Art Berman is a petroleum geologist and one of America’s top energy analysts. In this episode, Art talks about why supply drives oil prices, why no country or company can be “energy dominant,” how physics explains our dependence on oil, the U.S. as a superpower in refined oil products, Iran as the “ascendant power” in the Middle East, and how LNG exports are contributing to the surge in domestic natural gas prices.
Robert Bryce 0:04
Hi, and welcome to the power hungry podcast. I’m Robert Bryce, on this podcast we talk about energy, power, innovation and politics. And we’re going to be talking a lot about energy. And I’m sure some politics today with my guest, art Berman, he is the founder and director of Labyrinth consulting services aren’t Welcome to the power hungry podcast.
Art Berman 0:22
Thanks, Robert. Glad to be here.
Robert Bryce 0:24
So I didn’t warn you. But all guests on this podcast introduce themselves. So I’m going to ask you given your title. But if you don’t mind, imagine you’ve just arrived somewhere and you don’t know anyone. And you have about 30 or 40 seconds to introduce yourself.
Art Berman 0:38
Right? So I’m a working petroleum geologist. I do a lot of comments and in writing about the oil and natural gas business, but I’m not my main profession. Most of what I do is exploration and production, making maps, figuring out where to drill wells, figuring out what went right, what went wrong. And that’s that’s pretty much who I am. My clients are oil and gas exploration and production companies and a number of various funds, hedge funds and portfolio managers, banks and the like. So people are interested in where to drill wells, we’re not to drill wells, and what companies make sense as far as what they say versus what they really are.
Robert Bryce 1:27
That’s good. So let me just start off because I’ve, we’ve met a long time ago, and I followed your work for a long time. Let me ask you a simple question. What drives oil prices?
Art Berman 1:39
What drives oil prices? simple answer, I guess, is why more than anything else, people worry a lot about demand when they read just about any press version, or listen to network, oh, it’s all about demand, demand is down, demand is up. Markets don’t care about demand markets care about having enough supply. Obviously, demand is you can’t talk about supply without demand. But markets kind of can affect supply with price, they cannot affect demand very, very effectively. And so my opinion, price formation, the technical aspect of price is controlled by supply. Now, capital is equally important. We talk a lot about how this company’s production has grown or not grown and positioned in the Permian is awesome, either terrible or whatever. But without capital, and usually somebody else’s capital, there’s not a heck of a lot that these companies can do. And I don’t care if it’s, you know, if it’s Joe Blow oil and, you know, in West Texas, or if it’s a big oil company. So people seem to seem to forget that without money and mostly other people’s money. Nothing much happens well, anywhere, but certainly in the oil and gas. So that’s my simple answer. Obviously, that is oversimplified, but that you asked.
Robert Bryce 3:11
So it’s interesting when you say that art because a long time ago, I talked to a guy who had been on the Railroad Commission, the Texas Railroad Commission for many years. And, of course, as you know, from the mid 30s, to about 1973, the oil, the Railroad Commission in Texas set the allowable, so they limited supply of oil into the world market. And but his his comment, and I remember it very clearly said every month we met to set the allowables. And we looked at the amount of oil and storage. And if it gone up, then we reduced, the allowable went down, we increased it and was that simple. So does that rhyme? I mean, it seems like that follows someone on what you’re talking about, but that supply is really the issue.
Art Berman 3:48
Yeah, it really is. And and I mean, to be very clear, it’s about it’s about supply balance. It’s about supply minus demand. But I’m glad you brought up that comment because inventory. inventory is part of supply, let’s face it, I mean, you produce a certain number of barrels of oil, and you sell some of it, and where do you put the rest, you put it in storage. And so the most important calibration tool that I use is something called comparative inventory, where it’s very simple concept, you look at what inventories are right now. And I mean, the major refined products and crude oil, and you subtract the five year average from that. And that gives you a normalized number as to how this week this month or whatever data you’re looking at compares to the last five years. And if we’re above it, then you’ve probably got a little bit of an oversupply going on. So your buddy, the Railroad Commission, would say, well, we need to reduce the allowables so that we get things in balance, if there’s a deficit. In other words, we’re done. The comparative inventory is less than five year average. Well, I guess we need to increase production. And that way you keep price stable by balancing the two and of course, OPEC. You listen to what those guys what their subtext is. And, you know, certainly the Saudi oil minister, he’s all about inventory. I mean, that is, that is his measure. And people keep saying, Well, yeah, but it’s about price. Well, the two are intimately related. I mean, if you look at a graph that shows say, wt Ei comparative inventory versus wt AI prize, I mean, you’ll never see a more perfect negative correlation. And we can argue all day about you know why that should be so but I’m sort of a practical guy. And, you know, if something seems to work that well, it must mean something. Right.
Robert Bryce 5:54
Well, it’s interesting, you send it in and you mentioned OPEC, because one of the things that and we’ve met before, but we haven’t had much in terms of conversations like this. But one of the things that occurs to me is the the issue with OPEC. And the issue is I look at the history of the oil and gas business. And I’ve no nowhere near your expertise, but that the recurring problem, and OPEC is an example of it before the Railroad Commission was that the industry has always tried to limit supply to support price. Is that fair? Or put another way has is that is the recurring problem in the oil industry, too much supply, and therefore there’s always limited to too much too much supply. And there’s a limited effort, ongoing effort to limit it.
Art Berman 6:34
Well, I think you’ve said it correctly, Robert, and then we look back in history, I mean, way back, back to the times when the oil, the Texas Railroad Commission, along with our fellow organizations in Louisiana, and Oklahoma, for the most part, effectively controlled world oil price. Well, I mean, let’s back up and say why was and so after World War Two, the United States produced about 50% of the oil in the world. I mean, we, you know, we were way more than Saudi Arabia of world. And so we did it along with, we did it because we could and because it made sense. And, and shockingly, the the driving factor behind those decisions was to make sure we, the United States had enough oil in case we really, really needed it. And around 1971 7273, when our production us production started to decline. The Railroad Commission said, okay, you know, we can’t do this anymore. And there were a lot of other factors there. The devaluation of world currency with the existing Bretton Woods and a bunch of other things. But, you know, that’s when OPEC which it formed at least a decade before then that’s when they stepped in saw, saw their opportunity. But But I guess the point is, is that is that first, the Texas Railroad Commission and OPEC at least extensively, are trying to control price through supply. The problem is, is that the is that people in the oil and gas business, the companies themselves, they’re always a cycle off, they always overshoot or undershoot. And so, prices go up and they say, Oh, boy, you know, let’s start drilling and they drove like crazy with other people’s money. And they don’t get them. They don’t get the memo. That Okay, we’re starting to get too much oil. And so they overproduced and then the price collapse. Oh, my God, you know, now what, and they stopped drilling? And eventually, or maybe not. So eventually, the market catches up with them, and they catch him with their pants down, and we’re not drilling enough wells. So the market raises price. So
Robert Bryce 8:51
it’s a fairly and that’s where we are now. I mean, isn’t it after after COVID, after this kind of implosion of the whole, the shale gas and shale oil and shale gas sectors, we’re now in a period where there’s an entire recalibration globally, we had the complications of COVID. But oil prices, you didn’t mention that the value of the US dollar is one of these issues as well, right, that affects the price of oil, but it’s the combination of all these things. And I guess one of the things that if you were kind enough to send me one of your recent presentations, and it rhymes with a lot of what I’ve thought about is it will ask you the question this way, especially after COVID are these increasing prices, just an exam? proof that there’s no replacement for oil?
