 We have the joy of talking to Lou Pooley-Resee of E-prink. He's a CEO in Washington, D.C., by Skype, and he looks great. Let's have a flash on Lou just to show you what I'm doing. He looks great. Welcome back to the show, Lou Pooley-Resee, CEO of E-prink. Yeah? Nice to be here, Jay. Yeah, we were talking about the Hawaii Energy Policy Forum Energy, Clean Energy Day. It's in the last part of August. I'm going to say the last week in August. It is just before Labor Day. And it's a popular event. It takes place every year sometime in the summer. It's at the Laniacare YWCA meeting room, which is quite large. And a lot of the leaders of energy, all kinds of energy leaders in Hawaii participate and appear. So Lou, you're coming. And if you're going to be here in that week, that would be fabulous. And in fact, in one hour from now, we'll be having our, and you can watch it if you like, State of Clean Energy talk about solar and solar technology issues at 4 o'clock in Hawaii time. And those people are brought to us by the Hawaii Energy Policy Forum. So we can actually talk about you. Lou, in your role as a Washington Beltway person who follows policy, and that means following all the things that go on in Washington, including things that we like and some of the things we don't like, there are a couple of issues we need to talk about today. One is the Paris Agreement. Last time we spoke a couple of weeks ago, it's funny how things move so fast. Last time we spoke, that decision had not been made. It was suggested but not made. And since then, it's been made. And we've seen all kinds of fallout and feedback and what you're going to call resistance, if you will, all around not only the country, but the world. And I wonder what your thoughts are about that, about the reasons for the decision as it is and the reasons for the fallout. So I think the political reasons for it where are several, part of it is based on this view that the U.S. has entered into some kind of agreement in which we will carry a lot of the burden of reducing carbon dioxide emissions and the other big emitters, India and China will not. Now, that's a kind of complicated calculation. We've been producing CO2 in the atmosphere a bit longer than they have. But I think there was a sense that it is true that the agreement as specified, by the way, which was not a treaty agreement or any kind of enforceable agreement, that's very clear. There were two or three things about the agreement that were clear. It will have no effect using the IPC, the U.N. models. It will have no effect on temperature. So its agreement was an agreement to get started, really. It didn't really have any, everybody would agree that if you ran the IPCC models, even if you didn't believe in them, they had no effect. So that's very important. The second point is that the U.S. was putting a lot of money into this U.N. fund, this global energy clean fund, and that money was put in the absence of any kind of consensus or treaty agreement from the Senate. So I think there was a lot of concern about that. It was kind of general assistance to the U.N. which the Obama administration diverted there. And then I think there was a third piece people don't talk about, which is, yes, it was unenforceable, but under U.S. law, in which many environmental groups can enter through the civil procedures of these laws, they could compel various, they can compel the EPA or compel the U.S. government to enforce certain provisions of the clean power plan, even though they're not enforceable under the agreement. So I felt the administration felt that if they had gone forward with it, it would have undermined all their commitments to their basic groups. There has been a huge fallout, as you point out. One of it is that the U.S. has deferred or ceded its leadership in the environment to the Chinese, which on the face of it is kind of ridiculous when you look at the comparison of our two countries and on our environmental control system, particularly how well we do at air quality compared to the Chinese. So those are the kind of basic inside the Beltway reasons for this. But the fallout from this, of course, you know, Governor Brown has gone to Beijing and he's entered into his own international agreement with the Chinese. And there's a lot of this action out there right now. Yeah, just a footnote to that. A lot of people on the left, I would say are very horrified by this, yes. That would be true. Just a footnote to that is that his policy seems to be to make unilateral, rather bilateral agreements just the U.S. in one country at a time, which is actually not what Obama was doing and not what earlier presidents were doing. I think he feels from a business point of view he can negotiate better deals because you take most countries and they're at a real serious disadvantage in negotiating with the Goliaths, with the U.S. Yeah, so I think that really I think for the environment is not what the administration was talking about. And