3 Podcasters Walk in a Bar Episode #21 - Talks about the IRA i…

3 Podcasters Walk Into A Bar

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3 Podcasters Walk in a Bar Episode #21 - Talks about the IRA is subsidizing, Market Update and more.

March 19, 2023

00:00 - Intro

02:15- Talks about Cementless Cement

4:15- Talks about Coal Usage has gone up

08:32- Talks about amount of Reserves

11:53- Talks about power structure and grid gets older

13:27- Talks about Renewables on the grid

14:58- Talks about the IRA is subsidizing

18:31- Market Updates

23:52 - Outro

3 Podcasters Walk in a Bar Episode #21

Stuart Turley [00:00:10] Hey everybody! Welcome to today. Today is not only a great day, it's a wonderful day because I'm here with two of my favorite compadres. Never had that really funny uncle as he is at a party, and he says these three guys walk into a bar. I have no the other two guys, and they are two podcasters here, and we're three podcasters walk into a bar. I got David.

David Blackmon [00:00:33] Black, B-L-A-C-K-M-O-N

Stuart Turley [00:00:35] I was trying to think of something else. David I had a senior moment and I'm over here going to David Blackmon, who is a Forbes contributing author. And I mean, he's got the energy question. He has got his substack He is a man about town, who just got back from a cruise. Welcome, David. Thank you for stopping by.

David Blackmon [00:00:54] I'm tanned and rested and ready to go Stu let's hear it.

Stuart Turley [00:00:58] Boy, last week you look like Doug. I mean, you came in hard partying, hard off of that groove. You could barely even move.

David Blackmon [00:01:06] Yeah, well, that's just part of the general vibe. I get lost.

Stuart Turley [00:01:10] I got nothing on that. Our next guy. Yeah, We don't want to dodge that one. RT is coming around the corner and about warp speed. RT is a head honcho over there at Pecos Operating Corporation, an amp operator in Texas Oklahoma. He's also the podcast host for the crew. Drew's the one and only Crude Truth. Welcome RT

Ray Travino [00:01:34] Hey, welcome. Welcome. Welcome to you, gentlemen. I hope everybody had a great game and am excited to be doing this again on this wonderful Monday start. What, every.

Stuart Turley [00:01:42] Day? We got an action-packed show today. We want to talk about some of that, as we say in a text Okay kind of slang some of that ESG got me and you got a couple that is going on there, Dude.

David Blackmon [00:01:55] I drink a quart of it a day. I think.

Stuart Turley [00:01:57] Oh my gosh.

David Blackmon [00:01:59] The carbon footprint shrinks all constantly.

Stuart Turley [00:02:01] I don't want to know about that. Do you have medication for that? Because I can.

David Blackmon [00:02:05] Do I got three or four of them pretty I got to call my doctor's office room or over to get a prescription removed.

Stuart Turley [00:02:10] So nice. Now, what was your article you were going to talk about? What our Well, we had.

David Blackmon [00:02:15] A really interesting announcement from SLB. You used to know this company is Schlumberger, a big oilfield service company that's now bills itself mainly as a technology company. And there's good reasons why they have been introducing a bunch of new technologies over the last year. And at Ceraweek this week, they rolled out what they're calling cement with cement,.

David Blackmon [00:02:40] Which is an alternative product to the cement we all use, everyone uses in industrial applications, construction, and across the entirety of the oil patch. Upstream, midstream, downstream, cement, and steel are the two main ingredients in oil and gas and in the oil and gas business. All right.

Stuart Turley [00:03:01] I can't wait to talk about this one. Explain to me in my stupidity since I went to Oklahoma State University. What the hell is cementless Cement?.

David Blackmon [00:03:09] Yeah. It's an alternative product that they source. They make it from waste materials, and locally sourced natural products, and they have run an 18 well pilot tasked with pioneer natural resources in the Permian Basin as a proof point on the effectiveness of the technology. And pioneers apparently very happy with it and continuing to use it for future operations. So that's a good sign.

David Blackmon [00:03:36] And, you know, the thing that makes this such an interesting, tenaciously game-changing technology is that the carbon footprint of carbon of cement is enormous. It's one of the biggest drivers. CO2 man caused CO2 emissions globally.

David Blackmon [00:03:53] And if you can develop alternatives with a much lower carbon footprint, it could be really impactful in the whole ESG debate. SLB says that this product lowers lifecycle carbon emissions compared to actual cement by 85%, which is a huge, huge reduction.

