John Hanekamp’s career has been spent in the commodities business, including nearly 20 years in the grain sector and the last two decades in the coal industry. In this episode, Hanekamp explains why global coal prices have soared in recent months, the macro outlook for energy commodities, why high energy prices will lead to an economic slowdown, and the “unintended consequences” that are being felt due to underinvestment in hydrocarbon production around the world.
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 today, I’m pleased to welcome my guest John Hannah camp who I’ve recently become acquainted with John is a coal industry consultant. John, welcome to the power hungry podcast.
John Henekamp 0:21
Hey, hey, Robert, how are you?
Robert Bryce 0:23
Excellent, thanks. So I did warn you, John, we’re newly acquainted, but that all the guests on the podcast introduce themselves. So if you don’t mind, imagine you’ve arrived somewhere a party or an event and you don’t know anyone and you have about a minute to introduce yourself. Please. Who are you?
John Henekamp 0:41
John Hannah cat by grew up in Western Kentucky. Spent a lot of time on my grandfather’s farm. went to undergraduate school at the University of Kentucky and majored in ag economics. Economics being the preferred part of it degree spent about 20 years in the grain business during which time I bought sold, transported, managed assets met a squillion people learn the the business from a fixed price, or flat price as we used to say as a grain merchandiser. The futures markets, trading barge freight, ocean freight, rail transportation rail markets during that time, I went back to graduate school at the University of Chicago. And during that time, I really got interested in macro and micro economics at that school, had some really good professors with that, got an MBA there and spend another few years in a great business before the company I was working for got bought out by a larger company when the green business was something you really couldn’t transfer from one company to the other. In those days, you found yourself out on an island you had to go do something else. And it’s a long story and I won’t go through it but I wound up in the coal industry because there was an opportunity in St. Louis where my wife was from and was closer to grandparents with our five year old son at the time and it was a good fit. And at that time
Robert Bryce 2:33
the coal industry and that was that was Peabody he went to work for Peabody that
John Henekamp 2:37
was Peabody and the coal industry in general at that time sold everything pretty much FOB mind they had not moved down the value chain but Peabody
Robert Bryce 2:49
and so to interrupt so be mine means that the price is at the mind and the buyer pays all the shipping from the mind while the costs okay free Freon Freon just FOB is free on board
John Henekamp 3:00
at close loads in the in the medium of carriage, whether it be truck or rail or vessel, could be the case or barge. And Peabody was was an early adopter and trying to develop value added opportunities to sell coal further down the value chain and try and make money adding value to the product in order to try and diversify their revenue streams. And from that time, I started developing ideas and transportation terminals. We eventually got involved in some some mines in Venezuela in Australia. And I took over the sales and marketing and transportation for Venezuela. And eventually, we opened a trading office in London, which I started and headed up and spent three years in the UK and then came back to the United States and developed a I guess you could say a a grand strategy for exports out of the US because Peabody was in every major basin. And that seemed the direction we needed to continue to head and then they kind of lost their way and and I decided to move on. I also spent some time with a startup mine in the Illinois basin, which Yeah,
Robert Bryce 4:35
and this and this is before Peabody went declared bankruptcy, right, which was four, four years ago. Now when did they when did they declare as
John Henekamp 4:45
it was 2016 2015 16. So about about five a body and a number of coal producers declared bankruptcy, right, but after Peabody I went to a startup in the omoi basin did that for about a year. And then I went to Alpha Natural Resources in a senior level position to head up their export program. And during the time that I spent in the international markets, I bought and sold coal moved cold in and out of 62 countries around the world. And
Robert Bryce 5:24
so if you’ve been to 62 countries, it’s actually more than that.
John Henekamp 5:28
But I just 60 times a good number to stick to before somebody trying tags me on each and every one of them, I have to get out my passport, but
Robert Bryce 5:39
I got you. So you’ve, you’ve been to roughly a third of the countries there’s what 200 countries in the world, something like that you’ve been, you’ve been to a whole bunch of them. So but now you’re you’re on your own as an independent consultant looking at the international business, right? So if you don’t mind, just fast forward. And so this is the part that I you know, why I’m so pleased to have you on the podcast was what is going on in the international coal markets? Why are prices so high? I mean, you know, just a few years ago, we were hearing that, oh, coal is dead. There’s no room for coal in the international market, right, we’re gonna go and use renewables natural gas. And yet coal prices have wet tripled, but bring us bring us a quick up to date on what’s happening in international coal and why prices are so high now?
John Henekamp 6:23
Well, let’s take just a little bit of history and go back to the first cycle that took place in the early part of 2000. Prices had been dead. I mean, if the market moved up or down $2 In a year, on any product, it would have been caused for a run down the hall to tell the boss right. But in 2000, things started to pick up quite a bit, both on the domestic side and the international side. I’m not quite sure why. But I think it had a lot to do with the economy. And we can throw Bill Clinton under the bus as much as we want. But when he worked with both sides of the aisle, we actually had a fairly strong economy. And in that help, in the middle part of the first decade, the US GDP began what many believe was the first leg of the supercycle and commodities. And from Oh, seven to 2010. We had an explosive move up in in in prices on both thermal coal and met coal that saw the international markets reach $150 a tonne.
Robert Bryce 7:40
And we had to get in if I can interrupt because I imagine many of our listeners don’t know the different types of coal but thermal coal is correct me if I’m wrong is what you’re going to be using in a coal fired power plant to produce electricity is metallurgical, coal or met coal is what’s going to be used by steel producers. That’s right. And you have different grades of met coal and you have different grades of thermal coal from would be anyway from lignite as a low rank coal up to higher grade low sulfur coal from the Powder River Basin or other basins that are the commands a higher price. So just like oil, they’re different grades of coal.
John Henekamp 8:13
There’s a lot of chemistry and coal that people don’t know about. It’s not just black, black rocks that you throw in a firm’s right. And it all has to do with the content of the carbon and the density of the carbon. Okay, so, power plants use a less dense carbon versus metallurgical coal that uses a very dense carbon. And then there’s all kinds of that, but if, if we go back to 2007 3010, we had a global GDP that exceeded 3%. And that’s a magic level, you get above 3%, the demand for energy on a world scale 3% Doesn’t sound like a lot. But 3.3% is enough to move the needle a lot. And that’s exactly what happened. But towards the end of nine and 10, of course, we had a financial crisis. And that caught up with everybody slow the entire world down. But It crawled back between 11 and 14. And the markets erupted again, before it collapsed. I’m not sure I can remember why the coal markets collapsed other than a slowdown in the economy, but I’m not sure why. And then we go
Robert Bryce 9:42
So is it fair to say then that coal demand is just a proxy for broader economic growth in is that its energy? Right. So and that’s our Berman’s line. His energy is the economy but what that meant he’s much much more of an oil analyst. I’ve had him on the podcast but that’s his oil is the economy. He said that but is cold now the economy I mean? Yes. Any, any hydrocarbon?
