 Okay, this is ThinkTech. I'm Jay Fiedel. We're talking about Energy in America here at the three o'clock block with Lu Puirisi. He's the president of Eat Prink in Washington, DC. It's an energy policy research organization. And he joins us to discuss the intercession of energy and the presidential election coming soon. Hi, Lu. Welcome to the show. Great to be here, Jay, as always. So you wrote a paper on this and you have some slides. I wrote, actually, I wrote a kind of internal discussion paper, which I think we shared with you. It's just our ideas, you know, so it's not, we're not going to publish it. And it's not carved in stone, right? No, none of this is all very speculation. And, you know, as we always say, forecasting three things, the election, oil prices, and how the courts will decide on pipelines is a mugged game. We don't like to make forecasts. Guidance to how to think about policy. That's what we're going to do tonight. Why don't you roll out your thinking and your slides on this and I can be the gadfly, okay? Yeah, there's a lot to talk about here. I think we'll have just time to get through that and talk about the key issues because what are political leaders, whether it will be Biden or Trump, I think in this case, it looks like the tea leaves are pointing towards Biden because I say I'm not going to forecast the outcome. And he does have a lot of, you know, I think he has a strong team around him in many areas. So, excuse me, I'm outside. I just have to get rid of a bug. Okay, so let's, so shall we get right to it? Because I think what I'm trying to do is give a sense of what the size of the problem, if you might consider the problem or what we might not understand the scale and scope of how the world uses energy and why a lot of the initiatives of our political leaders are sometimes not as realistic as they need to be. Okay, let's just say that. But I think the data will speak for itself. So why don't we go to the first picture here? And as you can see, this shows us global primary energy consumption. I take it the slide is up. Yes, it is. Okay, it's hard to read the numbers. So you should tell I'm just going to say I don't think you need to read the numbers here. But I think what you want to see here is if you look at this, two things I'd like you to just take from this chart. One is that if you go to the very tippy top of the chart, you see, you will see other renewables, solar, wind, nuclear and hydropower, but you will notice that well over 90% percent of the world is still driven by what we call traditional fuels. In fact, biofuels, which largely in the world context means wood, still and in a way you can consider this a renewable fuel, but far exceeds even nuclear power, solar and wind together. So I think that's a really important task. Everyone who thinks we can transition this fuel mix to some nirvana of all renewables or 50% renewables or 30% renewables needs to kind of take a hard look at this chart and say, wow, this is kind of a big job when you consider the whole world. Yeah, and I think the chart tells us that to the extent that there are people in this world who wanted to avoid the quote, traditional fuels, I take that as fossil fuels, we have not been successful. We have not been as ardent as we would have liked to be. I mean, I think we've made some interesting developments in the power sector, but even there worldwide, I think we have to be careful that we look at the successes in the US or Denmark or Norway, we say, oh, look, we're almost there. No, the world does not consist of Denmark, Norway and the United States or the OECD. The future of the world is Africa, Asia, even parts of the Middle East. These are the developing parts of the world, where you're going to see massive population growth, economic growth, and people in those countries as they become. Remember, about 160 million people enter the middle class every year, and they want air conditioning. They want to be able to cook inside and get a car or a motor scooter. That's what they want. Right. And the ones who haven't entered the middle class, they just want a plate of food. They're not interested in anything beyond that. And so let's go to the next slide up, which is what do the big forecast models say about 2040? Because that's what we talk a lot about. We're going to get to a transition in 2040. The first chart, just to put it in perspective, your first chart took us to the end of 2019, essentially January of 2020. So it doesn't account for anything that happened in the drop-off after COVID? No, no, no. We're talking big time here. You'll see a little bit of the drop-off COVID in a couple of slides I have here. And actually, by the way, COVID is not going to change the long-run outlook. We just did actually a very interesting webinar, which is available on our website on a recorded basis. Anyone who didn't wasn't able to attend. That's eprint.org. Yeah. If you go to eprint.org, you can register and see the recorded version. And there was a discussion of how does COVID really change the outlook for long-term demand. And if you go through history and other disruptions and stuff, you'll see that long-term demand is driven by these fundamentals of what things cost and economic growth. That assumes that we won't have a complete crash of the planet. And I don't necessarily mean from environment. I mean from geopolitical costs. Well, you know, we have data going back to 1880. I mean, we've had a crash before. We've had the Great Depression. We've had World War II. We've had lots of crashes before. But the history of mankind is that we sort of figure things out and we restore economic growth. I mean, yes, we don't. Okay, Lou, but you know that we may not perfectly agree on that. I think we're in an apocalyptic moment. Yes, I understand you want to, everybody loves the apocalyptic moment. It makes great movies, but it is not supported by history, right? And so I can rely on history and other people