Hello and welcome to another episode of the Odd Thoughts podcast. I'm Tracy Aloway

and I'm Joe Wisenthal.

Joe, you know what's weird?

Tell me. Tell me what's weird. There's a lot that's weird actually, but we seem to be living in this extremely high-tech world where you can get a chatbot to write you an essay or create a video.

Do that, by the way.

Oh, sure.

Mhm. You could buy a robot dog to play with, all that stuff.

And yet, we still seem to be struggling somewhat to provide cheap and affordable and abundant energy to power all these things. And in fact, because all this new technology guzzles so much energy, data centers use so much power, it feels like energy is becoming even more strategically important in many ways.

It definitely feels like we're in an age of sort of people remembering the deep constraints that energy imposes whether it's data center, all kinds of things. Energy is not a solved problem by any stretch. Although I would say that in my limited sort of reading of the history of energy, it's never a solved problem. I know at the moment we find we we're in a period of energy surplus, we quickly find something to do with that energy. And once again, we are in a period of constraint, but it does feel like we're in some sort of period of constraint right now.

When Kanes was doing his whole abundance theory, did he mention energy at all? What did he say? Well, I'm just going to assume that Kane's promised us all abundant energy as well as everything else. and it's not here. So, we're all upset. Okay. So, um even though we've had all these breakthroughs in alternative energy technologies, you know, things like solar and wind, we're still using more coal, more oil than ever. And in fact, there's sort of some old school energy behaviors going on with China, stockpiling massive amounts of oil.

Yeah, as you said, coal is booming, China stockpiling oil, electricity prices in the US on the rise. Maybe perhaps due to some of this AI data center demand. It feels like I would say precoid at least I don't know if people got a little bit naive or optimistic or goldilocks but there was this view it's only a matter of time before energy is solved because we're going to have all this wind and solar. It's going to be cheap. It's going to be clean. We see all these cost curves coming down with like batteries and wind and so forth. It's only a matter of time before we don't need the dirty stuff. And right now it doesn't feel like we're anywhere close to that. And I'm sort of curious what happened.

Yeah. Well, everyone talked about the energy transition, but so far it's not really a transition. It's like a compliment to existing sources. Anyway, we could keep talking, but why not go to our guest who is truly

truly the perfect guest. We're going to be speaking with someone I wanted to speak with on the podcast for a very long time, Dan Jurgen. He is, of course, the author of the Pulitzer Prizewinning The Prize: The Epic Quest for Oil, Money, and Power. He's also vice chairman of S&P Global and he also has a new book out called The New Map Energy Climate and the Clash of Nations. So, a lot to talk about. Dan, thank you so much for coming on Odd Thoughts.

It's great to be on with you all.

So, does it feel like energy insecurity is still with us in many forms?

Yes, it goes through cycles. You know, you mentioned uh CO I think during CO demand went down, prices went down and people kind of forgot about energy and and there was a sense in 2021 the International Energy Agency did this uh scenario about getting to basically a renewable world by 2050. But now we're in 2025 going into 26 energy demand is going up wind and solar but also coal, oil and natural gas. And the share of hydrocarbons in energy has gone from about 81% to about 80.5% roughly.

So it's going to take a while to get down to zero.

Take a while. You know the whole you mentioned energy transition. I think it's time to do some rethinking about the energy transition.

Well, good. That's what I was going to ask you about. So when people talk about the energy transition, this fantasy or you know maybe fantasy is a little bit

scenario scenario

of okay, we're going to get to net zero etc. Is this just a matter of the timeline has been pushed back or is there a fundamental flaw with the premise?

Well, I think certainly the timeline has been pushed back. The notion by 2050, the closer we get to 2050, the farther away it seems the goal of net zero by 2050 is error. And what Tracy said before, energy transition has been energy addition.

And what happened?

What happened is I think the reality came back in that we live in a world that rests on an energy foundation and that you just can't overnight take a $15 trillion world economy and change it from one thing to another.

Are there any scenarios you could see where I guess new technologies like AI, the data centers that are getting built encourage new players to come in and provide capital for energy? So, you know, Google building their own gas.