John Henekamp 10:07
Yeah, and and and we’re going to get to where you’re trying to get to and just got to set the stage. Okay, fair enough. All right. During a period from 11 to 14, we had this over investment on the part of the coal companies that had a, a bucket load of loot from the previous rally, and they were getting a lot of pressure from Wall Street to expand and grow and take advantage of the supercycle the Chinese were buying everything they could get their hands on, and their market on everything was expanding dramatically. And then it was a slow down, and I suspect it had a lot to do with China. And all of a sudden, the coal companies and their balance sheets imploded because the revenue stream dried up. And they all ran for cover under the guise of bankruptcy and, and everything kind of sorted out. And then that process of the bankruptcies from let’s say, 15 through 17. You had the good coal assets and a bad coal assets and a good coal assets got restructured and, and rebirth, kept the names Peabody Arge consult well consulted go bankrupt, but alpha Alliance didn’t go bankrupt. But Marie eventually did. And, and, and, and so the good assets restructure, they get back in the game, very limited capital, very tight controls by the hedge funds or the private money that controlled everything. And the one thing that they controlled was no capital, no capital for maintenance, no capital for expansion. They wanted to harvest what was left of the good coal assets. The bad coal assets got traded around and exhausted to the point where even they had good coal, bad coal abandoned assets.
Robert Bryce 12:14
And so if I can interrupt it with good assets, meaning low cost of production, high quality coal, then is that is that fair? So and was this? I mean, where did it was at the Illinois basin, which is part in Apalachicola, where there’s higher sulfur content? I mean, which areas in the US I want to talk about international in a minute, but this realignment, the restructuring, as you’re saying from to 2015 2017 was the Powder River Basin and in Wyoming that got hit hardest or which areas in the US got hit the hardest, then
John Henekamp 12:43
they all got hammered. Okay. The only basin in the northern Appalachian region survived the best. Also during that period was a tsunami of coal generation that collapse. Under the pressure of the EPA, the Sierra Club, they basically got bullied out of business, either you guys shut some of these old assets down, or we’re going to spend your balance sheet in the courts. Okay.
Robert Bryce 13:13
And some of that was driven to buy low cost natural gas, right, shale gas underpricing coal in the market was
John Henekamp 13:18
and and natural gas was dirt ball cheap. Yeah, that coal could not compete with so we, we had this entire umbrella of activity that kind of collapsed in on itself and what came out of that, or the best of the best, okay, was all smaller. Okay. But it was the best of the best. And, you know, one of the dividends, if you believe in reducing co2 Was that gas generation grew substantially and reduce the carbon footprint out of the United States and everybody got to beat their chest and said we did the right thing. The market in the scenario of reducing carbon did the right thing, but it would have done it anyway. Because it was the cheapest fuel
Robert Bryce 14:11
gas gas underpricing coal in the market. It’s combined with a regulatory and political uncertainty, political pressure and political risk around coal ash rules around coal, leach ponds, etc. So that’s something that sets so that sets the table for then then one more hit. Okay. Sure.
John Henekamp 14:31
One more piece. The other thing that that that undermined the foundation was all the tax credits for solar and wind. And that has become that’s become the foundation of what we’re looking at now where the people that are chasing solar and when they’re using the opportunity to say you know, we’re We’re, we’re assisting in the process of becoming zero carbon, now’s the buzzword but reducing co2 footprint. But in reality, they’re chasing the tax credits on investment and sequestration. Right. And the leaders of the pack are the billionaires and the banks. And and the guys that make money, okay. Because it affords them the opportunity to substantially reduce their taxes. Right? If it wasn’t for the tax credits, a lot of this would have been a lot slower. Now, let’s add,
Robert Bryce 15:38
what is that. And when you’re saying a lot of this would have been a lot slower, you’re saying that the retirement of coal would have been a lot slower, except Except for the tax credits, then effectively forcing more solar and wind into the, onto the electric grid in the US? Is that and
John Henekamp 15:55
that the wind and the solar pricing? I mean, they didn’t have to make money. Right, right. So they always dispatch at whatever the market would bear in a weak economy. If the market would only bear $10 A megawatt hour? Well, solar would and when would take that, and then everybody else had to compete against it. So you had
Robert Bryce 16:19
back then, and the coal plants couldn’t couldn’t match that because their generation was 2025 $30 a megawatt hour, right.
John Henekamp 16:27
As the power auction takes place, everybody bids their power, right? At at the least margin to compete against a wind and solar. Okay. And around that great big universe is the stability of the grid that has to be managed in. Right. I have no idea how that works in reality.
Robert Bryce 16:50
Very, very, very few people do, John, this is this is the hard reality, or is it the ERCOT? The ERCOT manual on their rules is something like 1800 pages. I mean, it’s insanely complicated. So but it’s
John Henekamp 17:04
effectively it’s a it’s an auction process, where you bid your electricity at a price. If you get accepted, you run if you don’t you don’t run, right. And if you’re lucky, you’re on the reserve pool.
Robert Bryce 17:17
Right? So So you set the table in terms of kind of that last two decades of history in the coal markets and the coal sector, right, a boom bust cycle, which is familiar to a lot of in commodity businesses. But then COVID comes along and kills demand and slows production. And then am I right to say, then we come out of COVID. And suddenly, China’s electricity demand, I think, in the first half of the year was 12%. growth year on year, I mean, just staggering growth. So is, well you
John Henekamp 17:46
get that you get that plus, let’s let’s not forget along the way from about 17 until the present day, ESG becomes the buzzword and in the corporate C suite,
Robert Bryce 18:01
in social governance, which we’ve talked about before Dharwad was all of a sudden, and that’s conserving to constrain hydrocarbon financing,
John Henekamp 18:11
and participation. Right? People want to get out of the thermal assets. So they either let them expire, or they sell them to somebody else. The banks won’t loan that carbon assets, whether it’s oil and gas, or coal, they don’t want to loan him any money. Okay. And all of a sudden, we had no capital, we had no margin. For maintenance capital, we have no margin for expansion capital. So everything kind of contracts to, you know, what do we got to do to just get by? Right? COVID comes along, and it steals a really, really important asset, labor, right. And all of a sudden, we start coming out of this, people get sick of it, we start cranking back up, and the labor that’s necessary for close quarters work, let’s say PRB, Powder River Basin where everybody’s driving around in trucks, and they’re individuals. That’s one thing, but underground mines where people are all working with each other and there’s closer quarters, you know, all of a sudden, that became and everybody’s scared to death and dying from it. Right. Okay, that we start burning inventory. Because we’re not getting the coal that we need. And as the economy improves, then there’s a demand on everything. And the first thing that picks up is not so much the domestic economy as much as the international economy, and it starts sucking the coal out of the us big time. Right.
Robert Bryce 19:55
So So that’s interesting. I didn’t know that. So US exports spiked early on when We’ve heard
John Henekamp 20:01
that make up. Okay, I know that this spot availability of coal isn’t the drive up window is closed. That’s what we started saying. You couldn’t just pick up the phone and call your local producer and say, Hey, I need to train. Okay. And
Robert Bryce 20:16
so this has to happen in early 21. Early this year, then or when when do you get started
John Henekamp 20:21
happening in the second quarter of this year? Okay,
Robert Bryce 20:25
so q2 of 2021. You see this revamp where the world starts to unlock? And as I’ve written many times, no inventory, there’s no electricity demand is booming, right? Because electricity are always everywhere is a is a direct proxy for the economy. Right. Exactly. So is it so is it then the electricity demand driving coal demand? That that was a key was it was dry? Okay. So but it was it? Was it more thermal coal being the prized commodity, or being the one that was in more demand than met coal? Because both prices both both? Both of them spiked at the same time? No.