Stuart Turley [00:04:15] Call me, call me skeptical. But here's the thing we use currently, California's coal usage has gone up over the last several years because they use coking coal to make cement. So if we can get rid of coal usage, I'm in. But if we're using polychlorides and other chemicals that just took out Ohio, I'm not really interested.

David Blackmon [00:04:42] Oh, Vinyl Chloride now. Yeah, I doubt that's an ingredient here. I, I don't have all the details on it yet. I'm hoping to get an interview with one of their senior executives next week,.

Stuart Turley [00:04:53] Nice.

David Blackmon [00:04:53] To talk in more detail about it, and we'll have a subsequent report. But I wrote a story about it at Forbes on Monday. And, you know, just to get what details were in their release and out to the public and not trying to do a commercial here, but it. This is a significant thing. So I think everyone should be aware of it.

Ray Travino [00:05:12] Well, I'm just thinking, you know, as an operator myself, you know, being a pioneer, we have one thing in common water, oil, oil. Well, that's about it. But, you know, this is very interesting to hear because, you know, I know for us and anybody else, you got to seaman all around your casing and through your water source to protect the water source, which a lot of people don't. Don't understand that we do.

Ray Travino [00:05:37] Because, you know, again, we drink the same water, so we do our best. So it'd be really interesting to see how this, you know, again, how it holds up long term. And if the Pioneers already done this to 18 wells, that's not an I mean, in my opinion, I know Pioneer is a large company, but to do 18 wells, that's no joke today.

David Blackmon [00:05:58] That's pretty slow.

Ray Travino [00:05:59] Yeah, it's very significant. So they must be pretty happy with whatever the cement list cement is. And the Filby wants another smaller operator, give it a test drum, you know, Hey, you know, they could find a Pecos Country operator, and I can tell you that much I always about trying to save and protect the environment long term.

Stuart Turley [00:06:18] I am absolutely thrilled about this because of any energy tech we can use to save the carbon footprint. But Occidental Petroleum was probably a little upset since they're trying to enter into the 40 billion a $4 trillion market of carbon capture, they're going around destroying our market here.

David Blackmon [00:06:38] I think there's still plenty of other carbon emissions out there today.

Stuart Turley [00:06:42] Oh, okay.

David Blackmon [00:06:43] I don't think they're going to have any shortage of feedstock for carbon capture.

Ray Travino [00:06:48] No doubt. Oh, thanks, buddy.

Stuart Turley [00:06:51] Well, Artie, what's your story?

Ray Travino [00:06:52] Well, you know, here we are already in March, and I won't say about how the weather has been so far for March, and hopefully it'll continue and I'll leave it at that. But we didn't have a very bad winter. Yes, we had one or two days in December and one or two days in February. But as a whole, you know, the weather this winter was not very bad.

Ray Travino [00:07:14] And which is a very good thing, not only for us here in America but also in Europe. But one thing that I read today, it really is kind of a canary in the coal mine as the Arctic we've been using as an example, is up in the Northeast that their power grid is continuing to get older and that due to their regulations and their lack of pipelines and the old this of their infrastructure, that that is actually one of the largest power grids in America and that it is going to get I guess the best way to put it is they really need to start updating it or else we could see some major power outages and the most one of the most populated areas in America in the near future.

Ray Travino [00:07:54] And, you know, we've talked about it before that, you know, they have such old rules and regulations that really hinder them from getting all the modern necessities of getting more reliable natural gas to that entire northeast area.

Stuart Turley [00:08:09] You know.

David Blackmon [00:08:09] Yeah, you've had a blockade. Oh, go ahead, stay.

Stuart Turley [00:08:12] Oh, sorry. I learned a lot. Mike, You and I talked about Meridith Angwin on shorting the grid on her book. I learned a lot from her in our podcast. Same shameless plug on my podcast, but it's even more than that is there's another article that came out last week and we talked about the amount of reserves.

Stuart Turley [00:08:35] Soon as you throw the renewables on there, you got to add another 180% for the renewables instead of just adding 20%, which is the industry standard for natural gas and or a coal plant that you could use because those are rock solid or even less than a new a nuke, you only need 5%. So because of its steady energy stuff, 180 is a lot when you're adding additional reserve capacity.

David Blackmon [00:09:04] Yeah. And that, of course, is one of the shortcomings of renewables is their capacity factor is only what, 20% if you're lucky, you're generating 20% at the time and really less than that in a lot of instances. And so just because you add a couple of gigawatts of capacity in wind or solar, that doesn't mean you're adding a couple of gigawatts of actual generation time, 24 hours a day to the grid.

