peril, Credit Suisse all over the place of oil and gas. It was a little spicy oil currently sitting at like 66 bucks. So it’s not been pretty. We will bring you a full analysis of what happened over the weekend on Monday now. But four guys join us in viewing our top segments. Let’s kick it off. [00:00:47][18.8]
Stuart Turley: [00:00:48] Renewable energy investors squeezed by higher interest rates and cost. This has you mentioned it, Michael. And at first, this story actually has a byline with the bank failure this weekend, higher cost and buyers and sellers of renewable power projects recalculating potential returns, hampering fundraising, mergers and acquisitions, M&A. One of the quotes in here is just horrific. We came out of a cycle of low interest rates in which it was easy to look for an asset buy, build, de-risk and sell cash flows. [00:01:28][39.9]
Stuart Turley: [00:01:29] Now the transitions we are seeing are for growth they’re not based so much on cash flows, said Oscar Braz, investment director for fund manager at Qualis Energy. The pool of operators or investors out there who can handle those changes and generate improvements, it is much smaller than you’d think. [00:01:47][17.9]
Stuart Turley: [00:01:47] So the whole renewable market is in trouble we’re not going to be able to add new renewables. We’re not going to be able to add new. You’re not going to have financing. You’re not going to have I mean, you and I talked last week, even several for several weeks now, just because we have the Inflation Reduction Act with all the extra money doesn’t mean it’s going to get done. [00:02:12][24.6]
Michael Tanner: [00:02:13] It’s got to get it’s got to get distributed to its guy. It’s got to go somewhere. So it’ll be interesting to see how it ends up flowing. I do think with the collapse of Silicon Valley Bank, you will see it’s going to hurt the renewables game even more because this was one of the few banks that came out and made very generous loans to these climate tech companies. So it’ll be interesting to see how this money and through what mechanism this money gets distributed through now. [00:02:41][27.8]
Stuart Turley: [00:02:41] And what’s going to be interesting is you’re going to see people, you can tell and I’m going to give a shout out to the Energy News Beat Team here. We’re about the consumer. We are about the American people, the people of the world, and low cost energy. [00:02:56][15.4]
Stuart Turley: [00:02:57] This is not a good thing by by any stretch of the imagination. How Germany plans to phase out oil and gas heating. Okay, You can’t buy this kind of entertainment out there now. They are not going to be able to fill in 20 23 – 2024 winners. So natural gas is going to be a problem. [00:03:19][21.7]
Stuart Turley: [00:03:19] I just interviewed Osama Rizvi from Pakistan and they didn’t even get in a land tanker because of the issues there in Pakistan. So LNG is still going to be king. But let me drop into this article here for a reason. [00:03:35][15.7]
Stuart Turley: [00:03:35] Since about half of Germany’s households are still dependent on gas and oil, switching to alternatives is costly in simply not affordable for many, a heat pump costs 11,000 for a single family home. Michael , a problem with a heat pump is it runs on electricity. How’s Germany increasing their electricity? Coal [00:04:01][26.0]
Michael Tanner: [00:04:02] Yeah, I was I was I was going to say that they want they want to get you on a heat pump and you want solar to provide and they’re providing you the electricity to run these things from coal states. So you have to pay for the higher energy cost and they get it cheaper. [00:04:19][16.6]
Stuart Turley: [00:04:19] And then they want you to pay $11,000. I can’t afford that right now and there’s so many folks that cannot do that. [00:04:28][8.3]
Michael Tanner: [00:04:28] Deal what do you mean that’s a steal? [00:04:29][1.0]
Stuart Turley: [00:04:30] You first. [00:04:30][0.2]
Michael Tanner: [00:04:32] I plead. Yes. It’s like a mexican standoff. [00:04:34][2.7]
Stuart Turley: [00:04:35] Yeah, I’m over here. I’m going to go. I’m going to start instead of the MeToo movement with all the women coming forward, I’m starting a you first movement Tag you first. [00:04:44][9.3]
Michael Tanner: [00:04:47] Announced a new federal lending program. Okay, so let’s walk through the steps here about what happening. How? Because one of the key announcements in the Silicon Valley bank bailout, I’m using quotes. I call it a bailout, we’ll call it a depositor guarantee, was that the taxpayer will not be to foot the bill. I was one of the first things that Joe Biden said. Okay, so how does that happen?. [00:05:10][22.9]
Michael Tanner: [00:05:11] Well, the Federal Reserve is the one that is providing the backstop, which OC True. Technically, that’s not the taxpayer. But guess what’s happening? So what got Silicon Valley mixed mixed up in the first place is they took all the deposits that people had. [00:05:27][15.9]
