More Blackouts in TX?!

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New Zealand to lift oil drilling ban amid blackout fears in blow to Starmer

Colombia Risks Economic Slowdown Amid Natural Gas Shortage

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Michael Tanner: [00:00:14] What’s going on, everybody? Welcome into the Monday, June 10th, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up New Zealand to lift oil drilling ban amid blackout fears in blow to Starmer. Absolutely unbelievable. Next up we’ll go down to Latin America. Colombia risks economic slowdown amid natural gas shortage. Not good. Next up price of green is going higher. Absolutely unbelievable. They actually. [00:00:48][34.1]

Stuart Turley: [00:00:49] Say it isn’t so. [00:00:50][0.7]

Michael Tanner: [00:00:50] You know. Exactly. Say it isn’t. So, you know, a blast from the past, folks. Our next article, Ercot says Texas could be facing rolling blackouts in August as Houston officials announced cooling centers. Oh, no, folks, we’re back. I’m already dying here. I can’t have this happen again. And then finally, out of Virginia, ignored California. Let Virginians drive what they want to drive stupid, then toss it over to me. I will quickly cover what happened in the oil and gas markets on Friday, specifically talking about oil in relation to US interest rate cuts. We do see. And then we did see a little bit of an SPR repurchase agreement come up as, prices have dipped a little bit. So we’ll dive into all that and a bag of chips folks. As always, I am Michael Tanner, joined by Stuart Turley. Where do you want to begin? [00:01:38][47.7]

Stuart Turley: [00:01:39] Hey, let’s start with our buddies out there in New Zealand. But this is got one. This came out of the Telegraph, Michael. New Zealand to lift oil ban amid blackout fears. And it’s a blow to Starmer up in England. Policy reversal is a blow to Labor’s plan for similar crackdown in the North Sea. The North Sea, just had and Norway had a major natural gas shut down and it’s spiked electricity prices for the EU, I mean for the UK. So New Zealand out of this story. New Zealand was on Saturday night expected to revoke a ban for drilling in oil and gas amid fears of blackouts. As the labor plans in the UK are, similar crackdown in North Sea. The North Sea is is really got some history on that. And New Zealand faces an energy shortage which threatens our electrical system and the competitiveness of our exporters. We now urgently need to attract further investment in exploration and production, to keep the lights on our houses warm and business. This is. It’s amazing what happens that chart in their North Sea decline when you compare. Look at this, Miss producer, if you could bring that up, that chart 20 to 21, 20 to 23. And then you take a look at the forecast, it is declining. What I see is also a loss of tax revenue that these chowder heads are not figuring out. Oh wait a minute. Loss of of low cost energy. Loss of tax revenue equals skyrocketing energy prices. [00:03:27][108.5]

Michael Tanner: [00:03:28] Yeah I mean in in to focus specifically on what’s going on in in New Zealand. This is a country that as of 2018 only imported about seven or only produced about 17% of its overall oil and gas needs. So they critically need access one to local domestic drilling, which they did in, was it 2021, the year that they banned it? No no, no. Yes. 2018 they banned it. And that was under a previous, regime, that, that, that, that prime minister voted out actually in early 2023, a new right wing coalition came in. So that’s one of the reasons the wheels are turning to change it. But I mean, you have to and it’s not even about oil. It’s about natural gas. You know, at some point it doesn’t. [00:04:11][43.5]

Stuart Turley: [00:04:11] Matter how much do it 2018. [00:04:13][1.1]

Michael Tanner: [00:04:13] Are because you’ve got to go out and get energy to be able to supply your grid. You either get it from elsewhere, which can be extremely expensive in that premium relative to where you’re going to purchase it. On top of the cost. It would, it, you know, there’s going to need in order to at least get their money back, maybe less than the fact that even though you might make you might not make that much money on it, you’re going to make more profit margin relative to producing yourself relative to importing it. So I think it’s a really interesting shell game you have going on here. Specifically in New Zealand. I mean, they have a lot of gas there. It’s they have a decent amount of gas there. They got about 2.2, or 2.1, you know, gosh, I don’t even know. PJ, I think is what, into joules. I don’t even know what that terminology is. I’m just reading off Wikipedia here. They got a lot of they’ve got a lot of remaining gas. They could go get out there. So good for New Zealand to dive back in. It just goes to show you that, a lot of these a lot of these decisions that are being made are getting reversed quickly as people starting actually read the data. I mean, we all like to joke that everybody. Stupid. Everybody is not stupid when there’s a gun to their head, and I’m not in the proverbial gun to your head, his lights are going to be turned off. You’re going to have no power. That is the proverbial gun to your head. [00:05:23][70.0]