multilateral groups, they're talking about trade, where the smallest country dictates the policy for everybody, you know, the weakest link. So I think that's a lot of the complaints about trade. Although they might be, they have learned that a lot of the concerns they raised about trade were overblown. I believe a lot of this stuff is not, you know, a lot of fundamental problems with our manufacturing sector in the U.S. is less tied to trade and more tied to the skill of our labor force, the role of robotics and manufacturing regulatory programs. Trade is a piece of the problem and trade only really affects a narrow sector within the economy. There's a lot of parts of the trade that are not part of any of these agreements. In fact, Wilbur Ross, the Secretary of Commerce, appeared publicly on this very issue, saying, well, there's blameless trade deficits and kind of trade deficits in which somebody did something wrong. Mm-hmm, yeah. And energy, he said, was a blameless trade deficit. Well, energy is really, energy is important, but to me there's a question as to whether pulling, well, to the extent of the extent to which energy is affected by pulling out of the Paris Agreement. And it may not be directly effective, right? I mean, to what extent is energy effective? For example, in the U.S. system, the federal, the U.S. government was doing several things, right? Not necessarily tied to Paris. One was they were putting a lot of money into alternative fuels and technology. They were encouraging, and both state and federal government, subsidizing the deployment of electric cars, subsidizing the deployment of wind energy, and subsidizing the deployment of solar energy. Mm-hmm. And those programs, and also something we call renewable portfolio standards in the utility sector, feed-in tariffs, all these kinds of things which encourage utilities to use alternative energy. That is largely left untouched by this, this pulling out of Paris. Mm-hmm. The first, the production tax credits, and those things run through a sort of legislative course that doesn't expire for two to three years. And most renewable portfolio standards are driven by the states. The president pulling out of Paris, for example, has no effect on Hawaii's ambitious plans to go 100% renewable. I agree. And he's not gonna have, you know, where Hawaii can avoid, you know, his policies or anti-policies, it will. It's in a number of states in the Pacific area that are taking that position and they're trying to do their own Paris Accord, aren't they? Right, sure. But I mean, basically, if you think about what Hawaii should care about, the Trump policies of promoting North American petroleum fuels, right, is likely to lead to continued downward pressure and oil prices. And not only that, because of some unique conditions, continued discounting of jet fuel. So actually, no one would wanna admit this, but probably the tourism business of Hawaii is gonna benefit from Trump's policies. Mm-hmm. Yeah, well, and tourism is doing well here. I must say, in fact, there was an article in, was it this morning or yesterday, for the proposition that I think United or one of the big airlines is increasing the number of tourist flights out here. So that, we're doing well. From North America or from Asia? I think it's North America. Yeah, yeah, interesting. Yeah, yeah, yeah. So, but let me ask you this, though, and this is, you know, sort of a second degree on it. So, obviously, he's created a vacuum by backing out an environmental and leadership background globally. He's created a lot of things by vacuuming. Yeah, and this vacuum that is created, people are gonna move into it, as Xi Jinping, although, you know, his skirts are not exactly clean, he's gonna try to move into it, and you know, and Putin will try to move in as well. So what specifically is he going to do? This is the interesting thing. No one really, it's like a lot of things in Washington. No one ever says, okay, tell me exactly what he's going to, how he's going to either rule the world or rule the environment. And you know, and as I pointed out, if you take a look at just, let's start with air quality. Just take air quality. And I had a slide on that that I sent you, we can either show or not. But if you look at the 10 worst, maybe the eight to 10 worst cities in China, for something called particulate matter, or PM 2.5, which is the size of the microns, it's a very unhealthy thing. It contributes to small, the ability not to see very far down the street because it's hazy. The worst cities in the US, the ones that are out of attainment by US law are just barely out of attainment. They're in the good to moderate category. The worst cities in China are out of attainment by an order of magnitude more than the US cities. So we'll have put enormous effort into cleaning up our local atmosphere, right? And people confound that with CO2. If you listen to different discussions, they say, well, this is horrible, we're all gonna die of lung