Exactly. What we have now is the tech world meeting the energy world. And these two worlds have very different cultures. Tech world things go happen pretty fast. Energy, you know, in your software engineer come out with new software. In the energy world, an engineer takes seven years to build something. And these cultures have come together. And I think one of the reasons that we're seeing kind of this call the easy or simple notions and transition pushed out is what you've mentioned. It's going to take a lot more electricity and some of that will come from wind and solar. But what's come back into the picture is natural gas is a electric generation. If you wanted to go out and buy a gas turbine today,

Yeah.

you could get it delivered in 2030. If we back go back to 2022, I was talking to one of the big companies in the field and the guy said that year all over the world exactly one gas turbine was sold and it wasn't one of ours. So he said our market share that year was zero. Now they're all sold out. Is there an increase in capacity? We we talked about this recently and this has come up the shortage of gas turbines. Is the scarcity being addressed or is there still this phenomenon where no one really wants to do the initial upfront investment in a say factory that makes the gas turbines because there's still uncertainty about say 2032 or 2033. Um what I you know when I talk to the companies those who were around in about two two and a half decades ago remember there was a huge rush turbans and then it all collapsed and they're worried about

and that was coincidentally or incidentally that boom was also at a time of massive tech investment the late 90s which was another period of the sort of marriage of tech and energy at the time.

Absolutely. That's right. And so I think they are expanding capacity but they're not doing it helter skelter. Also like so many other companies there's a shortage of the talent that you need. I mean these are not simple things to build.

One of the reasons we wanted to talk to you is because you do such a fantastic job of connecting the oil space with capital markets and I have always maintained that oil is very much a capital markets story. Can you talk about the difference between how capital is sourced for something like oil or gas versus clean energy and whether attitudes towards the two have changed at all?

Well, I mean it was quite different with clean energy and a lot of it you know had tax credits and ability to you know to sell tax credits and things like that and a lot of the oil and gas development may be funded by financial institutions but a lot of it is funded by the companies themselves.

Yeah. What is it? Like we see these lines on charts that show the collapsing price of solar production or the collapsing price of wind production or the improvements in battery technology.

All true.

All true. And yet there is still so much public money that goes into these areas and there's so many tax credits and subsidies etc to kind of accelerate them along. Why is it that you have these lines going down and yet they don't undercut traditional sources in the way that maybe the tech mindset would expect?

So, well, first remember the renewables, wind and solar really were not competing with oil until you started to have uh electric cars coming onto the scene,

but you know, it was interesting. I was talking to a company that's developing a big battery project in Europe. I probably shouldn't say which country, and they're very excited about it. It's really big. They said, "Oh, by the way, they couldn't do it on their own. They had to go to the government and get incentive, subsidies, whatever, or a partnership with it." So, the costs are still up there. And I think we're seeing a testing now for wind and solar. Everybody's rushing right now to get steel into the ground so they can get the tax credits, which will expire in not very long time. So, the testing will be how competitive will they be? And I think we'll still see wind and solar, particularly solar, being put in, but it won't be enough. And what they concern right now is about the reliability of the electric power system. And you see prognostications about this area that stretches from Illinois, you know, as far as New Jersey, that by the end of this decade, which is not so far away now, will be looking at very tight markets with really great pressure on it. And I'll tell you, the kind of regulators, the people looking at it are starting to get pretty alarmed. And that's why you see a lot of a lot of discussion and and focus on can we get permitting reform so you can actually get something built.

Can you just what is the source of alarm? Is it about the generation of electrons or is it about the transmission and with the grid capacity to balance and take in all these things?

Well, it's both and certainly the transmission is a very key part of it. But what we have been doing has been retiring coal plants. We thought, you know, we weren't going to have any more gas and electric generation, but that's coming back. And now you see a kind of slowdown in closing these coal plants. And also, we see an election coming up in New Jersey where electricity prices are an issue. And suddenly, this whole issue, uh, I was looking at our numbers and electricity prices have been going up at twice the rate of inflation in the United States. Why can't clean energy seem to exist without subsidies given that electricity prices are going up and we all agree that energy is strategically important? Why can't it, you know, fund itself?