Stuart Turley: [00:05:24] What if the people are waking up, Michael, to the deindustrialization of the Green New Deal? The Green New Deal equals deindustrialization. [00:05:31][6.8]

Michael Tanner: [00:05:32] Yeah, the Green New Deal did not happen in New Zealand, but. [00:05:34][2.0]

Stuart Turley: [00:05:35] They are realizing it. Michael. Yes it did. If you take a look at another article that was posted out on this, the the other article was New Zealand’s party, the government, the it said and they stopped it in in 2018 under then leader Jaclyn Ardern, but continued to allow other ones so they could bolster their renewable, energy. [00:06:03][28.1]

Michael Tanner: [00:06:04] So yes, the Green New Deal though relates to what what happened in the United States. It’s happening all around. [00:06:10][5.7]

Stuart Turley: [00:06:10] The world in the generic term. Now, the Green New Deal, the Greens and the Greens in the party, I was referring to a green. People are referring to it, the Green New Deal around the world. Michael, I’m not sure why. So let’s go to Colombia. Colombia risks economic, slowdown amid natural gas storage. This is a follow along on this. Columbia’s economy could soon be hit by soaring energy costs. South America country is considering LNG imports to meet rising matching, natural gas demand while its domestic production slumps. This is really critical because with no natural gas, what happens? Industrialization occurs. And so this is a very good eye wakening here, for our partners. And another thing of what why the LNG ban for, the Biden administration really means to our partners we would be able to step in and help Colombia and say, hey, we will supply you your LNG, but I wouldn’t trust the U.S. Columbia was also not planning on importing natural gas from Venezuela, but may plans may not materialize because the, decayed idle pipeline in need of repairs. Venezuela may not be able to supply it. [00:07:33][82.8]

Michael Tanner: [00:07:33] Yeah, I think that’s the most important part of all. This is technically South it you know, South America has the has the ability to be energy independent as a continent specifically because they have you know, you’re talking about Venezuela, the Brazilian reserves talking about what’s coming out of Guyana, sir. I mean, there is enough energy in that continent to be able to self supply their stuff. The problem is, if you can get transported efficiently, doesn’t matter. You’re just it’s it’s almost like the, the electrical grid. It doesn’t matter how much wind power or solar power you have in Arizona. Exactly. Transported to exactly where it’s needed to a, you know, the northeast, you’re going to be in absolute trouble. So I think this shows a great example of it’s a it’s an entire vertical chain. Exactly. That need to happen. It’s not just finding the gas, finding the pipelines, it’s finding the export. It’s the export terminals, and it’s the whole nine yards in order to create a legitimate energy infrastructure. And I think Colombia is Colombia is going to learn real quick that, you know, it’s not again, it’s not just about LNG. It’s about how do we get it there? How do we source it. [00:08:36][63.6]

Stuart Turley: [00:08:37] Oh yeah. And the machine has been already built in the U.S. it’s just like, you know, let’s time to ring that cash register and sell it to all of our, our good people around the world. And I’m trying to get together in article Michael, because LNG reduces, emissions. I mean, it really does. We just got to get the word out there. Hey, let’s go to the next of the article here. I found this one just really, really good. The price of green is going high. There are five key bullet points to this one. And when you sit back and take a look at the article. Michael, first one, people around the world are beginning to, object to the increasingly expensive cost of the energy transition being forced on them by their government and businesses. Number two, a paper by the Climate Policy and initiative, the CPI advocates for much heftier expenses for consumers by recommending a seven fold increase in money spent on programs to achieve you in goals reaching 9 trillion annually by 2030 annually. We can’t the world can’t afford that and increasing after that. CPI is an international group with an initial funding from George Soros that advocates for aggressive climate actions. Number four, Europe has already begun to de industrialize and with Germany leading the way as they want. To retreat from some of their costliest plans under gambling pressure. Number five states in the United States, such as California, have led the green initiatives are also beginning to push back on some green policies. We’re seeing that in the next hour in the in our last article for Virginia. [00:10:35][118.0]

