 Okay, we're back. We're live. I'm Jay Fidel. This is ThinkTech, and more specifically, this is Energy in America, which we do every Tuesday, every Wednesday, rather, every two weeks. And we have Lou Punearisi on the phone from EPRINC. That's the Energy Policy Research Organization in Washington, D.C. Welcome back to your show, Lou. I'm happy to be here, Jay. So, you sent me a thing this morning, which I really, really, that was so interesting and provocative. It's Nopec. You've heard of OPEC? Well, how about Nopec? So, I thought we were going to call the show Nopec to the Rescue, except that's tongue-in-cheek because it's not to the Rescue at all. So, first, can we get a handle on what is OPEC? So, in our time, OPEC is the organization of petroleum exporting countries. And it is traditionally, although it's made up of a lot of countries like Venezuela, Abu Dhabi, or real big players in OPEC. Are Saudi Arabia a wrong way? Not Nigeria, not these other countries that generally are producing whatever they can. They do, of course, go along with OPEC guidance, if you like. But really, it's an organization dominated by the big producer, which is Saudi Arabia. Is it a democratic organization that they have votes and parliamentary procedure? Yes, they have votes, but they agree. So, if you think about OPEC, OPEC really came to the fore in 1973, 74, about the time of the Arab oil embargo. And prior to that, oil prices were four, five dollars a barrel, maybe eight dollars a barrel. They got the price oil up to twelve dollars a barrel. And at one time, during the Iranian Revolution, it then rose up again to thirty-two dollars a barrel, retreated to eighteen. And I think the, when we go to the sort of post, I guess the modern era, late 19th, turn of the century, oil prices then skyrocket way up. But they, they, they oscillate quite a bit. But right now, they, with the onset of the North American, even though we have problems with Venezuela, Libya, around the world, oil prices around fifty dollars a barrel. And they had gone at one time as high as a hundred and forty. And I would say OPEC has largely been concerned that the unconventional geology or the shale space was a big threat for them. And the conventional wisdom is they tried to drive the shale out of business. Some people think they just didn't want more competitors, but it was unsuccessful. So now they have to learn to live with the shale. And so where we had an era where we thought the long run price of oil was going to be closer to a hundred. It's now closer, probably long run price of oil is going to be closer to fifty or six. Yeah. And I saw something that suggested that that was because the U.S. was not using as much oil in its cars because of the cafe standards, whatever. And because we have, we have more oil that we are, you know, finding and exporting. So yeah, maybe we could look a little bit about our trends in crude oil, our trends in consumption and in the U.S. If we go to the first, do they have the slides? Yes. Let's get, let's go through a few of these pictures. So that's the wrong, that's the last slide we should go to the end of this packing work backwards, I think. Okay. So here, this is actually a really interesting, I think, so I like to show all of North America, the U.S. and Canada together. And I think what you should, on this particular slide, which is petroleum products, and if you think about, we don't really directly use crude oil. We turn it into products, right? And those products are gasoline and diesel fuel and residual fuel and naphtha and lots of inputs to petrochemicals. And I think what's interesting about this particular picture here is, look, you can see there's no major since 2010. North America is a very stable but not growing consumer petroleum, right? And this is happening in an era where petroleum is starting to grow. So let's look at the next slide for a second. Okay. This shows USMCA refers to the United States, Mexico, Canada, crude oil and petroleum products, net trade. And the reason I use the word net trade is we are a large continental land mass, right? And we bring in crude from around the world and then we re-export our own crude. So anybody who's interested in the question of are we a net draw on the world oil market needs to answer this other question, which is, okay, what is the net number? Because we have a lot of crude oil coming into the U.S. but then we have crude oil and products coming out. And if you look at this bottom here, we are now in North America is a net exporter of 320,000 barrels a day of exports, crude oil and petroleum product exports. And what that means is after U.S., Canada and Mexico uses all the oil and products they can, it has this much left over and it sells it to the world market. So we are not a net draw on OPEC oil. That is so different in the way it was. And take a look at that black line. You can see, take a look at that black line. It