This week Chris and Johan are joined by Robert Rapier, director of environment, health, and safety at Proteum Energy and author at various media outlets. Robert shares his insights on the oil and gas markets in context of today’s challenges such as the Keystone XL Pipeline and the trend towards energy independency. Listen in to find out why the sky rocketing oil prices are only partly a consequence of the war and where the oil prices will settle in half a year according to Robert’s prediction.
This week Chris and Johan are joined by Robert Rapier, director of environment, health, and safety at Proteum Energy and author at various media outlets. Robert shares his insights on the oil and gas markets in context of today’s challenges such as the Keystone XL Pipeline and the trend towards energy independency. Listen in to find out why the sky rocketing oil prices are only partly a consequence of the war and where the oil prices will settle in half a year according to Robert’s prediction.
Broadcasting from the commodity capital of the world, Zurich, Switzerland, this is ‘Insiders Guide to Energy’.
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| Timestamp | Speaker | Transcript
| 06:45.23 | chrissass | Welcome to insider' guide to energy I'm your host Chris Sass and with me every week is Johan Oberg. Johan, what's going on?
| 06:55.75 | Johan | Hey Chris it's good to be back again and finally down here in Zurich Switzerland the spring has arrived which we tend to speak about the weather sometimes but it's always related to energy. How are you doing.
| 06:59.54 | chrissass | The final link down here.
| 07:06.41 | chrissass | Yeah, if you little looked at my my Instagram post this morning. It was a sunshine over the river walking up to the office. What an amazing day here. You know, ah, it's it's nice to have that time a year. And with energy prices where they are I'm I'm also looking forward to not being doing any heating you know I had a conversation over the water cooler with a colleague of mine that owns an apartment building and he was talking about that. The price of heating his tenants units had gone up significantly.
| 07:33.15 | Johan | Um, yeah.
| 07:36.90 | chrissass | And so I think the the spring is going to be welcome for our european audience at least I don't know in the us if it's quite as big an impact but certainly is here in Europe.
| 07:42.80 | Johan | And then we'll come back to our ongoing discussion with air conditional, not air condition. But let's leave that for another show.
| 07:48.45 | chrissass | Ah know there's no discretion I'm going to have my air conditioner on and I'm not going to put up with the European heat when it gets to a heat wave I'll tell you that right on the front end So well I think we have a great show. It's gonna be interesting. We we are.
| 07:52.15 | Johan | Ah, ah.
| 08:04.63 | chrissass | Fortunate to find someone who' is as well-re respectct in the energy Industry. He's well published and he's not afraid to share his Opinion. So I'm looking forward to having this guest on now. It's kind of a timely topic because some of the things he's written about in the past are things like energy oil prices who's to blame for what pricing. And you know even sharing some of the American perspective on that which is near and dear to my heart. You know is is why are things the way they are so this episode to me is is is really going to be exciting.
| 08:33.72 | Johan | No I agree and it's spot on time as well isn't it when when we look at what's going on around the world about the energy transition. Not only about what we have discussed a lot on the show which is the the new renewable energy the new technologies but also the legacy in terms of the effects of this and how that is. Playing a part in that this energy transition. So I'm really looking forward to this one and I think it's going to be an interesting discussion and and see where it leads us because it's obviously some controversial topics in there somewhere.
| 09:03.68 | chrissass | Well, it's always controversial There's always some element of politics and energy. We can't talk about energy I mean if I think a us energy policy I think of the excel pipeline and what the impact could be and now I think of the energy crisis or kind of the the prices in europe and geez I'd love to ship a lot of l and g over here and wouldn't be nice to have all kinds of. Reserve and resource in the us to to ship out so it's good for the us market but rather than you and I speculate since we generally talk renewables and things like that I'm I'm also interested to talk in. Ah you know more of an oil basis to see what we come up with let's introduce Robert rapier to the program. Robert welcome to the podcast.
| 09:38.47 | Robert Rapier | Thanks guys. Glad to be here.
| 09:42.10 | chrissass | So so Robert I say this in every show as I have the advantage of our audience at this point is I know who you are but the audience doesn't so would you take a moment and share your background of who you are.
| 09:51.40 | Robert Rapier | Sure I'm ah Robert Ree Hereer I'm a chemical engineer I've been in the energy business for about 25 years I've worked overseas I've spent a couple of years in the Netherlands a couple of years in Germany um a year and a half in Scotland working in the north sea there in oil and gas and I've worked for big oil I've worked for petrol chemicals I've worked for renewables I've done a lot in the in the energy sector and currently I write for Forbes as ah as a senior contributor there. Been writing about energy since about 2005 I started a blog and it kind of took off and then I got requests from Washington Post and wall street journal to write editorials for them and things have really taken off and over the last I mean since I started writing there's been 2 periods. Where interest and energy issues really spiked and it was 2008 when energy prices when the price of oil ran up to nearly one ah hundred and fifty dollars and now and interest is very very high right now when people have to pay more at the pump they want to know what's going on and so I've been very busy lately. Doing a lot of interviews writing a lot of articles trying to explain what's actually happening.