can rely on science fiction, but and it's logic as the case may be. Yes, we might get hit by a meteorite or have a nuclear war. There are bad things that can happen out there. The caldera can blow up in Yellowstone Park. I agree. There are lots of bad things can happen there. And these so-called long tail incidents, we can talk about that someday because that's a very interesting area of research on climate policy. So let's go to the next one. What did the big models say about 2040? And I don't want to overdo this. This is from ExxonMobil, but it's not different than the energy modeling form or BP or Shell or lots of different. And I would say what's interesting about this is there are two things. If you look at the forecast for 2040, I remember in the Exxon model, they are using an assumed price, kind of a shadow price for carbon of $80 a ton in the developed world and $30 a ton in the developing world. And even with that in 2040, you don't ultimately alter the total fuel mix. I think that if you look at the chart on the right, you can see that, yes, the percentage of oil declines a bit, the percentage of natural gas grows a bit. But when solar and nuclear, they don't really dominate the energy sector even in 2040 under a scenario in which you're imposing pretty substantial taxes on the use of carbon. And if you look at the chart on the left, which I think is very interesting, where does the, how do you, what do you achieve by all these efforts to try to alter the fuel mix? And you don't really alter the fuel mix, you alter the total amount of fuel consumed. So if you look at the areas for the OECD, China, India, you can see the pale color. And that is what the effort of putting a tax on carbon does to so-called fuel reduction use, efficiency gain. Now, for some people, efficiency gains just mean you turn your air conditioning off and it's hot in your apartment, right? Some people walk instead of buying a car. Okay. So, and so what we've been arguing and what we've been trying to figure out in this, we're getting to start a long term, an effort looking at long term uncertainty on these forecasts because we believe that if the long run price of fossil fuels are closer to let's say 50, $60 a barrel or a crude oil and six, five, six, $7 a thousand cubic feet per gas, which is a pretty low price, you know, sort of what, what we might recover to in a, as you get economic growth that those efficiency gains may turn out to be very difficult to achieve. And so one of the thinking that needs to take place is, okay, what does it mean? What does it mean not to achieve this outcome? And I would say many in the environmental community would view this as a horrible outcome already because by 2040, under a cost-based model, with what we know about existing technologies and what we know about efficiency, cost and everything, we are not going to alter the fuel mix. We might alter total use. That's very important to remember that, but we might not alter the fuel mix. Now, before I go to how, for example, how a Biden campaign might address some of these things, I want to look at two more pictures here because they're very important to the political and economic forces a new president will face if he tries, as he tries to accelerate these transitions. So the first one shows USMCA, Crude Oil and Petroleum Products Net Trade. Now, what that means is if you take the US, Canada and Mexico as a single production platform, what is, and you sort out all the trading gasoline and diesel fuel and Crude Oil, what is that platform doing? Well, that platform, even at the end of last month, right, so even in a few weeks ago, that platform is a net contributor to the world market of two million barrels a day. So after we've sort of devastated the US industry, it started to come back a bit. It's really important to understand that it's pretty resilient. We're still, so OPECO has this kind of dream about the US importing eight million barrels a day. Well, we might be importing a lot of crude, but we're also exporting a lot of petroleum products. But I'm getting the feeling that you're making some assumptions based on historical, historical experience. I'm showing you the data as of last, but our economy is coming apart right now. And there's no immediate resolution of that, no solution. Well, actually, that might be a topic. And I worry about the economy coming apart and changing the address. It's legitimate to worry about the economy, but actually what's happening is worldwide is road demand is up. Over the road demand, trucks, cars is up. I would say diesel fuel consumption, gasoline's up, is coming back. And then I can send you, I can share some data with you later if you like, but jet fuel is down. Well, they united, terminated 36,000 employees today. And nobody wants, there was a report by, I don't know, I think it was CDC saying nobody wants to fly anymore because of the social distancing problems. I don't know when that's going to be resolved. That's going to go for a while and some of those airlines are going to be. I suspect it'll be until next year when that gets resolved. Eventually this will get resolved. We'll have a vaccine and airline travel. What I'm saying is that yes, ultimately it'll be resolved and we'll be in a new world, very, very speculative to try to figure out what that new world is like. All I can do is look at the historical record. We have always come back. Okay. People still want to go places. This notion that ride hailing saves gasoline. There's a fascinating paper by Mark Mills which looks at all of this. Mass transit is down, but commuting is up. And that is actually a topic for another program, I suspect. And so there's so many interesting things happening there. And then let's go to the next picture for a second. And this shows you net gas trade. Now, if you look at the black line, as that black line goes negative. Can we see that slide please? This is US natural gas trade. So as the black line