was 10 million barrels a day, net and gross. I was at a conference or a workshop of the Defense Department today and I said, well, you might think this means the Navy doesn't have a big job anymore. But in fact, a usual thing about this renaissance is the volume of shipping into on the United States has accelerated enormously. It hasn't decelerated in the petroleum era. That's because we are importing lots of feedstock but then we are also exporting lots of value at petroleum products. So it's almost the opposite of what you would think. So this must have an effect on OPEC because OPEC used to be, you know, all powerful. Now it's not all powerful anymore. Right. And so one of the interesting things is a Congress, one of the things Congress doesn't care about a lot of things, but members of Congress get really nervous when the price of gasoline goes up because they're worried their constituents might blame them for it. They can do all kinds of bad things. But if the price of gasoline goes up, they actually have to pay attention to what the constituents say because they might get thrown out of office. So they think the way, and this is why I think this is a kind of hope, this legislation if it weren't so serious is somewhat hilarious because many of the members supporting the NOPEC legislation, which by the way, the purpose of NOPEC is not just to sue NOPEC, it's to get them to produce more oil. So we have members of Congress who oppose the Keystone Pipeline, who oppose developing more oil and gas in states, but now want a piece of legislation to overturn the concept of sovereign immunity, which we'll get to in a minute, and take OPEC to court and actually seize their assets and make them produce more oil, or punishing them for restraining oil production. Why don't you tell us the specific substance of terms of this NOPEC bill? Okay, so a major term of it is to, right now, if you're a country like Saudi Arabia, Venezuela, and you take a specific action with your natural resources, you decide to collaborate with another country and restrain output, or you just cut output to try to raise prices, you cannot be sued on traditional antitrust laws because you're a nation state and you have what's called sovereign immunity. So this legislation seeks to break that sovereign immunity, which by the way also pertains to U.S. companies operating abroad as well. U.S. companies who are operating in other countries, who are operating under the instruction of the Omanis or someone, they also are protected under sovereign immunity because they're just following the instructions of the country they're working. Let me unpack that a little bit. So back in the early part of the 20th century, around the time of Teddy Roosevelt, as I remember, we had two major antitrust bills in order to break the trusts, which were then very powerful, railroads and oil for that matter in this country. And so antitrust was invented there, and I guess it was a positive element in our legislation at the time. There's a quite legitimate use of antitrust, and the question is the one cut out for it has historically been sovereign immunity. U.S. a lawyer probably knows what that means, but basically the provisions in U.S. and international laws grant this immunity to countries. Countries do not come under the Teddy Roosevelt trust-busting laws. This is not true for foreign companies who are not state-owned or state-directed. So this effort in Congress, this NOPEC bill, is an attempt to apply all of that antitrust back in Teddy Roosevelt's day to nation states outside the United States. Exactly. Right. And so you could argue, so the first part of the, I wrote an opinion editorial piece today in Real Clear Energy, that the most effective counter-OPEC strategy is to allow our oil and gas production to continue to grow. This limits their power. And also, we have a lot of trade with OPEC countries, including refining assets in the U.S. And if we went forward with this antitrust kind of provisions, those assets would get tied up. People might quit trading with us in some of these critical areas. And it's just a two cumbersome tool. Let me connect that up. So this bill would say that OPEC would not exist because it is in violation of this new concept of forget sovereignty. It's antitrust on a global scale. So they, as an organization reaching consensus on oil prices, could not do that. They could not exist. And then it punishes them somehow by allowing the United States to seize their assets in this country. Yes. So if you think about this, if these were independent companies, even though they're operating internationally and they were not under sovereign immunity, they were not entities owned by the government, they would not be immune. They would be subject to antitrust because getting together and restraining output is a clear violation of Sherman antitrust. So the question is, but there's a cut out for a nation