| 11:05.59 | chrissass | So so they guess that opens the can and worms so oil prices are clearly high So what's happening why so tools.
| 11:14.51 | Robert Rapier | So several things are going on and you can trace the roots back to the covid 19 pandemic before covid happened oil. Prices had gotten up to fifty sixty dollars a barrel and they had recovered somewhat you know Opec. Had a price war against usshale producers back in 2014 but prices had steadily recovered from then and just before the covid pandemic hit us s production was at an all time high us the prices in the us had had recovered quite a bit oil. Producers were starting to make some money. And then the pandemic hit and in the us we had stay-at homeme orders. We had people just stop traveling because of covid people stopped flying people stopped going places and demand for oil in the us plummeted and at that also sent prices plummeting. We actually saw the price of westex intermediate. Drop into negative territory and that's something that had never happened before and I think a lot of speculators got a shock I mean you could have bought $10000 worth of wti and most times you know if you buy a stock you can only lose the value of the stock. But when oil prices went negative somebody that spent. $10000 on wtis could suddenly find themselves down thirty forty thousand dollars and so they they lost well more than their than their initial investment so that put a lot of oil producers out of business. It caused a lot of small stripper wells which account for a respectable amount of production in the us those wells. Got capped and a lot of people just left the oil industry and so in the second half of 20 as the economy started to open back up demand started to rise but we had already set some things into into motion. We're going to make it difficult for oil production to to rise back up as quickly. You know those companies that were not of business. They're not going to start production back up those small wells that were capped those could not be brought back online easily and so we saw supply lagging demand and then you saw oil prices start to rise. Now here in the us a lot of people blame joe biden for this. But what they don't realize is this started well before he took office you know in the last three months of trump's of of trump's term the average monthly price of wti rose about 32% and that's because oil production wasn't keeping up with demand. And that continued when biden took over it went up about 20% in biden's first three months nearly another 20% in the next three months and then prices settled settle down. So for the second half of 2021 we traded between seventy eighty dollars a barrel in early.
| 13:59.63 | chrissass | So at the so the price points that you're seeing right now is unconventional or fracking coming back into vogue is is it because I mean I mean I remember being Calgary in boom times and I remember being in Calgary and looked like a real estate you know bunch of empty apartments and things like that.
| 14:03.10 | Robert Rapier | Yeah, go ahead.
| 14:18.65 | chrissass | So how how is that kind of oil coming in the market these days at this prices.
| 14:21.74 | Robert Rapier | So drilling in the us the number of rigs drilling for oil is up about 70% over the past year now we do have a fracking sand shortage and again, that's that's supply lines that's worker shortages. And that's kind of putting a damper on the ability to continue to ramp up production. So drilling is definitely going up but we're still not back to pre pandemic levels and just an increase in drilling that's still going to take you know 6 to twelve months for that oil to actually hit the market. You know there's ah, there's a long process that takes place. And what's happened this year you know we had oil prices that had settled down in the seventy eighty dollars range and then Russia invaded Ukraine now anytime a major oil producer is engaged in military activity. The markets get very nervous and Russia is 1 of the 3 largest oil producers in the world and that. That was the impetus for oil prices to go ahead and surge above $80 and so we closed we averaged above $80 for the month of ah January then in February when Russia invaded prices average above $90 and then in in March when the us said we're not going to import any more russian oil price jumped up above $100 and it'll probably average above a hundred dollars this month so that last $30 move is directly attributable to Russia invading Ukraine.
| 15:46.27 | chrissass | So now is demand going down because of this I mean so you know most your our audience is likes renewables and and would love to see less hydrocarbons used, but we all know the world is still run on Hydro hydrocarbons. It's not not there yet is. Is Demand demand side reflecting. The price is is that happening.
| 16:05.28 | Robert Rapier | Not really, um, you know on the short term demand for oil is pretty inelastic and if you look back in 2008 even when prices shot up so high. We didn't see a big change in in demand. And I just saw a graph yesterday that plotted the last I think 15 years of gasoline demand versus oil prices. There was a very small change in demand but it was very small I mean it's not like you would expect for most goods if the price of most goods doubled you'd see a substantial decrease but you know people need gasoline to get to work and they they. You know any discretionary usage. Yes, they can cut back a little bit but that doesn't move the needle a lot in the long term. Yes I mean if we sustain you know a hundred plus dollars yes that helps renewables in the long run but not in the short term. It doesn't affect demand a lot.
| 16:54.60 | Johan | So so if we go back to to elaborate a little bit on the last question in terms of the March incidents and what's going on in Russia versus the us and and I by all means not an expert on oil or the Us economy but if you look at the oil price. We talk about energy independence we're talking about notbe and I think every us presidentent's spoken about this since I don't know when but a long long time back in time. How much how much of the the us oil is actually imported by Russia and and how come such a big impact. On the us market I can understand the european market because we're by far more connected in terms of gas and oil. But but but how could this have such an impact on the us where we talked about energy independence and especially from Russia this is something I really don't get my head around.