Art Berman 9:32
Wow, okay, there’s a loaded question.
Robert Bryce 9:37
We only have an hour here bourbon. So
Art Berman 9:41
let’s just say this. Regardless of COVID or any other external factor, there is no replacement for oil in in good times and bad times. Regardless of OPEC, Texas, right. It doesn’t matter. There is no replacement for at least not Not that I’m aware of that without any kind of current technology and what I mean by that. Don’t get me wrong, I’m not an oil partisan, that is true. I’ve spent my life as a petroleum geologist, but I, you know, I’m, I’m a, I’m sort of an equal opportunity employer, I look at, you know, at all forms, and I consider myself an energy expert. And the the issue, the reason that the world uses so much oil right now, is because there’s a multiplier effect, if I know how much energy is contained in a unit volume of whatever it is, that I decide I want to use, whether it’s oil, whether it’s coal, whether it’s natural gas, whether it’s solar, I mean, you know, you name your, you know, your drug of preference. And the simple fact of the matter is, is that oil has the highest energy density of anything we’ve ever found, that is within its abundance, and is reasonably transportable and useful in a lot of different kinds of abuses. So, you know, we can we can, we can talk about, well, you know, but, but solar is cheap, and wind is cheap, and, okay, you know, the installation costs, fine, you know, we can argue about how that actually works out, but, but they have problems, you know, you Your, your electric car runs out of charge, and you go to a charging station, and you can’t just fill up the tank and take off and drive away, you know, you got to cool your jets for four or five hours or whatever, while the thing charges up, well, that’s, you know, that’s fine. That’s what you get, but it’s just not nearly as convenient. As I’m, you know, I’ve got a few drops of gas in my tank, I make it to the you know, to the Exxon station, I dump a bunch of gas, and I pay for it, and boom, I’m off for 400 more miles. So you know,
Robert Bryce 12:01
they’re refueling for maybe four or five minutes. And then depending on if you have to pee or get a get a Gatorade or something you could be, but it’s not an hour.
Art Berman 12:10
And people gripe about the cost of gasoline and all of that. But you know that I mean, the reality is, if you travel at all, and I know you do, and you find yourself in some foreign country, and you got 10 guys, and you need to go someplace halfway across town, you know, you’re going to spend 50 bucks in a cab or you know, rickshaw or whatever, right, where as 50 bucks, you know, is going to fill the tank of some giant us guzzler and keep you on the road for four or 500 miles. I mean, it’s, it’s just not that bad of a deal. Again, I’m not I’m not arguing as a partisan, I’m just saying, you know, as a practical guy that has to shell out money to to pay people so. So there’s a multiplier effect that
Robert Bryce 12:57
when you say multiplier effect, I think that’s interesting, because what what I hear you saying when you’re saying that is that there, it’s you’re talking about energy density, and you’ve talked about this, and it’s something, you know, theme that I’ve written about in the energy density, power, density, energy density, causton scale, it seems like that that’s the key, right? That the power density, the footprint of oil and gas is relatively small compared to wind, and solar, and especially biofuels. And then the energy density of it is just as you say, it’s, well, my line is if oil didn’t exist, we’d have to invent it. It’s like this is miracle substance,
Art Berman 13:26
just like God, right?
Robert Bryce 13:30
I’m not sure. We’d have to invent God, if God didn’t exist. And
Art Berman 13:33
somebody that’s a quote from someone that God didn’t exist, we, you know, we would invented. You know, that’s not my belief, but whatever. Now, so. So let’s just get this real, real straight. I mean, the, you know, the one of the slides that I sent, you actually shows the calculation. And so if you take a barrel of oil, 42 gallons of crude oil, and you actually calculate, you know, how much energy whether it’s, you know, kilowatt hours or joules or you know, whatever you want calories be calculated out, and then say, Well, you know, what, what is the energy output of a human being, and given the fact that we don’t work 365 days a year, and we’re not 100% efficient, and blah, blah, blah, it works out that a barrel of oil contains about four and a half years of human manual labor, with all the discounts thrown in. I mean, that is a multiplier effect, that you just can’t begin to match. And so if the world uses 100 billion barrels of oil 100 million barrels of oil a day, and you multiply that out, that’s the equivalent of having 500 billion people working. You know, we don’t have 500 billion people on the planet. We’ve got 7 billion That’s the multiplier. It’s a productivity. It’s, it’s an effectiveness multiplier that you cannot beat. And so you compare that with other and they use all these fancy, you know, energy return on investment, and I’m all for that, you know, net energy, how much energy Do you have to put in to get it out? It’s complicated, it’s a little bit messy. It’s a brilliant concept. But the bottom line is, is that you use anything else. And, and, and you instead of getting four and a half years, let’s be real generous and say, you know, with solar and wind, you know, maybe you get four or five months. So, I mean, that’s the kind of thing we’re talking about, which, you know, and I’m not in any way, suggesting or arguing that we, you know, the we not use other forms of energy, because diversification is critical. And, you know, let’s use the solar, let’s use the lit let’s use the hydro and everything, nuclear. But let’s just be clear, you there is nothing as good, just from a pure physics standpoint, as oil that we’ve found so far.
Robert Bryce 16:17
And if and if someone were to say, Oh, well, there’s Berman just talking his book, then you’re gonna say, Well, no, it’s interesting. You quoted, he could vote Slav smil. We’re both French fans of his work. He had these had a great interview in the in the Guardian in 2019. He said, I do not tolerate nonsense. I grew up surrounded his check. And I grew up surrounded by commie propaganda, the bright tomorrow, the great future of mankind. So I’m as critical as they come. It’s not my opinion. These are the facts. I don’t write opinion pieces, I write things that are totally underlined by facts. And then he says, and you quoted the mirror on this part, he said, the economists will tell you, we can decouple growth from material consumption. But that is total nonsense. Which
Art Berman 17:02
I’m with him, you know, I mean, he’s, you know, he’s just so brilliant. And, you know, I’m small compared to him and his knowledge, but, you know, I’m a scientist. I mean, I’m a geologist, and, and I have my opinions, and I have my preferences, and I have my biases, just like every human being. But the bottom line for me is data. It’s facts, it’s information. And whatever my opinion is, say, of solar, wind versus oil. These are the facts, you know, and these are the, these are the comparisons just like you know, I want to buy a house, right? Maybe I like this sounds a whole lot, but the out, you know, what you want for it just doesn’t compare to what I can get somewhere else, I’m not gonna buy your house. So, you know, just in a purely objective way, there is no comparison to oil that we know of right now. And and again, that you know, that that includes things like cost and all of that, I mean,
Robert Bryce 18:04
well, so and it will, what smells quote about we cannot do this, they will tell you, we can decouple growth from material consumption. So this recovery and oil prices is reflecting then the recovery of the global economy is that just isn’t that simple.
Art Berman 18:21
Not quite, but yeah, basically, on some level, yeah. So we, you know, are the economic activity went way down, price of oil went way down. And now the level of economic activity, it’s not back to where it was before, but it’s made a very impressive recovering. And so his our consumption of oil, I mean, there’s a slide that I sent you that probably many of the people listening to this podcast, have seen some version of, and it’s just GDP, country GDP, versus oil consumption. And again, that’s, you know, that’s, you can make the same graph using, you know, wind or solar or whatever you want. But, I mean, it’s like a, it’s an almost perfect statistical correlation. It’s got an R squared of something like, you know, point nine, five. And so the simple you know, you can even argue all day, why it’s so, but the countries that use the most oil, have the highest GDP.
