Valuetainment - Oil Expert Exposes The HYPOCRISY Of The Environmentalists

00:00:00.000 My guest today is Paul Sankey, who's known as being the analyst who first called for oil prices

00:00:07.100 to go negative while COVID began. And eventually we have the Sankey research team that he started

00:00:13.140 and recognized as a number one on many different investor surveys as the number one blog

00:00:19.360 expert that people follow in the specific area of oil. Having said that, Paul, thank you so much

00:00:24.580 for being a guest on Valuetainment. Thanks for having me.

00:00:30.000 The current climate. So current climate in regards to oil. Who is happy? Who is concerned?

00:00:56.640 Who is pushing us to get away from oil?

00:01:00.780 Well, listen, I'm not an oil analyst anymore, right? I'm an energy transition analyst.

00:01:05.580 And my website, Sankey Research, is styled as the energy transition on Wall Street. And, you know,

00:01:12.660 we've just had to sort of adapt to the reality around us. And that's, you know, the beauty of

00:01:17.600 Wall Street. We're trying to value the future. And if you don't get that, then you're probably

00:01:22.740 not going to do very well. Because essentially the value of an equity is the present value

00:01:27.120 of the future free cash flow. So we're putting a value on the future. And that's our job.

00:01:31.400 And so if you see an industry shifting in the way that I did with oil, you better start shifting.

00:01:36.500 And by the same token, I left the Bulge Bracket Bank, you know, the Wall Street banks in order

00:01:40.920 to start up on my own because I needed the flexibility to cover this challenge that you're

00:01:46.360 talking about. So essentially what's happened here is that there's been a bit of a conflation

00:01:52.320 of COVID and the demand downturn that we got as a result basically of economic collapse with

00:01:59.120 the end of the oil age. So people have thought that, you know, what happened last year, which

00:02:03.300 was the Fed essentially making the cost of capital zero, causing renewable stocks to absolutely rip

00:02:10.860 and really causing a lot of pain to oil stocks, which were suffering from very weak demand.

00:02:17.480 You know, people confuse that, which is natural, as a major shift that's occurring.

00:02:23.000 Now, in valuation terms, there is a major shift occurring because people want to buy renewable

00:02:26.700 stocks. And with ESG, environmental social governance, there's just no way you can make an oil stock

00:02:31.980 that good because the emissions associated with use of oil and gas are high, you know, as a fact.

00:02:38.120 But having said that, the debate is really shifting rapidly. And in many ways, as we are today,

00:02:43.980 which is really your question, there's actually a backlash against ESG because essentially we're

00:02:49.280 facing a global energy crisis. And so we've seen oil become the best performing sector in the market

00:02:54.560 this year. And, you know, a lot of these renewable stocks at times, for example, solar has been very weak

00:03:00.120 this year, you know, had a much more troubling year. And there's a lot of controversy even today

00:03:05.080 around statements by Jay Powell, Fed chairman, about the potential for the end of the tapering

00:03:13.340 and raising interest rates because inflation is kind of out of control. Our call has been that if you think

00:03:19.300 there's going to be inflation, oil prices will go up and you'll be long the oils. Additionally, the valuation

00:03:24.740 of the oils will improve relatively because if you're worried about inflation, a stock such as

00:03:30.120 a solar stock that's discounting 2030 or 2035 becomes even more expensive because the value of the

00:03:38.560 dollars in the future will be a lot lower. And therefore what you're assuming for their earnings

00:03:42.960 in 2035 will actually be a lot lower. And therefore the stock's very expensive. And so we see that group

00:03:48.700 trading quite aggressively with whatever the Fed chairman says, which is kind of weird.

00:03:52.700 In the meantime, the oil price is high and the oils have better strategies, more investor friendly.

00:03:58.460 And so the group's doing very well. Why are oil prices high right now?

00:04:03.460 Demand, basically. You know, you've had a pretty significant, the first principle of looking at oil

00:04:08.840 is always what's going on on the demand side. And the leading indicator, because it's very difficult,

00:04:13.380 the data is poor. The leading indicator is always refining margins. So how much are refining companies

00:04:18.480 making? If the oil price is going up and refining margins are going negative,

00:04:22.080 it tells you that it's speculative fear and it's not a real oil price. At the moment,

00:04:27.840 refining margins are going up at the same time as oil, which tells you that it's the demand-driven

00:04:32.220 environment and there's a lot of power there in terms of the demand side. Additionally, OPEC

00:04:38.580 is either both cut back production and struggling to produce as much oil. And finally, you've had capital

00:04:45.220 discipline, which is a new era for the U.S. E&P companies. They're not spending, they're returning

00:04:49.940 cash to shareholders because it's the end of the oil age. And if that's what you want

00:04:53.060 us to do, that's what we're going to do. And therefore, you've also not had the growth

00:04:57.160 from the U.S. that you saw over the previous 10 years on the supply side. So essentially,

00:05:01.240 as you can imagine, there's a combination of supply and demand. There's controversy about

00:05:05.440 how much more OPEC could produce because they're cut back. But we think that's probably

00:05:10.100 not as high as some people would imagine. And of course, the other major issue is that

00:05:14.540 we're going into winter and there's a global gas shortage, which was driven by a couple

00:05:18.400 of wildcard aspects, one of which was shortage of coal in China and India. Shortage of coal

00:05:24.000 in China and India was not on my business card. Well, it's not on my bingo card for 2021,

00:05:28.320 but we got that. And so you've had a huge squeeze on natural gas, which is leading to a squeeze

00:05:32.600 on oil. So if it's the end of oil age, how are these big oil companies going to, not only

00:05:40.400 how they're going to handle it, are they going to allow that to become a reality? You're not

00:05:44.280 talking about small companies. You're talking about a China petroleum company, net income,

00:05:50.320 you know, revenue is a $355 billion company, right? You got PetroChina 320. You got Aramco.