| 17:45.76 | Robert Rapier | So the us when when we include russian crude oil and imports like gasoline finished products. They supplied 7 % of our of our energy last year and that. You know it was mostly finished products but we did get you know 2 or three hundred thousand barrels a day of crude oil from Russia so we're not highly dependent on them but they were the third leading supplier for us behind Canada and Mexico so they they were the largest overseas producer for us or supplier for the for the Us. . so most of that is heavy oil that comes into the gulf coast and when president Biden said we're not going to do that anymore and people and and the oil price ran up very quickly close to one hundred and thirty dollars I got a lot of questions are we going to one fifty or two hundred and I said no. Because what's going to happen is that's just going to dislocate the flows that russian oil is going to end up going somewhere else. We're going to have to backfill it with Venezuela or somewhere else and the price will settle down to get 150 or $ 200 is going to require russian oil to come completely off the market. And then there's no telling high high oil would go because Russia does supply a large amount of global exports. Um, and and you talk about energy independence you know I always tell people you know what do you mean by energy independence because it's very hard to define if you mean. Us doesn't import any oil I tell people we will never be energy independent because we import oil and refined products and export gasoline. But if you say we we produce as much as we use then the us has been energy independent since um I think 2019 that was the year we finally after 15 years of of improvement we finally in that year flipped over to we produced as much as we as much as we used in this year we still imported a lot but we exported quite a bit as well and the final numbers for 2021 came in just a couple of weeks ago and that was still true. Even though last year our oil production fell sharply. We were still energy independent by that definition last year we produced more than we used.
| 20:00.85 | chrissass | And so so so where do we go so reading the papers today and yesterday I think your assessment about finding other sources is accurate I read something about saudi I've read something about Venezuela um, you know, looking for additional sources. How's this playing out right now short term.
| 20:19.90 | Robert Rapier | Well in the short term. It's going to take you know us producers are gonna have pick up production a little bit. It's not going to happen quickly. Um, you know that we we do have a bit of a shortage. We definitely have a shortage of oil was at $80 there's not enough $80 oil to meet demand. So. You know prices are telling you right now that we have a shortage um in the short term There's really not a lot that can happen. My great frustration is that in the us the the administration particular democratic administrations throw barbs at the oil industry. Instead of meeting with them and saying you know how can we work together to boost oil production. What do you need? What are your problems. What are your issues. Why can't you get production back to pre covid levels and instead. You know we're throwing barbs at the oil industry and we're going down a meeting with Venezuela and we're making overtures to Saudi Arabia and for me that's very frustrating because I think our domestic oil industry here in the us has a lot to offer and the administration should be meeting with them and understanding really what the issues are.
| 21:25.89 | chrissass | But in the past in my memory's foggy but I thought we used strategic reserves to help when these kind of unnatural spices took place when when there was politics or geopolitics driving temporary state of being right? So You know you're you're talking about. You know if you look At. The average American or someone that has to drive I mean if you look at the cost percentage that they put in if you're in lower income brackets and you have to drive to work you kind of still need to do it and so the government would step in and and help get prices down is that not happening or is that not part of the cards or's not the reserves. Why aren't we.
| 21:58.72 | Robert Rapier | Yes, that that is happening the the administration announced releases of oil from the strategic petroleum reserve to kind of help mitigate you know I always say that in the short term a president doesn't have very many options for impacting oil prices but 1 of those is release of oil from the strategic petroleum reserve.
| 22:19.80 | chrissass | Yeah, so and that so that falls the the historic line that that I've I recall you know from other times when oil's gone gone up that that's what presidents tend to do so So I guess you're you're talking about kind of the negative on it. You know longer term.
| 22:18.10 | Robert Rapier | And they have announced that they're going to do that.
| 22:38.82 | chrissass | What about renewables What about I mean it. It seems like there's a huge dependency on oil which which we know where where are things headed from. Are you getting asked to write about that I mean there's so much hype so much money so much talk and we we spend all our time talking about renewables and and what's coming down where does that fit into. Your conversations.
| 22:56.63 | Robert Rapier | Yeah I mean ah electric vehicles are are growing quickly and and whenever I write about lithium or electric vehicles. Those articles are always very popular people want to want to know you know where things are going I I try to temper them a little bit by pointing at Norway. Norway has had the fastest and highest penetration of electric vehicles in the world but their oil consumption hasn't changed much if you look over the past decade oil consumption is is about where it was and there are several reasons for that. Um, you know their population has grown their gdp has grown. And so you'll you'll see that you see at places like California in the us where we have the most electric vehicles. Um, you just don't see a lot of change in oil demand. So I caution people I'm optimis I'm optimistic that we're going to increase electric vehicle in electric vehicles in the us quite a bit. Um, but it's just going to take a lot longer to impact oil production than a lot of people think and oil our old demand.