Robert Bryce 19:23
It’s like, like, as with electricity, right, the same thing, right?
Art Berman 19:28
messy, it’s not the best measure in the world. Everyone knows that. But it’s, you know, it’s kind of what we got. And it’s, you know, as a, as a high level, it’s not too bad. And so, you know, it makes sense. The countries that use the most oil, which is the most efficient way of getting a lot of work, I’m talking physics work out of something are going to use the most efficient source. And so unless you’re just you know, burning it wasting, if you’re using it, to produce work, then the country that Use the most oil will create create the most work. And theoretically, at least their economy should be pretty darn good because they’re making a lot of goods and services and so on. And other people aren’t that complicated.
Robert Bryce 20:14
So I’m just gonna interrupt it. My guest is art Berman, he’s the director, founder of Labyrinth consulting services, you can find him at art berman.com. In the in a recent presentation, I want to shift gears. Well, I do have one other question here. So where’s global oil demand growing the fastest now on on either a per capita basis on an overall country basis? Is that China? where’s where’s the big demand Pole?
Art Berman 20:38
Well, another difficult question to answer. But overall, I think I would have to face the developing world. And China, to some extent is, you know, they’re they’re on the cusp of, of a developing country in a developed country. China’s demand in India is also, you know, its population base, I mean, the two countries there that constitute, you know, something like 25 20% of the world’s population. So it’s pure numbers, but they are, in my world, they’re developing countries. And I don’t mean that in any derogatory sense. But you know, they’ve got a lot of a lot of very poor people that are wanting or coming into wanting to get into the middle class, they want cars, they want houses, they want stuff. So that’s where it’s coming from, and countries like ours, and, and, you know, the OECD, the developed world, if you will, we were using less per capita all the time, because of a lot of reasons, you know, our populations are not growing as fast. We’re more interested in efficiency, we’re a little bit more concerned about the environment, perhaps, I mean, you know, many factors. But, you know, those are the facts. The facts are that electricity use in the United States, you know, it’s going down right,
Robert Bryce 22:05
then been flat for 15 years, right? It hasn’t grown at all,
Art Berman 22:09
which, you know, doesn’t mean that you and I aren’t using more than our fair share of electric power right now. Because we are, but we’re using it more efficiently. Right?
Robert Bryce 22:18
I don’t waste it. By the way. I never waste any energy. I always use just the right exact amount. I’m sure I’m cheap
Art Berman 22:25
to sell man. By the way, markets are two markets are they hate to overpay. And so you know, we have so many analysts talk about ridiculous things or, you know, nonsense and schmelz words? Oh, you know, oil is going to $100 a barrel? Well, I mean, you know, I don’t know exactly who the market is, but the markets you and the markets me, and we just agreed that the two of us are cheap, guys. So who exactly is it that’s gonna pay $100 a barrel for oil? Well, if supply is desperate enough, the market will pay $100 a barrel for oil, but it isn’t going to do it. Because Oh, that would be fun. Gee, we used to pay $100 a barrel, let’s pay $100 a barrel now. No, markets gonna look at what supply is available? What’s it gonna take? Get these jerks drilling? Again? That’s the market. And you know, and
Robert Bryce 23:29
I prefer the term lunk heads. I’m not sure what you will
Art Berman 23:32
remember a lot of jerk companies. But bottom line, Robert, is if oil companies tell you or me or the Dallas fed, which they regularly and they say, you know, we’re making money at $52 a barrel. And their quarterly statements reflect that they’ve got good free cash flow right now, which most of them do, then why in the world? Would I a cheap guy? Pay them? $100 when they tell me they’re, they’re fine existed? I mean, I’m not a fool. You guys can make money at 50 I’m going to try to give you 50. And okay, there’s a problem. Because not everybody, you know, maybe for a lot of reasons. They got, you know, they got caught by surprise. There’s not enough wells drilling. Fine, I’ll give you 60. Right. Maybe I’ll give you 65. But I’m not going to give you 100 unless I have to.
Robert Bryce 24:32
And it’s clear when you’re saying that to me. You know what I’m thinking in my own head. Well, the guys at OPEC are reading the paper too. And they know what that breakeven price is too. So they’re not it’s not like they’re going to set their price in a vacuum. But let me let me switch. I think there was one thing you wrote recently you said energy is the economy. Money is a call on energy debt is a lien on future energy. And then you also said no species ever as has ever gone from a higher to a lower density energy source. I like that idea that Money is a call on energy. I’ve never seen that formulation. Can you expand on that? And then debt is a lien on energy. I mean, you’re, you’re essentially in another place. You said oil is the economy. So can you unpack that a little bit? I just liked the way you wrote that that idea.
Art Berman 25:15
Yeah, sure. And let the, you know, be be clear. I mean, you know, I didn’t invent that idea. That, you know, that idea first came to me in that format from my friend, Nate Hagens, who is also means more of a biophysical economist, I guess you’d say. But he and I’ve worked together for a long, long time, we were both working in the oil drum back in the days when the oil drum was something. And the idea there is very simple that, that money is nothing more than a call on work, okay, and so back in, no, go back to the Paleolithic time, or whatever, you know, and you and I need to eat. And so we decide, hey, let’s go hunting. And you and I choose to use our own work, to go try to kill something or catch something, or whatever, that will give us calories, or jewels, or whatever, so that we can live. So our work that we do, gets us a surplus of work. So we can sit around and chew the fat for a couple of days before we have to go hunting again. And so, you know, with the advent of agriculture about 10,000 years ago, for the first time in human history, and agriculture is a messy do. You know, I’m not sure it was a good thing for everybody. But it was great for population growth. Agriculture, for the first time allowed some people to have a surplus. I mean, there’s only so long you can keep a bear. He’s gonna rot. But with grain, we can store the stuff. And now I got a surplus as I got a whole, a whole barn full of grain, and being lazy and cheap, which I am. Maybe I don’t feel like doing some manual job, like digging a ditch. And so I said, Hey, Robert, you got a kid? I’ll tell you what, if he’ll dig me that ditch, I’ll give him you. I’ll give him a bushel of wheat for digging that ditch. Right? And you say, Well, let me talk to my kid kid says, Yeah, sure. he digs my ditch is my hope I give him a bushel of wheat. And we’re good. All right. So the bushel of wheat is is is the the call on your kids work? Well, I mean, we is not exactly the easiest thing to, you know, to use to get people to do what I want. So eventually I don’t I invent current, and current and you know, what was currency until the 1970s. It was a pile of gold or silver, it was something that had that just like wheat. Right? So So money, people think the economy runs on money, it doesn’t runs on work. Everything runs on work. And I
Robert Bryce 28:13
can interrupt and energy is the the ability to do work. And power is the power is the rate at which work gets done. So the quick, the quick physics lesson here
Art Berman 28:22
is basic physics. And so when I say oil is the economy all I mean by that is that oil is the primary source of work in the global economy. It’s not the only one. Coal is important and natural gas. And so as you know, hydro electric and everything else. So energy is the economy. Well, I
Robert Bryce 28:41
think it’s interesting. You said that because it what vibes in my head, or was I thinking when you’re thinking about that? I said, I remember I met a guy who’s in the railroad business a long time ago, he said, without transportation, there’s no commerce. Well, without oil, there’s no transportation. So then without oil, there’s no commerce. So I mean, I’m throwing in a different idea here. But that ability to get goods to market and the fact that oil dominates, as you pointed out many times in the transportation sector. Without it, there’s no transportation, well, there’s no commerce, then there’s no business moving, that things aren’t moving. So is that that you’ve written? We talked a little bit about EBS, and I want to come back to that. But isn’t that really where we’re going in terms of just what what drives what makes the global economy move is oil and therefore without it, we’re we’re screwed. Is that too scientific?