disease or something because Trump killed out of a Paris agreement. But our local pollution is controlled by the EPA and by state rules, which control emissions from smokestacks and tailpipes of automobiles and then have special plans for local air quality districts, which are out of attainment. So we actually have made enormous progress and our air is, quote, clean. Well, but the EPA, you mentioned the EPA, he's taking the wings out of the EPA. Is there gonna be able to do that going forward? All of those particular rules, the regulation of criteria pollutants, sulfur dioxide, nitrogen oxide, ozone, particulates, those are prescribed in law under the Clean Air Act. The big fight over CO2 was they went to Congress, the EPA went to Congress and they were able to get the Supreme Court to say, yes, a colorless, odorless gas called CO2 is in fact a pollutant. This is where the big fight all started over this. And I think that two, two aspects of it, it's, of course, it is not in itself a pollutant. CO2 makes plants grown will not make you sick. So everything is based upon the loadings of CO2 in the environment, in the atmosphere, what it would do to the climate long-term. And I think a failure to separate local air quality, local environmental standards, which are part of integrating into our home legal and cultural framework and climate, it's sort of gotten all mixed up and Trump decided to separate the two. Yeah, but let me add one thought though, and that is this. Okay, Xi Jinping cannot, he has a certain credibility problem because China is not all that clean. And I don't think that Russia is all that clean either, but it's not necessarily an environmental leadership. It's the apparent environmental leadership. It's organizing global agreements and organizing global conferences and making speeches and carrying the flag for environment, even if you have a lot of work to do in your country. And I think that is what's gonna happen. Even if Xi Jinping is not in a position to clean things up, he will be in a position to say that he will clean things up. And he will at least talk to talk. That's the very reason Trump got out of the agreement. He's been talking about it because he said, our emissions are falling, right? And they will continue to fall through 2030. China does not even begin to address its total loadings until 2030 and neither does India. And so his views, that's a bad deal. I don't want to be part of that deal. That deal doesn't require them to do anything. Now, the Chinese have a different story on that, but. Yeah. So how do you see it? I mean, how do you see it affecting the US position on not only environment, but energy in general? I mean, we do have a certain hegemony in this area, and we have been the leader in both of these areas for a long time. Will this vacuum that he's created, will the loss of what do you call it, moral leadership that he is developing here, will that affect us economically over time? Or do you think that within his administration, whether it's four years or, oh my God, eight years, we not have an effect from what he's done? Well, I could see it's possible. US is a huge elephant in the room, if you like. And so it's really hard to say, okay, we're going to punish the US when we are now exporting a million barrels a day of crude oil, largely to Asia. We are exporting four billion cubic feet a day to Mexico. We are importing large supplies of energy electricity from Canada, so at least our energy sector is quite integrated into the world market, and there's no evidence that's going to change. There is a, as we talked about in the past, there is an initiative to expand US LNG exports to the Pacific, and both China and China has said it is prepared to buy more LNG as a substitute for some of its use of coal. So there's supposed to be gas for coal. It's still fossil, but it's an improvement. Yeah, and actually the one issue that deals, the one aspect of natural gas is that there are no particulates. So in terms of controlling the atmosphere with some of the more serious pollutants, natural gas is a very effective strategy. As I recall, but it doesn't help you with climate as much. As I recall, and we spoke last, this is interesting. I think you were anticipating one of the alternatives and perhaps the more likely alternative was that Trump would attempt to renegotiate the agreement, you know, accept, reject, prenegotiate. And you thought, there's only a day or two before he actually decided, you thought that he would attempt to renegotiate. Well he did, he did do that. It's a typical Washington thing that people always try to compromise because they don't want to do that. But he's obviously a different kind of character and he was convinced. And my understanding is that the administrator of EPA, administrator Pruitt and some of the folks in the, and Steve Bannon and other folks, they came to the president with lots of facts and figures. And Ivanka and Kushner and maybe Tillerson and some of the