| 23:55.99 | Johan | So so coming back a little bit to to kind of the transition from covid especially looking at the us market There's a lot of discussion saying that we're going to go back to where we were which I'm not really convinced because there is. Ah, across a cultural change in terms of corporates in terms of how we how we address, we might not drive as much. We might not fly as much working remote has become I know in the us it's probably a little bit more common than in Europe but even in Europe now that's becoming the norm rather than the exception so surely. The the way we ah changed and and covid was a big contributor to this in all its negativity but it's it's been. Don't we see anything regarding that. The cultural change has also driven down the demand or is it. Do we kind of expect that once we're out of this Covet. We're back to exactly the same we were. Growing population fly even more more cars on the road. The ev transmission takes a little bit longer than we thought so oil will be there slightly I thought the covid would actually help us to kind of reduce this not just by energy perspective but actually in the way we live and work.
| 25:09.66 | Robert Rapier | That is a great great question because I actually wrote an article about this as covid was playing out I wrote an article I said oil demand will never be back where it was because people are going to change the way they work people are going to find out they like working from home and so I thought. Our pre covid oil production. We'd never get back to that level because we'd never need to get back to that level and I can tell you personally me my commute back and forth to work a year ago wasn't bad at all and lately it's worse than it was before covid. So. I see things back to where they were I see demand in the us back to where it was the highways are just as crowded as they were before. So I've said recently I think I was wrong I think I was wrong because I mean there may be more people working from home but the population is still growing. There's still more people out on the roads. One day of the week I do notice a difference is Friday I guess a lot of people. There's a lot of four day work weeks and maybe a lot of people work from home on Friday so I do notice a substantial difference in traffic on Friday but Monday through Thursday it's it's as bad or worse than it ever was.
| 26:21.51 | chrissass | Um, but weren't cafe standards and things like that put in place to to handle that kind of growth. So even though we had more vehicles they were more efficient in as Manufacturers Their average mileage would go up is that not still the case.
| 26:34.11 | Robert Rapier | Yeah but there's ah there were a lot of loopholes around there for example, ah e 85 and a vehicle capable of running on 85% ethanol if you had an 85 vehicle you got credit for it as if it's running on 85% ethanol all the time even though it may be running on gasoline all the time. So auto manufacturers played a lot of games and it it. It hasn't really affected I think if I look at gasoline demand it's roughly where it was probably you know ten years ago I'd have to look but I think where gasoline demand is about back to where it was I don't think we've seen a major decrease we did in 2020 but it's bounced back and it's probably about about back to where it was.
| 27:15.90 | chrissass | So so we're we're talking quite a bit about oil. Um I did read an article I think you you talked about the excel pipeline and gas as well is that something that you you're you're talking about quite a bit in this environment.
| 27:27.54 | Robert Rapier | I have so I've I've talked about the Keystone Excel Pipeline and and and this is I've I've written many many many words, many articles about the Keystone Excel pipeline so there's an existing keystone pipeline. It brings oil from Canada down into the us and the keystone excel. Was an expansion and an extension of this pipeline that was going to bring more of that oil down into the us and that became a symbol for an environmental movement and so you had people protesting the pipeline you had a lawsuit after lawsuit and ultimately president Obama. His his state department actually came out and gave it a thumbs up and another thing more importantly, they they did an assessment and they said if this pipeline is not built and the demand is still there. An average of 6 people a year will die if that oil gets to market other ways. And that's because of train collisions and train derailments and we saw that in Quebec we saw a train derailment in 132 that wied out a big chunk of a town and killed 47 people so pipelands are much safer ways to to transport oil. So I always said look the win-win situation here. You have a private company wanting to hire americans and use american goods and support american jobs to build this pipeline. Let them build that pipeline and then work hard to ensure that it's never needed. So do everything you can. You know any government proceeds from that pipeline you could plow them right back into renewables. You could do everything you could to try to minimize the need for the pipeline. But if it's needed. It's there and so um, we president Trump president Obama Nicks the pipeline president Trump gave a thumbs up again and so they were working on it and then president Biden came in and he nixed it again. I think the pipeline is dead. But I think that was a political mistake and a strategic mistake because think about it I mean we're going to have other crises in the future and if we don't transition off oil as quickly as we think we do. We we think we should and we still have a demand then the pipeline is there for us and if we don't need the oil well then trans Canadada now Tc energy they spent billions of dollars to build that pipeline and it's not needed but if it's there it's needed if if it's there we have it if if. But if it's not there then we'll get into a situation where if we still need that oil. It's going to come by rail and truck and it's going to come from Venezuela and Saudi Arabia and a lot of times come come from places that have foreign policies that are hostile to the Us. So I've always argued.
