Daily Energy Standup Episode #221 – Tax Incentives, Saudi Arabia’s Gas Push, and China’s Booming Demand

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

Michael Tanner: [00:00:14] What is going on, everybody? Welcome into another edition of the Daily Energy News Energy Standup here on this gorgeous Tuesday, October 3rd, 2023. As always, I am your humble correspondent, Michael Tanner, coming to you from an undisclosed location here in Dallas, Texas, joined by the executive producer of the show that prepared the show and the director, publisher of the world’s greatest website, Energy News Beat Stuart Turley, my man. How are we doing today? [00:00:38][23.7]

Stuart Turley: [00:00:38] Hey, Hey. It’s a beautiful day in a neighborhood in Arlington, Texas. You got to love it. [00:00:42][3.9]

Michael Tanner: [00:00:42] Yeah, no kidding. You are right. You’re right there. Hopefully the Rangers tonight unfortunately didn’t did didn’t go and win the Al West that goes to the Houston Astros, which between me and you are not my favorite team of all time. I feel like I’ve only just adopted the Rangers, but we will look forward to the playoffs there. But despite all of your travels, do you have an excellent show lined up for us? First on the menu to cover solar wind energy, you get hundreds times more tax incentives than oil and gas. Interesting. But still, we’ll dive into it. And I’m sure we’ll talk about the difference between tax subsidies and tax incentives. Next up, Saudi Arabia finally joins the natural gas wave. They’ve pushed really hard into the LNG space and they did another M&A deal today that hits upon that note still. We’ll cover all of it. Next up, China’s demand for oil and copper is, quote, booming, according to Goldman Sachs. Love them back on the bull run. So we’ll dive in. And dual cover what Goldman Sachs has to say about oil and copper demand in China. And then finally for the news segment, the dangerous delusion of a global energy transition to, quote, just electricity. Obviously, there’s a little bit of a play on words here. We’ll Stu, we’ll dive into all things the electric future. He’ll then toss it over to me. I’ll lightly cover what happened in the oil and gas finance markets today. We really just saw a nosedive of prices. Other than that, not much news floating around as as companies roll into the start of quarter four here and really start working and deploying those budgets that they spent all Q3 worrying about. So we will dive into all of that and a bag of chips, guys. But first, as always, the news and analysis you are about to hear are brought to you by the world’s greatest website, Energy News Beat the best place for all of your energy news. Stu in the team does a great job of curating that website to make sure it stays up to speed with everything you need to know about the ever changing global energy markets. You can hit the description below and see all the links to the stories and all the time so you can jump ahead and dive into what’s going on in China’s oil demand or see what Saudi Arabia did in the LNG space. If you look to support the show, guys, the easiest way to do that is subscribe to us on YouTube at Energy News Beat can also find us on Apple Podcasts and Spotify or wherever you end up listening to your podcast. We’re like 12 places, so just Google us, you will find it, but subscribe in to us on YouTube at Energy News Beat is going to be the best way to support the show. You can email us [email protected], or you can see the description below. We have a form you can fill out. You can ask us any questions. We love the feedback and we appreciate a comment. I’m going out of breath Stu. Where do you want to begin? [00:03:17][154.4]

Stuart Turley: [00:03:17] Hey, let’s just have a barrel of fun and let’s start out here with solar, wind, and, you know, my home, solar, wind, energy, you get hundreds of times more tax incentives than oil and gas. As we set this to. What do you always hear in the argument when somebody saying that oil and gas excuse me, renewables are cheaper than oil and gas? You always hear that, right? That’s why we have to go there, right? Well, you take away the tax and the subsidies and they’re not. This article is pretty amazing. They get hundreds of times more tax incentives than oil and gas. Over the last ten years, domestic solar capacity in the United States has grown 13 fold. That’s pretty impressive. And when you take a look at the EIA just putting out their information and Robert Bryce just calculated that the solar industry receives 136 more federally related tax incentives per unit of energy produced than oil, gas and coal. It receives Michael 302 times more than nuclear energy. We love us some Robert Bryce because we interviewed him and he is a true industry thought leadership. And I think. [00:04:39][82.0]