other folks who wanted to stay in the Paris Agreement, they came to him largely with emotional arguments. And he actually was quite impressed by the legal concerns and the hard facts he was given by the other folks. He says, look, I don't want to be part of this deal, but I'll leave it open to negotiate in another one. Well, let's take a short break. We're gonna take a break and move on to our next topic. And that is the continuing failure of OPEC to raise oil prices. We talked about the outlook for a base load that is fuel oil costs and whether they are going to continue to be modest and what effect that will have on world energy markets and on the U.S. That's Lou Pooley-Racy. He's the CEO of E-Prick and Energy Policy ThinkTech in Washington. We'll be right back for more. You're watching ThinkTech Hawaii, 25 talk shows by 25 dedicated hosts every week, helping us to explore and understand issues and events in and affecting our state. Great content for Hawaii from ThinkTech. You're watching ThinkTech Hawaii, Hawaii's leading digital media platform for civic engagement, raising public awareness on tech, energy, diversification and globalism. Great content for Hawaii from ThinkTech. Okay, we're back, we're live. We're talking to Lou Pooley-Racy across the miles. He is the CEO of E-Prick in Washington, D.C. And we're talking about two very interesting energy issues that are on the deck. One is the effect of the Paris, the withdrawal from the Paris Accord a couple of weeks ago. And now we're going to talk about the failure of OPEC to raise oil prices, the outlook for base load, fuel oil costs, those increases are going to be modest and not rising very much. And this puts more pressure on the Hawaiian dream, which is a distant dream of 100% renewables in the near term or at least by 2045. So Lou, can you talk about the OPEC decision and what caused it and how it affects things? Yeah, so we went through a period in which oil prices were quite high as much as $140 a barrel. It caused a lot of turmoil in the U.S. and even the right. And I think a lot of that is, it's really unfortunate because governments, because they have very short electoral cycles often, they behave on short run information and they can't really get their, they can't go to their constituents say, look, the long run price over the next five to six years is not going to be that bad. So please don't throw me out of office tomorrow. People over there don't have a lot of patience. They say, no, you need to fix this now. And so what has happened is after oil prices, in the period of time the oil prices ran up before the collapse in say 2013, 2014, production in the U.S. expanded. I have a chart there, just, but we went up from a relatively modest production and by 2015, middle of 2014, 15, we were almost at one of the highest peaks over nine million barrels a day. The price fell, but it went down to 2030. It's now recovered to as high as 5860. It's now around 45. It's fallen back and in that period, the U.S. has done two things. It's drastically cut its cost of production. It's drastically improved its technology application to the oil field and U.S. production is rising again. At the same time, Obeck is not getting the demand, they're getting demand. World oil demand is growing by over a million barrels a day, but there's a lot of oil in the world and the dream of raising oil prices to 60 or $70 a barrel is going to be put off for a bit longer. How much longer would you say? When can we expect to see it climb up again? I think that some of us have to accept that it's now quite possible that the long run price of oil is gonna be closer to $50 than it is 70 and that sure will go through perturbations and ups and downs and this is gonna put enormous pressure on the Saudis and the Middle East producers, but lots of parts of the world, including the U.S. and Mexico now, Argentina, other places are learning how to produce this shale oil at relatively low cost. And as I say, as the Middle East producers are pulled out of Asia, U.S. is beginning exporting a very large volumes of crude oil to that part of the world. And you haven't mentioned the effect of LNG on this. LNG has a depressing effect on the price of oil, isn't it? LNG provides, there's two problems. When the price of oil falls, the incentive to move away from oil to LNG is declines because the cost savings aren't there. But if you look at Mexico, it's a good example. Natural gas can be transported by pipeline to Mexico at very low cost and we have a very open border and almost all of the natural gas going into Mexico, which is a massive amount, is backing out the kinds of base load, fuel oil, electric generation you see in Hawaii. So Mexico is replacing all its highly polluting, very expensive fuel power generation with natural gas from the U.S. And that eats into the market as far as oil is concerned. Yeah, that lowers oil demand. The other thing is is that the traditional growth in diesel fuel seems to be abating and