| 30:08.39 | Robert Rapier | You know, build that pipeline make sure it's there get oil from a friendly source to the north and from a place that has you know high environmental standards and high high worker safety standards.
| 30:17.81 | Johan | So so which I totally agree with but I something that I want to just touch based on I mentioned it briefly before and I saw a documentary not long ago where they basically went through the inauguration speeches and some of the speeches of every single american precedents back to. Probably could have been Nixon. It's it's way back and part of it. It was always about let's get our oil independence off some of the states. Let's move towards renewable energy. Let's put so the message has been pretty clear for fifty plus years but still we're now in 2022 and saying that we need to increase this we need to start thinking differently and is there a risk that once hopefully soon that the situation in Ukraine and Russia so ah settles down. We're back to to where we were again or. Is things changing you've been in the industry for quite sometimes we we see that oil is going up but surely things are changing or is it not is this just ah, kind of ah a water balloon to ready to.
| 31:25.10 | Robert Rapier | Now you're you're right? You're right? So I wrote a book a few years ago and I documented exactly what you said every president since at least Nixon has talked about energy independence and some have made very important. Policy decisions that affected the us our our energy balance with Richard Nixon he cleared away all the our hurdles to build the trans alaska pipeline that was a very important decision that he made it didn't pay out during his administration but it did years later when oil started coming from the Alaska pipeline and that helped. Reduce foreign dependence on oil. But you're right I mean the thing is oil is convenient. It's I mean we pull up to the service station and we expect gasoline to be there and that's very convenient for us and you know a lot of people I do think. You know electric vehicles are going to become more and more common I'm seeing them. You know I'm in Phoenix Arizona I see them more and more on the roads all the time but it's just going to take a while I mean we're still looking at ten or fifteen plus years of of high oil dependence before that really starts to make an impact. I mean our oil dependence is is going to be high for a while.
| 32:42.35 | chrissass | So.
| 32:42.28 | Johan | It but would you say then that it's the is it the transition to ev it's as the main part you know I'm Scandinavian I grew up very close to norway obviously majority of my friends drive electric there. They have a different situation of course. But. Is it the ev that is pushing because we see the the oems are are are really transitioned just a few years ago that was not on the cards. But it's it's there's a rapid transition or is there other things that because otherwise we're ah we're in for a long run.
| 33:12.49 | Robert Rapier | Yeah I think the evs will be the most important piece of it I think for personal transportation. It's going to be evs that are going to be really important. We do have biofuels in the us you know we make a lot of ethanol. But um, you know it's only 10% of our of our fuel consumption. So. Ethanol cannot ramp up and run the United States on on the you know combustion engines I think the electric vehicles as the range improves as lithium batteries get cheaper and cheaper and that's another issue right now there there are lithium supply chain issues that have driven those prices through the roof so we're used to seeing steadily. Ah, decreasing lithium prices and since covid those prices have skyrocketed so you know that that has helped drive adoption of more and more electric vehicles as they get cheaper and cheaper. But you know right now we're seeing a challenge with lithium pricing.
| 33:58.29 | Johan | Um. So so out of Curiosity I don't know if the global or especially the Us market. How much of the oil consumption is directly related then to to to the evs or not to the evis of course but to to automotive.
| 34:17.88 | chrissass | Hardest.
| 34:18.80 | Johan | And because we then start talking about Hydrogen for for maybe for for ship ship strucks and all the rest but how much in percentage give or take okay just a big chunk Of course.
| 34:19.19 | Robert Rapier | Automotive e.
| 34:24.28 | Robert Rapier | I think it's I think it's about 30 or forty percent I think it's something like that. Um I've I've I've seen the number before but it it's a you know it's not the majority but it's a substantial portion.
| 34:35.79 | Johan | Ah.
| 34:37.42 | chrissass | So its it seems that yeah so someone an american who lives in Europe right now and in Europe has a very different view than and and imagine many of those listening to this podcast. Um, you know about 60% of our audience comes from from europe are going to be fairly strong. Opinion about hearing what we're saying right? So what I'm hearing you say is like oil. Prices are high that the the demand hasn't really tapered off yet. There's really, it's easy. It's convenient and and that's where it's gonna be and it's with us for some period of time to come and yes evs may make the future at some point. But we're still a long long ways away from that. So when I when I think back about some of these climate change the cop meetings and and some of these things they are going on and people are throwing dates like 2030 or 2050 what what? I don't hear in this conversation is a reality check from a North America being aligned to that is that. am I am I hearing the conversation correctly.
| 35:34.96 | Robert Rapier | Yeah I would say that's probably true I mean I think everybody recognize or most people recognize the the urgency here and recognize that carbon dioxide is rising and and you know where I live in the hottest city in the Us and people tell me sometimes oh you don't you don't get it I mean. I Realize we need to reduce our fossil fuel consumption but I also look around and I see it's not really happening. Um, and Phoenix is getting hotter and hotter I mean we've had some incredible summers here that have makes it very difficult to grow anything. Um.