David Blackmon [00:09:31] And you have to have these other generating sources like natural gas and coal and nuclear. And up in the northeast on that grid already, one of the interesting aspects of that grid, they also continue to have old plants that use fuel to generate electricity, which is, you know, is as highly polluting as coal, basically.

David Blackmon [00:09:53] And it's really the only big grid left, still uses a lot of fuel. And it's because as you mentioned, they don't have pipeline capacity to take that Marcellus and Utica Shale gas up to the northeast because of the blockade. New York State has had in place for, what, 12, 14 years now? And unfortunately, the federal government continues to support that. So you can't get the pipelines built to supply the gas.

Ray Travino [00:10:19] Well. And you're absolutely right that you're talking about the power and getting the gigawatts that, believe it or not, as much as we hear about all the people leaving New York, but we don't hear about all the people moving to New York, moving to Maine, to Maryland, to all those 13 countries, 13 states and Washington, D.C. And, you know,.

Ray Travino [00:10:40] The amount of electricity that's needed right now is outpacing the amount of oil or fossil fuel or wind or solar through me 3 to 1, meaning that for every three parts of electricity, we're only getting one part of that generator of that electricity. And that's also one of the main concerns that they have right now is that the population is continuing to grow and the electricity need is continuing to grow at a much higher rate. Then the source of energy can get to them for the electricity.

David Blackmon [00:11:13] And they've got they have a lot of old generation up there that is really past normal retirement age there. One nuclear plant was scheduled to be able to be retired a couple of years ago and they have prolonged it.

David Blackmon [00:11:25] And, you know, you just have to at some point update these things and allow new construction of new capacity or you're just not going to have enough electricity to keep the lights on. And it's it's amazing to me how these regulators and politicians don't allow these situations to deteriorate all over the country, really. I mean, to a much lesser extent, we have similar issues in Texas.

Ray Travino [00:11:49] We do. And I think that's part of the reason. And by the way, this article is by Dr. Ed Ireland of TCU, Texas Christian University here in Fort Worth, Texas. But no, it's as the more that our power structure and grid gets older, you know, they're not allowing due to new regulations for us to build up because they want it to be in a way that we just can't with this wind and solar. And that's just a shame. Those guys, we need to get electricity to the people of the world. This is a necessity and it's a shame that they're turning it into a sexual propaganda story all the time right now.

David Blackmon [00:12:27] And that's unfortunately what we get in our news media. And pretty much every energy-related subject is propaganda.

Ray Travino [00:12:35] And if it goes out, which I don't want to do, it'll be blamed on the fact that, you know, that we didn't have enough natural gas or something like that, you know, and that'll be the funny part about it or not for the part, but the US will be like, we're already talking about this.

Ray Travino [00:12:47] And the example really for them that they'd be following us here in Texas, like don't do this. And this is what happened in Texas, which again we're following Germany still, which is we've already seen what happened in Germany and we're still headed down that. So, you know, I guess monkey see, monkey do I don't know.

Stuart Turley [00:13:02] Wow, That was a quote. You know, when we sit back and take a look, you know, there's a big play going on with the US versus the European BP and total energy and all that kind of good stuff with the renewables beyond petroleum is now they're backing up on theirs and they're walking that back.

Stuart Turley [00:13:26] But the hypocrisy guys, on trying to figure out they're not subsidies. And when we're talking about renewables on the grid and the $400 billion that all of the foreign countries are walking in trying to get some of that wind farm action and some of those things going on of our taxpayer money is all it's going to do is drive the price up to the end consumer, end-user consumers,.

Stuart Turley [00:13:52] Siemens and all these others are going to have a role in and try to take that money that they have printed, but they still won't be able to put all those on the grid because the regulations slow down. There was another article two weeks ago that said, Oh, by the way, you can't put any of all this money out there because of the regulations,.

Stuart Turley [00:14:15] You know, RT do you have to have things walk through, and sometimes they just don't happen with the planning. And I'll try a squirrel on like that back east. They're not going to be able to even add wind farms that we pay the money to overseas to have them come in and install them because we don't have any project managers to walk through the approval process with. Squirrel.

Ray Travino [00:14:37] Well, and I don't know if any one of you guys saw it over the weekend. There's a propaganda piece in the Washington Post. We talk about propaganda, and the Post was the thesis of this article was, well, we're going to need another big subsidy bill because [00:14:53]the IRA is subsidizing the build-out of all these new wind farms and solar panels. [4.9s]

Ray Travino [00:14:59] But what they didn't include in the IRA was hundreds of billions of dollars for the transmission lines you're going to need to build to take the electricity from the solar. Farm 300 miles away into the city where all the demand is. Right?