crosses the axis and goes into the red, that is net exports of natural gas from the US, Canada, Mexican production platform. And largely, yes, a lot of gas moves from Canada to the US, from the US to Mexico. But if you sort of take the whole market as an integrated platform, we are shipping more gas to the world than these three countries are using internally than imports. That is a trend that has increased. That has increased because you can see the green line is the net. Is it still increasing? It's still increasing, but at a much slower rate. And the US LNG exporters are having a very rough time right now. It's increasing at a much slower rate. Well, I recall that you, E-Prank, made a variety of trips to Asia to track on how it was doing and how Japan was going to be a hub to sell American gas into Asia. We still have a major joint research program with the Institute of Energy Economics, Japan. We're going to do a series of workshops in the virtual space where the annual consumer producer LNG meeting will take place in Tokyo on October 12th, but it will also probably take place in the virtual space. So yes, the world LNG market is suffering now in terms of the producers. The consumers are finding bargains everywhere for natural gas. Why is it suffering for producers? Because they cannot make much money selling that gas right now. Its price has fallen on the world market, particularly in the Asia Pacific region and in Europe. So the gas consumers of the world are doing very well right now. They're buying lots of gas at low prices, and hopefully they will be backing out coal with that. They won't be doing it. We're hoping that. So that is just kind of a background for the next slide I'd like to show you, which is what might the Biden presidency try to do? What would he try to do? And this is of course very speculative, but I think it's not far off to at least the aspirational goals of the new administration should a former Vice President Biden become president. I think one is going to rejoin the Paris Agreement. I think there's no doubt about that. Two, he's going to go to the extent that we have flaring and leaks, oil and gas wells. I think they're going to see a lot of regulatory efforts to try to control that, right? Remember, keep in mind, these efforts are really directed at the United States. That's where the first two charts are very important. We are part of the world. We could succeed wildly, but unless we all through the world outcome, it's not going to make a difference in terms of carbon emissions. We can talk whether that makes a difference in terms of climate. From your internal memo, I got the idea that the list of possible things that Biden might do came from the website, his campaign website, possibly from public statements that he's made. Yeah, just talking to people. Yeah, exactly. Maybe from what he was endorsing before. Yeah, I don't think it's a secret. This list is not a secret. It's a kind of expectation. Now, I say in my reaction, though, my reaction is as and when he gets to be president, environment, I'm sure he's going to want to try to restore old policies, you know, Obama policies on environment. He's going to want to go to the left more than the right. And all the points on the chart. And I don't want to interrupt you to do that. But I just want to add this thought is that that's not going to be, if I were him, if I could appreciate him. That's not going to be his top priority. His top priority is going to try to deal with the wounds that the country is experiencing right now in terms of, you know, the demonstrations, the Black Lives Matter, the racial justice, the concern with the Congress, and its, you know, its dysfunctionality. I mean, there's so many things that have torn our country apart in the last three years. So environment was nice. Oil and gas regulation is nice. But I doubt that that's at the top of his priority list. We have a lot of, a lot of problems to solve. I think you might be right about that. And let me just tell you from discussions I've had with people in the campaign, I think that there's a good chance that Biden's number one priority will be, as you described, dealing with healing these divisions in society, but also rebuilding the American alliances. I believe that's going to be, and there's very likely, I wouldn't be surprised if he is on the road extensively in his, perhaps his first and only term, if should he be elected, but he will be traveling extensively to, we have a big issue with China. And I think his, if you look at the architects supporting him and the foreign policy folks, I think they're going to be saying, okay, how do we build traditional or old traditional alliances to have an effective counterweight to China? How do we keep the global democracies together for the kinds of value? Oh, yeah, absolutely. Well, I suspect these two issues will be at the top of the list. Well, don't forget COVID. Yes, COVID, of course, is a huge problem. And so I would put infectious diseases, building out the alliances and dealing with these social divisions in society. That's, you're, I think you're absolutely right. I mean, we do energy. So this is what we talk about. We're not really experts on that other stuff. But I do think that, and in fact, that's why I think the last picture, last slide I want to show you is very important because he is going to, but you know, so my view is how might the real world affect these initiatives? And I think what you pointed to is very interesting. The real world might affect these initiatives in the first order just by taking his time away and putting it on these other issues. He might not have time to resolve these disputes. They may be allowed to fester for a while, but so, so building traditional may, so many in foreign policy, when you travel around Asia or Europe, I think he's going to hear, well, Mr. President, if your policy is going to end the export of LNG to Europe or to the Asia Pacific region, are