00:05:57.840 You got Shell 261. You got BP. You got Exxon. These are not small companies. These are guys

00:06:04.040 with a lot of money with lobbyists and a lot of people that are making millions on top of

00:06:08.880 millions of dollars. Are they really going to allow the end of oil age?

00:06:13.560 You know, what environmentalists miss is that the companies don't have a choice if you change

00:06:19.080 your behavior. So if you buy an electric car, if you start using less energy, if you put a solar

00:06:24.620 panel on your roof, if you behave more efficiently, they're powerless. And that's their biggest

00:06:30.000 threat. That's my biggest frustration with the environmental movement is they keep attacking

00:06:33.980 the supply side. For example, new pipelines, new pipelines are really environmentally friendly

00:06:38.620 because the existing infrastructure is very old and it leaks, but they oppose new pipelines

00:06:43.280 because the theory is if we stop supply, then we'll stop demand. But that's pretty regressive.

00:06:49.260 The point being, it hurts poor people more than it hurts rich people. And, you know, it's pretty

00:06:54.720 almost fascist, arguably, to say, okay, I'm not going to let people supply energy because

00:06:59.400 you shouldn't be allowed to use it. What you should be doing is changing your own behavior

00:07:03.700 and that would then knock the companies out. Where the companies, the companies are changing

00:07:07.840 as fast as they can. They've been busted in the case of Exxon for trying to denigrate the

00:07:14.660 climate change movement, which is really, you know, nightmarish for Exxon. But most of

00:07:18.920 the other companies, if you look at a Chevron or a ConocoPhillips, they just accept that the

00:07:22.740 change is happening and that they've simply got to be more efficient, better players to

00:07:27.340 survive the potential for lower demand in the future. At the same time, demand's not falling.

00:07:33.320 Demand's hitting a record high for oil and we're at 100 million barrels a day plus, which

00:07:37.000 is, you know, 1,000 barrels a second of oil are being used. And to replace that with solar,

00:07:43.160 people just don't understand the energy density of oil, which by the way is naturally occurring,

00:07:48.740 arguably environmentally friendly because it comes from the earth, where you're going

00:07:52.620 to be replacing it with solar panels, which are often built, 90% more or less, are built

00:07:57.180 in China using coal-fired electricity and forced labor. And you're going to tell me that's a

00:08:02.700 better option than using Texan oil. So that's part of the ESG backlash. It's really dynamic

00:08:09.740 though, I must say, you know, this is a, this is an ongoing situation, fascinating to cover

00:08:13.900 obviously, but what I will tell you is the more the government gets involved, the more

00:08:18.400 they're going to screw it up. And so far we've seen California, UK, arguably certainly Germany

00:08:24.500 essentially completely screw up their energy systems by going too far, too fast.

00:08:29.260 It's funny you say UK and California, because I think Boris Johnson said as of 2035, they're

00:08:36.620 not going to allow for gas powered cars to be sold. They're going to ban it. You can drive

00:08:41.280 it, but you can't sell it anymore. And I think Newsom announced that last week on the same

00:08:46.780 thing. He pretty much mimicked exactly what Boris Johnson said. They're going to do it in

00:08:50.140 2035 as well. So the question it would make me think about is Paul, this is your world.

00:08:55.320 What percentage of oil is consumed because of cars? What percentage is, you know, can you,

00:09:03.720 do you know the breakdown of how oil is used around the world?

00:09:08.020 Sure. I mean, you know, the single largest sector of the oil market, the oil market, as

00:09:11.540 I mentioned, is kind of elegant. It's a hundred million barrels a day, a thousand barrels a

00:09:15.020 second, 10 million barrels a day alone is US cars, just US. So the single biggest part of

00:09:23.480 the global oil market, the single biggest sector by sector is US gasoline, which is

00:09:28.660 used, you know, really wastefully. You know, I think I counted once for my son heading down

00:09:33.300 the Long Island Expressway. We reckon that 80% of US pickups have nothing in the back.

00:09:39.160 You know, why are you driving a pickup? Because you know, the efficiency of the fleet here is

00:09:44.320 the same now today, 20 miles per gallon as the Model T Ford. The Model T Ford was about 20 miles

00:09:49.940 per gallon. Now, of course, you've got air conditioning and DVDs and what have you. But

00:09:52.960 the fact is, getting from A to B use is very efficient. Overall transport is about 40 to 50%

00:09:59.660 worldwide. Worldwide, yeah. About 8 million barrels in aviation is very difficult to replace.