Michael Tanner: [00:04:40] This article does bring up is again, it’s talking about the fact that, you know, according to these calculations, the solar industry receives 136 times more federal energy tax related incentives, as you mentioned, and 300 times coal. The part that I want to focus in on, Stu, is the incentives part, because I think everybody, you know, ever listen to a politician on on the Democratic side of the aisle, They’re going to hammer subsidies, subsidies, subsidies. But what they’re doing is conflating incentives with subsidies. A subsidy is. Stu, here’s $400 to go build a factory. An incentive is if you build this factory, I will give you zero taxes for six months. Maybe monetarily. It’s the same thing because it works out to be $400 of tax savings versus $4 original. But they’re completely different versus subsidizing something a.k.a., you know, the United States purchasing corn from farmers as a direct subsidy to the farming industry in the form of ethanol. When we had the go E85 push or an incentive, which is almost like an opportunity zone if you’re in real estate, hey, if you invest in this lower income area that’s designated as a opportunity zone, forgive me, I’m not I’m not the real estate guy, but in X amount of time, I think it’s ten years. If you hold the property and do something, you then get to withdraw the profits with zero capital gains. Now, I think they’re going away at some point, but there’s a difference. And so subsidies are far and few between in really either the in the energy space in general, whether it’s oil and gas or solar and wind, what’s ramping isn’t incentives. And if you’re an oil and gas investor, we have a lot of those people that partner with our clients. You receive a nice tax incentive if they go and spend that money on capital expenditures like these solar. Those same incentives are also available for other solar and wind projects. And according to Robert Bryce, do it’s way more. So. I think it’s important to understand the difference between when you hear, oh, the oil and gas industry is subsidized, they’re conflating subsidies with incentives and yes, the oil you’re incentivized to produce oil and gas news. We should be we should also be incentivized to do solar. The problem is the solar and the wind we have right now don’t really work. So any incentives, the incentives don’t really, which is a whole nother story. But I love this breakdown by Robert Bryce. [00:06:53][133.7]

Stuart Turley: [00:06:54] Yes. And let me give you an example is in the U.K., everybody is screaming, you know, subsidies. We had to get rid of the subsidies for oil and gas. Guess what? The subsidies for oil and gas and coal right now is because they have too high of energy and they’re giving those subsidies to the consumers because they have too much renewable on the grid in order and it’s now too expensive. So the subsidies, they’re saying, or for fossil fuels are actually because they’ve got renewables on there and they’re paying people’s bills. And in Germany, it is they’re subsidizing the electric bill because they have to use all the renewable energy. So those subsidies are what also Robert Bryce is talking about and that he’s not get clear in this article I. [00:07:43][48.7]

Michael Tanner: [00:07:43] Had a new piece of merch do incentives, not subsidies. [00:07:46][2.8]

Stuart Turley: [00:07:47] Exactly. To get ahead. Let’s go to Saudi Arabia. Saudi Arabia finally joins the natural gas wave. Michael, this is just an amazing kind of thing. The Saudi company has been trying to get into the natural gas space for quite a while, hired a team of LNG traders in Singapore and Saudi Aramco is spending $110 billion. Michael, developing the I’m going to butcher this the jar jar for gas field that will help double output by 2030 and make the kingdom as a gas exporter for the first time. Now it’s also buying may slide down in here into a Australian outfit for mid ocean energy and is in Australia LNG. So they’re buying Michael the assets and the knowledge to get into the LNG market from Australia. I thought that’s pretty cool. [00:08:48][61.6]

Michael Tanner: [00:08:49] Yeah, because Ben Ocean is in the process of acquiring somewhere about four Australian LNG projects. Is is it attempts to siphon that stuff away from this Origin Energy, which is Sydney based? I mean it’s an interesting move for Aramco. You you saw hints of this earlier this year. We’ve covered a few of their deals there, the deals that they’ve made with the UAE and Qatar and some of these other long term purchase agreements we’ve seen that come through the Middle East is really making a shift into that LNG space. It’s about time Aramco did that. I mean, $110 billion do is not a number to sneeze at, you know, doubling their gas output. It’s a lot of gas. Do you have something to do with that, considering a lot of the gas they make right now is currently flared? So they’re really going to. All right. The question is, are they going to you know, these refineries, they’re a building. Are they going to only take what what is considered high BTU gas or are they going to strip a lot of the stuff out to capture some of that excess? Because as you see in the photo right there, they have a lot of waste gas and that generally for a refinery is too low of BTU. The question is, are you going are they going to have the refining capacity to take some of that low? You know, I’m not familiar with the gas analysis, though, in Saudi. And if it’s anything like I know the Middle East is, it’s probably 1700 BTU gas and it is why does it gets oops. So in a good way. I mean, you want wet gas. [00:10:07][78.0]