Ray Travino [00:15:13] So they're already setting up for the next big subsidy bill to go through Congress the next time the Democrats have majorities in both houses, which, you know, who knows, could happen in 2024. So anyone who thought the IRA was going to be, you know, the full cost of this energy transition in terms of subsidies for renewables knows it's just a down payment. It's just a down payment. The plan is to have one of those every year or two from now on. And, you know, until we all wake up as voters, this is going to continue.

Stuart Turley [00:15:45] That's like you going in and trying to buy a truck for your oil field and they go in and say the payment is going to be $1,000 a month for the truck. Wheels are $4,000.

Ray Travino [00:15:58] Well, I was about to say, first of all, by Ira, you're talking about the Inflation Reduction Act, correct?

David Blackmon [00:16:03] Yeah, I hate to use that full name because it's somewhat misleading. But yes, that's what I'm talking about.

Ray Travino [00:16:09] I was going to use the example that it sounds like they built the airport building, but they forgot to build runways for the airport.

David Blackmon [00:16:15] Exactly. That's exactly what we're talking.

Ray Travino [00:16:17] And it's like I'm trying to drill an oil well, but I don't have the actual drilling apparatus to drill. You know, it's like, all right, we're going to drill a well. Okay. Now we got to actually drill bit.

Stuart Turley [00:16:26] Yeah, we can be out there with a shovel.

Ray Travino [00:16:28] Oh, shoot. I'll be doing that. I think I'll I'll be out there with two shovels this coming week and so much rain that we've been having lately here in North Texas. I tell you what,.

Stuart Turley [00:16:37] That's funny.

Ray Travino [00:16:38] But no, it's just a damn shame that the way we are beginning to see the subsidies in action, they are no longer subsidies to truly help out America. They are more of a way to just give money to certain individuals or organizations almost as what they called the not pork spending almost. It's almost a fancy way for a good old-fashioned wordsmith, would you say, David?

David Blackmon [00:17:04] Oh, absolutely. Yeah. I mean, that's what most of it is. I you know, it is going to be I will say this, you know, all these subsidies are going to attract all this private investment to those projects, and they are going to become a driver of economic growth in the communities, in the areas where these projects take place.

David Blackmon [00:17:22] There's going to be a lot of jobs connected to them and, you know, a lot of steel and all sorts of supplies that are going to have to be purchased in construction. That's going to have to be done. So they are going to be a driver of economic growth, but they're also a driver of enormous budget deficits that are going to continue to grow.

David Blackmon [00:17:40] This year we're paying $400 billion in interest on our public debt in the United States of America. In 1977, the entire federal budget was $400 billion. So that's where we are. And those numbers are only going to continue to grow because all these subsidies are with, as do said, it's with printed money and it's not something that we really have the money to do. And there just seems to be no one thinking about that. And I it makes me fear for my grandkid's future.

Stuart Turley [00:18:10] If we had the money, if we didn't give it to Ukraine.

David Blackmon [00:18:13] Well, we do have 110 billion more, I guess. Right? Or we would have printed 110 billion less because that's printed money.

Stuart Turley [00:18:20] To print money to pay the interest. Right? Exactly.

Ray Travino [00:18:22] That must be nice. Must be nice.

Stuart Turley [00:18:24] Oh, you bet. So this next coming around, RT what do you see coming around the corner this week?

Ray Travino [00:18:31] Well, I think I think gas prices are going to continue to go up this week. I think oil going to continue to go up a little bit. I wouldn't be surprised if you start with maybe 85, but definitely going to hit over 80 this week and probably stay there.

Ray Travino [00:18:45] And then for Paco's country operating, God willing, as long as we get the dry weather, we'll be doing a couple of francs this week. So we're excited about that kind of thing. Increase production, you know, try to keep up with the pioneers of the world.

Stuart Turley [00:18:57] Price fracking and Batman. That's pretty cool.

Ray Travino [00:19:02] There you go, There you go.

Stuart Turley [00:19:03] All right, man, that's outstanding. Congratulations on the getting out there, because that's one step closer to producing.

Ray Travino [00:19:09] Well, that is. You're absolutely right. Yeah, That's.

Stuart Turley [00:19:11] Cash for your investors.

Ray Travino [00:19:13] That's right. They like it. They like cash returns.

Stuart Turley [00:19:15] Oh, absolutely. Mr. David, what do you see coming around the corner? I mean, you got your finger on the entire globe. What do you see?

