 Hey, welcome to Stand the Energy Man here on Think Tech Hawaii. Stan Osserman, coming to you live and direct from Kailua, Hawaii. And the weather's nice. Book your vacations now. It's not gonna get any better. So perfect weather right now. Even good surf on the North Shore if you're into big waves. So come on out. But today, we're gonna talk again with Dan Goen, one of my regulars on the show. And we're gonna talk on the macro end of energy. I like to talk about hydrogen and what's going on in Hawaii, but there's so much happening in the world right now that's different. It's really different. And we can't look at energy the same way that we used to look at it where it was just something that we could negotiate the cost of a barrel of oil and we could manipulate things and we could take care of inflation because it was kind of just a finite problem to solve for the federal regulators and stuff. But now you have huge economic, international, geopolitical, national security, things in motion all the way on the other side of the world that most Americans are just oblivious to because we're busy talking about silly local stuff instead of looking at really big picture stuff. And just for an example, you can't stop producing oil and turn it all into clean energy overnight. I mean, that task is a multi-year, if not decades long or more, goal that we've done a very poor job of transitioning into. And now we're running headlong into international relations issues and other things that are impacting the cost of energy. And so we got Dan going on and he's gonna give us a little bit of a brief but before we actually get into the brief, I'm gonna ask him a question that is really important and we'll probably do a whole nother show about it. And it's, okay, Dan, a barrel of oil has a lot of energy in it. And right now it's going for in the 80-something dollars a barrel. What do you think a barrel of oil is really worth in terms of work and energy? What's the real value? In my opinion, as an engineer, I think it's worth $10,000 a barrel. So what we're paying $80 a barrel for and screaming about because of the increase in gas prices is nothing compared to the real value of that oil in terms of manufacturing durable goods and important things like even things that we think are important for clean energy, like wind turbines and solar panels. If you don't have oil, you can't make those. And we're sitting here just kind of focused on the fossil fuels being burned in turbines and stuff like that. And we're not really thinking about the value of that oil. And I've been telling people for years burning oil in machines is like burning $100 bills. It's just once it's gone, it's gone and you have nothing except the ashes from that $100 bill. And it's the same with the oil. So Dan, I'm gonna let you take it away and start off with your presentation. Then I'd like to get into a discussion what's happening over there in the middle Asia world. I get to slide number one, please. So what we're gonna do today is we're gonna, just a pitch for the company but what we're gonna do today is we're gonna start off with a couple of slides. And what I'm gonna show is the hill that Stan and I are climbing up and so everybody can see it for themselves. I fully expect everybody to play these videos a couple of times and watch the first 15 minutes in these slides and hopefully digest what we're gonna show. And the second part of this we're gonna show you what's going on right now in Europe and what's happened, the collision that's occurred probably what caused it a long time ago, right? And probably how this is actually gonna get resolved. And it's gonna get resolved in a way, well, I'm fairly sure the folks in Washington, DC don't want it to resolve this way. Maybe they know about it, maybe they don't but we're gonna go ahead and talk about slide number two, please. Okay, so what that slide is that's a global oil demand, that's the latest data. The world right now we are back to consuming 100 million barrels of oil every day. Now, according to the International Energy Agency the surplus, the buffer, the extra oil the world has is only about 1.5 million barrels. And we will, that buffer, that excess energy, the excess oil will be out by July. The reason why you're seeing inflation is quite literally the human species we're burning up, there's more demand than there is physical supply of oil. And so as we have more and more demand that means you get higher and higher inflation. That's why you're seeing inflation because right now our growth is being limited by the master resource and that is oil because oil is in everything. It's in all our transportation systems. It's in the plastic in this laptop, your cell phone, the paint, the shingles on your house, everything. And now this master resource is limiting our economic growth. Now, if everybody says, well Dan, the economy's not growing all that great right now. Yeah, we all know that. Okay, that's the sad part. So the other thing you need to remember is that our old oil fields, especially the super major oil fields, they're all more than 40 years old and the annual decline rate of the world's oil fields is 6.7% per year. So if we're burning through 100 million barrels of oil, 100 million barrels every day, that means that by next year, by