| 35:59.12 | chrissass | Mostly.
| 36:10.76 | Robert Rapier | You know I've got a garden I can't garden here in the summer it just bakes everything out and it's very very difficult. Um I will say this though when it comes to carbon emissions Asia -pacific emits more than something like 2 or 3 times more than the us and the eu combined and that's because. Primarily of china's heavy heavy coal consumption. So I tell people if we really want to get serious about reducing carbon emissions that is the lowest hanging fruit china but you know not building more coal-fired power plants and replacing them with either natural gas or nuclear and putting in as much wind and solar as they can. And and to be clear. They are putting in a lot of wind and solar. But you know china getting off of coal would do wonders for global carbon emissions.
| 36:56.79 | chrissass | No I get that right? and so in the Us we had advantage of having a lot of natural gas resource right? So We have a lot of gas. We were able to get a coal coal really out of the power stream in a way that other countries may not have had that luxury right from the us that that reduced our footprint a bit just because of that. Um. What about gas Markets. Ah are you are you focused all on that a natural gas does that come up in your day-to-day writing and talking.
| 37:21.39 | Robert Rapier | Yep, yep, absolutely and you know some of the same dynamics apply there when oil production plunged a lot of the natural gas. Yeah, we do drill for natural gas but a lot of natural gas is produced in the us is from from associated with oil. So. It's natural gas that came off of the oil production and when oil production plunged our natural gas supplies declined as well and so prices shot up and got very high still not to european levels and so there is a big driver of trying to get Us natural gas into Europe. And there are some places over there where there are enough l and g import terminals but we are limited on our export capacity here. Um, but I think this whole situation with Russia I think 1 thing that'll come out of it is is europe will decide. We've got to get off of russian gas. And you know through a combination of more renewables and you know France may build more nuclear plants I don't know if anybody else if there's going to build more nuclear plants. Um, but I think I think europe is going to be looking to other places for its natural gas. So. You know Russia can't continue to hold that over over their heads.
| 38:30.13 | chrissass | So so the the gate you're saying from l and g shipments is our terminals to export or terminals to import in Europe or is it. Both is is part of the gate.
| 38:39.70 | Robert Rapier | Yeah, this both both ends so we have limited ability to export. Although we're building more export terminals all the time and Europe technically has enough import terminals but they're in the wrong places. So um, if they were all in locations where the demand was then then. We'd be. Okay, if the Us could just continue to build export terminals but I saw an analysis of this and it said over over all of Europe there is enough import l and g import capacity to replace russian oil. It's just not all in the right place. There are some places where it's limited in some places where. You know there's there's plenty of capacity.
| 39:19.10 | Johan | But isn't this isn't this a little bit of the challenge in general. So so we've been running this podcast for quite some times we have different guests on from from different areas in terms of talking about the entity transition. It seems that a lot of capabilities. A lot of things are. In 1 way in place and in one way as you as you mentioned here in different places or not deployed. So for example, we had talked about the transition to wind solar and batteries so that there are number of reports coming out saying that you know this will actually.
| 39:52.16 | chrissass | Council.
| 39:56.71 | Johan | The amount of wind and solar we have with the lid with batteries towards this we don't need anything else so it feels like we have enough renewable energy Germany is producing a lot of renewable energy. But we don't seem to be able to to catch it. We're talking about the gas but it comes to the wrong places. So so are we producing renewable enough.
| 40:07.62 | Robert Rapier | The.
| 40:13.89 | Johan | And it's just that We don't have the infrastructure to distribute it or where is where's the catch here.
| 40:17.21 | Robert Rapier | Yeah I think it's really the the batteries because I mean if you you I think Germany does produce plenty of renewable energy at times but there are times when it doesn't produce much at all and so you have to have enough batteries to be able to last through those periods where you don't produce. Um. You know happens in the us too. We've had some areas that produce copious amounts of wind and then for 3 days the wind doesn't blow and so you've got you know you go from very good production to 0 production and so you have to be able to supplement that and in a combination of batteries and in the us it's usually natural gas. Because natural gas responds very quickly and you know ultimately I think that is the future is is large battery banks that can hold power for a long period of time and renewables and you know that's the ideal that's the ideal scenario you know problem is always a lot of these energy projects take. A long time to build and so you know it's just like in oil in us. People say why aren't oil companies ramping up production faster oil is one hundred and twenty dollars a barrel why can't they move production faster well because these projects take years and so they're not looking at today's prices they're looking at what is the situation going to be. 1 or 2 years from now and so over there if you're thinking about building an import terminal. You got to be thinking about that. Okay, what's the situation look like five 1020 years from now through the lifetime of this project is that something we want to sink money into or not and. Same case with the keystone pipeline. You know you look at the Keystone Excel Pipeline they're going to put all that money into it the the company building it felt like the old demand will be there and a lot of people against it said no, it's not needed. Um, but I always said if you got a private company willing to build it. Let them build. It. Let them take that risk and. You know that's the case over there if if somebody wants to build an import terminal I realize you're still supporting fossil fuel infrastructure. But if you get to the point where it's needed and you don't have it. You may be right back in the situation where you've got to take rush's gas because that's all you. That's all you can do.