Well, it it it has to, you know, ultimately it has to be that. But, you know, obviously there's a lot of debate about what happened in this big beautiful bill where they, you know, basically are cutting back and then eliminating the subsidies. And at least this administration says, well wait, these were put in 32 years ago for infant indust industries and now the prices come down. Why are we we doing it? So I think these industries are going to have to stand on their own right now.

Would they be economical in their current form?

I think you know it depends on the circumstances and where they're built and whether they have access to transmission because of course you can have solar but then you need you need it connected to the grid and grid connection becomes a very important issue.

That's the expensive thing. That's why with my solar panels on my farm, I mooch off of the entire Connecticut system grid.

How is your solar panels working?

They're fantastic. Our energy bills are like maybe $20 a month. Sometimes we get paid.

So, you put electricity back in the system.

You didn't get any tax credits or

Well, the house had it when we bought it.

Oh.

But I'm just very happy with the low electricity bill and not having to shoulder the costs of uh the grid.

Yeah. And somebody else will take care of it. Somebody else's problem.

I want to talk a little bit more about the return of uh natural gas or LNG. What do you think the prospects are for the US as an LG export powerhouse? Can it continue to grow at the pace that it's been growing, especially given some of the bottlenecks and constraints?

Yeah. Well, obviously you need pipes to get gas to the Gulf Coast or to Tidewater in order to ship the gas and that ability to build pipes is really difficult or has been difficult. It's going to get easier now unless you're in Texas where you could build them anyway. But it's an amazing story. A decade ago, the US was not exporting any LG. In fact, and now it's the world's largest exporter of LG. Yeah.

And our own numbers say that in the next half decade or so, global capacity will increase by over 50%. Half of that increase will be in the United States. You know, and people don't think about it this way, but were it not for US LNG, Putin might well have succeeded using the energy weapon, cutting off gas to Europe, and shattered the coalition supporting Ukraine. And what prevented him from doing that was US LNG, which he hadn't counted on. I in in the book, you mentioned the new map, I have this story about where I had this interaction with Putin in uh 2013, and it was at the St. Petersburg International Economic Forum, which was his version of Davos. Uh it was before he enacted uh Crimea, and he was up there on the platform with Chancellor Merkel, and you could see the ice between them. And they said to me, "Oh, you get to ask the first question." So I thought I was just asking the question. Yeah, exactly. No pressure. The normal question about um you know, what are you going to do? Your budget is overdependent on oil and gas. By accident, I mentioned shale. And he started shouting at me in front of all these people and said, "Shale is barbaric. It's terrible. He'll poison people. He went on and on like that. And I can tell you it was very unpleasant being shouted at by Vladimir Putin in front of 3,000 people.

But it's a good story.

Yeah. But it's a good story, you know. Exactly. It did. At the time I didn't think it was a good story. At the time I wanted to get out of there. But uh afterwards I thought he was actually precient. He saw that uh shale gas in the form of then LNG would augment US influence in the world which it certainly has and it would compete with his jewel his crown jewel gas problem which has also happened because now Russian gas is being pushed out of of Europe. So I think you know people don't connect speak of connecting the dots that the shell gas revolution there tied into the ability to support Ukraine in this war that's now gone on almost as long as World War I.

It sounds like you're saying Aubry McClendon is was a great hero for the West and democracy and all this stuff.

Well, I'd say a great entrepreneur. Yes. Yes.

Um when it comes to old school energy sources, whether it's oil or gas.

I like your term old school.

Is there any lowhanging fruit left in terms of making the technologies more efficient? I remember maybe like almost 10 years ago now there was a big standardization push and all these you know drills that used to have custom parts started to standardize them and that actually brought down prices quite a bit or helped ease some of the pressure at a time when oil prices were quite low. Is there anything like that on the horizon?