00:10:06.740 They'll tell you they're going to use burger fat in order to make biofuel in order to run planes. But

00:10:11.580 in reality, you just don't have enough burger fat. So there's numerous elements where you have

00:10:17.100 greenwashing, where essentially they say we're going to use biofuel, you know, renewable

00:10:21.100 diesel, whatever. But in fact, you know, the 8 million barrels of jet fuel alone, simply

00:10:25.460 you can't run a plane, that number of planes, on renewable fuel at the moment. And if you

00:10:31.980 do, it's going to be very expensive. And one of the key effects will be highly inflationary

00:10:36.000 food prices. Because essentially what you're going to end up doing is using soybean oil, which

00:10:40.900 arguably is not that environmentally friendly, in order to make biodiesel and so on. So the biggest

00:10:46.560 marginal changes that we're watching are basically China and India. In the grand scheme of things,

00:10:53.420 basically about a third of oil is used in the Americas, a third is used in Europe and

00:10:57.360 the Middle East and Africa, and a third is used in Asia. And the biggest marginal increase,

00:11:02.460 as you can imagine, is China, which is now the biggest energy consumer in the world, to

00:11:06.340 the point where it's actually more than Europe and the U.S. combined, China alone. And the

00:11:14.400 big issue in energy this year actually has been the strength of Chinese electricity demand,

00:11:19.720 which has been huge off the biggest base in the world.

00:11:23.320 So, Paul?

00:11:24.260 The key point there really is the scale of the energy density and the amount of energy

00:11:28.440 used is very, very difficult to replace with interruptible windmills and solar. You know,

00:11:33.180 it just doesn't balance. You can't do it. And that's what people have to accept, which is

00:11:36.880 that you have to have with natural gas or nuclear as your true transition fuels.

00:11:42.760 So if you're saying U.S. out of the 10 million of the 100 million is just U.S. automobiles,

00:11:48.520 worldwide is 40 to 50 million. Aviation was 8 million. What's next? So at that point,

00:11:53.420 we're around 48 to 58 million a day. What is next? What other industry is next in oil?

00:11:58.380 You've got the, let me think now, basically you go down through propane, you know, which

00:12:05.360 is used in home heating. That's the lightest part of the barrel. Then you get into jet fuel

00:12:10.560 and gasoline, which as we mentioned is a very large part of the balance. And then below that

00:12:15.740 you have distillate. Distillate is partly used in transport. It's also used in a lot of industrial

00:12:21.000 facilities, you know, so you might use it in a factory. You might use it in a generator.

00:12:25.080 You're going to use it in ships, trains, you know, so that's part of the transport balance.

00:12:30.060 That's what you would know called diesel. And then the remainder is going to be stuff

00:12:35.060 that you don't even know you're using, like plastics. I mean, one of the key things here

00:12:38.360 is that people underestimate the importance of plastics, which you can basically either

00:12:42.160 make from natural gas or oil. That's what the global industry uses, but that's going to

00:12:46.780 be another 10, 15, 20%. And then finally, things like asphalt, you know, the heaviest part

00:12:52.080 of the barrel, which you obviously use on roads. So all of that adds up to, you know,

00:12:57.180 an enormous number of products, not just in cars that need somehow to be replaced. And

00:13:02.820 the point is really that the replacements are not necessarily better. So what you're seeing

00:13:07.740 is, for example, the IEA would say what you're trying to do is shift the global economy from

00:13:11.840 a hydrocarbon economy to a mineral economy. Now that might reduce your emissions, but it's

00:13:16.680 going to cause a lot of problems. You know, mining is not environmentally friendly. It's often

00:13:21.200 done in countries that are nightmarish, like, you know, for example, the Congo, where they're

00:13:25.300 going to be using child labor to mine cobalt, et cetera, et cetera. And a ton of this stuff

00:13:30.420 is processed in China. You know, one of the reasons I'm independent is because I can turn

00:13:34.700 around and say, look, China's a totalitarian regime that, you know, you shouldn't support.

00:13:39.620 You should actually oppose. You should try not to buy an iPhone. Nobody does. And yet you'll

00:13:44.120 hear yelling at me about, you know, how evil Exxon and Chevron are. You know, it's just kind

00:13:49.080 of BS, frankly. It's pretty wild what you just said right

00:13:52.580 there. So you call China totalitarian and they'll still... 0.77

00:13:58.080 Yeah. These guys can't. They would just delete it. If I wrote that in my previous employers,

00:14:03.080 they would just delete it. They can't be rude about China. But, you know, I'm British. My

00:14:07.080 father's a British diplomat. These guys are appalling human rights. You know, what are you doing?

00:14:12.080 What's Tesla doing? Should it really be allowed to do that? Just today, we've had a guy from the

00:14:15.080 NBA pointing out what they're doing for that. And the guy's being scrubbed from the Chinese 1.00

00:14:19.080 Institute. I saw that.

00:14:20.080 The Boston Celtics games are not being shown. It's like, you know, you want to deal with

00:14:23.080 these people and you want to buy all your soda panels from them.

00:14:25.080 He's a friend, Enes Cantor.

00:14:27.080 You're probably going to have to scrub this webcast now.

00:14:29.080 Well, we like webcasts like this because this gets people to think for themselves.

00:14:33.080 But going back to it, you said when the government gets involved, he says, you said they're indirectly

00:14:39.080 not hurting the rich, they're hurting the poor. Can you unpack that? What do you mean by they're hurting

00:14:43.080 the poor instead of the rich? Well, just the energy costs are regressive, right? So that if

00:14:48.080 you're a poor person, you spend more of your income on energy and gasoline than a rich person does.

00:14:53.080 It's just very regressive. That's why I got you. So basic economics.

00:14:57.080 Essentially, if gasoline price goes up, it's way worse. Or if the price of oil goes up, you know,

00:15:02.080 at the moment, actually, for separate government reasons, I think there'll be more deaths in the UK this winter

00:15:08.080 from energy poverty than there will from COVID. We've got 40,000 to 60,000 deaths coming this

00:15:13.080 winter based on the gas crisis that the government's basically engineered. But the regressive idea,

00:15:18.080 yeah, is simply that, you know, a given person at a low income spends far more of their income

00:15:23.080 and is far less flexible in terms of, you know, how much they have to spend on energy just to survive.