we still going to be have access to American crude oil? What, you know, are you going to be doing these things? So I think that that made temper policies which would severely restrict U.S. production, right? Policy limits U.S. production could limit gas, could, you know, hurt him if it raises gasoline prices likely to take a deep breath on that. By the way, I don't believe Biden is anti-business. You know, I don't believe he's anti-business. Limiting natural gas supplies could make it more difficult to deploy the renewables because it's a very essential backup fuel, right? Growing debt from, I think this is an issue no one's talking about. But when we come to the other side of this, and we will get to the other side of this. Okay, I'm going to hold you to that, Lou. Right. We will get to the other side of this. We are going to have a massive debt, and that debt is not just funny. You know, if you look at Britain after World War II, it killed economic growth in Britain for almost two decades before they could get that debt under control. They owed so much money. And we're going to have this debt, and people are going to say, well, I want a four billion dollar program to deploy all this exotic renewable technology. And some was going to say, well, you know, Mr. President, maybe we don't really have that money, or you're going to have to really raise taxes a lot, or maybe we should be putting our time in infectious diseases. I think the environmental community has not really struggled with this yet. It's not going to be a walk in the park. No, and we haven't struggled with infrastructure in general, which has been a perfect child. Right. And I'm pretty sure he will deal with infrastructure in a big way. But infrastructure is not just about the environment. Oh, no. There's a lot of normal things in infrastructure like this. Yes. And they've been abandoned. Bridges and power. But there's one thing you mentioned that I think we ought to just take a quick look at, and that is this. You know, the thought was that if you get to the other side, we're going to have a lot of debt, huge amounts of debt. But we're not going to get to the other side. In my view, we're not going to get to the other side very quickly. And it's nice to know that somewhere out there there's a vaccine, but we don't know when. And it could be a while. And so in the meantime, everybody's going to be reluctant to participate in an economy. And the economy right now, it's not productive. And you can't collect tax money at either state or federal level. And we are going down, down, down without without really having a reopening. In fact, the reopening is going the other way. So all of this means huge government debt, so much so that even while we try to get to the other side, we are in dire straits over our fiscal policy along the way. So it's not only that we're going to big debt at the end, we're going to have big debt in the middle. It's coming soon. It's going to be, it's going to be a slog. And it's going to have, we're going to have higher taxes. And if we don't do this intelligently, we're going to have a lot lower economic growth. So I agree. I agree. I think it's going to be a very big struggle. And we're going to have to start to deal with that in a major way. And so the sort of the purpose of this little discussion today is to show you that, I mean, a question I have raised with a lot of folks. If you think, when we get to the other side of that, and the Biden presidency, we're finally going to fix all these problems to transition the world economy to some idealized view of a renewable world, you'd better think pretty hard about that. No, I agree. What has happened in the past few years, and I guess I should be talking about the Trump years, is a lot of things have changed. And people say, oh, well, you get to the end of the Trump administration, and you just turn it all around 180 degrees, and you're back to where you were, and you're making progress, and all this. It doesn't work that way. Trump has had, and his administration has had, a significant effect on the course of history. It's embedded in history. And so when you get to the end of it, you can't just shirk it off like an old shoe, you still are burdened by it, and it's not as if you could reverse things and go right back. And I hope Biden realizes that. You can't just go 180 right back. You have to make the same arguments, make the same gains, consider all those various influences, political, geopolitical influences to get back where you want to go. And that's going to take a long time, not only with energy, but with everything. Yeah, I couldn't agree more. It's not going to be it's not going to be an easy road. But you know, we have to allow, you know, I guess I have a little bit different view. I do think I think we never got to the point where he said, look, COVID-19 is bad. But shutting down the entire economy is also bad. We never really wanted to confront that it's bad. Okay, it's bad. But how do we proceed with something like this? Was it right to shut the economy down or should have we taken other kinds of social distancing measures? Was it really essential to all these dramatic things? And we didn't know enough. We were ill-prepared. I don't believe the U.S. will be ill-prepared next time. I believe we're going to, we're pretty good at figuring stuff out. Or as Winston Churchill was purported to say, the United States always does the right thing after it tries everything else. And I think we're going to figure this out. Well, I agree, but it's not going to be on this administration. I don't think that he gets it yet. And the result is he's going to keep on making mistakes like 99% of the cases are harmless. Are you kidding me? I don't pay any attention to anything Trump said. I look at the data. Actually, the death rate has been, even though the cases are up, we've got some hot spots, but I think we're getting better at treating this thing. Actually, death