Stuart Turley: [00:10:07] Yeah. But when you sit back and take. Hey, any time you can get rid of flaring, I’m all ended. [00:10:13][5.3]

Michael Tanner: [00:10:14] So too bad we don’t know anything about bitcoin or we’d be screaming, losing our minds about bitcoin, but we’ll save that for something else. Let’s talk about China. [00:10:21][7.2]

Stuart Turley: [00:10:21] We got a lot of us from China. China and demand for oil and copper is booming, says Goldman Sachs. Hey, did they call you and ask to have you come back in as their China representative? [00:10:34][12.5]

Michael Tanner: [00:10:35] No, they haven’t interviewed me for for Jeff Currie’s old job. I was a little too bearish on my outlook. It was really cool. One question Where do you see oil in 2024? And I didn’t put 250, so I don’t know if I’ll be getting the job. [00:10:49][13.8]

Stuart Turley: [00:10:49] Yeah, well, we’re having to really work on that. China’s demand for many major commodities has been growing at quote unquote robust rate, according to Goldman Sachs. That could be very, very high since they love, what, $250 oil is that which is in their strength in demand, is largely been tied to a combination of strong growth from the green economy and grid and property completions. Now, Michael, the green economy as defined by China, is making all of the green components for the other SAP’s. I mean, excuse me, the other countries in the world to install. They’re making hand over fist on making all the components. So now Goldman Sachs is also saying in here on the critical minerals, the most significant strength has come on the renewables side where copper demand is up. Michael, 130% year on year man. Anybody with a business degree loves 130% increase year on year. [00:11:56][66.9]

Michael Tanner: [00:11:56] Yeah, it is going to mean that your prices are going to go up. And you know, this isn’t a surprise. Have you been following the podcast or following what’s going on in China? They’re clearly using and stockpiling oil and stockpiling really critical minerals in order to really take themselves and allow them to do this quote unquote, energy transition at the speed at which makes sense for them, which could be interesting. Again, Goldman Sachs, I don’t think, is jumping out here on a limb and saying something too crazy. The question is, where does this demand what does this do to prices? Clearly didn’t have any effect today because we saw prices down about two and a half percent today. So, again, yes, we’re seeing a lot of Chinese demand from Goldman Sachs. Yay! Will result in our $150 oil price. I don’t know. [00:12:40][43.2]

Stuart Turley: [00:12:40] Yeah, I’m not sure. But I’ll tell you, the the more they can make money off of the renewables they’re selling around the rest of the world, the more they’re going to keep making them and the more want to. [00:12:50][10.3]

Michael Tanner: [00:12:50] Get in on this renewables game and make some money. [00:12:53][2.5]

Stuart Turley: [00:12:54] I’d rather go to bed at night and sleep proud that I’m not ruining kids lives. Okay, let’s go to the next one. The Dangerous Delusion of Global Transition to Just Electricity. Michael All these stories kind of see a theme again. Here is, you know how we normally pick things out. This is a article written by Ronald Dyne. I have had a opportunity to you and I have talked about him a couple times on the podcast. And this article is just another reminder. Michael, do you like your iPhone? Do you like your microphone? Do you like your PC? Do you like everything? You have to have oil and gas in order to do that? If you have your wind farm and you have your solar panels, doesn’t mean you can have an iPhone. You got to have oil in order to get tires. Do you like your TV? You got to have oil and gas. And so that’s what Ronald is really talking about here. As John Stossel so often says, give me a break. You can’t have your cake and eat it, too. Tells us that you can’t rid the world of oil and gas and you cannot continue to enjoy the products and fuels that are currently manufactured from crude oil like food. [00:14:08][74.3]