December, by January of 2023, the shortfall will be 6.7 million barrels every day. So from here on out, we're running into a shortfall. Maybe there's some things we can do to extend it, but that's kind of what I can add even more to it. Let's go to the next slide, please. Okay, that's Alaska LNG project. That is a project it was approved by the Federal Energy Regulatory Commission in December of 2020, the Army Corps approved it in Q4, 2021. The US government has provided a 30-year loan guarantee of $25.6 billion. So in 80-20, in other words, the oil and gas business had to put down 20% and the banks loaned the other 80%. So what's going on here? Well, it goes back to this whole saying, Stan and I have talked about for quite a while, and that is the last thing that passes to the oil head is natural gas. When you have an oil deposit, the very bottom deposit is asphalt, the top of it is natural gas, between the two is the oil. When they find the exact center of the deposit, what they do is they look for the edges and that's where they drill. They drill around the edges of the deposit because they use the pressure of that gas to force the oil out of the ground. You've seen those old black and white movies where the oil shooting out of the ground like a gusher? Well, that's why, because the natural gas is powering that oil to the surface. Whenever that deposit gets down to the point where there's not enough pressure to push the oil out or there's not enough oil in that deposit, right? The last thing that they pull out of that deposit and bring it to market is the gas. So what this is telling you is that Purdue Bay is going dry because there's no other reason why they would do this other than they've got all the oil out of it that they can and that's where we're at. Now, to put this, so to talk about some of the large oil fields that are being depleted around the world and more specifically in the western part of the world, I know we talked before about the North Sea going dry. Well, the North Sea was discovered back in the 60s, came online in the late 70s and the reason why it took almost 20 years to bring it online is because it's an oil field that's between Scotland and Norway. It's out on the middle of the ocean. They had to put oil platforms, lots of infrastructure, very expensive to bring that oil online. That's why it took almost 20 years to bring that oil and gas to the oil line. They had to invent a lot of technology that did not exist up until that time. The last one was Purdue Bay. Purdue Bay was actually discovered in the 1970s and didn't come online until the 1980s, 10 years later. And the reason why, if you look at that map there, they had to build a pipeline over a mountain chain. The northern part of Alaska, that's the Arctic Ocean, it's frozen. You couldn't get oil tankers up there. So they built the pipeline up over a mountain chain from the north part of Alaska to the south part of Alaska. Not only that, but that pipe had to be heated and insulated. The oil is hot enough that if they ever spring in lake, if the oil hits the air, it catches fire. All right, so there was a lot of technological engineering. It took them 10 years to build that pipeline to bring that oil to market. So the North Sea, like I said, went into a term of decline in the late 1990s. There was another major oil field down in Mexico called Cantrell, and it went into a term of decline back in the 1990s. So those three oil fields right there have set the stage to today. The term of decline of those major oil fields are setting the stage for the energy prices that you're seeing today. Okay, so if I can get to the next page, please. That there is some data from Art Berman, and Art Berman is a scientist, he's a geologist. This is a guy who actually goes out and drills wells, okay? And he's somebody I converse with probably about once a month. And an arts are really, really smart, man. He's been in the oil business for something like 40 years. I think he started at Chevron years ago. But in any case, right there, that's a combination of data of the price of oil, West Texas Intermediate, and inflation data of the Federal Reserve. And there's a pretty tight correlation with oil and inflation. Those two track each other. The price of the primary energy resource and inflation track each other, right? So if you wanna keep inflation low in the world, you need to have lots of energy, you need to have lots of oil. You need to keep your inflation low. And if you don't have lots of the master resource, you're gonna have inflation problems in your economic system. To give you an idea of some of the resource problems we're running into around the world, because most of us don't recognize this is happening. So as of right now, I was checking the price of natural gas that at the Henry Hub is $4.80 per million BTUs in natural gas here in the United States in lower 48. Japan, a liquefied natural gas to Japan. It's $26.81 per million BTUs. So you think we have high natural gas prices here in the United States? Go talk to somebody in Japan or Korea. And if you think that one's ugly, Dutch, the Dutch liquefied natural gas at the TTF terminal is $29.51. It's $29.51 per million BTUs. And what was the US price again? $4.80. Yeah. And if you say why is that liquefied natural gas so expensive? Couple