John Henekamp 21:05
thermal coal started in April, that coal started to move in May. Okay. Okay. By the time we got to August, everybody realized, well, we got the low hanging fruit. Okay. And we only had to move up a couple dollars at a time. The time we got to August, there wasn’t any more low hanging fruit you had to you had to get a ladder. Right.
Robert Bryce 21:33
So when you’re saying writing or low hanging fruit was inventory, that was stockpiles of coal that existed either at power plants or elsewhere, it was
John Henekamp 21:41
just you’re starting to absorb the cape capacity.
Robert Bryce 21:45
The overall global production of the of the of all the mines on the on the planet, right that they were starting to go back to work and all of that slack or inventory was taken up and then and then you start it losing, then we
John Henekamp 21:58
get a pause, then we get a pause in August, because in August, I learned this after living in Europe for three years. Everybody goes on vacation, they got a problem. It’s this winter, but I’m going on vacation when they go on vacation in Europe for August, they leave and they you don’t hear from Okay, when we go on vacation, we take our phone, we take our iPad, we keep up with emails, right? You know, but when the Europeans go on vacation, it’s See ya, okay, then they come back. Then they do their budgets, okay for q4 and q1 to get through the winter. And that’s when they realize we got a problem. And I call Houston. Right? And then the market starts moving by. Helicopters. Alright, we jumped off the ladder. Now we’re in a helicopter. It’s like it’s moving up 10 $15 a day, because it can’t find the coal.
Robert Bryce 23:00
So you have more people bidding for shipments that can’t find it. So the price per ton then starts accelerating. And and,
John Henekamp 23:07
and now. Yeah, let’s now when commodities in general around the world are moving, right. And we all know when traders see a trend. They all jump on, like ants on an anthill. Right, right. They’re all over. And that exaggerated even further. Until October 5 and October 5, we hit the highs. And, and as October passed, we saw a significant correction, which I talked about last week that really corrected these markets, all the coal that’s available to get through the end of the year has been more or less transacted and Urena square to spare.
Robert Bryce 23:52
So okay, so just to be clear, though, so you’re saying October 5, then was that the spot price for Newcastle Cole? The the Australian marker,
John Henekamp 24:00
it was Newcastle? It was South Africa, it was Europe.
Robert Bryce 24:04
Okay. But on that, but on the global market, Newcastle is kind of the proxy for Brent or for WTI. Right. And then on October 5, had got to what 200 went to remind me of that. You said it
John Henekamp 24:15
Castle, actually the the real market is API to because it has the greatest liquidity and that’s that’s in Europe.
Robert Bryce 24:23
Okay. Is that ever to Rotterdam? Or where’s that? Is that?
John Henekamp 24:27
Yeah, it’s delivered in Antwerp, Rotterdam, and Amsterdam.
Robert Bryce 24:32
Okay. And it’s API. I haven’t heard that market API to API API to Okay, great.
John Henekamp 24:38
Yeah. At the same time. We almost have to backtrack a little bit. We saw a clue of what was going to happen in a gas market last winter in January when that that strong spike hit Northeast Asia, and LNG prices went to $36. A million right Okay, for LNG per million BT years, right, yeah, yes. And, and at the same time coal started moving, gas started moving and carbon prices started moving. And oil was kind of the late was late to the party. But all this really ballooned in September and early October and oil is still kind of finding its way up because we got to the point where you can’t buy any more coal, you can’t buy any more gas, the only thing you can burn now is, is oil. Right?
Robert Bryce 25:36
And on. And on a bt u basis. In many cases, it’s cheaper than cheaper than natural gas, which is a really remarkable thing. So you’ve seen and this correlate well, a correlation or a very unified increase in price for what API to for Newcastle for WTI. Brent? And then for the jKm marker for LNG and for delivery into the Asian market. Because is it is it fair to say then, that the buyers were looking for any kind of hydrocarbons, anything that burned? What what what,
John Henekamp 26:06
like they could generate power with, right and the Chinese room this whole mix to Okay. So, on top of that, you got ocean freight? That everybody and their brothers trying to move? You know, paperclips and phones and shoes and everything under the cars. Yeah, right. It got so bad with these containers that people started buying our chartering bulk carriers, okay, that are used to haul bulk commodities. They’re putting containers in those and moving them around the world. And
Robert Bryce 26:43
I hadn’t heard that. So they’re putting putting shipping containers on coal ships and on but but
John Henekamp 26:49
the common seed here, the common seed here is ESG. Because it starved capital from from fossil fuels all over the world. Okay. It was the catalyst that no while nobody was paying attention, everything’s kind of shrinking in terms of capital investment, or maintenance capital that you need to make sure the mind the oil, well, the gas world or whatever gets what it’s supposed to. And, and maybe the the tipping point was when the Biden administration choked off the pipeline. And Keystone XL. Yeah. And everybody, and they’re working on another one in Michigan right now. And everybody realized, yeah, these guys are attacking fossil fuels, from the administration. And all we’ve heard these guys do is go out beg somebody else to produce more. Right. And not only did the Saudi say we’re not going to produce any more than the incremental 400,000 barrels a day. But yesterday, they put a premium, a bigger premium on oil over and above what you see in the Brent and the WTI. Marker. So now there’s a premium on top of the index
Robert Bryce 28:09
for the Saudi oil, what is the Arab sweet or Aeroblade? Whatever their, their, their, their whatever,
John Henekamp 28:15
they got they they’re charging a premium? Well, you know, the Russians are going to be right behind that. Right. And the US will be right behind it, too. Because high prices love high prices.
Robert Bryce 28:26
Right? Well, so Well, let me ask about that. So let me just review then. So John, and I think it’s great the way you set the table and said well, so there are a whole bunch of factors that have come together, right to I’m not gonna use, I’m gonna say the words perfect storm, but that all these factors come together to then lead to this spike in prices, but it’s multi factor, right that the restructuring of the coal market prior to COVID, then you have COVID and labor shortages and minds not producing agitation. Transportation, okay. Right. Good. That’s good. So that and I haven’t even talked about rail. Okay. So but transportation in general, the ocean freight and so on. So, the restructuring of the market prior to COVID, then you have COVID and labor shortfalls, then you have ESG, constraining capital and you have is transportation, transportation bottlenecks and the economic recovery. So all of those together is that is that contributed?
John Henekamp 29:26
Let’s put one thing in really good perspective. Remember when we talked about 3.3% global GDP from Oh, seven through 10? Right. Our global GDP started this year at 6.4%. Wow, six, okay. 6.4% and on October the 12th I was positive the IMF was gonna say Well, boys, we just can’t keep up. We’re just gonna have to knock this down. Well, they knocked it down just a little bit. I They didn’t want to rain on the parading glass and
Robert Bryce 30:02
what do you mean by economic? They’re going to slow this down. But what was the IMF? What was their? What were they going to be able to do?
John Henekamp 30:09
They weren’t going to be able to do anything, they were just going to be able to project that there just isn’t enough energy to sustain 6% global growth. So we’re going to have to ratchet ratchet this down, the availability of energy to sustain this level of growth just isn’t available. So we’re gonna have to adjust our forecast.
Robert Bryce 30:31
Oh, I see. So you So you were saying the IMF was I was thinking about making an announcement that there were energy shortfalls or that they were right,
John Henekamp 30:38
they come out every quarter. Right. And, and they didn’t change it. But the big banks like JP Morgan, Credit Suisse, Goldman Sachs, they cut us four quarter GDP GDP down about two and a half percent from over five. But they have been touching,
Robert Bryce 31:00
because they were looking at the the the spike in energy prices and saying this is going to slow the economy. The banks did, right. Okay. I gotcha.