Michael Tanner: [00:10:36] That’s I mean, I mean, clearly, I mean, again, let’s go back to this, the climate policy initiative. They think that we need to go from 1.3 trillion of funding to 9 trillion. I mean, that’s just a redistribution. It’s just a redistribution of wealth. And whether or not that number is true or not, the question is, can we actually do that? And if we spent $9 trillion, would we be better than we are now? That’s I think what people who don’t understand is there’s always a there’s always an opportunity cost. You know, I’m an economist. So I think of the I think of these things all the time. If I’m going to do X, what’s the opportunity cost of not doing Y. And if the opportunity cost is less we’ll go do x. In this case, if the opportunity cost of not moving to renewables is less than the opportunity cost of moving train labels, you might as well do it. The problem is they look at a small sliver and they’re using this word. And I’m using quotes for podcast listeners, climate science, to make this argument that the opportunity cost is way more than it is way more, when if you actually look at, you take into account other things like the economy, people’s well-being, all this other stuff, and you group it all into more of a meta analysis with the answer becomes a lot more muddied than just, oh, we’re going to save it. [00:11:53][76.9]

Stuart Turley: [00:11:53] Exactly from. [00:11:54][0.5]

Michael Tanner: [00:11:54] From two degrees. So it’s the second, third, fourth order effects. I mean, when they throw these big 9 trillion, 10 trillion numbers, right. The first thing I think of, they’re just trying to redistribute the wealth from one group of, I mean, at the end of the day, it’s redistributing wealth from one group of rich people to another group of people. So I’m not concerned for either one of them, per se. But it is interesting how I think more of what they’re trying to do. It’s trying to get the people they like the money and not the people they don’t. [00:12:21][27.4]

Stuart Turley: [00:12:21] Exactly. Here’s here’s a paragraph in here that is right above the conclusion, Michael Illinois’s, which is requiring 50% of its electricity to be renewable by 2030, had its power regulator reject grid improvement plans from two utilities, stating the state’s household should not be unfairly asked to shoulder undue costs, tied to the state’s energy transition. The CEO, one of those Illinois’s utilities, Exelon, protested because requirements are is going to cost money. The question is who’s going to pay if the state does not, utilities could go out of business, thereby transmitting no power to residents who expect lights on 24 by seven. It’s a complicated problem. [00:13:07][45.6]

Michael Tanner: [00:13:08] It’s extremely complicated. All right, what’s next? [00:13:09][1.9]

Stuart Turley: [00:13:10] Let’s go to our cosmic complicated. Our buddies over here. I’d say Texas could face rolling blackouts in August. Is Houston officials announced cooling centers. Y’all always gotta love it. Ercot, demand energy could be dangerously approached state’s total electrical supply this summer, leading to a 16% chance of electric grid emergency and a 12% of rolling blackouts in August. From the Energy Reliability Council of. Of Texas. [00:13:40][29.9]

Michael Tanner: [00:13:40] Yeah, I mean, this just I’m already dying right now. It’s, you know, I mean, you woke up this morning and it was already like 120 degrees here. So the fact that now all of a sudden they’re saying, hey, we may or may not have rolling blackouts just. [00:13:54][13.8]

Stuart Turley: [00:13:54] Disappear, like, shoot me. [00:13:56][1.3]