state called sovereign immunity. And so the question here is, should we break that? By U.S. law. Well, it's interesting because we, as a matter of law, we cannot affect what other countries do. But I suppose what this NOPEC bill is trying to do is saying, well, if you choose to restrain trade of a product that is entering the United States, that is sold to the United States, we're going to punish you. We're going to apply sanctions insofar as you're trading that product into the United States. Oh, yes. We're going to have damages and seize your asset. Remember, that can go two-way. These countries can also seize U.S. assets. Some of these assets. We've seen that lately. Right. And some of these assets in the U.S. are very valuable to the U.S. They're not necessarily engaged in the upstream issue, but in refining assets. We have a lot of foreign refining facilities in the U.S. that produce a lot of oil and gas, a lot of petroleum products. They would be tied up in this legal morass. And they exist in the very same countries, at least to some extent, which are the members of OPEC. Exactly. OPEC would really have us for lunch, so to speak. Well, I just think the, you know, the, as they say, the juice isn't worth the squeeze. We would have, we'd probably do more harm to ourselves than whatever game we got in breaking up OPEC. And the other thing about OPEC is, they don't really need to meet. What if, what if the Saudis just say, well, we've decided to restrict output because it's not good for climate. Well, I mean, we have members of Congress that all the time, we should not develop our offshore resources. It's not good for climate. So I'm sort of struck by this notion that, okay, we can do this, but really what we're upset about is the price of oil is too high. But the way to get the price of oil lower is to produce more oil and gas. And a lot of the members supporting this, support other legislation to restrict oil and gas. What I hear you saying, Lou, is that the progenitors of the introducers of this bill, and I want to find out who they are, really don't understand how global energy works. Don't understand how oil works. Don't understand how OPEC or the American market works. And they shouldn't be doing legislation on things they don't understand, am I right? You would hope so, but this would not be the first time. No, no, not lately anyway. So yes, and the interesting thing about this bill, it has support by both Republicans and Democrats. So traditionally, this legislation has been around for decades. This time it's, you know, it's past the House. It's got a lot of sub-onsers in the Senate. And traditionally, American presidents have said, look, we don't really like this bill. I hope we're asking you not to pass it. We'll probably veto it. It does a lot of, it's very counterproductive, but we don't know what Trump's going to do. Trump might say, well, this will be fun. I can, I can lower this over people who don't want to do what I want to do. Yeah. Sure. We can expect some fisticuffs. It's to understand the second and third order effects of this legislation of where to pass. And that's why I show, that's why we want to show some of these other slides so you can see the, you know, the net exports in the U.S. The fact that we are a major force in the world oil market. Yes, please. So the second order effects of this legislation. Oh, what have we got? Let's see. Let's see some of those slides. Yeah. Let's take a look at a few more. Okay. So this is very good. This is the U.S. Mexico-Canada natural gas train balance. Once again, it's a little, you know, maybe a little strange for the audience to read, but the red, the black line at the end there is actually exports, you know, and the black line is net exports. So the U.S. Mexico-Canada, a lot of gas moves across the borders, right? But some of it moves abroad in LNG and shipments, mostly LNG out of the U.S. You can see there three, up to three, almost three billion cubic feet a day of U.S. natural gas is now being exported to the world market. Keep in mind, it wasn't that many years ago where the price of natural gas in the U.S. was $10, $12, 1,000 cubic feet. And today it's only $2. It sets $3. Makes it much more attractive. It's very attractive. It's spurring a manufacturing and petrochemical renaissance in the U.S. And it's also becoming, within a couple of years, we will be the second or third largest LNG exporter to the world. Well, you know, you've been involved in efforts to export to Asia. I don't know how far those efforts have been realized, but strikes me that's a huge market. And we may see this export area on this chart increase dramatically going forward. No. We will. And in fact, we have a very, which I will send you. Your audience will be able to get it through a website within a couple of weeks right after the Shanghai LNG conference. I'm heading to China on April 1st to 4th. We will issue a report