00:15:29.080 So let's say it costs, a simple example, let's say it costs $200 to rent an apartment. Obviously,

00:15:35.080 if you're making $10,000, that's a lot more than it is if you're making $100. It's as simple as that.

00:15:41.080 Paul, $40 to $50 million a day out of the $100 million is automobile. Okay, automobile.

00:15:46.080 So if—

00:15:47.080 I want to check that, actually. You're making me nervous because I did that off the top of my head.

00:15:50.080 $10 million a day for sure is the—

00:15:52.080 U.S.

00:15:53.080 U.S. gasoline alone. And then about 40% of everything else is two. So there's that, yeah.

00:16:01.080 There's somebody that really wants to talk to you, by the way. I don't know if that's—

00:16:04.080 It's the third time they knocked on the door. You may want to just say hi to them. But no, here's where I'm going with this.

00:16:15.080 Let's say the number is 30%. Let's say the number is 40%. Let's say the number is 50%. It's a big number.

00:16:21.080 So the biggest one is going to be automobile. So I guess the question I'm asking is if they're pushing for everything going electric due to climate change,

00:16:29.080 if that is what everybody is pushing for to go in that direction, how are—how is the oil industry,

00:16:36.080 these big oil companies hedging themselves against this eventually going there? Because you're not talking about 5% of the business, not 10%.

00:16:44.080 It's 40% to 50% of it. So how are insurance companies—how are oil companies essentially insuring themselves against the trend that we're going away from oil-driven cars?

00:16:56.080 Well, basically, the first thing that happened is that people started selling oil stocks, right? Because they were like, we can't own—for example, European firm managers,

00:17:03.080 quite a few of them now have a calculation of how carbon-intense their funds are. And so, obviously, if you're selling 8 million barrels a day of oil, like Exxon is,

00:17:13.080 you're going to basically come up as very, very high emissions, and therefore, you know, unfriendly in terms of your emissions.

00:17:19.080 And so people don't want to own the stock, want to own the stock. So the stock prices performed very poorly.

00:17:23.080 At that point, the strategy began to change. And so you saw some extreme examples like BP, or Total actually is a better example,

00:17:31.080 because they did a good job. BP did a horrible job, in my opinion. But Total, for example, as of 2017, 2018 said,

00:17:37.080 OK, look, we're going to transition, and we're going to start going after consumers. We're going to do really what I've said you should do,

00:17:43.080 is to address the fact that individuals have to make an individual decision to use less energy and be more environmentally friendly.

00:17:49.080 You can't do it any other way. Greenpeace themselves would say that, you know, you're the solution.

00:17:55.080 You personally are the solution. You've just got to ask yourself, you know, how much am I flying, et cetera, et cetera.

00:18:00.080 That's why people go nuts when Leonardo DiCaprio is like hanging out on yachts. And, you know,

00:18:05.080 Emma Thompson flew from L.A. to join the Extinction Rebellion protest in London, and people were like, what are you doing? 1.00

00:18:12.080 You know, just stupid. So basically, absent that, the oil companies then were forced to change, 0.95

00:18:18.080 and they're really, to be honest, they're really struggling with it, because the problem is that their cost of capital is high.

00:18:25.080 So if the market sells the stock, their cost of capital goes up, if that makes sense to you.

00:18:30.080 For example, a renewables company the market wants to invest in gives them a very low cost of capital,

00:18:35.080 so they'll very easily raise money and they can invest. And as you know, the value of an equity is the cost of capital,

00:18:41.080 is the returns over the cost of capital. So if you've got a relatively low return project, like a windmill,

00:18:47.080 or a major wind farm, that's going to be an 8% to 10% return at best, but if your cost of capital is 2%,

00:18:54.080 then that's a very good return for investors. The problem for Exxon is its yield alone,

00:18:59.080 its dividend payment is 6%. If you add that, you know, a cost of capital to make a return above that,

00:19:05.080 their real cost of capital is probably 15%. If we were to say, shall I invest in a new oil project,

00:19:11.080 we would want to see a 15% to 20% return. So for these oil companies, my view is they should shrink,

00:19:18.080 they should just get smaller and make very high returns and in many ways follow the tobacco model.

00:19:24.080 You know, so what tobacco companies did is with a declining market is they simply went into a very high cash return

00:19:29.080 to shareholder mode and they became very attractive stocks because ultimately the market doesn't have a conscience,

00:19:34.080 which is debatable now with ESG. The issue with ESG is that, you know, is it really morally better to use renewables

00:19:42.080 than it is oil and gas is a rising debate, you know, and it hasn't been one up until now,

00:19:47.080 but the more people realize that solar panels are built in China using coal-fired power and forced labor,

00:19:52.080 the more people realize that you might kill people by not having energy available when it's the depths of mid-winter.

00:19:58.080 All of these things are causing people, I think, to reconsider what will be probably, for example,

00:20:04.080 a disastrous climate summit coming up here in Glasgow, you know, in two weeks, whatever it is time,

00:20:10.080 November the 1st in Glasgow, you have COP26. It's probably going to be a shambles.