reasons. One is it's being compressed into a liquid. They burn a lot of natural gas to compress natural gas into liquefied natural gas and then put it on those ships and ship it over there. So you get it, you know, you get a multiplication, okay, of cost there. What unfortunately has to happen is the Federal Reserve is in a situation where they really have to slow our economy down, slow the world economy down to match the resource because otherwise inflation will run away and it'll cause more and more problems. Now if you say, well, Dan, the economy is not all that great right now. Yeah, we all know. We all know. And if the Federal Reserve is forced into slowing the economy down to match the growth rate of this energy source and it goes back to what Stan and I've been talking about is we need to diversify. That oil, what I said is worth $10,000 a barrel. If you don't have it, a lot of things are not possible. Right? If there's any way we can come up with a transportation fuel for trucks and cars and so forth, we need to do it. Not sit there wait, not sit there pushing around. We need to get it done. Not doing the things we're doing in Washington DC right now. If I can get the next slide please. And that there has to do with high prices to kill demand. So that depends on the strength of the economy, the rate of inflation and those high prices. But there's one thing that we definitely know and that is high oil prices relative to the strength of the economy and inflation will cause a recession. Oil will cause a recession. It caused two recessions back in the 70s. We had an oil shock in 1990 because the first Persian Gulf War, right? It caused a recession and the great financial crisis was probably triggered by oil going to $147 a barrel in July 15th of 2008. We were having banking problems leading up to 2008, right? But that's probably what triggered it was July 15th of 2008. Lehman Brothers collapsed September 15th of 2008, exactly 60 days later. If you say, Dan, is that coincidence? The answer is no. It has to do with the future, what's called the futures contracts. Futures contracts are 60 days net due. So if you can go from July 15th when that futures contract for oil when it was due and you go forward 60 days, that was the exact date that Lehman Brothers filed for bankruptcy. That is not an accident. What happened was Lehman Brothers owed somebody some money and nobody would loan them the money and eventually were forced in the file for bankruptcy September 15th of 2008. Next slide, please. All that is, all I'm trying to show there is just that there's an engineering diagram. I'm not gonna go into it. I'm just saying if we're going to use a wind and solar to try to replace something like natural gas, use wind and solar to try to produce enough hydrogen to replace that natural gas, that's the equation that slaps me in the head all the time, right? Let me show you in here. But that's what I have to deal with, but it also makes it clear that you've got to have a lot of wind and a lot of solar to make up the amount of energy that's in that natural gas that's in the oil that's in those coal deposits. So that gives you an idea in just plain mathematics how hard this subject is. Next one, please. That there shows that's the mountain that Stan and I are climbing, okay? Now there is a piece, there's some hope here and I'll tell you what it is. So what I'm gonna do is I'm gonna talk about something that in engineering is a kind of an important concept and it has to do with something called a BTU or a British thermal unit. So we measure energy resources in BTUs per pound. A British thermal unit is measurement of heat in one pound of fuel. It could be Joules per kilogram or BTUs per pound, okay? So coal, now we can argue about the quality of that fuel but these are average values for these fuel. So coal has 9,000 BTUs per pound. Diesel has 18,300 BTUs per pound. Gasoline has 18,700 BTUs per pound. Now jet fuel is usually between the diesel and the gas. Natural gas has 20,000 BTUs per pound. The master chemical fuel is hydrogen at 51,000 BTUs per pound. So if you want to lie to the engineers and scientists Stan and myself while we're into this hydrogen thing, now you understand why. Because not only is it flimsy fuel but it's got more bang for the buck, literally, right? If you're gonna do anything with fuel, that's the good one. Hydrogen's the good one, okay? That's why we're so focused on it. Now there is a fuel that I kind of allude to on this page here that everybody kind of needs to pay attention to. And the fossil fuel industry, they tend to try to ignore this fuel. And we in the renewable energy sector, we kind of ignore this fuel because it's not really renewable but it's something we can't ignore. And that is uranium. Uranium, plutonium, nuclear power in general but uranium. Uranium, BTUs per pound, 265 million BTUs per pound. And I was checking the spot price uranium today, it's $46 a pound. It's the most energy dense, the most economical fuel that we have in this plant, okay? Now there are two advantages that the United States we have. We have a glimmer of light for the United States. Now there are safety issues with nuclear power, we need to work on those things. There are long-term radioactive material waste issue things we need to work on, we need