Well, I think you're right. I mean shale the development of the shale revolution is to kind of continue your memory. It really became a manufacturing process. It was a very repetitive manufacturing process and you know no one back then when days of you mentioned Aubrey Mlennon who's one of the pioneers could have possibly envisioned the US being the world's largest oil producer largest natural gas producer. I think right now you know about maybe 10% of the oil is recovered from shale. So one thing companies are working on can we increase that output can we increase it be more efficient but there is the sense uh now which it wasn't even had a year ago that maybe shale has peaked out

peaked out at a very high number but peaked out and people I start to see are starting to talk about what is known as exploration going out and finding new oil sources in parts of the world where nobody really looked for them. Does it make you nervous to use the word peak in an oil conversation?

Now that you mention it, it does. Uh what should I say? Plateau. How's plateau? Okay, there you go.

Yeah, peak oil. I remember when when people were talking about peak oil back in, you know, decade and a half ago and that the world was going to run out of oil. I remember I said, I better go back and look in the prize. I went back and said, oh, the world has actually run out of oil five times. And every time it's what you pointed before, it's new technologies and new geographies that change the game.

Well, tell us a little bit more about some of those times where so I guess probably the 70s. When else has have there been

well right at the end of peak oil running out World War I turned out to be a war that really sort of elevated oil because it started with people on horses and cavalry. It ended up with tanks and airplanes and trucks and all of that. And there was this great fear after World War I that the US had what was it uh nine years worth supply left. And so what happened is American companies started to go out and they went out to the Middle East and of course found lots of oil. So that was a period then after World War II there was that concern because oil had been so important. there had been an oil war within the larger war and then of course the 70s but it had even happened in the in the 19th century that you know people start ringing the bell saying you know it's it's all over and technology keeps expanding the frontier

so speaking of oil supplies and stockpiles one of the big stories in energy markets has been China buying enormous amounts of oil and stockpiling them for reasons that we don't know for certain how important has that dynamic been to you know, a fairly resilient oil price. Crude has come down a little bit, but it's still, you know, around $60 a barrel, I think.

And why are they doing it in your opinion?

That is always the question. Why are the Chinese stockpiling? I've been we've been working on minerals, too, and looking they stockpile minerals, too. It's what they do. Is it because they think there may be a a conflict or is there a problem? Are they worried about the South China Sea, which I write about in the new map? and they know that during World War II, the US cut off the oil line to Japan and so they want to be sure they have supplies. Or is it just cuz it's cheap and they're expecting it to go up? We don't know. I'll be there in a couple months and I'll ask them again. I'm not sure I'll get an answer, but uh they're doing it. But the role of China has changed because for two decades, the growth in oil demand worldwide, half of it was in China. And now the view I won't use the word peak I'll use the word plateau. Okay that that uh demand in China is plateauing at a high level but they're importing 75% of their oil and they don't want to continue to do that. That's why they've been pushing one of the reasons they've been pushing electric cars. The other reason is because they see it as a way to uh an export market. So you don't have the growth engine of China. And so, you know, there's a fair amount of debate today at what rate at oil demand will grow, but is it how how much will it grow? Will it be a million barrels a day, million half barrels a day? And that is a subject within oil circles of a great deal of vigorous debate. We obviously don't know what uh Xihinping's strategic plans are, mil potential military plans in the future, but for all of the EV adoption in China, which has of course been huge, military conflict, whatever the source, is still be an incredibly oil inensive process.

Yes, I think exactly. I mean, that's right. All you're not going to have battleships, you know, uh, you know, solar powered not anytime soon. Yeah. Yeah. I mean you do mention I mean what is we know some things that are in Xiinping's mind because he said them

and he does talk about the dominating the new industrial supply chains which means EVs which means solar panels which means wind and of increasingly critical importance batteries which is another issue that's going to actually is percolating up about here we have regulations against uh batteries that come from foreign entities of concern and you say what's a foreign entity of concern and it tends to be mean parenthesis China in the energy discussion.

Could you ever envision a time where rare earths are more important strategically than oil?