David Blackmon [00:19:24] I agree with Aarti on the outlook for oil prices. I think we're on an upward trend. China's reopening fully. There was a semi-disappointing projection of economic growth for China this morning that caused prices to drop just a little bit, but then they recovered immediately.

David Blackmon [00:19:42] So I just think the general inertia is towards higher prices. We're going to start to see this month. We'll start to see some of the refineries being taken offline for annual maintenance and change over to summer blend fuels.

David Blackmon [00:19:54] That's always going to cause an increase in gasoline prices. So gas prices are going to be going up, folks, fill up today if you can, before that happens. And, you know, otherwise, just try to keep up with all the propaganda and debunk. As much of it as we can.

Stuart Turley [00:20:09] Let me ask you both this. Because of your opinion, I got real mixed emotions about what the world is going to happen with OPEC and with the oil price in coming around the corner is.

Stuart Turley [00:20:21] The president or the head, Doug, over there at Saudi Aramco said that they do see a continued really big increase in just like you mentioned, the China demand and oil growth. But in the last several weeks there were some big articles about the Dark Fleet and the Gray fleet.

Stuart Turley [00:20:41] We're losing 30 global tankers a month to Russia and to India and to the others that are now transporting oil outside of OPEC's control. I have no clue how that loss of all those tankers is because China is going to buy off the dark and gracefully and then India and all these others are going to be buying off of that in the suppliers to the DART fleet are Iran, Iraq, Venezuela, and Russia.

Stuart Turley [00:21:10] And so all that takes the product out from the OPEC plus as well as the OPEC. So it pulls it out of the market. And so all the sudden your whole pricing model changes. What are your thoughts on that? I have no clue how.

David Blackmon [00:21:23] To finance that black market that sprung up to get around the sanctions on Russia mainly, but also Iran and Venezuela. And yeah, it makes it harder to account for what global supply-demand really are and it forces traders to look more at inventories and things like that as indicators and to economic growth projections in places like China and growing economies in Asia.

David Blackmon [00:21:47] But yeah, you know, that's a growing problem that OPEC is going to have to figure out a way to deal with. And but not just OPEC's but the the traders and investors as well know.

Stuart Turley [00:21:57] Yeah. Or as an EMP dude or guru, what do you think are doing Well, I mean.

Ray Travino [00:22:03] With that disappearing off the books, I mean technically that doesn't help. You've got to account for it somehow, someway. So you know the price you will see that price to account for me in 30 tankers is not a small amount of what every dollar for every month. Yeah, because I don't know the official amount of how much a tanker hold, but.

Stuart Turley [00:22:21] I mean that's to the dark Fleet. There are over 200 already in the Dark Fleet, Right. I mean that's 300 can, I mean that's 30 a month coming from the regular fleet. And correct me if I'm wrong, I think it's around 1000. I could be wrong. So let's say it is a thousand. You're losing that, you know, three.

David Blackmon [00:22:41] 3% a month.

Ray Travino [00:22:42] Yeah, Yeah. You're losing that. And then, you know, so you've got it. You've got to make up for it somewhere. And then of course, you know, OPEC's said that they do see the price going up themselves and the price is going to go up. So they're already accounting for it somehow. And I'm sure our Wall Street will do the same.

Ray Travino [00:22:59] And so, again, I definitely see as they continue to only go up for the price of oil here probably throughout the summer. I bet. I bet we go as the star David Blackmon would say, think the inertia is headed upwards in an upward split there.

David Blackmon [00:23:12] That's where it's headed, man. All right.

Stuart Turley [00:23:14] Last last thing around the corner, guys. We kind of overstayed our welcome, folks. But on the other hand, R.T., tell us how they get a hold of Yes.

Ray Travino [00:23:22] No, they can definitely reach me via LinkedIn or at the crude Trip.com and send me an email there. I mean, I just hope everybody has a great week.

Stuart Turley [00:23:30] All right. And almighty, David, how do they reach you?

David Blackmon [00:23:35] Best place to find me. Is it Substack Blackmon dot substack dot com or go to Sprecher or Spotify or any of the podcast platforms and search for the energy question with David Blackmon. You'll find me, and if you want to send me an email, I met David dot Blackmon at Reagan.com

Stuart Turley [00:23:52] Dot Nice and also R.T. and David, your podcasts are going off like bonkers. I found them on Pod Bay and oh, mine's there too. So Pod Bay has all three of ours there. So it's absolutely wonderful with that. We will see you guys next week.