00:20:15.080 So all of these things are really live debates. And for the oil companies, it's very difficult

00:20:19.080 because they've got the challenge of maybe chasing the ball here into an area where investors don't want them to go anywhere,

00:20:27.080 anywhere, anyway. Or do they actually just tough it out and say, you know what,

00:20:32.080 I'm going to stick with what I do unapologetically in many ways, or rather I would advise them, frankly,

00:20:37.080 to greenwash and pretend that they're green, which people are so bad at analyzing this stuff,

00:20:41.080 they'll probably buy it anyway. Certainly stop advertising. I don't know why they advertise.

00:20:45.080 Nobody's ever going to love these companies. But basically just reward your shareholders as much as you possibly can,

00:20:51.080 which would be to buy back the dividend and keeping the lowest possible profile. 0.65

00:20:56.080 Is it hypocritical? Sure. But, you know, as I said, if you want a friend, buy a dog. 0.78

00:21:02.080 I'm looking at data based on what you just said when you said tobacco and cigarettes.

00:21:11.080 OK. And this data I'm looking at, I can't share it on the screen here because I'm looking at it over here,

00:21:17.080 but I'll send it to you. And it shows it shows how it grew from early 1900s.

00:21:24.080 It's then Great Depression increased smoking even more. World War One definitely helped it, helped it. 0.97

00:21:31.080 World War Two helped it. Then in 1960s, the first surgeon general's report on smoking and health came out.

00:21:38.080 Then fairness and it went from I mean, you have to see how much the numbers dropped off.

00:21:44.080 It's a 50 percent drop off immediately and gradually goes all the way down to today being a quarter of what it was in mid 60s of smokers.

00:21:53.080 So a quarter of smokers today versus what we had in the mid 60s. Right.

00:21:58.080 Do you think the trend is going to look the same way with oil?

00:22:01.080 Do you think it's going to be that dramatic of a drop off?

00:22:05.080 No, I mean, I think, you know, obviously smoking is more demonstrably directly negative. Right.

00:22:10.080 So people make an intelligent decision. I think, you know, I'm one of the few college educated Americans that smoke left.

00:22:16.080 You know, you have to be really seriously dumb to actually smoke cigars in my case. 0.91

00:22:21.080 But, you know, people still want to do it at the margin. But no, it's it's going to be difficult, certainly. 0.96

00:22:27.080 And that's why people talk about hydrogen, because there's really no alternate way of really cold coal or cheap energy into heavy industry is very, very difficult to replace.

00:22:40.080 And again, it's very difficult to make hydrogen in an emissions friendly way. And there's no infrastructure.

00:22:44.080 Another point, by the way, I make is if you want to recycle stuff, why would you rip up all the existing infrastructure for oil and gas in order to put in you?

00:22:52.080 That's going to be hugely energy intensive. So that doesn't make sense to itself.

00:22:57.080 The one that is huge that we mentioned is cars, you know, if you can switch to EVs.

00:23:03.080 Now, that's of course going to put enormous pressure on the raw materials for EVs and the electricity system.

00:23:10.080 But ultimately, that at least massively lowers your emissions if the electricity is made in an emission friendly way, which really should be nuclear.

00:23:18.080 At the moment, you're still 40 percent of U.S. power generation.

00:23:22.080 U.S., actually 30 percent of U.S. power generation is from coal.

00:23:26.080 60 to 70 percent of China, which is really the problem, is coal.

00:23:31.080 And that's going to be extremely difficult to replace.

00:23:34.080 The other issue, which the chart that no one looks at, which you should look at, is look at a long term population chart.

00:23:41.080 You know, what's happened here is the global population has gone to seven billion on a just kind of crazy exponential rise.

00:23:50.080 Nobody ever plots these emissions on a per capita basis.

00:23:53.080 But the reality is we're actually, given the population weight that we face, getting more efficient.

00:23:59.080 So it's really a major question for the next 50 years is, are we really going to be able to replace this oil?

00:24:06.080 And if you look at all the forecasts, they're just wildly optimistic.

00:24:09.080 It's going to be extremely difficult.

00:24:11.080 And again, the key issue is environmentalism is a luxury.

00:24:15.080 You know, it's all very well for Greta to come out and say we should use less energy.

00:24:20.080 She's had a massively privileged upbringing in one of the richest countries in the world, which has some of the highest rates of hydro power production in the world.

00:24:27.080 And she wants to turn around to a bunch of Indians and Chinese and say, no, you're not allowed to have my life. 1.00

00:24:33.080 That's kind of that's just outrageous in my opinion.

00:24:35.080 Greta has done a wonderful job in raising awareness of the energy challenge and making people think.

00:24:40.080 Brilliant. Well done to her. Absolutely remarkable.

00:24:44.080 But at the same time, her position is so fundamentally nonsensical when it comes to somebody who's virtually starving in India,

00:24:50.080 who's desperate not to use dung and die of emphysema at an early age because they're using dung or firewood inside an enclosed space.

00:25:01.080 You know, I mean, this is this is causing deaths.

00:25:03.080 So ultimately, environmentalism is partly a luxury and partly a suicide mission.

00:25:09.080 You know, what you're really saying is we need less people in the world.

00:25:12.080 And you're probably going to get less people if you really apply some of this very aggressive and very expensive zero emission stuff.

00:25:19.080 It's a simple fact. And that's that that circle is never is never square.

00:25:24.080 If you look at what Greta said recently, she's talking about global leaders going blah, blah, blah.

00:25:29.080 But she didn't say she didn't present any solutions herself.