No. But I can tell you that they're really important and I would say in the last 6 months there has been if you're here in Washington a crisis mentality about them because I think that was a shock when you know Trump was rolling out all of his tariffs and the country that they were going to be most aimed at which was China. Suddenly China said well you know two can play this game and uh and then that is of course in recent days has once once again come up the Chinese whether for strategic reasons but again new supply chains you know they produce process 90% of the rare earths and they know it and when you hear an automobile maker saying you know we have a week and a half of supply you realize how urgent it is and so uh you know it's really come up it's and trying to grapple with and it's not something you can solve overnight because it takes a long time to open a mine, put up a processing thing. And the Chinese have put not only controls on rare earth, they put controls on the machinery and equipment for processing rare earth and they put controls on the people who have the knowhow that they may not be able to have passports anymore.

Let's talk about US energy policy. It seems a little unfocused to me. or we might say variable.

Okay, go on. Like how would you characterize it? Or like when you say right, let's say it's variable. How would you characterize what's going on the way US energy security or energy policy

and under Biden of course it was all about basically renewables, climate change, the goal that have no gas, natural gas or coal and electric generation by 2035. half the new cars in America were to be electric by 2030. That was then, this is now, when it's just pretty much in the opposite direction. Can the US, you know, I think Trump would like powerful, dominant US energy industry.

He uses that word.

Yeah. Is that realistic? Can he get there? I mean, there's wanting to expand drilling, but with the price of oil, actually, it's below 50, below 60 now. 5875 today for like

can these things hang together? Can we have prices at these levels and a booming domestic oil industry? No, I think that's one reason we get into not the peaking but the plateauing uh for that reason and you know you look at the survey from the Dallas Federal Reserve uh that came out and you know below 60 people don't um you know they just pull back and they husband capital and you know it certainly seemed that it was possible that we would see oil prices below 60 in the latter part of the year and it's come maybe it's come earlier than people might have expected and very much affected by the trade war between the US and China among other things but the US is the dominant player right now and uh energy you know the new trade deal that you're supposed to have with the US they're supposed to buy more natural gas from us and so forth and they have they set up something called the national energy dominance council which is you know kind of the view of the US in this position but it is tough to both want to have a very vibrant domestic industry and have low prices at the same time.

I know you just mentioned that Europe is still going to be getting US oil, but do you foresee a more I guess energy future for the world because it does feel like at least with manufacturing goods and some strategically important goods, people are stockpiling and people are focused on building out their own capacity. Is that going to be the case in energy or will it be that energy is just so geographically specific and expertiseoriented that not everyone can do?

Well, we've already seen a partitioning of the global oil market in terms of Russian oil not going to its natural market, Europe but going to uh China which was a market before and India which was not a market before.

We see that in natural gas. So I think call it economic nationalism or uh economic sovereignty. I think that the U and in a sense that's what all the tariff policies are about. I think Europe is in a very difficult position because uh they would like to continue to pursue net zero as it's called emissions by 2050. But now they have this other problem which is called being competitive or rather not being competitive and losing industry. And on the other hand, they're now supposed to spend not one and a half% but 5% of GDP on uh defense. So I think Europe is in a in a very tough position. M and I know you speak to a lot of experts in the energy industry, but what's your sense of the mood on the ground among I guess oil and gas workers specifically? Cuz on the one hand, Trump has been a friend of oil and gas and has said that he wants oil and gas to be dominant. But on the other hand, a lot of the policies that he's actually put in place, you see people in like the Dallas Fed survey complaining about them and the mood seems to be kind of bad.

Yeah. Well, I think it it's both. I mean, I remember CEO of one oil company saying he was actually to his surprise was invited to I I don't know if he was joking or not to the Biden White House, but he said he had to go in through the basement door. Uh and now, of course, uh they're very, you know, accepted and, you know, and part of the dialogue. You know, I think it's a mixed message. They're glad to see a reduction in all these new regulations that have been imposed and kind of just the general hostility to an important US industry. But on the other hand, they at low prices, you you've seen, you know, layoffs in the industry. You see people putting down drilling rigs. You know, at this prices, I think if they persist, we'll see more of a negative impact.

So the US is producing massive amounts of oil and gas. How does this sort of change the geography or the uh the energy industry?