John Henekamp 31:10
The IMF should have, but they didn’t. And I was really surprised by that. I kind of think they did. Because they didn’t want to rain on the glass scope, right?
Robert Bryce 31:21
Because they didn’t want to step out of line ahead of the this big climate conference and say that hydrocarbons matter.
John Henekamp 31:27
I mean, is that is that too blunt that you guys went too far. Now, this thing’s out of control. And, and if you if you paid attention over the last week, all of a sudden, I’ve noticed this. We’re getting, we’re getting people coming up and saying that I think we better slow this, this major transition to renewables, these targets to 2030 and 2035. We got to slow this down. We may freeze to death this winter, because we move too fast.
Robert Bryce 32:01
Well, it’s interesting you say that, because that was one of the things I saw the quote from Larry Fink, in fact, from Blackrock saying, Oh, well, you know, these high prices and cause social unrest, and I thought, Well, wait, darn and hold just a darn minute here, weren’t you the one saying that ESG and everything’s gonna have to be slowed down? And what? No hydrocarbons, no fossil fuels? And yeah, he was, he was beating the drum the loudest. Right. And so and that was the post. So am I too cynical? Or here? Am I just observing this correctly, that where Europe is now I don’t hear any of these these countries are the utility saying we want more solar panels and wind turbines? I’m to hear him saying we want more natural gas and coal. And I mean, there seems like there has been a guess the question is this is this if we crossed some kind of line here now that we’re there’s suddenly a big dose of energy realism happening? Or what do how do you see it, John?
John Henekamp 32:49
Well, let’s think about the macro economics. Okay. The micro economics, I’ll give you a good example. My utility bill, my you look this up on your power bill, I’m sure you’ll see the same thing. My electricity cost me four cents a kilowatt hour. Right. Okay. Now, there’s a whole lot of surcharges on top of that, right. But the electricity portion of its four cents kilowatt generation part of it, yeah, my cost and other 10 cents and taxes and distribution and all that other stuff. Maybe it gets up to 14 cents. But in Germany, it’s it’s 36 cents Euro,
Robert Bryce 33:27
John Henekamp 33:28
cents, a kilowatt hour, right. That’s three, four times what we pay. Okay? These guys are having to decide between food and heat. Right? That’s, that’s big. Yeah. Okay.
Robert Bryce 33:46
So you may think there being this may be an inflection point, then this, this run up in price, Oh,
John Henekamp 33:50
there’s one of two things, it’s got to happen. We’re either at an inflection point, or we’re going to see her rendus demand destruction because cost of energy is too high. We’ve already seen that because of natural gas prices, that fertilizer. Nitrogen fertilizer plants in the UK have shut down. I can’t afford to gas.
Robert Bryce 34:14
Well, it’s interesting you say that, because I heard the same thing in Australia that they’re fertilizer plants going to be that are going to be closing there. So that the knock on effects of this spike in hydrocarbon prices, but particularly natural gas could lead them to much higher food prices or even shortages that this
John Henekamp 34:32
now now see. You’re starting to think at 50,000 feet, okay? That the climate evangelists only think at 5000 feet because they’re on a mission and unintended consequences are not part of the narrative. Okay, so what we’re seeing are the fit at 50,000 feet the unintended consequences of ESG. Okay, parents And when you slow global economy down to darn near zero, and then you crank back up, and the margins expand game on, but where’s the energy?
Robert Bryce 35:14
And when you say the margins, expand the margin, it lost me there, the margins expand. So again, let’s
John Henekamp 35:20
think about economics. Everybody comes out and the first thing they want to do, because they haven’t been spending money for last three, six months, right, is they want to accumulate right? Other than toilet paper. They begin to accumulate, okay.
Robert Bryce 35:38
They, they did some shopping, I was at the department store, they said business is really good. I was there. Yeah. There’s and yeah, that’s been
John Henekamp 35:44
margins expand. And as margins expand, you chase more and more production of all kinds of goods and services and commodities. Okay.
Robert Bryce 35:56
And you’re talking about, you’re talking about profit margins, right, right there. Okay, Mark. Okay.
John Henekamp 36:02
So, but along the way, we discovered that, because of ESG, there’s been no investment in energy, transportation. For example, that railroad industry in the United States said, Well, if we’re going to kill this cow, before we kill it, let’s milk it till it falls over. We’re not putting any more capital in. Okay. So there’s a limit because of transportation to what you can move both domestically and internationally. In the ocean freight arena, on top of this 6% global growth rate that’s just not sustainable. In 2020, everybody had to go to diesel fuel. Okay, well, that’s pretty darn expensive.
Robert Bryce 36:52
And you’re saying you’re saying the ocean going freighters had to had to change their low sulfur diesel? Is that what you’re talking about?
John Henekamp 36:58
Right? So they’re competing for a lot of the same fuel that the rest of the world is competing for? Okay, instead of burning the bottom of the of the distillate at the refineries, you know, what’s, you know, after bunkers, which is the heavy oil, right? Is is asphalt to make, you know, to make roads with, right, well, these ocean going vessels could burn that. But after 2020, the IMF said, can’t burn at any more, you got to burn number two diesel, right, not number three or higher. But number two, same thing that you burn in trucks and automobiles and, and, and generate rain engines, right, everybody? Okay, right? So, and in 2025, they’re saying all these ocean going vessels, you guys can’t emit all that carbon dioxide anymore. And we don’t know what we’re going to regulate you to. But we’ll let you know when we figure it out. So in the meantime, nobody wants to build any more boats.
Robert Bryce 38:02
Because they don’t know how to what their power plants are going to be.
John Henekamp 38:06
Yeah, because once you build it, it’s not like you can go in there and take that engine now. Put a different one in. Right, modifications are really expensive. So this ESG has attacked everything.
Robert Bryce 38:19
So if you were gonna, so if I were going to ask you, John, we just, you know, say assume we just met. Okay, well, what’s what’s what’s driving up coal prices? What I mean, and you could say one thing is there, we listed a lot of things that COVID the economic recovery. ESG is it’s it’s any last. Okay, you’re talking about the demand for coal being inelastic, this supply is any lasting, and the supply determines the price
John Henekamp 38:43
supply of coal is any elastic. The supply of gas is any last the supply of oil is somewhat any lasting.
Robert Bryce 38:51
Because we can’t grow. We can’t quickly grow that supply can’t expand
John Henekamp 38:55
that supply because we don’t have the capital to expand. I see where
Robert Bryce 39:00
you’re okay. I gotcha. Okay, and are going on art Berman, on the podcast said that supply that determines the price. I mean, it was implied
John Henekamp 39:09
and it kind of goes both ways. Okay. Fair enough, is in this scenario. ESG has starred energy supply of capital needed to maintain much less expand production. Okay. Hmm. And you combine that with the fact that you had this labor restraint, right as a COVID. And you had this explosive growth that took place in place in the back end of 2020 20. And army
Robert Bryce 39:48
after the lock downs or window after the lucky one. Yeah, right. Yeah.