| 42:27.22 | Johan | Um, but isn't this isn't this a big part of of the problem right now we should have been discussed years ago but it's kind of mixed messages so from because we have independent companies that drives it you have old. Government infrastructures. You have politics that changes every 2 to 4 years depending on what's going on so and and on top of that one you have long-term investments be that in in in a pipeline be that in a port. Whatever it needs to be done. So so the investment here is not really. Covering in terms of the risk of decisions and in a transition. So how how do you How? How do you Ah, address that as an oil company or or as anyone else if you don't know and you used to invest in 10 to 15 to 20 years investment and you have no idea how that's going to be.
| 43:19.79 | Robert Rapier | Well, then then it puts a chill on investments I mean that's what happens if if you know that every 4 years in the us a new administration may come in and be very hostile toward your project. It puts a chilling effect on any projects that take a long time to to build. And that's always been the case and you know it's very difficult in the energy business where where these projects are multi-year projects and if we had a consistent long-term energy policy that was consistent across administrations. We could have done better long range planning and and. You know instead energy companies are are very tentative with their spending because they well what's the political climate going to look like in three or four years and um you know Keystone Exopyline was a good example. You know we it's on again, it's off again. It's on again. Um, and then finally when Biden canceled permanent. They said okay, we're we're out. We're we're done and I don't think they will you know there's a lot of talk about it in the us because it would have transported enough oil to offset what we got from Russia and so that was a big deal and but it it wouldn't have been built yet. Let me be clear on that it would not have been built yet. But for the next crisis for one down the road. It could have been there. But it just shows the difficulty of doing these long range projects across multiple administrations.
| 44:38.35 | chrissass | Um, so so what's the current status on leasing in oil like oil leases and government land and things like that because that that changes from political administration administration. So what's the current culture on on that.
| 44:52.55 | Robert Rapier | That's also been a hot topic here in the us because when Biden got elected oil companies stockpiled permits because they were afraid that he was going to stop drilling in a lot of locations and so they bought up a lot of permits and. Right now. The administration will say hey the old companies are sitting on all these permits. Um, ask them why they aren't drilling and the reality is it takes some time to work through those permits. So but the leasing is going up drilling is going up. I think you'll see oil production going up, but it just it's not a quick process and um I've said it's not fair to say they're sitting on nine thousand permits. They're not sitting on these permits. They're working their way through these permits but they did stockpile them ahead of Biden coming into office because they anticipated that he would not be.
| 45:40.26 | chrissass | But I guess the other thing that I know from doing this podcast and being the energy business is. There's you know trillions of dollars basically lining up for renewables in investment right? So if you look at strategies from everything from funds to pension funds and you know folks that are investing whereas you know.
| 45:40.69 | Robert Rapier | Drilling friendly.
| 45:58.94 | chrissass | And the past you might you have found a nice oil major and and had that as part of your pension fund is that really changed as well. The capabilities in the reach or is it just that there's still. There's still enough money in these businesses to build these projects and things like that without having to go to the street for money.
| 46:13.23 | Robert Rapier | Um, yeah I mean right now with with oil prices where they are the oil companies is regenerating plenty of money to plow it back into the into projects and I'm with you I know there's a lot of money pouring into renewables I own several renewable investments myself and i. You know I wrote an article in 2007 that said solar is the future I said eventually we will get all of our power from solar and it was a little bit of an exaggeration but it's going to that's I think that's where we're gonna be 30 or 40 years from now almost all of our electricity is going to come from solar and there's gonna be a contribution from wind and batteries are gonna back that up that's ultimately where we're headed but you know. And the short term that's not happening yet. it's it's it's growing it's it's but it's going to take some time.
| 46:55.24 | chrissass | Now I get that and I guess I go back to Johann's question about stranded assets right? So you you talk about putting these huge infrastructures in places that are just going to get stranded because there's not a 30 year return on on an investment in these day and age if if the sense urgency there. For usinging carbon and and other you environmental concerns are are a factor right? So it. It seems like it's you either need to get your return in a much shorter window to to guarantee your investments or your performa. It's got to be a totally different performer than in the years past I believe and and I don't know that for a fact that's just me. Pontificating.
| 47:31.40 | Robert Rapier | Right? Well the shale wells do produce most of their oil in the first couple of years I mean the production curve its production spikes and then it falls off dramatically in a couple of years so they do get back most of their money quickly. But you're right I mean they have to be looking long term at reserves. And I know Saudi Arabia is very conscious of this. They're sitting on a lot of oil. They'd like to get that oil sold. They don't want to get stranded. Um and so that is definitely consideration with them.