00:25:33.080 You know, her taking a carbon fiber yacht across the Atlantic, she said, was to prove how difficult it is, which was a point well made. 0.78

00:25:40.080 I mean, how many people across the Atlantic in a freaking carbon fiber yacht?

00:25:44.080 You know, it's just like it's very, very difficult.

00:25:49.080 And the only thing that we can do is try and be more efficient individually and get governments to do a better job of, for example, improving the electricity grid or using more natural gas.

00:26:01.080 So to me, there is there's a few ways I see this here.

00:26:07.080 So when I see the politics side of this, then there's the economic side of this.

00:26:13.080 And then there's the guys that are just the predictive analytics guys. Right.

00:26:17.080 Where. OK, the politics is what climate change, climate change, climate change.

00:26:22.080 That is a number one, you know, issue.

00:26:26.080 That's the number one above everything else that we should be worried about.

00:26:29.080 And so it gets when a leader or president says that the populace, oh, my gosh, climate change is the biggest issue.

00:26:35.080 If climate change is the biggest issue, we have to get rid of gas.

00:26:38.080 We have to do this. We have to do that.

00:26:39.080 So it gets the populace to say, now I understand why they want to get rid of cars.

00:26:43.080 OK, so that's politics. But let's set politicians aside. 0.97

00:26:46.080 Let's set the economical side aside, which is guys that are driven by profits.

00:26:51.080 They're like, listen, if this thing drops below sixty five bucks, we don't make money.

00:26:54.080 Whatever that number is between sixty to sixty five dollars when it drops, they're not making money.

00:26:59.080 My question is the data guys and the those on the inside that are with the with, you know, a government that's sitting there like a Norway saying,

00:27:08.080 yeah, we're just not going to get rid of our oil right now.

00:27:11.080 We're going to sit on the reserves right now. We're not going to touch it because we're going to long our oil.

00:27:15.080 Why are you long in your oil?

00:27:17.080 So why are so many countries long on oil when everything about the direction we're going with the climate change epidemic that they're talking about is forcing us to get away from oil?

00:27:30.080 If that's really that big of an issue, why are several government handling their oil reserves in a different way, thinking they're going to need it fifty hundred years from now?

00:27:39.080 I don't know if my question makes any sense, but maybe it does to you based on what I'm asking.

00:27:45.080 Yeah, my attitude is that the first problem, the most emissions intensive is coal.

00:27:51.080 You know, you're still using full-time record amounts of coal, you know, and really you shouldn't be.

00:27:56.080 So coal, arguably, certainly the natural gas is replaceable over time, and that's forty percent less emissions right there.

00:28:02.080 So just that basic move, you should focus on that, right?

00:28:06.080 But the problem is you're going to have to change behavior in China and India.

00:28:11.080 As regards oil, yeah, it's more emissions intense, and there's definitely areas where, for example, in the U.S.,

00:28:18.080 you can just get much higher efficiency from cars and greatly lower emissions, you know?

00:28:23.080 And even that's controversial, because where it turns really hypocritical is sort of the Norwegians. 0.98

00:28:31.080 Sure, they don't want to not produce their oil, but what's really hypocritical is no U.S. politician would do the most logical thing,

00:28:38.080 which is just to put on a gasoline tax or a carbon tax and force people to pay a price for energy which is more reflective of the emissions associated with it. 0.98

00:28:48.080 So you can't just, you know, run electric heaters like crazy or drive around in a stupid jacked-up pickup truck without paying for it. 0.83

00:28:55.080 You have the right to do that, but you're going to have to pay the true environmental cost. 0.98

00:29:00.080 But, you know, no politician, because it's widely considered to be environmental suicide, ironically, thanks to Jimmy Carter,

00:29:06.080 not environmental suicide, sorry, political suicide, thanks to Jimmy Carter, no politician will go near it.

00:29:12.080 Ask AOC, do you support gasoline tax?

00:29:15.080 I'd actually answer the question, you know?

00:29:18.080 Because the fact of the matter is, it's known that the U.S. consumer doesn't support it.

00:29:22.080 So if the U.S. consumer doesn't support it, you're kind of wasting your time in the first place, right?

00:29:26.080 Because no politician is going to support it. 0.99

00:29:28.080 Then, worse, you have things like the Green New Energy Deal, which is just absolute crap. 0.97

00:29:33.080 I mean, if you read it, it's like running for class president saying, you know, no homework and free candy. 0.86

00:29:40.080 It's like we're going to create four million jobs from, you know, a whole load of wind farms,

00:29:45.080 and we're going to completely take coal out of the electricity system in the U.S.

00:29:49.080 And you say, well, if you do that on the timeframe that you say that you're going to do it,

00:29:52.080 especially given that utilities don't want to change,

00:29:55.080 they're the most boring, regulated, conservative companies that have no interest in change.

00:30:00.080 It's going to be basically impossible to do it.

00:30:03.080 And if you do do it, the lights are going to go out.

00:30:06.080 And then you're not going to be able to use your iPhone.

00:30:08.080 So if you think it's going to happen, the answer is it's not.

00:30:10.080 It's all just noise, you know?

00:30:12.080 At which point, you turn around and say, well, look, the oil and gas stocks are undervalued.

00:30:16.080 People might not want to earn them for moral reasons, I get it.

00:30:20.080 But in reality, the value of these stocks is much higher than it's currently discounted by the market.

00:30:25.080 Because let's face it, this oil and gas age is going to last a lot longer than you think.

00:30:30.080 So we'll see.