Michael Tanner: [00:13:56] Yeah, exactly. Shoot me. I’m going to go need to buy time. And again this comes back to you know, you know, if you if we if you had a reliable grid, you actually could implement some sort of battery backup for a lot of these in places that really need it, because we do have a lot of excess energy. The problem is the energy grid is set up to supply on demand energy. It’s not necessarily set up to demand and supply energy from peaks and valleys. So I think that when people talk about the grid and the grid reliability, it’s stuff like this that we need to, move. I mean, the chance that it’s a 16% chance of an electrical grid emergency and 12% chance of rolling blackouts is pretty unbelievable. Now, the Electric Reliability Council of Texas, it is a lobbying firm for, you know, the other side of the equation. So they may have a you know, it’s like me writing an article about why oil and gas is great. Well, I’m a little bit I think oil and gas is great. I’m gonna have a hard time being maybe 100% objective, but they’re the fact that they are raising that alarm a little bit does show you that they’re seeing a little. There’s something in the data that they’re seeing. [00:15:00][63.4]

Stuart Turley: [00:15:01] I agree. And but, you know, you sit back and kind of take everything with a grain of salt anymore. I trust no data unless I fabricated myself. So let’s you ignore California. Let’s go. [00:15:14][12.9]

Michael Tanner: [00:15:14] What’s next? [00:15:14][0.2]

Stuart Turley: [00:15:16] Ignore California. Let Virginians drive what they want to drive. I gotta hand it to Governor Glenn Youngkin as he gives his state of the Commonwealth address. I tell you what. California policies on electric vehicles are exacerbating blackouts and restricting the restricting the ability of its reserve residents to buy the cars they want. Virginia’s like gasoline powers. They like 99.9% of their vehicle. 99.39% of the vehicles are Ice cars. If California wants to drive its state into an economic ditch with a senseless ban on gasoline powered, but let so be it. But let’s lead Virginia. It time to be Virginia to stop riding shotgun. Go, governor young. [00:16:02][46.0]

Michael Tanner: [00:16:03] Yeah. I mean, it’s it’s really hard to add any other commentary on the fact that, you know, you got to let individual states do what they want to do. California can go and do whatever they want and can do with the outcomes of their don’t force your dumb policies on other states. [00:16:18][15.2]

Stuart Turley: [00:16:18] Here’s the 17 states that have laws on their books that say, if California passes something stupid that bypasses and writes to the head of the line of stupid, they can just ditto whatever California does. These are the dumbest laws I have ever seen in my book. It’s the California stupid law. There are 17 states you can do the California stupid duplicate. [00:16:42][23.4]

Michael Tanner: [00:16:43] Yeah, I said. [00:16:43][0.4]

Stuart Turley: [00:16:47] So get my hats. We got to give Governor Youngkin a shoutout. I’ll reach out to him, get him on a podcast. [00:16:52][5.5]

Michael Tanner: [00:16:53] Yeah, absolutely. Well, we’ll go ahead and, talk a little bit about oil and gas prices. But before we do that, we need to pay the bills. As always, guys, thank you for checking out Energy News beat.com the world’s greatest websites. Doing the team do a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear when it comes to the energy and the oil and gas business. You can hit the description below in the podcast for links to all of the timestamps. They’re 50% accurate. You can have all the links to the articles and you can also check us out. Dashboard@energynewsbeat.com. We have some really interesting stuff we’re about to announce here. Soon. Some, some really great educational, series that we’re going to be putting out in partnership with, with, with a great oil and gas company. So we’ll look out and be on the lookout for that as it comes down the pike. But as always guys, just check us out www.energynewsbeat.com. [00:17:47][54.3]