Art Berman 29:30
Not at all. And let’s, let’s see even more graphic? Sure. Talk about what does it take to support a world population of almost 8 billion people. Now, the world didn’t have anywhere near a billion people until almost our lifetimes. The end of World War One world economy was something like 2 billion, maybe a little bit less maybe when it’s hard to know precisely but you know, it’s in that range and we Why was that? Was it that, you know, people didn’t like to reproduce before 1920? No, the world could not produce enough food to feed more than about 2 billion people. And there were two German guys named hover and Bosch back, just before World War One started, that figured out how to supply the world with enough free nitrogen to make fertilizer now, we knew about fertilizer forever. And until harbor and Bosh came along, we use whatever we could find, you know, bat guano or you know, whatever. But they’re in a for some reason, the Earth is just not rich, in free nitrogen. And so but the air is, and so harbor and Bosh figured out how to liquefy air, same process, we use the liquefied natural gas costs a fair amount of money, you gotta cool it and pressurize it. But all of a sudden, we had a source of free nitrogen. And we could make as much fertilizer as we wanted. And that more than anything else in my reading of history and vaslav. Swamy Oh, by the way, it was fertilizer more than any single other factor that allowed the world population to grow to the size that it is right now. Well, what’s fertilizer made from how do you do what’s made a methane, it’s made of natural gas. And it takes a ton of power to run the the process that super cool and super pressurizes air. And so without fossil energy, coal, natural gas and oil, we just don’t have the means to make enough fertilizer, we’re back to World War One. And we can’t support a population of anywhere close to seven or 8 billion people. And so one of the things that you know that the the so called Green, or D growth or whatever you want to call them people are and by the way, I’m, I’m a conservationist, I love nature, no problem there. But when they talk about let’s get off of fossil energy all together soon, like tomorrow, what they are not understanding or telling you is, that means the death of at least half the planet. Is that part of your platform, guys, I mean, you know, you want to go advertise that we’re, you know, the part of what we want to do is mass extermination, or mass starvation. And think about what that does to the dynamic of civil order. If people is half the world doesn’t have enough to eat, or the means to make a living? What are they going to do, they’re going to sit there and starve to death, no, they’re going to migrate, they’re going to come to your country or my country, you know, we’re going
Robert Bryce 32:51
to riot or overthrow who’s ever in charge and make sure that they get heard somehow, some
Art Berman 32:56
way, or countries are going to fight wars over the existing resources, it creates a huge mess in the world, one way or another, the world will find the most efficient way to reduce its population to about 3,000,000,001 way or another. And every way it will do it is ugly. And is that really what you want? Now, you know, that that that question doesn’t have a doesn’t have a nice answer. It really doesn’t. And that is the problem with these, these radical ideas. You know, we talk about everybody’s an expert on something, but how many people actually know how to think in terms of a system? The energy is a system, the Earth is a system, the economy is a system? And if I if I pull out a piece over here, you know, what happens to everything else? Oh, am I my grandchildren like to play this? You know, Jenga? You know, we start taking pieces out of some structure. And you got to figure out, well, when does the thing fall down? Because if it falls down on me, I lose the game. Right? You take out these little pieces, and you think, Well, you know, it’s fine. You know, all we do is replace it with something else. But if we replace it with something else that doesn’t have anywhere near the productivity or the efficiency of oil, then the structure falls down. Oh, yeah.
Robert Bryce 34:22
Somebody asked you that about that. Because I’ve thought the same, you know, what is the end game for the people who are promoting these kinds of all the all renewable Mirage, the all renewable fantasy? And I’ve, you know, I’ve been writing about it for a long time. One guy I met recently, he was one of these big pressure groups. I’m not going to call him green groups anymore environmental groups, because I don’t think they are. He said, we’re a campaigning organization. And which means, you know, he was just saying it flat out well, we don’t have to manage anything. We’re just gonna push a point of view. But is that all it is? I mean, is it well, I guess the the question, the short question would be, what’s their endgame? The people who are pushing this these scenarios, what do you see as their game and maybe I’m asking you to be a mind reader, and that’s not your business, but I mean, what’s their? What’s their? What’s their goal?
Art Berman 35:08
Well, I’m not only not a mind reader, but I’m not an abnormal psychologist either. But I honestly, you know, I say that in jest, but it really does have to do with psychology. And, and, and more than that it has to do with belief. And so we have a lot of people say, you know, in this country right now, who prefer to believe in conspiracy theories, then do believe in information. Why? Because it simplifies their lives. The facts,
Robert Bryce 35:43
too, it’s a religious, it’s been on the podcast, I’ve had Sally trim bath some weeks ago, and she’s a theologian. And then she talked about this idea of, you know, around climate and redemption and salvation. And you know, these issues around Energy and Climate were very intimate, very closely aligned with Christian belief, right. So she said, Well, this is a religious orthodoxy just like anything else. So is that your point? That is
Art Berman 36:03
exactly my point. And so if, if we have in fact, soiled our bed, the earth as children, we got punished for that. Okay, you know, no, no, no, I told you not to do that. I mean, this is, you know, classic Friday and super ego kind of stuff. So. So, you know, so what do I do? I want to, I want to show you that I’m a grown up. No, I didn’t do that. He did that. You know, it’s all those those nasty oil companies. And what we have to do is we have to punish them, you know, we have to, you know, we have to put them in jail, we have to deconstruct them, we have to make them go away, so that I can show daddy that I’m a grown up boy,
Robert Bryce 36:51
or in this case, mommy would be Mother Earth. Right. Well, yeah.
Art Berman 36:57
And again, that’s that’s a little bit oversimplified. But that’s what belief is based on. And I’m not, I’m not opposed to belief. But let’s understand what is belief? And what is what is fact?
Robert Bryce 37:11
Well, let me follow up on that. Because that seems to be now there. You mentioned Exxon, and it just these pressure campaigns, and you’ve seen it by the State of New York, taking New York to trial, and then right at the end of the trial, pulling some of their initial legal claims and saying, Oh, no, we’re withdrawing those right after, you know, I don’t know how many 10s of millions of dollars the company, I’m not just saying this. Yeah, nevermind. And now the pressure groups, including I guess, an engine number one, or whatever the name of the company is, you know, very small hedge fund. They’re aiming at Chevron, what is it that those big companies then are easier to pressure? Because this is one theory that I’ve heard that this ESG movement, the net zero movement, all of these are really campaigns that are aimed at these publicly traded companies, because they’re more susceptible to public pressure than privately held companies or other entities? Is that a fair assessment? How do you see that?