called China's Search for Blue Skies, the role of LNG. So we've found some very, this is a really interesting paper. It shows that Chinese political imperative to clean up their local air pollution. It's not a climate issue for them. Particular matter, just getting a bit of smog, is going to drive a very large demand for LNG. But that has a secondary effect for climate, doesn't it? It will have some benefit. Anyway, so what I see happening in this chart we're looking at is that the Asia component will greatly increase in the relatively near term. Absolutely. And we will be exporting all that much more. And I expect, you have to tell me, but I expect that the more LNG that's on the market, the less oil, displaces oil as an energy supply around the world, am I right? Absolutely. So it has several roles it can play. In some parts of Asia, particularly, they still use a lot of residual fuel oil or heavy fuel oil or distillate as you do, as you still do in Hawaii. And it will be, it can replace, it will replace that. And in some areas it will be a backup fuel for renewables or a substitute, or seasonal substitute for to hit surge capacity in certain areas. It will displace coal. And the most interesting thing I think in our China paper is the emergence of small-scale LNG. Something that should be very interesting to the Hawaii. What is that? What is small-scale LNG? Small-scale LNG is the use of it in trucks, residential, you know, residential areas. LNG, what we call LNG in a box. You could think of a utility sector. I mean you guys banned the use of LNG in Hawaii, but I mean it could, it could be, a small-scale LNG gets more efficient. You could even use it to replace the fuel, the oil in Hawaii. Which further marginalizes OPEC, further marginalizes oil from the Middle East. Yes, so I think there's several, there's a lot of forces out there, the more efficient automobiles, which are probably more efficiency in the world automobile fleet, much more powerful than electric vehicles. The substitution of gas and renewables or liquid fuels in the power sector, all of these are going to limit the long-run price in the powerful. Oh, what you're saying is, the bottom line is that we don't need as much oil. We don't need to find external methods to undermine the restraint of trade that's inherent in OPEC. And so this NOPEC bill is of no effective consequence at all, whether it passes or not. I think actually the prominent OPEC bill is the second one. The fact that U.S. companies would get, there would be retaliation, there would be a loss of trade. In other words, there's a lot of components to what OPEC, there's a lot of pieces to what happens in these countries, which are also members of OPEC. And we would be throwing out the baby with the bathwater instead of thinking of, okay, what's a coherent counter-OPEC strategy? And the loss of it is a clumsy instrument for dealing with these kinds of issues. Well, it's interesting because OPEC and oil out of the Middle East has formed a fundamental part of American foreign policy over the past several decades. It's been really important to us. It's driven so much. And now it's not as important. And now, I mean, whether Congress or the president realizes this or not, it's really not as so much consequence. So it's not only the price of oil, it's not only the price of, you know, fuel around the world or the use of fuel. It's also geopolitical arrangements and diplomatic connections that have to change. So I'm participating in a two-day workshop at the Defense Department on this very issue, which is what is our energy future over the next 20, 25 years? What does it tell us about our defense capability? What's going to happen to regional rivalries in the Middle East? What happens if we have a future in which the price of oil is not so high? Now, it turns out, so there's a lot of direct economic benefits to the U.S. from this. But there's also another side of this, which is the cost of renewables become more expensive. Because if petroleum is cheap, then it's more expensive. Unless the renewables become a lot, a lot cheaper, they become irrelevant. But what do you expect the president's view of this to be? And we know that he's not all that excited about renewables to start. And now this may excite him, this NOPEC thing, even erroneously. And then, of course, LNG must excite him. So where is he headed? Does he have a cogent plan here? He's the big supporter of LNG exports. He's pushed the agencies to finish the regulatory reviews quickly. And actually the U.S. is doing a pretty good job of evaluating these projects and getting the export license. There is a lot of debate inside the continental United States on pipeline placement and whether the U.S. should have a full cycle analysis when they approve an LNG project, which means go back and measure the GHG emissions all the way up to the well-head. So there's a whole bunch of political and