Michael Tanner: [00:17:51] A weekly look at the overall markets on Friday. They were fairly muted. We actually had a fairly decent jobs report. This is what’s funny. So we’ve I mean you can you can agree or not agree with the data, but the data that was presented to us showed non-farm, non-farm payroll increases, which means jobs created was up about 200 and 72,000 for the month of May. And it was much higher than whatever Wall Street thought, which is about 190,000 jobs and well above the gain of about 165,000 jobs that happened in April. We also saw 1.4 4.1%, of hourly earnings increase over the past 12 months, more than expected. Great news, you’d think, right? Yeah. We’re getting new jobs whether or not you believe those numbers or not. But hey, the market if if the numbers are legit, I believe they are, Stu doesn’t he? Shaking his head. But let’s just for let’s take the take the number at face value. Well why why did markets then drop. We saw the S&P 500 down a 10th of a percentage point. We saw Nasdaq down a 10th of a percentage point. Well unfortunately it probably means that the fed is going to hold off on any interest rate cuts. And interest rate cuts theoretically are going to lead to more movement of money. Movement of more money means you might see an increase of demand. And unfortunately, demand is one of the big things pulling down oil prices, getting to what happened on, Friday specifically, we did see crude oil open up a little bit above $76. We cinched trailer down, closed at about 7553, and we’ll open probably a little bit here as the market opens here in a little bit we’ll open a little bit, below that 70 550 mark, probably 7538 as you’re listening to this weekend or on Monday morning, you know, we’ll probably still be below that, below that 75 mark. So it’s super interesting, as we see as the interest rate and as the interest rate theory goes, so will oil prices. We also did see a huge spike in natural gas prices all the way up to, $2.93 again as the hotter. Going back to that air con, article that we talked about, one of the reasons why they’re saying demand or we might have rolling blackouts is because of the insane heat. We might see this this summer, specifically in the US South. That’s what’s driving natural gas prices again, $2.91. That is specific. I mean, think considering where we are, it’s pretty unbelievable. We also did see rig counts drop. Should we go ahead and drop this? On the screen? I mean, I continue to be, not shocked, but I continue to find myself on the wrong side of this analysis piece. US rigs dropping, not drop six rigs week over week below now 600 at 594, and it picked up 15 rigs internationally. They dropped 25 rigs. We’re down 101 rigs from where we were last year. So companies continue in the United States to drop rigs. They continue to keep their, you know, keep their locations available whether or not to drill. Now we’re in the, not to drill now, but in the future. So, you know, something that I specifically kind of swung and missed. That was the idea that rig counts. We’re going to continue to go up as we saw stabilization of oil prices above that 70 mark. But I also think you’re seeing what I think a lot of people internally at these oil companies are seeing is 70 is, you know, 75 is, you know, the new you know, the new 6065 and it’s $60 oil. It’s tough to make money. I mean, when you talk about a 15, you know, three mile lateral at $15 million, you’re gonna have it’s it’s an interesting underwrite proposition. You know, I mean that that that number used to be 11, $12 million just a couple of years ago. And that those numbers made sense. There’s enough margin in there. But now when you’re pushing that $15 million mark, or 13.5 to 15 million mark, or a three mile lateral depending on what type of completion job you want, you’re gonna you’re squeezing out a lot of the margin that was in there. And when people say go, you know, to when people talk about pushing that the pushing the lateral length, the question is what does that increase of capital relative to the increase in the amount of oil you’re going to produce? Generally, it’s been the reason why you drill longer laterals is because you’re, you know, the incremental cost of going from two miles to three miles is a lot less than the incremental gain that you’re going to have, the amount of oil, I mean, if you’re talking you’ve got a thousand barrels per foot. You can very quickly do the math. And if you’re, you know, if your CapEx is only going to increase by 5% by going that extra mile because the rigs already out there, you’re already paying for the people, you just got to keep it going and then pull it out. The theory has always been we’ll just go longer and longer, the better. The real question is, as prices skyrocket up and the quality of the rock goes down, if the if you’re not drilling tier one acreage, the question is in your tier two. Tier three, does that same relationship hold up? I think you’re going to see a lot of interesting stuff come out about that, and we will be watching that closely. The only other thing I wanted to talk about stew was, the U.S speeds up purchasing, for the Strategic Petroleum Reserve as oil prices dip. I want to get your thoughts on this. The. Yeah, you know, the Biden administration said on Friday and I’m read now straight from the article, has increased his purchasing of crude oil to replenish the Strategic Petroleum reserve following its sale of in 2022. The Department of Energy said on Friday that it issued two solicitations to buy a combined a whole whopping 6 million barrels of crude oil for its delivery to its bayou chalked outside of Louisiana. From September through December. You know, it’s it’s basically increasing their rate of purchasing per month from 3 to 4.5 million barrels per month, again, which will add about 6 million barrels. Secretary Granholm said in a exclusive interview on Tuesday that the department may speed up the replenishment SPR this year, and on Friday they made good on that deal. Her quote all four sites will be back up by the end of this year, so one could imagine the pace would pick up depending on the market, so they’re at least dipping in and filling up the SPR. It’s almost like taking a, I that, you know, taking it, you know, taking a, coffee cup full of water and dumping it in the ocean and saying, hey, look, we’re refilling it. Exactly. [00:23:50][358.6]