Art Berman 38:05
Well, it is fair to some extent, I mean, every public company has to be sensitive to its shareholders, or else it’s out of business on some level. And Exxon, I suppose, is a good example of a company that really just never as kind of give them a crap about what anybody thinks about what it does. And I say that as somebody that respects Exxon tremendously, I worked for them as a contractor for several years. And I have tremendous respect for their organization. However,
Robert Bryce 38:43
in a few years ago, lead Raman was very clear about that. I mean, as a CEO, and a chairman, he did not do them any favors, but I mean, he was a very gruff, and kind of just kind of Well, yeah, appears was kind of his attitude about every critic,
Art Berman 38:53
he was the CEO at the time, I’m talking about Nero in the early 2000s. But that’s the way the company was and their attitude was looking, at least we’ve had the premier return on investment or whatever you want to measure for an awful long time, we know what we’re doing. So let us do it. And, and that’s not working for him so well anymore for a variety of reasons. And so they’re, they’re, they’re more vulnerable. And so, you know, this little pressure group, if you will, what’s in it for them? I mean, some of its belief, but some of its money, right. I mean, they’re paying salaries. I mean, I don’t know what the CEO of engine number, whatever it is, makes, but you know, he’s not doing this for free. So you will only earn a living and that’s fine. I’m not criticizing him. But yeah, we all need a job and whether that job is doing the kind of work you and I do or whether that job is, you know, being, you know, a Taliban I mean, that’s the job to write.
Robert Bryce 39:57
Not a job, not a job. I’d want
Art Berman 39:59
Nobody wants to wait on anything else to do right there,
Robert Bryce 40:03
apparently No, unfortunately. So last year, you wrote an article titled The party is over for you for shale and us energy dominance, and us energy dominance. And then your subtitle was the US is screwed when it comes to near to medium term oil production. So it Why is the party over? And you don’t clearly don’t like the will? Or are you like this term energy dominance? I’ve never liked it. But anyway, is the party over? Yeah, go ahead.
Art Berman 40:29
Well, it’s just it just, it’s a, it’s a fabrication. I mean, you know, the United States has not been energy self sufficient. In my adult lifetime, and, and the fact that if you can’t even be energy self sufficient, the United States imports 6 million barrels of oil a day and we still import a net of, you know, let’s just call it 3 million or so. It’s a lot better than it was, say, for shale. But I mean, 3 million barrels a day. I mean, that’s, you know, that, that that for most countries, I mean, that’s, that’s off the charts. For for import volumes, so so we are not energy, self sufficient. Never have them. Should we say that? We probably were could have been back before World War Two. But we weren’t because we chose to trade and do the right thing. Right. And as far as energy dominance, we know it was who is energy dominant? I mean, is Saudi Arabia energy dominant? Maybe, but not enough to do all the things that they want to nobody’s energy dominant, the oil. I mean, the oil commodity market is the biggest commodity market in the world. And I don’t care how big you are, whether we’re talking about barrels per day of production, or reserves, or just capital, how much money you have to throw around. Nobody’s big enough to control the oil market for very long, maybe a few days or a few hours, or maybe even a few months. If you’re you know if you all your buddies get together like OPEC plus, but I would contend and I don’t know if I did in that particular article. But I think one of the problems with OPEC and OPEC plus, is that which means Russia, a couple of other guys in Kazakhstan, whatever, is you cannot manage a market for very long, you know, maybe debeers could manage diamonds for a while. Right? It can’t anymore. But diamonds, now the little bitty market, you know, mostly came from one country or a few countries. Oil is huge. You can’t manage market. Like,
Robert Bryce 42:52
oh, and that market is what $2 trillion a year, something like that, if you figure it out, you’re just a base on what 50 or $60 oil 100 million a day, something like that. I mean, it’s a it’s an extreme extraordinarily big number, you know, well,
Art Berman 43:04
and then you and then you count, you say, well, you only have to put down 10 cents on the dollar to you know, put a contract on oil. So multiply that by, you know, divide that by point one, and it’s even bigger. So no, you can’t do that. It’s, you can try and you can claim that you can So my point is, is that let’s assume for a moment, you know, one of the other things I hated was, oh, the United States is the new swing producer of oil, right? Well, no, not not even a little bit, a swing producer, whatever that means that well, what it means is that I’ve got enough extra production in my pocket, that I can just turn it on, or turn it off. When I want to and swing supply. That means that I have to have a few million barrels a day at least, that I can turn off and turn on the United States, at the height of the shale boom. We never had anything to turn on, turn off. I mean, we were we were selling every barrel. We’re a price taker. That’s what the US oil businesses, and that’s not a criticism, that’s what we are. But a taker needs a buyer. And you can’t be in business unless somebody’s going to take your oil. And so the when I listened to people talk, oh, isn’t it great that the US is energy self sufficient, and we’re energy dominant? Well, if this oil we’re producing is so damn good. Why don’t we sell every barrel of it to export and continue to import somebody else’s oil? What’s that about? And that’s because not all oil is the same. Right? And and again, this is just a fact. The oil we produce in the United States is not that good. It’s not that good for What refineries need today? It was great in 1940. But it’s got a chemistry that isn’t that good. And so we see how much of that stuff we can pawn off on other people so that we can afford to buy the good stuff that runs our refineries.
Robert Bryce 45:19
And so if I get so if I can interject, and correct me if I’m wrong, but the US is producing light, sweet, it’s a mismatch with the US refining in general, which we’re everybody’s refining it. Yeah. So, but other than that, our refineries were built for higher sulfur, lower quality croods that make the refiners can make more money off of
Art Berman 45:38
that, and why you say lower quality, but it’s, it’s got a higher energy density, though.
Robert Bryce 45:44
Okay. All right. But a different okay. Yeah, different formulation.
Art Berman 45:49
But let’s just think about it one more little anecdote. Sure. Of course. I can’t remember the guy that came up with this, it wasn’t me. But he said, well, let’s just use talking about us energy independence. He said, If I’m a country that manufactures no automobiles, and I import millions of automobiles from Italy, and France, and whatever, every day, and I paint them green, and then I export them to the world, a Maya net exporter of automobiles. And his answer was, actually I’m an exporter of green paint.
Robert Bryce 46:30
That’s funny. And that’s
Art Berman 46:31
that’s kind of what the United States does. We are a a, we are the the the superpower of refining, and reselling refined products to the world and good for us. But an awful lot of that oil that goes into those refineries to produce the, the, the gasoline and diesel and the jet fuel comes from other people’s oil, because it’s better than ours.
Robert Bryce 47:02
So let me let me follow up on the shale thing. And I just, I don’t want to spend too much time on this. But yeah, I don’t know. It was eight or 10 years ago, we were on a panel together somewhere in Florida. I forgot exactly where and you were predicting then in Jacksonville. Thank you. And you were predicting it was going to end badly. And I remember I was much more sanguine about I thought everything was fine. And finally, fine. Deloitte, I think it was last year estimated that was $300 billion in capital that was destroyed by the shale drillers in the United States. Is that number in the neighborhood? Or do you have a different number? And is that the right term for that 300 million 300 billion was just, you know, invested and then just lost and the winner was the consumer because of lower prices is that if you can summarize what’s happened with the shale revolution in just those Stark terms? Is that a fair assessment?