Michael Tanner: [00:14:10] Yeah, I mean, I think this is a this is a classic breakdown of, you know, you know, pointing out the hypocrisy that people have when they want to rid themselves of oil and gas, not knowing how integrated oil and gas is with all of our lives. And I think if we had a better understanding of that, we would probably go about this energy transition a little different. That’s why a lot of this stuff does come down to just education and educating people on what exactly oil and gas is doing for you and how a low cost energy is making you better off as a human and richer. [00:14:41][31.2]

Stuart Turley: [00:14:42] And elevating people out of poverty in the way. [00:14:47][4.6]

Michael Tanner: [00:14:47] Making you richer. [00:14:47][0.5]

Stuart Turley: [00:14:48] Making humanity richer. [00:14:50][1.1]

Michael Tanner: [00:14:50] You know. [00:14:51][0.1]

Stuart Turley: [00:14:53] Wait a minute. [00:14:53][0.2]

Michael Tanner: [00:14:53] It sounds or when I say making you richer, but is it more accurate? [00:14:57][3.6]

Stuart Turley: [00:14:58] Which is why I’m here in so many ways. Oh, that’s a that’s a whale waiting for you to kill it. Now, there and in the bag. [00:15:04][6.5]

Michael Tanner: [00:15:05] I’m not trying to make the whales richer. I’m proudly, proudly standing. You can say I am not trying to make the whales richer. Put that in a t shirt and print it. [00:15:15][10.0]

Stuart Turley: [00:15:16] Don’t ever go swimming, Michael. They will. They will never be. [00:15:19][3.1]

Michael Tanner: [00:15:19] Enough for me in the ocean. Finding Nemo. You got anything else? [00:15:24][4.5]

Stuart Turley: [00:15:24] No, I’m good. That was a lot of fun. [00:15:26][1.5]

Michael Tanner: [00:15:26] All quickly, cover oil and gas finance guys in the broader markets. We were actually a fairly flat. S&P was only up 0.01 percentage point, so it’s basically flat. Nasdaq did climb about 8/10 of a percentage point. Crude oil saw largest tumble in the last three weeks down from over to over 9140 is where we saw today sitting at all the way now down to its current trading, 8861 as we record this at about 602 here on October 2nd. So not a great day for crude oil. Mainly what happened on that side is the contract for both Brant expired, which does lead to a little bit of weakness in crude oil, specifically the WTI contract which we talk about just due to the fact that it rolls over, it’s always going to affect that a little bit because of what’s called this. You know, you’ll read the articles and they say, oh, everybody’s profit taking. Well, what does that mean? That means as you roll contracts over, you have to close out your current position and reopen new positions. And there’s always usually only about 98, 99% of the volume that gets rolled over, which generally leads to a small downtick. So that’s mainly what we saw. We actually did see a higher dollar index up about 8/10 of a percentage point. So really, you know, mixed mixed bag around that. But again, on the day that Goldman Sachs comes out and screams that China demand is up, we see a drop in oil prices. So, again, everyone’s going to be a little bit a little bit difference. You know, we did see that this, you know, avoiding this government shutdown is also going to help, you know, looks like they’re coming to some sort of an agreement still. You probably got more insight there. We’re it looks like the stuff I’m seeing is we were to avoid the shutdown, Is that correct? [00:17:04][98.1]

Stuart Turley: [00:17:05] That is correct. And I’m looking forward to my conversation on Wednesday with Congressman Andy Ogles. And we’re going to get the inside baseball, what he’s been fighting for. [00:17:17][11.9]

Michael Tanner: [00:17:17] Of the inside baseball. So you can check that out again on the energy news podcast. Same feed as you’re listening to this. You got anything else to what these fine folks get out of here then? [00:17:27][9.7]

Stuart Turley: [00:17:28] Oh, it’s going to be a great day. Everybody is going to just go out and make a bazillion dollars and save the whales. [00:17:33][5.7]

Michael Tanner: [00:17:34] Yep, exactly. Make yourselves rich. You’re not the whales. Put that again on a T-shirt and sell it and let’s make some money off. It’s all right, guys. For Stuart Turley, I’m Michael Tanner. We’ll see you tomorrow, folks. [00:17:34][0.0][1017.1]

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