policy fights taking place. Let me ask you this. It just occurs to me to ask you, LNG and oil, and the U.S. has both, right? But where does that go? Can we look forward to a future where there'll be more LNG and less oil comparatively? Will it stay the same? No, I think LNG is... You know, it's going to be... its applications will be more in the power sector, which traditionally is a sector that has been dominated by coal. And then in smaller countries in Southeast Asia, fuel oil. So its main role will be backing down the growth of coal and providing a substitute for fuel oil in smaller South Asians like Vietnam, Myanmar, places like that. And also as a backup for intermittent renewals. So do you see the whole... Transportation sector will still be dominated by liquid fuel. By what? Liquid fuel. Gasoline and diesel. So how will these changes, you know, as they affect the NOPEC bill and otherwise, how will they affect public attention, governmental attention to renewables? Because you can't do renewables without public and governmental attention. Well, I mean... So we've talked about this a lot and I think the real problem is and this is what Gates talks about a lot, which is, you know, Bill Gates said, we got to get these renewables and these alternative fuels. They have to get more competitive. The government can subsidize them. They can use feed-in tariffs. But, you know, it's like the... Subsidy for electric vehicles in the US. You can take 5 billion from the upper middle class and give it to the upper class, but you can't take 50 billion. So you could take the subsidies, but at some point people don't want to keep paying them. And so one of the issues is how do we get the long-run cost of these renewables competitive? Some of them are getting competitive, but not all of them. Alu, you've got some more charts. Do you want to refer to them? Oh, yeah, we can take a look at them quickly and let's see what they show. Okay, what's this one mean? This is crude oil consumption in the United States, Canada, Mexico. And this actually... Once again, you see it's risen a bit, but the rise there for crude oil consumption is that doesn't include that some of this crude oil is turned into products and exports, right? So that, you notice that the consumption of products was flat, but the consumption of crude oil is rising. That's because these three countries are also engaged in exporting some of that to the world oil market that we're not using domestic. Okay, next slide. Let's see what the next one is. Is there another slide? That may be it, I'm not sure. Okay, well, let me... Oh, here's another one. Natural gas. Yeah, I think the thing about natural gas consumption, once again, you can see it's risen and it's very seasonal. For the winter time, there's a big spike. I think that's... And the US is blessed with lots of natural gas storage, which makes this possible. We have lots of underground geologic caverns that allow us to efficiently store large supplies of natural gas in the non-winter seasons. You can see it moving up. You can see it. It's quite interesting. But the surge in gas production is just so much ahead of... I mean, the surge in gas production is way ahead of consumption. So we have to keep exporting it. And that's actually why AppRink in Mexico is very important in that regard. And we just put an announcement on our website, starting on April 1, we will have a full-time person in Mexico City. Ah, good. You know, Mexican issues. E-P-R-I-N-C dot org. Yeah, and actually there's a lot of interesting stuff on the website that posted recently. I would encourage your audience to go to apprink.org. There's a great set of presentations on transportation from our Transportation Fuels Workshop. There's a little new apprink in the news section, which links to a lot of... a whole bunch of issues for, you know, sort of oil and gas nerds, you know, the IMO. What we're doing, there's a little couple of pager that announces our new program in Mexico. We're really excited about that. Oh, that's great, Lou. You know, energy is technology, and technology is change. And thank goodness you and I can cover all these changes that we need every couple of weeks. But, you know, I styled the title of the show kind of on a reactive basis, Nopec, with a rescue. And I just like to get a handle on the answer to that question. Nopec isn't coming to the rescue of anybody, right? No, no. We're going to be able to do this without a legal. We have to educate Congress. That's what we have to do. Big job. It's a big job, Jay. You need to spend more time. Well, maybe some of the... maybe all of the huge field of candidates will be watching this program and learning more about it, or at least looking at your website. I wouldn't count on it. Again? I wouldn't count on it. D.C., E. Pring, joining us from Washington, D.C., always enjoy these discussions. Thank you so much, Lou. Thank you, Jay. Aloha.