Art Berman 47:49
Yeah, I probably, I mean, capital destruction is probably not a term that I would use. But if Deloitte use that, that that’s fine. What what? And so back to the discussion, or the meeting we had back there in Jacksonville. I was at the time, I guess I’d say more naive than perhaps your. And I honestly believe that if if a company or an industry couldn’t make money, that eventually they would be forced to stop producing the product that they did, and I was dead wrong. And that’s why what I expected would then poorly in terms of supply was incorrect. Because I had no idea that investors would continue to give money to companies that were losing their asses, every on every MCF they sold. But in the end, I was I was, we were both REITs. I was right in that this this business model is is absurd. It just doesn’t make any sense. And and if anybody who, who was, was a sanguine investor, wouldn’t put a diamond to this thing. It’s nuts. But they did. Okay. And everybody caught up to that. And so back to your question about the article where I said, we’re screwed. Sometime around mid 2018, the investment community got wise to the shale gig. He said, You don’t want you guys to keep talking about making money. And you never make any money. I mean, you’ve never made any money back. You lost a ton of money every quarter, just about every year for a decade. And you know what, we’re done. We’re not and it didn’t happen in one day, but it you know, it was a gradual process, of course. And so where we are right now, whether we’re talking about shale gas or or title oil, Is the companies are saying okay we got religion and this
Robert Bryce 50:04
this time is different we’re gonna be discipline this time you just watch us
Art Berman 50:10
and you know what gives me discipline I got no money it’s really easy to you know to put a put some lipstick on that pig I don’t have the money to drill the wells but I want to so I’m going to call it system this I’m going to call it here and returning value to the shareholder but give those guys more money and I think that fiscal discipline goes right out the window I mean and I don’t mean to pick on the shale guys this is this is the oil industry This is the way we and I include myself have always been that’s the way we are for better or worse
Robert Bryce 50:46
it’s always gonna be boom and bust we have
Art Berman 50:48
never returned the kind of free cash flow that we talked about if you look historically at you know when when did oil companies in general ever have any free cash flow over the last 20 years and you know maybe one year maybe two I mean it’s not it’s not a shale disease they just happened to be they abused the privilege I mean they’re they’re they’re an end member
Robert Bryce 51:19
just just just the latest example of how the industry has been for decades
Art Berman 51:24
risk taking industry
Robert Bryce 51:25
so if I’m if I’m reading you right and just the way you’re talking about it in your body language, you wouldn’t buy oil and gas stocks today Are you a buyer or would you be I’m not no I’m not so you know this business you’ve done it for 40 years but you don’t think that that’s a reasonable and wise investment for a retail investor?
Art Berman 51:46
I think there are companies that are wise and wise investment
Robert Bryce 51:51
attitudes such as such as such as Chevron then why
Art Berman 51:56
I look at their balance sheet and I look at their their their asset and I compare them you know, I mean if you wanted an energy stock I’m not saying that you do but if you wanted one, I do a simple exercise where I look at share price of a whole bunch of companies and I normalize over some period and I do the same with oil price. And I look at those curves and I say what company is outperforming wt Ei are performing at the level of wt Ei or underperforming and you look at that crowd and the answer is that today at least Chevron and Pioneer are outperforming their peers and Conoco doesn’t do too bad conocophillips doesn’t do too badly either. Most of the rest of them and companies like oxy and Exxon I mean they’re grossly underperforming the base commodity which is oil and their peers so you know I don’t have a preference among those companies. I mean I don’t like one better than the other but the first task is just to look at that as a shareholder if if their share prices is going down I’m not gonna make any money right? Sure.
Robert Bryce 53:16
Well so let me ask you about that and again My guest is art Berman he’s the director of Labyrinth consulting services and you can find him an art Berman calm you publish a lot of graphs and and I asked this kind of as a lark but serious I mean you produce it you handle a ton of data. So on any given day or any given week how many spreadsheets are you managing how many graphics are you working on? Because it just you’re very prolific and putting out different reports and you’re you know multiple different I mean, how many how many spreadsheets? Are you updating on it on as part of your business? Or is that even Can you even know that number?
Art Berman 53:50
I don’t know that number Robert but it’s it’s many it’s dozens. And before we went on air he lastly Will you know, what is leverage consulting Sir, it’s me. I mean, the only employee I don’t have I don’t have guys that you know that do this stuff for me. So
Robert Bryce 54:11
Art Berman 54:12
It is and it’s you know, it’s being as efficient as as I know how to work. That’s what I do. I like spreadsheets. I’m good at
Robert Bryce 54:20
it. You are good at them. I asked, apparently envious because it’s just very simple, very simple graphics. That’s the only kind I can do. Let me shift gears a little bit on your art here because I know that you got an undergraduate degree in Middle Eastern history. And that was interesting to me in a graduate degree in petroleum engineering. I went to Lebanon four years ago for the film that I produced juice how electricity explains the world and wrote about it in my in my book, and I’ve been watching Beirut and of course the economic disaster there is there is what are the big rivalries that are defining the Middle East, I’m assuming you’re still following that area. There. What? And is there an Ascendant player in the Middle East? If so, who is it?
Art Berman 55:05
Well, I guess the simple answer is, I mean, the Middle East is is, is always been a zone of conflict of everything. I mean, right, sort of the center of the is not really the middle of anything geographically, but it was the middle of the trade path from, from the Orient to the occident. And I think that’s, that’s where the term came up. But I mean, yeah, I mean, you’re Rob is the ascendant power, if you will, and has been for, for really a long time. I mean, beginning in, right after world war two countries, like, you know, I mean, the traditional power sources like, like, Saudi Arabia, the Saudi Arabia has always been propped up by the United States. And so I like to point out to people who are interested in me if you are, but that at the end of World War Two, I already mentioned the United States produce something like half the oil in the world, we were completely energy self sufficient. And President Roosevelt, Franklin Roosevelt formed a commission, because he wanted to understand how the hell we’d won World War Two, because he didn’t think we was at certain points in the effort. And the answer that he got from the commission was better access to petroleum than our energy and then our enemies. And of course, Japan has no petroleum. In fact, the way they got into Pearl Harbor was they took Indonesia because Indonesia had oil and rubber by the way that you need for jeeps military equipment, Germany, where did they attack first? They attack countries that kind of made no sense why because they had oil refineries. Yeah, Romania, they, you know, they, they worked on all this, you know, gas to liquids kinds of stuff, because they knew that they were at a disadvantage. So Roosevelt’s Chris Fisher tropes are the Fisher tropes. Exactly. Yeah, another hopper Bosch trying to write synthesis. And so Roosevelt on his way back from Yalta, where he and Stalin and Churchill divided up the world after the war, he stopped in the Red Sea and met with the King of Saudi Arabia and made a deal with it. He said, we will prop up your kingdom in exchange for oil security. Now, why in the world? Would the President of the dominant that the energy dominant country of the world do that? Because he could he won World War Two because of it? How about that, for that reason? Right, I want to keep that whatever that is. So that is the central piece, and always has been of Middle Eastern, certainly US foreign policy, and anyone who
Robert Bryce 58:11
thinks that who controls the flow of oil, right, and, and that that was rack one or rack two was fundamentally about that very that very issue of, in my view,
Art Berman 58:22
in my view, also, and anyone who thinks differently, simply doesn’t understand history very well.
Robert Bryce 58:30
And so your point about Iran rising? I mean, partly, that’s because of the the will the chaos in Iraq, the Saudis being? Well, I mean, they’re distracted on a whole lot of levels. But Iran is nominally pro American, and would in theory could be it. Well, I, you know, look that we both suffer from bad governments, but they’re clearly have a growing population and growing energy demand, and they want to be players, they still remember want to be connected to Europe via gas pipeline is or is keeping their oil off the market. The key to keeping Iran secondary power is because that’s been part of the policy as well, for a long time.