00:30:31.080 Additionally, we just don't know how the environment's going to react, right?

00:30:34.080 Because the modeling is so poor that it's not really understood.

00:30:38.080 Where mankind is responsible for sort of 10 to 20% of CO2 emissions,

00:30:42.080 and CO2 encourages plant growth, you know, there's a whole load of stuff that essentially is very, very unknown.

00:30:49.080 If you look at the margin of error on how much difference it makes at sea level,

00:30:54.080 how much of the sea level temperature actually changes, all these things are massively unknown.

00:30:58.080 So if you make multi-trillion dollar decisions or destroy your economy,

00:31:02.080 it probably is not going to make a whole lot of difference, quite frankly, depressingly enough.

00:31:06.080 So I think what we're going to do is basically live through a long emergency here, unfortunately.

00:31:11.080 And you should plan accordingly.

00:31:12.080 I live in Brooklyn Heights, you know, for a good reason.

00:31:15.080 You don't want to be at sea level too much.

00:31:17.080 Not so much that it will be flooded, but that it's going to flood a lot, you know, throughout the year.

00:31:22.080 It's not going to be underwater, but you'll see a lot of volatile weather.

00:31:25.080 It's tough.

00:31:26.080 I mean, it's tough.

00:31:27.080 And frankly, I think the politicians are doing a horrible job.

00:31:32.080 We'll see.

00:31:33.080 So then if that's what you're saying, let me kind of restate what I think you said is.

00:31:39.080 So is this all just a bunch of show?

00:31:41.080 Is this all a show what they're talking about in regards to oil, knowing this thing's not going to be going away?

00:31:46.080 Somewhat.

00:31:47.080 Yeah.

00:31:48.080 I mean, I think the clearest thinker in my mind is not fashionable to say it, to say the least.

00:31:55.080 But if you listen to Vladimir Putin, he'll explain to you, he'll say to you, look, he said this at the Russian Energy Week this past week.

00:32:01.080 Electricity doesn't come from a socket.

00:32:03.080 You know what I mean?

00:32:04.080 You've got to generate it.

00:32:05.080 What we really need is for one year to have a dictator come in and say, look, this is actually what needs to be done.

00:32:12.080 And everybody do what I say.

00:32:13.080 We're going to build nuclear.

00:32:15.080 We're going to plant trees.

00:32:16.080 We're going to upgrade the grid.

00:32:18.080 We're going to use natural gas to offset interruptibility of wind and solar.

00:32:22.080 And we're going to max out wind and solar.

00:32:24.080 But we're not going to buy it from China if they use coal fired power and forced labor to make it. 0.99

00:32:28.080 It's not complicated.

00:32:30.080 What's actually happening is, you know, a whole lot of nonsense about union jobs and, you know, President Biden saying we're going to take carbon out of the electricity system by 2025.

00:32:39.080 You're like, well, he means 2035.

00:32:41.080 And by the way, that's BS.

00:32:42.080 So it's double BS.

00:32:43.080 You know what I mean?

00:32:44.080 It's just like, what are these people talking about?

00:32:46.080 AOC is clearly very intelligent, very brilliant politician.

00:32:50.080 She doesn't know jack about energy.

00:32:52.080 People just don't know the units.

00:32:54.080 They just don't realize how much 100 million barrels a day is in solar panels.

00:32:58.080 If you want one gas station made by solar power, you need to cover the whole.

00:33:03.080 The whole of Manhattan needs to be a solar power.

00:33:06.080 And then you'll get one gas station's worth of gasoline when it's sunny.

00:33:11.080 So, I mean, you know, the idea that we can replace all the gas with solar in them is just nonsense.

00:33:17.080 And by the way, these guys like Apple and Google, we see that they're full renewable.

00:33:21.080 Yeah.

00:33:22.080 All the data centers are located in coal heavy cheap electricity zones.

00:33:26.080 And what they say is we've now covered all our electricity usage from renewable energy.

00:33:32.080 But we know that renewable energy doesn't run at night.

00:33:34.080 And we know that wind doesn't blow when there's no wind.

00:33:37.080 Yet somehow the data centers run 24-7.

00:33:40.080 It's just a lie.

00:33:42.080 They're more guilty in many ways than Exxon and Chevron who basically pretty openly admit that they produce oil and gas and it's not going to be that great for the environment.

00:33:53.080 Paul, what's the right thing to do?

00:33:56.080 If an administration said, listen, we want to bring you in, we want your inside, we want you to help us think long-term what's the right thing to do, what would be the right thing to do right now?

00:34:06.080 They should all read Vaclav Smil or somebody who's good on energy who explains to you energy density and, you know, who can put everything in terms of horsepower.

00:34:15.080 He can put it in any unit you want.

00:34:17.080 What people don't understand is units.

00:34:19.080 They don't understand how much electricity they use, how it's made, and, you know, the fact that it's 30% made by coal in the U.S.

00:34:27.080 So that every American uses 20 barrels of oil per head per year.

00:34:31.080 Even the most efficient tree-hugging green is going to be using 10, which is five times the per capita use in China, which, by the way, has multiplied by five times over the past 10 years.

00:34:42.080 The average Chinese uses five times more oil than they did, and they're still only 20% of what the average American uses, you know.

00:34:50.080 And so all this stuff about, hey, I'm environmentally friendly, it's just like, you're really not, you know.

00:34:55.080 And by the way, what happens if I take plastic Saturday night?

00:34:57.080 Because people don't even think about that.