John Henekamp 39:52
And, and they’re still talking about 4.4% Will GDP and 22 Right, well, we can’t wait do that,
Robert Bryce 40:01
because the supply of energy won’t be able to keep paying off. So, so the price is going to go up and then we’re going to have an economic slowdown, because that’s what always happens. Right? Is
John Henekamp 40:10
that is that will will land at a higher low? Well, let’s
Robert Bryce 40:14
come back to higher low in just a minute. Because when we talked on the phone the other day, you talked about setting this, this change now that we’re going to end this I’ve heard the same thing from people in the oil business, right? That they’re not, they’re having to live within their own cash flow. They can’t borrow the money that they used to get. But let me ask you about coal more generally, John, because I’ve thought about this a lot, you know, written about the electricity business a little bit. Edison use coal in 1882 on Pearl Street, right. And here we are almost 140 years later, and coal, I just looked it up in 1985. Coal provided 38% of global electricity today, it’s about 34%. So let me the question Is this why is coal been such a durable fuel? I mean, because there are a lot of haters out there and say, Oh, well, coal, you know, we just can’t use coal, you know, too dirty, too dirty today, carbon, carbon, carbon. But we’re still 34% of global electricity. And that’s a very large number, when you think about seven and a half billion people, and the amount of power that’s produced with cold Why is cold been such a durable fuel,
John Henekamp 41:14
because the infrastructure is still there.
Robert Bryce 41:17
So it’s the inertia of the machine.
John Henekamp 41:19
It that the rail transportation, the the minds are still there, the reserves are still there, the ports are still there, the vessels, the boat, cargo carriers, you’re still there. The infrastructure is still there. Okay. Now, one exception, you’ll love this little story in the UK, in a fit of panic. In August, the Ministry of Energy said, well, we need to go out and buy some coal and restart these three power plants. I said, Well, that’s all fine and good, because we’re the only ones left they destroy the other ones as they shut them down. Right? Well, we got three left, but we got a problem. We got two problems. Number one, there’s no coal. And number two, you you scrap the rail car, so now we got no way to get him. Oh,
Robert Bryce 42:14
I hope so. This is the way we can interrupt because, I mean, I heard what you said. But I’m in my head. I’m thinking about the invention of the steam engine and how it was really the use of steam, the steam engine to move coal from Newcastle to the port that as in one of the books about coal that I’ve read that the coal was mining itself, right, because they were using coal steam engines to mine the coal and they’re using coal fired rail cars to move the coal to the users. But you’re saying that the not only did Britain shut down their coal mines they killed they shut down or they destroyed their coal carrying railcar. So even if they had the coal, they couldn’t get it to the power plant? is that exactly 200 years after that 200 years
John Henekamp 43:00
that’s burning the bridge behind? Right? You can’t go back. That was their goal. We can’t go back. Okay. So they’re their box. And then as you pointed out and one of your last podcast about when you guys started talking about windmills with that professor in
Robert Bryce 43:21
Gordon Gordon Hughes University of Edinburgh. Yeah.
John Henekamp 43:24
And he talked about you know, the cables under sea and of course that in in in August, that substation that that had the power cable from France, I think bird up it ain’t gonna be available now until April.
Robert Bryce 43:41
Right. And that was to move power from to move power from France to Britain. Yeah.
John Henekamp 43:45
So they’re, they’re kind of isolated, they’re their only choice to keep warm, is, something’s not going to get produced. Plants are going to go down demand destruction for the energy. Okay, the productivity of goods and services in the UK are going to have to shut down in order to keep warm because they don’t have the energy. And if the wind doesn’t blow, I get a real problem.
Robert Bryce 44:11
Soon as Britain so you’ve obviously we’ve talked about macro here and about what’s going on is so which country is it? We’ve talked about the UK are they in the in the biggest day? are they facing the biggest problems if you if you were going to high grade this or handicap it? Which countries are facing the biggest energy problem their energy crisis now in your view?
John Henekamp 44:31
Well, Spain is in Spain shut down a lot of power plants and then they came back at the last minute and went out and bought some coal, Italy
Robert Bryce 44:41
and their their steel makers are shutting down in Spain as well.
John Henekamp 44:45
Well, yeah, because a lot of that and think about this in Europe, a lot of this steel production in Europe is electric arc furnaces not necessarily blast furnaces, right? That’s kind of shut down. They can’t afford $80 or 100. Or I’m sorry. 80 Euro 200 euro per megawatt hour power prices right to melt scrap steel. They’re there, I think Europe’s gonna have a lot of demand destruction through the winter. Okay. But when we come out and winter, there’s still no inventory.
Robert Bryce 45:21
So higher higher prices for longer going to be required to spark new demand or new new supply of hydrocarbons in order to meet demand Otherwise, otherwise the deindustrialization of Europe lasts for longer.
John Henekamp 45:36
Now, let’s roll back who owns all the coal companies for the most part?
Robert Bryce 45:42
And you’re, I hope you’re gonna answer that.
John Henekamp 45:44
They’re the, they’re the hedge funds. They’re the, the, the guys that are controlling what happens to those, those tsunamis of profits there, they’re going to extract a lot of that harvest a lot of that because nothing has changed. And here’s the biggest nail in the coffin that took place. I don’t know what the date was. But it was recently, the Supreme Court, after four years of deliberation ruled that co2 is a pollutant. So the EPA can now regulate that. Well, holy cow, if we may have all this demand for coal. But if you lose in court to some contest that says you contributed to co2 is a pollutant, okay. And that’s responsible for I don’t know, whatever the case might be, well, you’re kind of you kind of get your back up against the wall. So there’s even more encouragement to harvest, not invest.
Robert Bryce 46:53
So to extract I, the way I would put it maybe is extract rent, whatever rent you get, if you own that coal mine, you’re going to run it wherever you can to maximize profit, because you’re not necessarily publicly traded, you’ve got private capital, you want to return that to your investors. And so there’s not going to be growth in supply because there’s no incentive or actually there are more disincentives to grow supplies. That is my paraphrasing. There’s
John Henekamp 47:16
more restrictions. Okay. More restrictions on more restrictions on growing supply. Yeah, there’s a lot of incentives to grow it but the restrictions are, are too difficult. And not only that. We still see these these generators, the big utilities, still shutting down power plants, coal fired power plants, because they’re tired of fighting in court. They’re, they’re tired of spending hundreds of millions of dollars fighting these climate bullies. Okay. They’re like, okay, fine, we give all right.
Robert Bryce 47:57
Well, but it’s not even the coal plants. If I can interject, because this was what the Natural Resources Defense Council and River Keeper did in New York to Entergy that ultimately, Entergy said Uncle and they closed Indian Point It wasn’t because the plant wasn’t making money. They were tired of the, as I understand it, I’m just tired of the legal fight, which was leaving them and say, well, here are the keys and they walked away. And then that has now created more demand for natural gas in New York, of course, which was whatever I expected. But going back to John did to just the Okay, so I said which countries are in The Hurt Locker? And you, you you gave me you talked about Spain? We talked about the United Kingdom, where which countries are are really driving the demand the most? Is it China because you also mentioned the other day when we call it’s everywhere. It’s everywhere. So the demand for demand for coal is across the board from all the industrialized and the less developed countries. The demand for energy across the board, hydrocarbon hydrocarbons, I’m gonna say hydrocarbons.