the world fuel that's growing the most these days, it's not electric cars, but gasoline. Yeah, sure, more cars. Gasoline is outperforming diesel, even in Asia, which was traditionally a very big diesel market. As long as people feel there's a supply of gasoline at prices they can somehow afford, they're gonna prefer, I think, gas cars to electric cars because electric cars are generally more expensive, especially if you don't have a tax credit on it or if the tax credit is declining. But let me ask you this. I mean, what do you think happened in Saudi Arabia when Trump was there? They're a big player in OPEC. They are looking maybe for guidance, maybe to wanna know how the great leader in energy in the United States wants them to move. Does he tell them something? What position would he have taken? No, I think they, I'm almost sure this was hardly discussed. I believe the big benefit to the Saudis and the Persian Gulf states, except for Qatar, of course, was that he agreed to restore the U.S. traditional relationship, of course, in Trump style, which is a little different than me, but of a solid kind of Sunni alliance with the U.S. against what they believe are the more radical intonations or inclinations of the Iranians and some of their sponsors in the Middle East. And the Saudis embraced this wholeheartedly. This is what they were really looking for, not the oil problem. That's a long-run problem that they're working on themselves, but we've got 3,000 oil producers in the U.S. We can't make an agreement with anyone. So that takes me to the next question, is that was it the right decision? Are they taking the right course of action now in terms of their own interests, their own economic interests, or should they be, and what would you advise them? Should they be raising lowering prices from where they are now? Is OPEC doing the right thing for its own interest? So that's a good question. I think that the interest among all the OPEC participants are not the same. And the Saudis, which have a vast oil reserves and resources, they can actually get by with a lower oil price. And some of the other participants cannot. So it is not in the Saudi interest for the price of oil to be $100 because at $100, the rate of world economic growth slows and the substitution away from petroleum occurs at a very fast rate. So they've realized that. Now, for the Saudis, they think the Goldilocks price is like 65 or 70, but they're having a hard time getting there. And they're going to have to do major, major reforms within Saudi society if they're going to survive at $50 a bit. What about going down? I mean, you alluded to the effect on the world economy. If prices get too high, that slows the world economy. But suppose they go to 40, or who knows what? Something below 50, would that accelerate the world economy? Is that what we need? So it depends on whether all the participants in the world economy think it's a long run shift or just a short run shift. We have this problem in the US. The traditional view was if oil prices fall and American consumers save a dollar, they run out and spend two, right? That's what we thought was going to happen. In the 2014 downturn, where we had this massive decline in oil prices and literally overnight $75 billion in upstream oil investment disappeared in the US, right? But consumers saved a lot more than that. We did not see the bump, because we were still in the post financial crisis era and consumers decided to take that money and pay down their debt. So, and I think it started to come back later on. We started to see more spending, more vehicle miles traveled, things like that. But it was not the usual boom we see from falling oil prices. You know, one thing that occurs to me is that, and you alluded to this also, that the pressure holding the OPEC price down actually has a negative effect on policy to develop renewables in this country and probably elsewhere. How does that work? What's the linkage and what do you predict? This is a kind of traditional dilemma in economics. Because people say it's terrible. We would be better off if oil prices were 100. Well, that's not exactly true. If prices oil was 100, we would be a lot poorer and we would take our less money that we have and start to look for ways to find alternatives. That's a very costly strategy. I don't think people in Hawaii would be really dancing in the streets and they found out jet fuel doubled and the price of gasoline was $7 a gallon. So the upside of this is we can all ride bikes now. That's actually what people are trying to get out of this. And this is the problem. People kind of do want their cake and eat it too. Yeah, right, you can't eat your cake, you have your cake and eat it too. Well, it's wonderful to talk to you. I so appreciate these discussions. I look forward to our next time two weeks from today and I will also look forward and try to make plans for your trip in late August. I mean, definitely we'll get together. Thanks so much.