Art Berman 59:09
Well, that’s been part of the default policy, because, again, you know, politics, party politics is not an issue right now in this conversation. But what George W. Bush did when he invaded Iraq is he completely upset the balance of power in the Middle East. And he created this tremendous opportunity for Iran to expand its its sphere of influence into Iraq, now Iraq, for those listeners who don’t know, I mean, Iraq is the second largest producer of crude oil and OFAC after Saudi Arabia, and as far as reserves are remaining reserves and etc. We can argue about the details, but probably Iraq has as a has a longer future. In oil than Saudi Arabia does. And so Iran is also an absolute powerhouse of production, you combine Iran and Iraq. And you’ve got, you’ve got a focus of oil power, that is at least equal to Saudi Arabia, the United Arab Emirates and Kuwait. And so that’s, that’s the struggle. And of course, there, there’s the there’s the Shia, Sunni, you know, the sectarianism that also divides kind of nicely along those lines. And so we screwed it up. Again, no, not pointing any fingers. But we did. We messed up the balance of power, gave a huge opportunity to do Iran. And along comes brock obama. And he said, you know, the future, the Middle East is not in our traditional alignments, which is to say, Egypt and Israel and Saudi Arabia, the future is in Iran, Iraq, and etc. And I’m not going to argue right or wrong, but his position was not without some basis or some logic. And so he pivoted towards Iran. Of course, that annoyed us a nice word, our traditional allies, and Trump came in and he went the other direction on that, and who knows exactly where we’re going today. But for Lebanon, I mean, Lebanon gets, you know, it’s caught in the middle of this. It was basically a puppet of Syria for an awful long time. Right. Syria has been distracted in a terrible civil war for a long time. And Hezbollah again, Iran. I mean, it’s basically if I had to say Lebanon is is more under the influence of Iran than it is anyone else right
Robert Bryce 1:01:52
now. And well, that’s my that’s my read as well, just driving around Beirut and I don’t I don’t have a degree in Middle Eastern history. I’m no expert, but being in Beirut just for a week or so and seeing Hezbollah has power and the fact that entire Hezbollah neighborhoods in Beirut don’t pay their electric bills which you know, was the focus of right tells you who’s who runs the place. So just a few more questions aren’t because we’ve been talking for almost an hour now again, my guest is art Berman. He’s the director of Labyrinth consulting services. He’s at art Berman, calm you can get his free newsletter by signing up there. William Stanley Jevons was the first energy economist was was Jevons in for those of you listening? Don’t know. He wrote a book in 19 1865 called the coal question and the the gist of the Jevons paradox was efficiency doesn’t save energy at increases. It was Jevons, right.
Art Berman 1:02:43
He was. I’m not an economist. But
Robert Bryce 1:02:47
this is your field. I mean, you. You work in the connection between the physical and the economic. Right. That’s how I make your money.
Art Berman 1:02:55
Yeah, no, I think I think he was, you know, again, high level. Yeah, he was right. I mean, they’re, they’re certainly complications to, you know, every axiom. But yeah, it makes sense to me always has.
Robert Bryce 1:03:08
And so we may be using oil more efficiently, but we’re finding more ways to use it. And we’re using it in plastics and everything else. So but but let me let me move on to you haven’t just noticed you have been running for Forbes in since January, I think of this year, have you as you publish more on your own website. Now, I’m just curious about how you know where you find your own best platform in terms of your work?
Art Berman 1:03:33
Right? Well, so I’ve gone at least as an experiment more of a subscription basis. So as you pointed out, I mean, there, there are plenty of essays or posts or whatever you want to call them on my website that are free to everybody. But as an experiment, I’ve gone to devoting most of my energy to a couple of two weekly reports, one on oil and one on gas and a monthly which is just a newsletter, which is mostly about oil. And that’s, that’s consumed most of my time. Forbes’s is wonderful and great. And my probably will go back to publishing with them, once I figure out where this experiment is heading. But that’s the explanation, Robert.
Robert Bryce 1:04:23
Gotcha. Well, let me we haven’t talked at all about natural gas and the prices for net gas are just now over five bucks. And Chris are just quick, quick question. How much is that a reflection of the the decline in the in the production of associated gas in the US and how much of it is just this incredible demand surge that we’re seeing in Europe, in the United States around the world for gas?
Art Berman 1:04:44
Well, in a way, neither. Okay, what it’s really about it is about demand. And so what what’s gone on more than I mean, everything you said is true, by the way, I mean, I’m not. I’m not disagreeing with what you said. But What’s happened is the United States has gone from being a net gas importer. And in about 2016, we became a net gas exporter. And today, our gross exports are something like 17 or 18 BCF a day we use something like 70. So that’s a, that’s a massive proportion
Robert Bryce 1:05:25
of exports. I’m just so and that’s we’re exporting 17 to 18 BCF a day how much of that is LNG about 10 is that roughly half or more than that?
Art Berman 1:05:34
Um, right now I can, I’d say it’s a little bit more than half so that the export, so we haven’t. So if we talk in terms of net, the net, I’m guessing today is about 10, nine or 10 BCF a day. So we export gas by pipeline to Canada and Mexico, right. And we import gas from Canada, but not from Mexico. So Mexico is probably on average, maybe four BCF a day of x net exports and LNG is the rest so it’s a little bit more than half. Gotcha. Okay, so so what’s happened here is, is that the the net exports of gas have steadily increased from 2016, from zero to let’s just say 10 for round numbers, 10 BCF a day. And in 2020, last year, last last summer before Yeah, last summer, because of COVID. There was like no demand for LNG. So LNG exports from the United States went way down. And they’ve gone right back up, actually, they’ve increased. And so we got a break last year, we should have had this problem less last summer. But because actually, last summer was hotter than this summer. So far, in terms of weather and weather is, you know, I think a factor it’s not the only factor, but it’s a big factor. Sure. And so what’s happened is, is that we got a break on on exports last summer, which come back in spades. And the other thing that that’s hurt us, because of his hurt, the consumer got hurt, is the big freeze that we had in February, right, just wiped out the our surplus, like in a matter of two weeks. And so we went from very comfortable surplus to not an uncomfortable deficit, but a deficit nonetheless. And so again, back to our where we started this conversation about markets, and what they’re looking for, which is supply markets are right now saying holy, you know what, we’re going into winter, and and we got an increase in comparative inventory deficit, and comparative inventory has gone down 30 BCF in the last two weeks, and this is not a good. I mean, usually we’re adding we’re, we’re growing, and we’ve been declining for most of the summer for all the reasons I just stated. And so the market is saying, guys, you know, we’ve been raising the price, get busy and drill. Back to your question about associated gas. You know, that was the theory, the theory was that, okay, the you know, title, oil production is way down, therefore, all that associated gas is going to go way down, and why I bought into that completely. But that didn’t really happen so much. I mean, oil production went down, gas production went down, but they both came back or at least leveled out. And so today, natural gas production, dry gas production in the United States is at levels that are higher than just about anything we had before about mid 2019, which was the peak of natural gas production. So in the historical context, it’s not like we’re, you know, we’re producing a pittance, we’re only producing less compared to the peak. And so you get a get right down to it. And the simple answer is, is that title oil producers have figured out how to use rigs more efficiently since about 2019 in a very impressive way. That if you look at the number of completions, forget about rig count, that before, before COVID came along, completions were dropping at a fairly impressive rate and production was increasing. So we were using rigs better, we were doing completions better. And then after COVID, we don’t seem to be doing the completions as well, because we don’t have any money. But we are doing the rig management better. And so rather than dropping production down to what I thought it would be eight or 9 million, we’re holding steady at 11 or, you know, 11 and a little and that’s that’s, you know, a big kudos to the oil out to the oil and gas business, figuring out ways of doing things more
Robert Bryce 1:10:04
efficient. And it’s remarkable isn’t as you say that because it just jogs my memory that that’s roughly at 11 million a day, we’re roughly 100 to twice the level of production in the US in what 2005 2006 timeframe. I mean, it’s just, it’s unprecedented in world history, as far as I know, that see this kind of increase in oil and gas production in one country over such a short time. It’s just, it’s a remarkable it’s just a remarkable part of how the oil and
Art Berman 1:10:32
natural gas was the same I mean, resurgent production that, you know, that began in early 2017. And went on. I mean, it was, it was just jaw dropping Really?