Well, it really has changed it uh dramatically. It was really brought home in 2019 when the Iranians attacked the most important infrastructure in the entire world, oil industry in Saudi Arabia. and the price went up for a day or two and then went down and I think that's because of the existence of of shale and just it kept growing and growing and it gave a sense of security that wasn't there before.

I totally forgot about that but I think I was actually in the Middle East when that happened.

Does OPEC matter anymore?

Uh yes and well it's really OPEC plus that matters right now and they took a lot of oil off the market basically giving room market share to the US. they're now begun the process of taking back their market share and that's partly what's reflected in price.

One of the things that is a constant theme on the podcast and it comes up in numerous industries whether we're talking about housing or lumber or anything else is that you know periods of surplus or periods of slack you end up paying for it at the end. You end up maybe paying for it 5 10 years down the road because you get this decline in production. The talent leaves the industry. The labor moves the industry. the parts rust and you can't just like take them out of the warehouse etc and start drilling or whatever again. When you look at the declining price of oil today, are we going to pay for this at some point?

I think so. Yeah. I think it's interesting because I, you know, I had to write this uh new epilogue for the new edition 30th edition of the prize and I was thinking about what are the lessons and one of the lessons to me is among the hundreds of characters in the book, there are only two who really matter. one is supply and one is demand and they're always fluctuating between the two of them and I could see that today. Let me give you ana because there's a natural decline that goes on in oil which people are now saying and gas maybe it's 5% a year. So in 2021 you had the international energy agency come out with a scenario for net zero by 2050 in terms of emissions. Uh and all these steps to get there made it look rather easy because demand was down and price was down. They just came out with a new study saying the world needs $540 billion dollars of investment every year between now and 2050 just to kind of stay where we are with oil. So it is that cycle that people forget there's a whole decline there. And I think if you have a period of slack, you pay for it down the road in terms of a tight market because investment leaves. And I think you made a really important point. People leave too. They say, "I don't want to be in this industry."

Yeah. We did some episodes a couple years ago like actually when oil was much higher about one of the constraints would be well a bunch of like the petroleum schools they didn't have the same pipeline of engineering talent because in 2019 or whatever those years were who was going into majoring in petroleum engineering in those years

exactly now it's actually looks like it's a more attractive uh industry but

there's competition from geothermal as well if you want to go drilling some rock somewhere you now have options

well actually we didn't talk about geothermal but in Fact there is now the notion can you apply shale technology trillion to

geother are you optimistic about that

um I don't go through optimism or pessimism I just say but uh it's promising let's see how it plays out

I want to talk more about Europe you mentioned the industrial economy is getting clobbered I mean German let's just talk about just Germany maybe they were able to substitute LG imported from the US from some of its Russian sources but the price is up and uh industrial production in Germany has been terrible Do you think at some point European leaders will sort of cry uncle or cave on the net zero ambition? Because it it feels like the politics of that have been running on fumes for years.

You know, it's interesting because of course there so it's so entrenched that it's hard for them. I mean, you could say, okay, we're for net zero, but maybe not by 2050. But Europe continues to, you know, it's not just energy costs. It's this incredible weight and burden of regulations that are designed without any connection to the markets. I was talking to one company on Sunday and they said they just closed one facil plant in Europe. They had another one that was 80% built that they've decided not to go ahead with. Talking to another company that's also closing. I mean, they impose these policies with no connection to the marketplace or to technology, saying 70% of jet fuel has to be so-called sustainable aviation fuel. Well, it's less than 1% now. And so, it's just if you say it, it's going to happen. So, I think maybe in Germany, we're starting to see some of that easing up. But I I think that those economic realities are weighing down with them. And if they don't step back and as I say it's not just climate policies but it's this whole regulatory straight jacket that tells people go invest in the United States.

I do feel like even before Russia invaded Ukraine there was a sense that I guess ESG in general was kind of failing. You know inflation started to pick up.

Zer bureau phenomenon.

Yeah. Well, inflation started to pick up and suddenly there was what I thought was an inevitable backlash against ESG and targets net zero and things like that. Do you think that ever comes back or how would you characterize I guess the the helpfulness of ESG when it comes to building out clean energy?