Stuart Turley: [00:05:28] Right. [00:05:28][0.0]
Michael Tanner: [00:05:28] And they traded them for illiquid private market assets, mortgage backed, mortgage backed securities, equity in private and private companies that have no that are very illiquid. Think of the most illiquid things you can think of gold. I mean, gold is even probably more liquid than what they had and held that on their balance sheet to meet their minimum of solve, you know, to balance their balance sheet to be pun intended. Okay. [00:05:52][24.1]
Stuart Turley: [00:05:53] Right. [00:05:53][0.0]
Michael Tanner: [00:05:53] So then as withdrawals happen, you eventually have to then keep going to your assets these mortgage backed securities, these U.S. Treasury bonds, these things that you’ve purchased that are in illiquid markets and sell them at the market price of whatever it’s trading at now, regardless of where you bought it at, they were having to sell they’ve been selling treasuries and mortgage backed securities at a 30 to 40% loss for like three weeks now. [00:06:19][25.5]
Michael Tanner: [00:06:19] And so then what? So now all of a sudden you’re in this precarious position where you’re left with no cash and all of these illiquid securities, whether, again, mortgage backed securities, Treasury bonds, some that’s not as liquid as maybe cash is or maybe stocks are. [00:06:36][16.6]
Stuart Turley: [00:06:36] Right. [00:06:36][0.0]
Michael Tanner: [00:06:37] How do you get cash quickly? Well, the Fed came in and today on top of guaranteeing deposits, announced a new lending program and I want to read you some of the language here. This is from the Financial Times. I think they do a great job of breaking this down. [00:06:50][13.1]
Michael Tanner: [00:06:50] They say the so called bank term funding program will offer loans up to one year to lenders that pledge collateral, including U.S. Treasuries and other, quote, qualifying assets like mortgage backed securities, like all these other things and this is the scariest parts Stu. Which will be valued at.Par. Whoa. What does that mean? Break that down. [00:07:13][23.2]
Michael Tanner: [00:07:14] You buy a mortgage. Back to you. I give you $1,000 Stu you turn around and sell that thousand dollars or sell that use that thousand dollars to go get a mortgage backed security value. $2,000. The value of that mortgage backed security drops to $500. [00:07:27][13.5]
Michael Tanner: [00:07:28] I come to you and need my thousand dollars back you say I don’t have your thousand dollars. I have $500 and $500 worth of mortgage backed securities. [00:07:37][8.4]
Michael Tanner: [00:07:37] So what the Fed just said is we’re going to open up a lending program that we will buy your mortgage backed securities do for a more at par. Well, what’s par? $1,000 so basically, they will give you $1,000 for something that’s valued $500 on the market as another backstop lending program. It’s unbelievable what they’ve actually come out and done today. And it’s the second thing nobody’s talking about. [00:08:03][25.3]
Michael Tanner: [00:08:03] Everyone’s talking about depositors versus this is all well and do but it’s the second I’m going to and I’m going to be on this for a while. The bank term funding program is, I think, one of the scariest things they’ve rolled out because that what they’ve basically said is any bank can do whatever they want and when they mess up, I mean, it really is The idea of too big to fail was. [00:08:24][21.6]
Michael Tanner: [00:08:25] What’s crazy is the idea of too big to fail was a Democratic thing. Like the Democrats, Bernie Sanders made his name saying the term too big to fail and now in 2023, I’m on the Bernie Sanders side. [00:08:36][10.7]
Michael Tanner: [00:08:36] These banks are too big to fail and they keep getting more and more help at some point. You can’t. It’s just insane I could go on and on about this, but I think that’s the most important fact to note, is this bank term funding program, which basically guarantees that no bank will ever go under, which I mean, that’s insane. It’s just it’s. [00:08:56][20.3]
Michael Tanner: [00:08:57] So it goes beyond the deposit what this has to do with circling this all back to what this means for energy, I think it’s clear Silicon Valley Bank was one of the few companies that backed early that backed and provided debt venture debt provided products that allowed founders of startup and founders of Silicon Valley tech startups and everything you want gave them capital to be able to really large majority of climate tech startups banked with Silicon Valley Bank, and they were a huge proponent of that. [00:09:29][31.6]
Stuart Turley: [00:09:29] China to host major Middle East summit after the success of Saudi Iran. And let me go in to this relationship. Back in 1979. That was before you were born on it? [00:09:45][15.7]