Stuart Turley: [00:23:51] Trump filled it at $24. They sold it at 94. They’re buying it back at 75. They’re. But they’re only buying less than 1% of what they sold in order to fraudulently impact the market for an election. Yeah, I’m still waiting. [00:24:10][19.1]

Michael Tanner: [00:24:11] Yeah. I mean. [00:24:11][0.4]

Stuart Turley: [00:24:12] Numbers matter. [00:24:13][0.5]

Michael Tanner: [00:24:13] Yeah. I mean, you you, on the other hand, you could argue that buying oil for the future reserve does not help prices. It actually drives prices up a little bit because there’s you’re taking oil off the. [00:24:23][10.1]

Stuart Turley: [00:24:24] One you’re not buying less than 1% of it. It doesn’t. It’s not going to impact them. [00:24:28][4.3]

Michael Tanner: [00:24:28] But the market’s not being moved on this. no. You know we’ll hammer the administration where we can hammer them. You know, you can at least give them props in the standpoint that they’re they’re doing it, they’re refilling it, you know, and they’re being fiscal. [00:24:39][10.8]

Stuart Turley: [00:24:40] But I’m also afraid of and I don’t know the numbers on this, but the amount that they have left unfilled for the amount of time in the salt domes, I don’t know how much we will be able to replenish in there and still have it usable. I have to go do some research on this, because some of the tanks are not even able to be used again. [00:25:02][22.5]

Michael Tanner: [00:25:03] Well, you’re going to need to do some research on that. But I. [00:25:05][2.1]

Stuart Turley: [00:25:05] Don’t know. You can’t let them sit there empty. [00:25:08][2.5]

Michael Tanner: [00:25:08] No you can’t, but we’ll, we’ll take the wind and take the extra oil in the. Hopefully we’ll see prices rebound a little bit from there. But but but it can be assumed that we’re going to see some interesting shenanigans as we get closer and closer to the election. [00:25:20][11.4]

Stuart Turley: [00:25:21] Well, Michael, two weeks ago, they just closed the entire gasoline strategic thing. They didn’t just sell all of it. They closed and then they sold. I mean, they sold everything. [00:25:32][11.0]

Michael Tanner: [00:25:33] So I mean, again, they’re they’re looking they’re very much looking to to calm the energy markets relative to this election. Who wouldn’t if they were in their position, you know, Trump would be doing the same thing. Every president has done the same thing coming up to a reelection to extreme. I know, I know. I know they’ve done no wrong. You’re right, you’re right, you’re right. What, what should people be worried about this week? [00:25:55][21.5]

Stuart Turley: [00:25:55] Well, I tell you what. It should be pretty, interesting coming around the corner. Watch out. Next week. This week or, in the next few weeks for the $507 billion that may be coming. Fiscal problems for banks. Banks are now really under scrutiny. There’s 74 that are really in trouble. I reached out to Thomas, Congressman Thomas Massie to try to get him on the podcast. And I’ll reach out to Governor Youngkin, get him on a podcast. I love talking to folks about energy. [00:26:29][34.2]

Michael Tanner: [00:26:30] Yeah, absolutely. Well, we hope you guys have a great week. It should be a pretty, pretty wild one. Will look and we will be with you this entire week. Keep you up to speed with everything going on in the energy and oil and gas business. But with that, guys, we’re going to let you get out of here. Get back to work for Stuart Turley on Michael Tanner. We’ll see you tomorrow, folks. [00:26:30][0.0][1540.1]

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