Well, I think it was um clearly that all was a package together. I think now really the clean energy argument, the argument for solar now is less about that and it's about that you can do it quickly and lay it down quickly and get those electrons into the grid. So it's more about less economics are kind of working

economics rather than virtue and ESG clearly is faded away. I can't see it coming back with the full force that it did because it has a built-in backlash which we're seeing now. So I think it is means that these things have to be more market driven.

That is a of course a very critical question and it was raised at the end of the Biden administration. We did a study on that. You know we've been S&P and the commodity insight team there and concluded that we have a lot of natural gas so that it's not a threat in terms of prices. Natural gas is not as constrained as oil.

What about nuclear? We've gone this entire conversation without talking about nuclear, but nuclear, you know, could solve all these problems.

Well, and it's also interesting because that circles back to one of the points we talked about before because you say, well, what's brought nuclear back? Partly it's you know just time partly it's need but I think it's also the entry of the tech companies from being just consumers you know for software to uh really worrying about data centers and you look at it last time I looked there was been $6 billion of venture capital infusion nobody ever used to do venture capital infusion that was what the government did because it was 50 years away and we had a an event at our SAR conference in Houston this year where we had Commonwealth Fusion, which came out of MIT, the head of the largest, the main utility in Virginia, and the governor of Virginia saying, you know, we think we're going to have fusion here by 2032. So, nuclear is definitely back. Small modular reactors are a hot topic. I think the first ones will be deployed around 2030.

So, you think they're actually going to happen because this seems like another technology that's always 5 or 10 years away.

Well, I think it's going to happen, but I think the test will be then uh can you bring down the cost and is it a more flexible way to add nuclear but it is I think this it's really the tech companies who I mean there you had Amazon investing in one of the SMR companies with the notion that they will then buy successive reactors with the idea that each one the cost will come down. Now that will still be tested. It still has to go through a regulatory process at the nuclear regulatory commission and all of that. But there's certainly you have the sort of entrepreneurial Silicon Valley spirit now imbued into into nuclear which of course is not an overnight thing but it is back uh on the agenda and I think history will go back and say in Germany Chancellor Merkel's one of her two biggest mistakes was shutting down the nuclear basically in a weekend.

What was the other

that was and that was 25% of her electricity. What was the other mistake?

The other m mistake was saying you know immigration the door is open.

This might be a dumb question but you know if

there's not such there's not such a thing. I better watch out now. Okay.

But if Amazon or someone invests in a small nuclear reactor or some other type of energy plant, how are those agreements actually structured in terms of the offtake? cuz I assume they get priority and then does whatever is left over get sent into the grid.

Well, I guess it depends if it is a reactor that's owned by a utility or is it possible that these would be like merchant nuclear reactors. You have seen examples already where some of the I guess we used to call them big tech now we call them hyperscalers.

Uh when did that happen? We just all started using that term. I don't even anyway.

Yeah, exactly. I think it's about a year I think. Yeah, just I mean for first time you had to think what's a hypers scale is it like an elephant what is hyperscaling but um where they've signed where they will take the entire offtake of nuclear power plant so they are very these companies are very concerned about power because it's so electricity intensive the other day there was a story saying that the two data centers that uh uh that Elon Musk is building in Memphis will use more electricity than all the households. So this is a big issue for regulators. What do you going back to the question you raised before about who pays for this? How do these costs get disagregated?

Right now you mentioned electricity costs having gone up faster than inflation. Right now can we draw a line between these prices and the data center boom or is this two things that happen to be happening at once? I've seen different views on how directly data centers right now are contributing. I

think it I think it's it's part of it and but it's just the general increase of demand including you know EVs although not on the scale that had been envisioned. So all those things and just having I mean we had gone for 25 years with flat demand in electricity in the United States then it and now it's just recently that it started to grow again and so you have a whole generation of utilities who've grown up in flat demand and now figuring how do you get things built? How do you get through the regulatory process and even when you get it approved and you're end up in court because somebody challenges it?

Are we ever going to solve the energy problem?