Robert Bryce 1:10:46
Well, so let me just ask you a few more things are because as I said, I like to keep these around an hour. Are you bullish on America?
Art Berman 1:10:56
I’m bullish on America, compared to our peers. I’m not bullish on America now. I think we have. We are we are drowning in debt. And there’s just no way for me to be bullish on on a company or a country that has the level of debt that we do right now. But compared to everybody else, you know, we’re kind of all in the
Robert Bryce 1:11:22
best house in the bad neighborhood. Exactly. Well, so well, then you just, you begged me to ask this question, then we’ll So you said you wouldn’t invest in the company. So where does it where’s the guy like you, given your long experience? Where do you put your money? With most investable?
Art Berman 1:11:41
I’m a yield. I’m a yield seeker just like everybody else when it comes right down to it. And, you know, I wherever I can get it as where I go. And right now energy just isn’t it? I mean, you look at the not just oil and gas, but you just look at all the the the the energy index from the s&p 500. And compare it to the total s&p index for the ESG index. And I’m going to we’re going in the opposite direction. And so is that right, I mean, should it be that way? Well, that’s a whole nother conversation. And obviously, I think, no, I mean, you know, I’m the guy that said, oil is the economy. And if energy is is 2% of s&p 500 market cap, there’s a huge disconnect going on there. And that’s part of the reason that I I hesitated strongly when you ask that very good question. Am I bullish on America? That if America is as energy blind, as I see it to be, then for as much as I love the place and wouldn’t live anywhere else, and will defend it to the death? No, I can’t honestly be bullish about it. Robert. We can’t be blind to what is so fundamental he didn’t he didn’t ask me to follow up on on that comment I made that no species has ever gone from a higher to a lower energy density source. I mean, go go try to convince a lion that it came a vegan Yeah, exactly. You know, I mean, I I’ve been out on the savanna and you know, I am sit around and do nothing for a lot they sleep a lot. Right? As they got they got the dense back they they kill the Impala they you know, they kill the whatever’s out there. And and if they had to spend 23 hours a day eating leaves like an elephant, forget it. Not gonna happen right? And same is true with us, we we are held them for better or worse on going to a much lower energy density or power density source of our economy. And how in the world can you be bullish on that economy, knowing that it is directly proportional to the energy productivity of its source? And whether we need to do that for the climate is another conversation altogether. But I have a I’m convinced that the people that are the most enthusiastic about the growth and about extinction, rebellion and all this kind of stuff, that if if they understood that what they want, will lead to negative economic growth for them. Forget about gdb I don’t think they would. They don’t know what they’re signing up. They believe the propaganda of decoupling back to skills comment They think that, you know, somehow we’re going to make this change. And everything’s gonna be just like it is right now. And it won’t, it can’t be. It’s just the physics of it. It’s not my opinion. And and that’s something that people, you know if this is something we want to do, because we feel it’s necessary for the climate and the environment. And that’s great, let’s understand what we’re what we’re, let’s understand what’s on the table and say it out loud. And be honest about it. And economic growth is not part of that equation. As far as I can gather, and I want to believe, you know, I’m like, Fox Mulder on the X file, and I want to believe, but I don’t you know, I don’t I don’t see that they’re not there. Now, that’s for sure.
Robert Bryce 1:15:48
What are you reading? I know, we’ve mentioned about swab smell what’s on what do you what are you reading on your nightstand or on your desk? What books review at hand?
Art Berman 1:15:56
I’m reading Moby Dick. I read it in a library. And it’s one of those books that it must have been a different person who read it because I remember the story and absolutely nothing else. I’m reading the snow leopard by Peter Matheson, which is about a trek through the Himalayas by a botanist and his friend and Peter Peter Hudson and George Schaller. Exactly, and I think I read that when I was probably 35. And same comment, I, I liked it then I like Moby Dick. When I was in eighth grade, too. I was great. But it was a different person, a different personal.
Robert Bryce 1:16:39
So I met Peter Matheson, this is apropos of nothing and it’s anyway, long time ago, I met him at the king King Ranch on a bird watching expedition and he was there. And so before I left, a friend of mine told me Well, I have a joke for you to tell Peter Madsen and I said, Okay, well, what is it? So anyway, I meet Peter Madsen, and with my wife, I said, Well, I have this riddle. I need to lay on aces. Okay, go ahead. I said, so what is the what did the Zen Buddhists say to the hot dog vendor? Make me one with everything. So anyway, yeah. Is it a book about Zen and not the hidden finding the snow leopard when you quit looking for the snow leopard? So anyway, alright, that’s a big aside, which I don’t think I’ve ever told that riddle on the podcast, but now. Okay, last question. Art Berman, what gives you hope
Art Berman 1:17:28
isn’t any help is, is that despite the, the sort of the arcane and very technical aspect of of what I talk about, that there are a lot of people that that want to know, that want to know, I mean, I, you know, I’m never going to be a public figure. I’m never going to be famous for what I do, and don’t care if I am. But the fact that I have 10s of 1000s of followers on Twitter, and that there are people that say you we want to understand, you know, what you’re talking about, that gives me hope that they’re young people who, you know, they’re they’re desperately concerned about climate change. And they get this idea that what you’re telling us that there’s, you know, that I don’t know what I’m signing up for, tell me what I’m signing up for. That that’s very encouraging to me that there are people who subscribe to the I don’t think it’s uniquely American, but I look back at guys like Abraham Lincoln. And I mean, I stayed up until the candle without reading whatever the hell he could find, even if was just the Bible, because that’s what you did to guys like that. Did you learn as much as you could? And the fact that, you know, that maybe there’s 95% of people that, you know, are in their Xbox or their their iPhone, and there’s a few percent that say, Hey, we, you know, we want to know more about what you know, that that that encourages me and gives me hope. Because they’re the ones that are going to inherit whatever it is, we’re given. So good for them that there’s some that and not to say should necessarily come to me. You know, I don’t have all the answers. I’m not even sure I’m right about some of the answers. But I assume if they’re coming to me, they’re coming to you they’re coming to the vaslav Smeal they’re they’re coming to other people that collectively can give them some kind of a of a balanced view of of what the world really runs on and it runs on energy.
Robert Bryce 1:19:34
Let’s stop there art Berman, thanks a million for coming on the power hungry podcast. And thanks to all of you in in podcast land you can find art at art Berman calm and this has been great art great to catch up with you. Thanks to all of you in podcast land tune in for the next episode of the power hungry podcast. Until then, see you.