John Henekamp 49:02
Okay, and so how does this balance its way out? Well, growth has to slow down, demand destruction, right? Growth has to slow down, etc just can’t keep running at this at this pace. Okay,
Robert Bryce 49:17
so when if growth slows down, then jobs aren’t going to pay as much there’s not going to be as much opportunity less
John Henekamp 49:23
just more going down that macro macro road at 50,000 feet and and they’re just dominoes that begin to fall. Right.
Robert Bryce 49:33
So the knock on so are we’re just starting to see the knock on effects. Is that Is that what you’re saying? In fertilizer, aluminum and all these other industries?
John Henekamp 49:42
Yeah. So let’s think about let’s take a little sidebar. Okay. Let’s go over to Germany. You know what the installed capacity of wind in Germany is? Wind and solar. Not off the top my head. It’s 130 gigawatts, you know? If everything’s running, if we’re at full demand, it consumes about 86 gigawatts of power in the country of Germany. So they got 130 gigawatts of capacity for a maximum demand of 86. Okay, okay. And last week when the wind wasn’t blowing and the sun wasn’t shining renewables produced, I think it was 36 or 38 gigawatts of power to get 130 gigawatts of capacity. But all that capacity was only generating 36 gigawatts of power,
Robert Bryce 50:40
right. So you had to have 50 gigawatts of installed thermal to make that make up the difference
John Henekamp 50:46
of thermal gas and nucular and let’s not forget, the last three nuclear power plants in Germany shut down on December 31. No more No more nucular.
Robert Bryce 50:59
So is this and I read an essay, and I’m happy that it was in was published by Zero Hedge. But the author had a term I thought was really interesting. Unilateral energy disarmament. Is that what’s going on? Is that what’s going on?
John Henekamp 51:14
Well, it’s it’s an unintended consequence. Hmm.
Robert Bryce 51:21
So let me ask that question again. So you don’t have the countries that are that are the ones that are facing the biggest challenge you? Is it the UK? Is it China? I mean, we’ve talked about it deindustrialization of India, where they’re slowing their aluminum output, or any I
John Henekamp 51:36
think it’s the I think it’s the EU at large,
Robert Bryce 51:40
the EU is facing the biggest problems, right? Because they’re because because ESG has the strongest foothold there. What Why?
John Henekamp 51:48
Why I think all of its, its its, its the macro view of 50,000 feet, that the unintended consequence was, you went too far too fast. How are you going to back up?
Robert Bryce 52:01
So they went? So if I’m testifying before the Senate next weekend, on November 16, that’s my message. What happened in Europe, under investment in hydrocarbons over investment in renewables and the premature shuttering of coal and nuclear plants? Is that is it that simple?
John Henekamp 52:18
Is it? Oh, look at California.
Robert Bryce 52:22
You know, the other the other basket case?
John Henekamp 52:26
Nobody talks about his power disruptions in the United States. Right, which you find it interesting that nobody ever talks about it. Right? The fact that it’s actually going on? And did you know that the greatest growth industry in California is home generators?
Robert Bryce 52:46
Generac Generac, sales are up? Well, their stock price is up fourfold. I big since the beginning of the you
John Henekamp 52:53
know what the weight is, you know, what the weight is for a Generac. It’s something like 12 or 14 months?
Robert Bryce 52:58
I well. And I know Kohler has their tripling their output of one of their plants.
John Henekamp 53:02
I put a whole house generator in my house in 2012. That’s when I saw, you know, this is not this is not going to add up real real well.
Robert Bryce 53:12
And so but you’re depending on the natural gas grid, right? Well, yeah. Okay, so if everybody on your neighborhood signs up, and they all are natural gas, fire generators, is it gonna be enough gas for everybody?
John Henekamp 53:23
Well, here’s, here’s another little funny thing that happened on the way to Louisville, was that a lot of people and a lot of industries trying to reduce their energy costs, didn’t read the fine print, when they went to one of these third parties, instead of their local utility. A third party sent him a mailer or an email, it’s like, we can save you 30% Right. Yeah. And if you look at the fine print, you’ll find out that we do that by interrupting your power or your gas or whatever. utility that you’re signed up for to save money, right. And if you don’t email us back, or contact us or call us, you’re automatically signed up. I called the local outfit that did that here. And they wouldn’t answer the phone. So I called my utility and said, Don’t let them do that to me. I want to stay with the utility and they said, We gotta go. Okay. Well, think about this. How many coal mines out there when things were really bad in 2020? In order to save money, he said, Okay, we’ll do that. Because it’ll save us 30% Oh, what happens if the coal mine loses its power to produce the coal that runs the power plant
Robert Bryce 54:47
which is what we saw in Texas in in the blackouts was that the natural gas fired power the natural gas fired power plants couldn’t get enough gas because the plant the the pumps, to the plants on the pipelines were electric, and they were being shut off the As the bank as
John Henekamp 55:01
the windmills froze, right? Unintended consequence?
Robert Bryce 55:05
Yeah. Well, so let’s then talk about what countries then let’s get
John Henekamp 55:11
going before you go there before you go there. Let’s add one more little wrinkle that. Okay, really. And I want to give credit to Joe crap. The CEO at Alliance resource partners,
Robert Bryce 55:24
right Joe craft is from Tulsa. He by the way was helped me get in the cardinal mind when I’m for my fourth book power hungry that was oh, there you go. The Cardinal miner Alliance resources.
John Henekamp 55:33
Yeah, he gave a speech in Lexington this past spring. And I didn’t know this, but the grid has to hum. So it’s the least technical way I can explain this has the Hamat 50 megahertz
Robert Bryce 55:49
660 Hertz in the US 50 Hertz in the rest of the world. But yeah, 5060 Hertz. Alright, well, you know, 6060 cycles, okay. So
John Henekamp 55:56
if you got all these renewables, and that doesn’t happen in the grid starts, starts closing in, it starts shutting down. Right, right. Because if it doesn’t maintain it falls off. So then you have all these blackouts. That’s what happened in Texas, right? Right. It wasn’t home it right. So. So here we are. We built these these renewable energy supports, and when the wind dies down, or the solar dies down, and you don’t have that, if you can’t bring it on, you got to keep reducing the availability of power in order to keep the grid functioning, right. Yeah. So if you increase like Germany is done, I get 130 gigawatts of capacity. But if it doesn’t perform, then the grid begins to destabilize. And if they can’t bring on the power from other forms of energy, well, then you got it. You got to start deciding who gets power. Who does,
Robert Bryce 57:11
right. Yeah, no, I agree. And this issue of grid vulnerability fragility is one that I’ve been focused on now, since February 15. Believe me, it’s been too long.
John Henekamp 57:23
If you get down to the micro economics of it, who suffers the most? Poor? Right. Okay. And I won’t interrupt you from going to the next level that you want to go
Robert Bryce 57:36
to? Well, so you mentioned the other day, I remember we I made some notes, you said that China is now producing about 4 billion tons of coal per year for power generation for power generation that doesn’t include their met coal. No. Okay. So and you said they need to increase output by 20%. Is that even possible? For the court? For the same again, for what? For the quarter? Oh, for the quarter? Oh, they needed to increase the quarter, it was needed a 20% increase in coal availability to timber demand. Okay. And are they able to do that? Well, I recall. So I tell you
John Henekamp 58:15
what, I never discount the Chinese when they say they’re going to do something. Right. And of course, they use the stick instead of a carrot said, If you don’t produce tons, we’re going to put you in jail. And that’s when I told you, I thought, Okay, well, then what are you going to do about the first quarter? If they’re all in jail?