| 47:59.79 | chrissass | You know, um what? what questions do you still have I mean we we've been all over I think it's been a very very oil centric very North american episode which we knew it would be bringing bringing this guest on and and talking about it. Um, what are your thoughts.
| 48:13.45 | Johan | No I I found it fascinating because as I said in the beginning these are areas a little bit. Ah well not a little bit off quite bit off my my ah my expertise and it's but interesting to hear that it's it's not always. As easy as just cutting it off and and enough we go. We're talking about timelines 2030 twenty 35 always a bit discouraging to hear that it's still growing growing growing but but it's not going to be a quick fix but maybe as building on that a little bit where. Where do you see you mentioned solar and you wrote that in 2017 but what else are you seeing as kind of trends against or kind of transitioning away from oil where are the big parts where are the positive things that we're seeing that that actually are are happening because I think we all agree. Ah as you mentioned that. We need to get off the fossil fuel and the sooner the better but let's can we end on last couple of minutes on a positive. No, where are we heading.
| 49:13.90 | Robert Rapier | Yeah, so um, ah I'll tell you a european story here first I lived I lived in the Netherlands in 2008 when oil prices shot up to one hundred and forty dollars a barrel and I think petrol prices then went to. Close to the equivalent of $10 a gallon and at the time I rode a bicycle just like a lot of the dutch. Do they ride bicycles but I can remember being out 1 saturday petro was $10 a gallon and the streets were absolutely packed with traffic. So. It had no effect at all I mean it seemed like it had no effect. You know it's costing people a lot more money and I think what happens is they they still will pay that and it's just coming out of other parts of their of their budget and that's why I'm pessimistic then in the short term this this high prices right now are going to. Impact us this is going to impact demand I just don't see it impacting demand much in the longer term. It will all of these price shocks you know I think people thinking about a next vehicle and looking at you know electricity prices compared to oil prices right now are quite low. And so people have to be looking at that and have to be thinking? Well what's it going to look like you know are we going to have more price shocks in the future. Yes, probably so so I think that all helps renewables it helps. Ah, you know, solar's growing fast in the us it's growing fast in Europe. It's growing really fast in China. China's adding more solar capacity than anyone which is very very important. Um, it's more important for them than anyone because of their heavy reliance on coal. So that's a positive development. Um, it'll be more positive whenever it it actually starts to reduce their coal consumption. They still use half the world's cold. And that's where the bulk of the carbon emissions are coming from but you know there there are a lot of bright spots. Um, yeah, I'm very optimistic about solar, especially and um, you know wind is going to continue to grow. But I actually you know I've seen solar as the future for a long time I see you know, getting cheaper and cheaper. I see solar panels on houses everywhere here I lived in Hawaii for 5 years from about 2009 to 2014 and those electricity prices are very very high and you saw solar panels on every house out there I mean it was crazy and I said. That's the future for the us you're going to see that in the us you're going to see everybody with solar panels on their houses and that's that's I think that's where things are.
| 51:47.25 | chrissass | So I guess you know if you if you could make a crystal ball prediction six months from now where where the oil price is gonna settle.
| 51:55.20 | Robert Rapier | So six months from now will be the end of summer driving season. So we're just now coming into summer driving season that's going to keep pressure on prices. It's very very hard to make oil predictions because don't know what Putin's going to do and I don't know what Opec's going to do but. Assuming the status quo right now I think we'll see some relief from oil prices six months from now because us producers all the drilling that's increasing is going to start adding to the to the market and so um I don't think. I don't think the status quo in Ukraine can go on for for six months I'd I'd see something happening there. Um, and and most of the outcomes would be posture for oil prices. So I expect you know we're here in in March. I think by September we will see oil prices back below $100 both because I think there'll be some kind of resolution in Ukraine and because production in the us and in other countries I mean other countries are trying to take advantage of these high oil prices. So I think we will break back below $100 and and and be there.
| 52:59.82 | chrissass | Interesting. Well I want to thank you for sharing your insight. It's It's always nice to get a different view and from from this podcast point of view. We certainly have not talked about oil as you can tell by both of our kind of maybe shocked look and when you said a few things of you know reality check of where where people are and where the markets are um.
| 52:59.35 | Robert Rapier | And september.
| 53:19.13 | chrissass | It was interesting and enlightening to me to hear we had it. We're at frankly I was a bit disappointed that we're not further along in my home country because I would love to see us be more green but I also know that the world still runs in oil right? I'm a realtistic underneath and and and understand where we are um I'm just hoping that the the transaction goes. As quick as possible. So thank you very much for being our guest today and for audience you spent another hour listening to insider's guide to energy if you found this interesting please share it if you have comments or feedback. Please don't be shy to leave them. We look forward to hearing that and we will talk to you again next week
| 53:42.41 | Robert Rapier | Anytime guys. Thank you for having me.
| 53:58.56 | chrissass | Bye bye.