to do that. We have to, okay? But here are the two bright points about uranium for the United States. I can't say this about the rest of the world but I can say it about us, United States. The long-term radioactive waste issue, 90% of that issue can be resolved by simply recycling the spent fuel that we have in dry storage around all the power plants we have in the United States, okay? Here's the better part. We have enough spent fuel, we could power the United States for 500 years just on the spent fuel. So when you see congressmen and senators that are like, oh, we need to do something about the price of uranium and so forth and et cetera, really easy, it's not really a problem for us. Like I said, just recycling the spent fuel that we have in dry storage around the United States, we could probably United States for 500 years. The other thing is, and this has to do with the byproduct of the Cold War, and I can't go into the details of some of this, but here's what I can tell you. We have enough uranium in storage, we could probably power the United States for 5,000 years, just the uranium we have in storage here in the United States. And those are things that are just byproducts of the Cold War, okay? So those are the good parts of the story. Yeah, that's gonna be a whole show by itself now. Yeah, yeah, I know. Last page and then we're gonna talk about the serious thing. So now we're gonna get into the geopolitical and some of the policy aspects. Okay, the headlines are now Ukraine, Ukraine, Ukraine, Ukraine. So where does most of Europe get a bunch of their energy from that is in that picture? Is it Russia? 40% of the natural gas going into Europe is from Russia. So what kind of appetite do you think all the NATO members besides the US have to piss off Russia right now? United Kingdom and us. Yeah, that's it. None of them do. Germany doesn't want to, France doesn't want to. They're all just kind of, and they're NATO. I mean, NATO was meant to stand off the Soviet Union from rolling into Europe. And now we're sitting there face to face with Russia and all the members of NATO, except for the United Kingdom and the US really are not all that excited about getting into a conflict in the Ukraine with Russia because it'll impact their energy. And this subject is complex in a lot of different ways. One is everybody needs to step back and remember that the Russian people, this isn't Vladimir Putin. This is the Russian people, right? They have this collective experience. They've had a Frenchman and a German invade their country and murdered millions of people, okay? That's Napoleon Bonaparte and Adolf Hitler. And there isn't a Russian family today that has not been affected by the last 200 years. So you have to understand the Russian people, not Vladimir Putin, the Russian people have a fear of the Europeans, okay? When we ended the Cold War, James Baker, whenever we reunited basically East and West Germany together, James Baker, who was Secretary of State, made a promise to Gorbachev that we would not expand NATO beyond where it was for this today, okay? And unfortunately, George H.W. Bush, President Bush, basically backtracked on that. And the Russians have always wanted for allowing East and West Germany to join together and understand the reason why Germany was split because millions of Russians died in those two conflicts, Napoleon Bonaparte and Adolf Hitler. And that's why Russia was divided. And to reunify Germany back together, they wanted in writing to guarantee that NATO would not expand beyond its original members when of the Cold War ended in 1990. Well, then we had President Clinton and he sort of doubled down and yeah, we did make an agreement, nothing was in writing. Well, back in the 90s, so it went from Gorbachev to President Yeltsin. They're a Russian. And the Russians actually made an overture. They wanted to join NATO, okay? And a lot of us here recognized the wisdom of wanting that to happen. And here's why. I don't know how you would do it politically or any of those things. But if you could have had Russia join NATO, you could have pulled them into this European sphere and they would be much more European centered and we wouldn't have problems today with Russia. But we didn't do that. What happened in the last 30 years is NATO's expanded. We added a bunch of countries to NATO, okay? And we forced, we pushed Russia into China's backdoor. That's what we did. Well, then that kind of leads us to another topic which is Turkey was one of the countries that came into NATO fairly recently. And what's going on in Turkey right now? And that goes back to, this is gonna go to what is really gonna happen. So two weeks ago, Turkey has three countries that supply them with natural gas. Russia, they're in Baku, Azerbaijan, they're in Baku and Iran. Two weeks ago, Iran turned off the gas, right? So they've had a power blackout in Turkey for the last two weeks, no electricity, shut down 67,000 factors. The only gas- We're not talking to rule out, I mean a blackout in a couple of cities that are rolling blackouts. We're talking they are blacked out. Yeah, for the last two weeks. You haven't seen that on the news? No. It hasn't been on TV, but there's been a blackout. 