Robert Bryce 58:36
That’s all I remember. So but it appears I mean, the recent more recent headlines from India and China appear to indicate that some of the critical shortages that we heard about a few weeks ago have eased a little bit that call availability in India’s has has been, has recovered a little bit.
John Henekamp 58:54
It’s demand destruction, it forced consumption down.
Robert Bryce 58:59
I see. So where are we in terms of spot? So the spot price of coal then hit what 200 a ton in in? You said October 5 was the peak? Is that right? What was that where we had the spot price? What what did it peak at?
John Henekamp 59:12
The API was up around? I want to say 257? Uh huh. And Newcastle would have been in the same neighborhood. And that was for the derivatives. Okay.
Robert Bryce 59:23
For the derivative, not for delivery. What do you mean, that was physical price?
John Henekamp 59:26
The physical price is actually traded higher than that. Okay.
Robert Bryce 59:32
Because I did see spot prices in China hidden simply as we’re hitting over $300 a ton, right? For immediate for immediate, and then the Chinese
John Henekamp 59:39
came in and said, Well, we’re going to correct that. The corrected it down to $150 on government intervention. And then the following week, they dropped it down to $86. Equivalent a time, right, and they said that’s the price. And you’re gonna have to accept that it’s shut up.
Robert Bryce 1:00:00
but that doesn’t necessarily solve the black market problem, right? I mean, they, you know, everybody can say that. But as you know, and I know, You’ve been in Venezuela and
John Henekamp 1:00:08
have, it did have a negative effect, a follow on negative effect in the international markets to the point where the markets don’t have any liquidity. Nobody knows what to do. Okay, first of all, there isn’t any physical cold to trade. And if there is, is because somebody’s selling something that they thought they were going to need, they don’t be, okay. The new buyer in the markets, probably Ukraine, because the Russians cut them off and said, We’re not shipping you a coal. They don’t like the Ukrainians, and now Ukrainians are going to have to go out to the world market, try and find some coal to get through the winter. Somebody,
Robert Bryce 1:00:52
let’s talk about them. So, I mean, it’s easy to forecast, you know, catastrophe, I guess, you know, because there’s some something in us that we like the idea of dire stories, but are we going to see people freeze to death this winter, for lack of lack of heat?
John Henekamp 1:01:07
Yes. Yes, we are. There’s more people die from cold than heat. Every year period. Okay, but that’s gonna happen.
Robert Bryce 1:01:21
And it’s gonna be mainly in Europe, you think or in China, it could be here
John Henekamp 1:01:24
Robert Bryce 1:01:28
You sent me a link to the story about coal availability. In China, it was in China insights, which I thought was just really remarkable about the price of coal in China having risen so much, particularly in the Northeast and the eastern provinces that people were burning clothes, they were burning corn, that
John Henekamp 1:01:48
was central North Central China, which would be our Minnesota and the Dakotas. And northeast China, which would be like our main higher latitudes in China, the price of coal is so high that selling their corn crop would not pay for a ton of coal. So they’ve decided that they’ll burn the corn. We’re burning food now to keep warm and to cook, and any old clothes. Okay, that was what was on that video that I sent you,
Robert Bryce 1:02:21
which was just shot. We’re just shocking. I mean, just chucking that. I mean, we burn food here to make ethanol, right, which is a whole long, long time critic of the corn ethanol scam. But, but to see the Chinese and ordinary Chinese being interviewed on the street saying we couldn’t we can’t afford coal. What is going on? Here? We,
John Henekamp 1:02:39
again, these aren’t the urban centers. This is out in the country. Right, right. Sure. Yeah.
Robert Bryce 1:02:45
So people are gonna freeze to death. And there is that real prospect? And but but but but again, handicapping it, you think Europe is in a bigger fix than other places because of the way that they’ve handicapped themselves? Is that fair?
John Henekamp 1:02:59
Yes. The unintended consequences. They move, they have moved too fast. In the light in the name of climate change. Okay. I mean, I watched the video yesterday and, and Tifa challenges, any conference that wants to debate, climate change and or carbon emissions. Okay. And yet, statistically, some of these scientists that aren’t chasing the money, if you will, they’re chasing the science have said that, globally. We haven’t co2 drought. Okay. And, and, and one of the best examples that they gave was look at the Dominican Republic in Haiti. If you look at it on a map, right, correct map. The Dominican Republic is green, because they’re burning fossil fuels. And Haiti is brown because they’re burning all the trees. Right. Right. For for carbon.
Robert Bryce 1:04:09
Sure. I’ve seen I’ve seen those satellite images. Yeah. And quite frankly,
John Henekamp 1:04:13
they had demonstrated that if you increase co2, okay, plants grow more, not less. But here we are in the UK. We’re burning wood pellets for power generation
Robert Bryce 1:04:31
shipped over from the United States. Yes. And those
John Henekamp 1:04:35
guys think we’re going through the forest plucking out all the trees it fell down.
Robert Bryce 1:04:40
Right, which is not the case. So let me let me let me let me dial back then John. And again, my my guest is John Hannah camp, he. You can find him on LinkedIn. He’s there. You can google him. He’s he’s pretty easy to find.
John Henekamp 1:04:54
You might get my cousin when you do that. Okay. All right. He’s a doctor in Boston. So The curve. Okay, fair enough.
Robert Bryce 1:05:01
So is there is this? I haven’t I don’t know if I have it on this podcast I’ve ever talked to any of my guests about investing. But I looked at Peabody Peabody Coal used to work there their stock prices up for x this year. Is this is this part of a long reign long run commodity supercycle? And are you putting money into this these commodities? What is where does the smart person put money these days?
John Henekamp 1:05:26
It depends on the strategy. And it also depends on your age. Okay, well, fair enough. But it depends on that company strategy. Okay. There’s only one coal company in the United States. It’s dedicated to power generation. And that’s Joe craft. Alliance. Alliance. Alliance. Right. Everybody else is milking the cow. And I can’t blame them. All right. The guys at console had a really good platform. And, and they had pushed northern coal to India, and they use a lot of the coal from the northern Appalachian region for bricks and cement kilns. Okay.
Robert Bryce 1:06:15
And this is just to be clear, this is be clear, this is higher sulfur coal, it’s
John Henekamp 1:06:20
higher sulfur, which gets lost in the cement and in the bricks. Okay. Okay. And it’s higher energy than anything else. It’s about 13,000 bt use, and it’s cheaper and more available than the petcoke. Uh huh. And the petcoke is much higher soul for much higher energy, but its availability has been really low.
Robert Bryce 1:06:44
And petcoke is petroleum coke, which is produced in refineries as part of the refining process. Right? Okay. So, I see. So you’re saying if you’re, if you’re long electricity generation, or think that’s gonna keep going, then buying coal for thermal generation, like, like alliance would be reasonable, but as this, but I guess that just I don’t want to spend much time on this. But you say we’re going to have higher lows than in other words, that the price for all energy commodities in your view is going to be higher than it has been traditionally. And it’s going to stay higher, because of ESG. Because of all these supply constraints that you’ve talked about, is that is that your basic thesis then? Right. Okay. Fair enough.
John Henekamp 1:07:25
Yeah, if you don’t, if we don’t do that, we’ll destroy that fuel franchise.