rate has continued to decline. It was a bump yesterday, but I believe this was from old data put in the system. We're getting better all the time at treating it. I think the trials for the, the trials for some of the new, for the vaccines look very promising. And it just depends. I think most Americans like me, we're optimists, right? I don't think there's a real payoff to being so pessimistic. You become paralyzed, you know? No, no, we can't be paralyzed. Well, we are, we are paralyzed now because we're getting nothing from Washington. Nothing. In fact, we're getting reversed. I mean, now he's playing with the educational system and bringing, sending money to religious schools. And I mean, what, what kind of distraction is that? But when we get to the end of him, and we get Biden's say, another president, all the things that have happened will be lessons for us. And I agree with you, we will do better in the next administration, not this one. And what will happen is, okay, the federal government will step in and do things. It will, it will develop, you know, national policy. It will support the states and the cities. We won't have a blame game. We'll have national policies that will actually deal with it. Once we deal with COVID, then we can establish a rational reopening and get back to business. It's that sequence. But there is some basis for this. How is it that these cities, which have been democratically run for decades, which have these burdensome pension systems and these high degree of bureaucracy and regulation? These are the places that are having the most problems. And really, I think for the Democrats, they need to heal themselves to some extent. They need to be honest about that some of the policies in these cities have failed miserably. It's not everything is not what, you know, Washington, it's not a lot that what people have the wrong idea. I grew up in California. Our local government was the key to everything. Yeah, Washington sends some money. Okay, that big deal. But your local politicians are still the most important people, your mayor, your governor, and they need to step up and take some response. I wouldn't disagree with that, except that he tries to manipulate them too and threatens them and tells them he's going to cut off funding and they have to reopen and using all kinds of federal leverage to make chaos. So I think, I think, okay, maybe the next show. But I don't think we agree on that. I wouldn't put any blame on the local governors or mayors. I would put it all on the federal government for abandoning the effort. That is a huge mistake. Your local government has, they have a lot of, they have traditionally states have traditionally had the primary public health function in this country from the beginning. This is a pandemic, Lou. It's not like some small thing. It's not the first pandemic we've had. We had an Asian flu in the 50s, 150,000 people died and we only had 177 million people. It's not the first time this has happened. I think we have big, I mean, I do think the question of how these diseases spread and how we get prepared for these things, that's, I mean, I believe we worked on the wrong stuff. I think we have the wrong president. I think he's not capable of managing this issue and he will not be capable through the end of his term. However soon, hopefully soon that will be. Right. I'm not going to defend Trump. Okay. I'm not going to defend what he says and how he's done this, but it's a huge mistake to think, if we can just get the right guy president, all our problems will go away. And we don't really have to do anything for ourselves, right? We don't have to make sure the governor pays attention. I'm not saying that. I would seek collaboration. I would seek working together. You'll have to agree with me that it hasn't been that way at all. I mean, you know, I'm not actually, I'm not going to defend Trump, but Newsom said he got everything he asked for. Cuomo said he got everything he asked for. They still had he, this was a very tough problem. It was a very tough problem. And I suspect somebody else could have done a much better job. I have no doubt about this. But so before we get to that, and we should get to it, I think we will get to it, but can you summarize, you know, what you want to leave with people as a result of the analysis in your internal matters? Yeah, so what I would like to leave everyone with is, look, the climate and renewables are not the end all and be all of your personal well being long term. It's a world is a much more complicated place than that. And you need to work on the right stuff. I mean, we as a public policy need to work on the right stuff. And COVID-19 for me, my view is that's change that should change your attitude of what's important in life, right, protecting ourselves against a plague or is very important. And we need to be prepared for that going forward. And the politics of that, you know, just the politics of that are one thing. But we need institutions, we need to build other institutions that can deal with that. We need to get we need to get healthier as a society. These co-morbidities have made a lot of us more vulnerable to this than they need to be. A lot of this is personal responsibility, too. It's not just not just and it's also justice and inequality, right? A huge swast of the African-American community have been harmed by this partly because they live in more crowded conditions, partly because they have more co-morbidities. And the New York Times can only find that out on a freedom of information act soon. So anyway, let's leave it there, Lou. That's a longer, that's a problem outside my expertise. Okay. That's Lou Puliarisi, is the CEO, the president of EPRK Energy Policy Research Foundation in Washington. And we so enjoy having this kind of ongoing conversation about these various influences in our world. And I mean the whole world. Thank you so much, Lou. Okay, Jay. Aloha. Take care. Bye.