00:34:58.080 They realize that, hey, I used a paper straw.

00:35:01.080 It's like, come on, man, get real, you know.

00:35:03.080 Look at where your pharmaceuticals are delivered from.

00:35:06.080 It's basically partly from an oil company, you know.

00:35:09.080 It's really, really tough, and it's being driven by partly alarmism, partly genuine concern.

00:35:17.080 But above all, it's in a political environment where it's so difficult in democracies to make real massive change, right, because it's a democracy.

00:35:25.080 So right now we have 50-50 in the Senate, and Joe Manchin is like, I don't want to lose coal.

00:35:31.080 That's the end of the U.S. energy policy for four years, basically.

00:35:36.080 He's the most respected and hated politician right now from opposing sides.

00:35:44.080 Some like him, some hate him.

00:35:46.080 It's interesting.

00:35:47.080 When we realized it would be a 50-50 Senate and Joe Manchin was head of the Energy Committee, it was like, yeah, I don't think much is going to happen here.

00:35:55.080 But he's right in one regard, which is, you know, you printed 20% of all the dollars ever printed last year, right?

00:36:04.080 And now you're saying we're going to do, and by the way, the recession is the shortest in history, and we're long since out of recession because they printed so many dollars.

00:36:11.080 And somehow they're like, okay, let's print another 1.2 for infrastructure, and why don't we throw in 3.5 for human infrastructure, which, you know, you just read through it, and you're like, this is just absolutely insane.

00:36:26.080 I've been to visit a friend in Washington, outside Washington, and you should see the mansions that are being built on the outskirts of Washington as you go down, you know, into some of the greener areas down there.

00:36:36.080 Literally, it's a new mansion being built, a new mansion being built, a new mansion being built, because, you know, all these Washington, D.C. guys are making insane amounts of money from insane money printing that Joe Manchin is saying is insane.

00:36:49.080 Paul, why are you so diplomatic?

00:36:52.080 In what way?

00:36:54.080 I'm being sarcastic.

00:36:57.080 Mansion after mansion.

00:36:58.080 I'm looking at an article here with Newsom, because he's trying to pass gas taxes.

00:37:04.080 It says California expands road mileage tax pilot program.

00:37:10.080 So rather than increasing gas, he wants to track how many miles you're driving to tax you based on the miles you're putting in rather than taxing your gas, the direction he wants to go in California.

00:37:22.080 I mean, this is a Pew trust article.

00:37:25.080 Yeah.

00:37:26.080 And that also would take into account, obviously, road, you know, having to maintain roads, because the other cost of, there's two additional costs to, you know, heavy use of cars.

00:37:36.080 One is obviously that you've got to maintain roads.

00:37:38.080 The other is arguably that you go and fight wars in Iraq.

00:37:41.080 Right. So I mean, I actually testified to the Senate and they begged me not to.

00:37:46.080 And I said, well, why not?

00:37:47.080 But if you wanted to pay for the war in Iraq through a gasoline tax, you should add, I think at the time it was $2.50 to every gallon of gas sold in the U.S.

00:37:56.080 That's how much the war cost.

00:37:58.080 They told me it wasn't about oil.

00:38:00.080 So, you know, they were not happy about that.

00:38:02.080 But, you know, it's like, well, yeah, you shouldn't be.

00:38:05.080 Paul, how often are you in South Florida?

00:38:10.080 About once a year for vacation.

00:38:14.080 That's about it.

00:38:15.080 Got it.

00:38:16.080 Okay.

00:38:17.080 Well, if you're ever down here, I'd love to have you on a podcast to go along from two to three hours because I love the way you think.

00:38:23.080 I love the answers.

00:38:24.080 I love the insight.

00:38:25.080 It's very helpful.

00:38:26.080 But I've really enjoyed this conversation with you, man.

00:38:28.080 You're not only smart, interesting, and you've got a great sense of humor.

00:38:33.080 Appreciate it, mate.

00:38:34.080 Thanks a lot.

00:38:35.080 I'd be happy to come see you.

00:38:36.080 You're out of Miami Beach.

00:38:37.080 That's where I go.

00:38:38.080 I mean, I'm a Forlada del Boca.

00:38:40.080 So if you're ever out here, we'd love to host you and we'd love to have you on the podcast.

00:38:43.080 Yeah, there's some money there.

00:38:45.080 As you know, there's a couple of big fund managers, so I'll be down there sometime in the next year.

00:38:49.080 Fantastic.

00:38:50.080 Looking forward to it.

00:38:51.080 Thanks for being a guest, buddy.

00:38:52.080 Really enjoyed it.

00:38:53.080 Take care.

00:38:54.080 Bye-bye.

00:38:55.080 Crazy how Paul Sankey ended up being one of my favorite interviews of the year.

00:38:59.080 I hope you enjoyed it as much as I did.

00:39:02.080 If you did, give it a thumbs up, subscribe to the channel, and I did a video that you may or may not like.

00:39:08.080 It was predicting the fact that I think gas prices are going to get to $10 a gallon here very soon.

00:39:13.080 Matter of fact, a county in Central Coast, a city in Central Coast, gas station prices were at $7.58 just this week.

00:39:21.080 If you've not seen this video, click on this video.

00:39:23.080 Take care, everybody.

00:39:24.080 Bye-bye.

00:39:25.080 Bye-bye.

Valuetainment - November 17, 2021

Oil Expert Exposes The HYPOCRISY Of The Environmentalists

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