Robert Bryce 1:07:34
Okay, if we don’t keep the price high enough, I’m done. Make sure it’s right.
John Henekamp 1:07:37
If we don’t provide the margins for coal production, it will go away. If we, if we make decisions to destroy the infrastructure, it will go away, then what’s your backup? Your backup is the gas or oil itself? Right?
Robert Bryce 1:07:56
Because you can’t right. So then well, in which is one of the other macro trends that I think is remarkable that really since 1973, the world has been moving away from oil for power generation. I mean, the drastic, right that one, because the US at that time, I think was 20% of our generation came from oil, well, then oil prices spiked. And so there was a big push, of course, during the Carter administration to move toward coal fired generation, right, which was oh, we you know, when because we have to conserve natural gas when oil is too expensive. So we’re seeing these whipsaw effects. I guess I’m thinking, you know, just as I’m talking as I’m thinking about it, but whipsaw effects in these commodity markets here in the US that are in many cases policy based that are reactions to these, these other conflicts or other global issues. Are they are they? Is there an intuitive is there an Intuit is there as a way to solve this to solve the boom bust cycle? Or is this just inevitable?
John Henekamp 1:08:54
Well, yeah, you have to make the right policy decisions. Okay. I mean, if, if, if, if Congress is responsible for policy decisions, and they don’t consider the and intended consequences of radical change, then we as a consumer, and particularly the poor, who may think they’re helping, right, suffer the most.
Robert Bryce 1:09:27
Agreed. Well, so John, let me I always asked my guests and we’ve been talking now for more than an hour, so I don’t want to keep you too much longer. But I have this fascinating conversation. I’m enjoying it tremendously. So what about a few more questions Who What about alternative energy? I mean, you’ve you’ve made clear that you’re you’re on a you don’t believe necessarily the the catastrophic climate change narrative, or renewables gonna continue to grow? What do you see in that market? I know you’re a commodities guy, but how do you feel about what they’re doing?
John Henekamp 1:09:54
What what happens if we wake up in 2050 with a net zero accomplishment? The co2 is so low that we can’t produce enough food. You know, when I was in the green business, the most profitable business that we could participate in was a program called pl 480. And they were, they were powdered milk in 100 pounds are 150 kilo bags. It was pulses of all kinds of drive. Beans. Okay. Was wheat, it was flour. Okay. And and you, you put together these great big pallets with these with these big bags and you put them in barges and you ship them to the Gulf and you put them on handysize vessels with their own cranes and you ship them to countries that were suffering from starvation because of crop failures all over the world. Okay. When’s the last time you heard about a drought them in massive starvation around the world? When was the last time?
Robert Bryce 1:11:01
It’s been a while? That’s right.
John Henekamp 1:11:03
Okay. And I’ve said all along. If you look at when I left the grain business in 1999, the biggest crop we’d ever had was 8 billion bushels. You know what we produce them the United States this year. 15 billion bushels of corn
Robert Bryce 1:11:23
20 years later, 22 years later than Yeah, now? almost doubling. But that’s better as precision agriculture. It’s better. Better, better, better genetics. Yeah. But
John Henekamp 1:11:34
more fertilizer, better crop management, technology law. Yeah. But co2, supposedly being higher. That’s food for plants. And yet the the Supreme Court ruled that it’s a pollute. Like, you know, I hope when you sit down in front of the Senate, you sit back and go, so food for plants that produce oxygen, has now been determined by the US Supreme Court to be a pollutant, and EPA can regulate that.
Robert Bryce 1:12:09
I might stay away from that when John big a whole whole can of worms, but I
John Henekamp 1:12:14
think that fertilizers, but we have to, we have to open those cans of worms. Okay, oh, we’re gonna wind up, we’re gonna wind up with no bridge to cross behind us.
Robert Bryce 1:12:27
Which is where Britain is without enough coal rail cars. Right. Okay, so just the last couple of questions. John, if you listen to the podcast, you know what I’m going to ask you. So what are you reading? What books have you been looking at? or other things that you’re reading what he would well caught your attention? Like?
John Henekamp 1:12:45
I, I’ve been reading the library produced by Bill O’Reilly, to look back at history. Okay. So many things. Okay. History. History is actually the research foundation for a lot of things that happen and are going to happen with policies. Okay. So that’s one thing. But the other thing that I found a, an insatiable desire to learn more about is the debate on climate change. Okay. Nobody’s listening to the other side. Okay. And I find it interesting that most of the people that worked for NASA, who have not challenged anything, number one, because they’ve been told not to a number two funding is so important. Of watch, I’ve been watching a lot of YouTube videos where you get to see the other side of the debate. And the other thing that I found out, is, if you want to really understand climate change, follow the money. You ever wonder why all the billionaires are rooting for climate change and, and co2? reductions? Did you know that the billionaires on this planet are the largest landowners on the planet? Right? Yeah. And most of what they own has, has green on it producing oxygen and and consuming carbon dioxide. And if the policies change enough, those properties which right now for the most part, only produce an annual tax bill will all of a sudden start generating huge carbon credits. They can then sell to everybody else that needs a carbon offset. Always follow the money. Well,
Robert Bryce 1:14:50
that’s that’s Well, that’s one one of the Maxim’s in my reporting that I do so. Okay, so thanks, in terms of what you’re reading that Bill O’Reilly books. So what gives You hope
John Henekamp 1:15:03
this lat that the fact that all of us, you included, that have worked hard and this journey through life that have earned what we’ve accomplished, persevere, and made sure that we take young people under our arms, who are extremely impatient. Okay, best example I could give, I was talking to a friend of mine the other day, and his son was complaining that he was never going to have what his parents had. In the meantime, he’s making payments on an ATV, a boat, a motorcycle, and a four wheel pickup truck. But he’s living in a really small house. And he’s, he’s complaining that he’s never going to achieve what his parents achieve. Okay, well, as long as you’re willing to earn it. And the only thing I had left at my age is to share my experiences and what I know, and my knowledge. And when I got a call from you that said, Would you like to be interviewed, it was an opportunity to share my knowledge and my experience. I don’t want anything from it other than a pair of ears. Okay. I remember a story my grandfather gave me once, when I was 12 years old working on a farm. They said, Johnny, I would give you every dime I possess. If I could take my knowledge, what I know, and, and be your age. And when I was 12 years old, I had no idea what he was talking about. Am we we have to earn this journey through life. And, and one way to earn it is to share what we’ve learned. Right? That’s all we got left. When we get to a certain age. We learn, we teach, enlarge, and then we teach.
Robert Bryce 1:17:07
I like that idea. All you want is a pair of ear. So I hope on this podcast, you get more than one pair, maybe a few 1000 pair would be would be great. So Well, listen, this has been great, John, we’ve gone for more than an hour. So I don’t want to I don’t want to drag on too much longer. Although I’ve certainly I’m certain that we could so My guest has been John Hannah camp. He is an independent coal industry consultant. He’s based in the Chicago area if I’m not mistaken, St. Louis St. Louis, I’m sorry, St. Louis area, so you can find him on the interweb I’m certain. But John many thanks for a fascinating discussion and for being on the power hungry podcast. You’re well, and thanks to all of you in podcast land. Tune in next time for the next episode of the power hungry podcast. And if you are so willing to put one of those ratings on us give us 3465 stars, however many you can put on there. Until then, thanks. See you next time.