Michael Tanner: [00:09:45] There was. [00:09:46][0.2]
Stuart Turley: [00:09:46] Oh, shush. Oh, my young apprentice. 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 other thing. [00:10:14][28.1]
Stuart Turley: [00:10:14] 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. [00:10:34][19.9]
Stuart Turley: [00:10:35] 1982 Saudi Arabia supplies Iraq with 1 billion in money in aid. Oohh 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. [00:11:02][26.1]
Stuart Turley: [00:11:02] 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. [00:11:14][12.3]
Stuart Turley: [00:11:15] 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. [00:11:44][28.9]
Michael Tanner: [00:11:44] It is a long article, man. They go through this detail. They’re talking about multiple quotes per month. [00:11:50][5.6]
Stuart Turley: [00:11:51] 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. 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 broken in the Middle East in order to make peace? [00:12:30][39.3]
Michael Tanner: [00:12:31] And it has it been in my lifetime. [00:12:33][2.1]
Stuart Turley: [00:12:33] It was under the Trump administration, the Abraham Accords. And then that was the first time that they started it. [00:12:39][5.6]
Michael Tanner: [00:12:39] You’re right. I forgot about the Abraham Accords. [00:12:41][1.5]
Stuart Turley: [00:12:42] Many, many years. That is a tryout. 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. China understands the way to Iran’s heart is through money. They need it badly right now. [00:13:14][32.9]
Michael Tanner: [00:13:15] 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. [00:13:28][13.2]
Stuart Turley: [00:13:29] 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. [00:13:47][17.9]
Stuart Turley: [00:13:48] Biden’s 30% crypto electricity tax may be too blunt of a solution. All right, Arizona, I’m interviewing a very nice guy tomorrow on Bitcoin. So it’s going to be a good educational thing for me, ESG, Bitcoin. So I guess this will help. [00:14:09][21.0]
Stuart Turley: [00:14:10] In his latest budget for fiscal year first paragraph, Fiscal year 2024, President Biden has proposed new tax on electricity use from cryptocurrency mining. If the budget becomes law, a 30% tax will be phased in over three years. [00:14:30][20.6]
Stuart Turley: [00:14:31] The proposal aims to address the growing concern about the environmental impact of cryptocurrency. All right. Where most of the crypto miners are going as they’re looking for trapped natural gas, they’re looking to get off the grid. [00:14:49][17.9]
Stuart Turley: [00:14:50] And if they can find a trap net or where trapped natural gas means, where they cannot export it out on a pipeline. And there’s a bunch of places where you’ve got a lot of natural gas or flared wells or those things in areas and use that for low cost energy every Bitcoin mining fund Or people I have talked to are looking for that low cost kilowatt per hour it can be hydro, it can be anything. [00:15:20][30.0]
Stuart Turley: [00:15:20] So the high cost of energy in the ESG movement in Bitcoin is already there without taxation. This is just another way of trying to get more revenue coming in and all it will do is drive Bitcoin mining underground if you want my honest opinion. [00:15:43][22.1]
Michael Tanner: [00:15:43] Well, because you know, it’s they’ve got to get their grubby little hands on it, you know what I mean? We got to tax it, baby. You know you’re not gonna let it go. We’re not going to let it go on tax. [00:15:52][8.6]
Michael Tanner: [00:15:52] You don’t think there’s a way to weasel around And for us to be able to the federal government to be able to get their take. Here’s what I think. [00:15:58][6.2]
Michael Tanner: [00:15:59] I think that it’s clear when they don’t like something they branded as unclean, when they don’t like something, oh, it’s emissions blamed you’re creating emissions because if what you’re saying is true, Stu that the primary use case for crypto mining is to captured flare gas, which would normally be flared into the atmosphere and release CO2. The very thing that causes climate change, which the federal administration is then taxing people to do that. [00:16:29][29.8]
Michael Tanner: [00:16:29] Now I get what they’re saying they’re going after people who are plugging into a wall. But how do you even know that? I mean, this is just where they’re throwing things in the budget to virtue signal to their base, Hey, look at us. We’re on your side. They’d never implement this. [00:16:43][14.4]
Stuart Turley: [00:16:44] You never know what stupidity lurks in the mind of a politician. [00:16:48][3.9]
Michael Tanner: [00:16:49] Appreciate you guys tuning in for this week in Review. As always, these stories are brought to us by the world’s greatest website, Energy News Beat dot com. Check us out all the links and descriptions below. Have a good weekend, folks. We’ll see you Monday. [00:16:49][0.0]