67,000 factors have been shut down in Turkey. There's enough gas coming from Vladimir Putin and from Azerbaijan that they're keeping the houses warm. They're in Turkey, so they don't have cold houses but they've got no electricity in Turkey. And I was looking this morning, Turkey's central bank, they're down about $7 billion worth of US dollar currency reserves. And basically they burn about $10 billion a month in growth of natural gas. They ran out of money to pay the Iranians, the Iranians turned the gas off. So it's not like the Iranians are being bad or nefarious is that the Turkey's not paying their bill. Now the contract with the Russians and Azerbaijan is in euros and Turkey still has access to euros and those bills are still being paid. So when everybody thinks that Russia's gonna invade Ukraine and China's gonna do the Taiwan thing, that is not what's gonna happen. In the background, and I caught one of this about four months ago, is Russia has a 20 year deal with Iran. They had completed 90% of the agreement and I think the last thing we're doing is dotting eyes and crossing teeth. But it was kind of strange because they hadn't actually signed the agreement. I understand this was on the heels of Iran's 25 year deal with China. So this agreement with Russia, between Russia and Iran is like to deal with China. Now I've got some copies of that contract, it's in Cyrillic, so I have to go through Google to translate it, I've read it. Basically, well, we've been in these conversations with Iran trying to give it their new growth program. Well, part of this agreement, the Iranians are gonna give up their new growth program, not only that, but they're gonna pack up all the new material and put it on trucks, let the United Nations Atomic Energy Commission witness it and they're gonna ship it all back to Russia and exchange the Russians are gonna build a permanent military bases in Iran. So when you put all this together and in context now, America's weak foreign policy standing right now has basically driven Russia and Iran together, China and Iran together. And what have we been spending the last 20-something years in the Middle East doing is basically trying to set up a democracy as it were in Iraq to offset Iran because it would hold off this big unholy alliance that is now developing. So we got like 30 seconds left in, wrap it up. Well, you said it right there and what happened the last couple of weeks is what the Russians were waiting on is they went back to the United Nations and they talked about not letting Ukraine join NATO, put a list of demands and that was between the January 10th to January 13th. We flat turned them down the following week, January 19th, the president of Iran was in Moscow, made a big speech in front of the Dumas that's like the Congress for the Russians, right? And talked about that there needs to be a permanent, that Russia needs to have a permanent influence or a permanent presence in Iran from here to the end of time, basically. So what cemented that 20-year agreement, we did it by basically refusing the demands of the Russians of saying, not allowing Ukraine to join NATO and the fact that Ukraine's right on Russia's doorstep. And yeah, and this has been brewing for a long time, unfortunately. So just an observation from my point, it seems to me like a lot of our weaker politicians or bureaucrats or executive branch state department people tend to go and say, well, back in 1970, this worked, so let's do it again. Or back in 1990, this worked, so let's do it again. And when we really have to understand is history in context and not just make a decision based on, well, it worked back then, so we'll do it now. And that's why I came up with there, looking for the 70s energy policy. When politicians and policymakers don't have a good grasp on the subject matter in context, like we've discussed today, that's when you sit there and make really poor decisions at the treaty table, at the negotiating table, at the, you know, on the international level. And right now we're paying the price, a serious price for a very weak US policy. And it could be driving us into a really terrible hole. So we'll try and paint a rosier picture of some other time, but... Well, I mean, Stan, and just everybody understands that the watch and the show, Russia is in a position right now, just by turning off that gas and turning off the oil, they can drive inflation here in the United States through the roof, by simply turning it off. Not invading, not doing it, just by turning it off. Exactly. As a military guy and a UR-12, that's just one center of influence. He's not gonna invade, he's not gonna invade, he doesn't have to, that costs money and resources. He could do, if the easiest thing for him to do is to shut the resources off. And that's probably what he's gonna do. Well, we've maxed out a time and gone a little bit over. So before we get kicked off, I'd like to thank you down for your insight and a good discussion today. And we're gonna bring back some more discussions on this macro-level energy talk, because I think people really need to understand and have a grip on it and understand that they're not seeing things in the news that really impact a lot of what's going on in our country today. So, Dan, thanks for your time and we'll catch you next week, next time. Until next Tuesday, stay on the energy man signing off. Aloha.