No, I think it will just I mean it will always be there as long as uh industrial society it'll be one form or another. Maybe

fusion the dream of

ah fusion. Yes. I used to play Sim City and that was always the ultimate goal. You you work up from the gas plant to nuclear and then to fusion.

Fusion solves everything. But it's also striking to me what I've noticed uh you know having studied energy for you know some time that you get a consensus about energy and it lasts about three years and then something new comes along and just changes the view.

Are there any past periods? We actually tal we talked a little bit about the late 90s when there was the gas boom then. Are there any other past periods that people should study right now that might help inform the current environment?

Well, I think that uh what we have to remember which to me is absolutely uh critical is energy security and that it gets forgotten and for me I have this story in the prize about Winston Churchill converting the Royal Navy from coal to oil before the first world war which to me is that is what made oil a strategic commodity that that transition.

Why did he do that?

He did it because you gained speed, flexibility, you didn't need to have all these guys shoing coal on board and you gained 30% extra cargo space.

That's the very start of the book, right? That's the opening anecdote.

Exactly. And I always thought that phrase. He said safety in oil, but we could say in energy lies in variety and variety alone. That you don't want to be overdependent on anything. You want variety whether in terms of your suppliers, in terms of your sources.

We ever going to bring whale oil back?

You know, I said there's not a single energy source that has not increased. Even wood has increased. The only one that hasn't increased is whale oil.

All right. Joe can dream, I guess. Dan Jurgen, author of the probably, I'm pretty sure the best book on the oil market ever. Thank you so much for coming on All Thoughts.

Thank you. It's great.

Joe, that was so much fun. I'm so glad we finally got together.

I can't believe it took us that long to uh talk to Dan, but that was great.

I know. Well, fortuitous meeting in Washington DC.

I got to say his point about the sort of interconnection between energy and technology.

Definitely, it does seem to be a driving force, right? And as soon as you get new advancements in weaponry or transport or in this case software,

you do tend to get a a sudden like rethinking of what your energy needs actually are or some sort of transition.

And then on the flip side, like if you ever are in an era of energy surplus, you're going to find something to do with it, right? Like you're never just sit around and like here's a bunch of cheap energy, let's not do anything with Although China is stockpiling successfully, right?

Well, they are stockpiling. We don't know for what exactly, but yes, they

haven't spent it yet.

They haven't spent it yet. Although they're spending, I guess, in a sense, to acquire all the oil. It does feel to me and I it's not like this is that new but there was a phase in probably the US and Europe in the late 2010s and maybe it extended through 2020 magical thinking with respect to energy being solved regard you know that there is just like this like clear path towards cheap clean abundant energy and some sort of reality clearly smacked a lot of policy makers to the face and I guess the question is how locked into current plans are they what has to give? It does feel like in Europe specifically the constraints when it comes to industry, energy, climate security are pretty real.

It seems to me like the big problem is the cyclicality of the industry. like you're constantly going through booms and busts and as soon as you get a boom in oil production, it inevitably leads to a collapse in oil prices and then you struggle to build out capacity for years and years and then there's not enough oil and then prices start to rise and everyone goes back in again.

If we could find some way to moderate that, I don't know how you would do it, but that might be a way forward. I feel like an underrated element of the Chinese economic story over the last however many decades has just been this like sustained boom without major downturn etc. And so then you don't get these like big periods of like people leaving an industry or whatever that are really hard to escape out of. It's like I sort of think the cure for the boom bus cycle is just perpetual boom. Like that's the answer. Just always be booming.

Always be booming.

Always be booming.

I like that. But I also have to say China as a source of energy demand, you know, they're buying for stockpiles right now, but they're using so many electric vehicles that their gas consumption is actually going down. Gasoline,

it's very impressive.

All right. Uh, should we leave it there?

Let's leave it there.

This has been another episode of the All Thoughts Podcast. I'm Tracy Aloway. You can follow me at Tracy Aloway.

And I'm Joe Weisenthal. You can follow me at the stalwart. Follow our producers Kerman Rodriguez at Kerman Arman Dash Bennett at Dashbot and Kaleb Brooks at Kalebrooks. For more OddLots content, go to bloomberg.com/odlots.

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