 Aloha and welcome to Stan the Energy Man here on ThinkTek Hawaii, Stan Osserman coming to you from my back deck on my cabin in Hamakua, Hawaii, well actually I'm still in Kailua but I wish I was on my back deck of my cabin in Hamakua, Hawaii, but it's a beautiful view and a nice quiet place all I can hear is birds and turkeys and cows and it's kind of nice to get away to that kind of world when our world's going crazy. We'll be talking about that crazy world with our guests today but before we get into that next week Tuesday besides a great Stan the Energy Man show we're going to have I'm also hosting a dialogue or a program for Renew Rebuild Hawaii. So if you go to the Renew Rebuild Hawaii website and you want to hear a discussion from some folks that have experience in microgrids we're talking about how microgrids can help Hawaii get through a disaster like a hurricane. So that's on Renew Rebuild Hawaii and it's right before my show on ThinkTech so you could roll right from that one into watching Stan Energy Man right afterwards. But for today we've got a really I think a really good topic it's when we've talked a little bit about in the last couple shows with Dan going but we're going to really get into a little bit more of the nuts and bolts and the last show we did together we talked about our predictions for the economy and for oil and things like that and you know it may have sound kind of like we were looking at a crystal ball but Dan doesn't use crystal balls I don't use crystal balls we just kind of do a lot of homework and figure these things out so Dan's going to explain in nuts and bolts terms what we're really looking at in the energy world right now because a lot of people are still living in the days when OPEC and big countries just kind of manipulated stuff for their own economic you know advantage but the landscape has changed and some of the you know trying to twist arms to get people to do stuff doesn't work anymore so Dan's going to tell us a little bit about what's going on in the real world so Dan welcome. Thanks Dan for let me back on so for everybody out there listening to this this news guest that we're at the center and talk about what I'm going to do is I'm going to sit down I'm going to put lay down some pieces on the table and show you how the puzzle fits together and show you what Stan and I've been looking at I've been looking at for probably more than a year and I know ever since I've been sending out emails to Stan he's been chewing on the things I've been putting out and I think Stan's finally realized like a lot of people that received my newsletter that wait a minute there's a little bit more map and upwards and substance what's going on so if I can just get him put slide number one up there and that's just another pitch for the company electron power technology and we'll quickly go into slide number two. Okay so that's from a world oil and that says falling US crude supply begins to impact global oil prices so what's going on here well this story starts back in the year 2014 when well oil had been a hundred dollars a barrel average between 2008 and 2014 and in the year 2004 the 2014 the oil the world oil markets had crashed and basically what it was it was a combination of the shell drillers here in the United States were producing a lot of oil and they collided with a country called Saudi Arabia okay and between Saudi Arabia and those shell drillers they effectively kept the average price oil down around $50 a barrel between 2014 and 2020 now part of this it's important has to something called the break even cost of producing oil for the shell drillers here in the United States that's roughly about $55 per barrel right and if you're keeping oil down at 50 bucks that means they're either losing $5 per barrel or they're barely make be able to pay their bills now in the case of Saudi Arabia most the countries in the Middle East Saudi Arabia's break evil on what break even on oil production is actually $80 per barrel and most the countries in the Middle East have the same break even that means they're not making any money selling oil at that price they're they're they're losing money now so if you say $50 minus 80 that means that for six years Saudi Arabia was losing $30 in every barrel of oil there that they were selling now there are two players out here that have a really really low product break even production level one of them happens to be Russia Russia's break even is actually $15 per barrel you throw in Russian taxes so it's about $25 per barrel the other one is actually Iran Iran's break even is actually $20 per barrel yet in Iranian taxes it's 30 bucks now Iran have been kept from the international market for selling oil mainly because the trade sanctions and the other reason is because they were trapped inside the Persian Gulf that all changed this year when that will pipeline was opened up that open up near the the start of the Persian Gulf and ended up around the the straits there up near the Pakistani port so that allowed start allowing the rain this is so crude oil on the international market down and built that pipeline by the way down I'm sorry we built that pipeline Russia yeah that was Russia grass gas from to built that so last April 20th the oil markets crashed and the price of oil went to minus $37 a barrel the reason why that happened is because when we went into lockdown from COVID we are all were trapped at home not driving our cars we weren't consuming oil and there are a lot of people out there that had contracts for oil or oil that already been on on big oil tankers and had to get rid of the oil and since you can't just let an oil tanker sit out in the ocean because the shipping company is going to charge you money for that well sitting in their tanks so people actually pay oil people actually paid other people please take my oil off my hands and it was they were paying you to take the oil for $37 a barrel not you weren't buying it they were actually paying you to take it and we were running out of storage places to actually store this oil and but that's why the oil markets crash now whenever that crash happened a lot of the small business people here who had been holding on for good six years they started going back in the droughts a lot of small medium little business drillers here in the United States all replaced going back now when it comes to Saudi Arabia sovereign nations can borrow a lot of money trillions of dollars so the Saudis are deeply in debt today now a lot of their shale drillers share in the United States have gone bankrupt because that crash that happened that now let's go to page number three okay so what that what that page there is just drill rich drilling set we're drilling for sale the top line there is the year 2019 2019 or 2020 I can't see it anyway the bottom line is the year 2021 so in 2019 the top the maximum production the United States was producing is about 13 million barrels a day four million barrels of that was traditional oil wells the remaining eight million barrels with shale and that was with 1600 dregs drilling oil you know throughout the year now whenever the crash happened right now our current drill fleet is roughly about 500 wells that were that were drilling right now now on top of that of course we've changed governments we went from the current administration to the Biden administration the Biden administration it is not as friendly to the oil folks it's probably the easiest way to say it so what they did is they turned around and they scrapped 1,100 drilling rates I mean sent them off to be melted down for scrap steel so the Biden administration today is wanting these drillers to go and drill more oil to drop the price oil but we physically don't have the rigs to actually go out do the drill so now one of the aspects of this keep in mind that the United States our country we have an oil addiction we burn 20 million barrels of oil a day and actually at the latest report I was reading today that it's gone up to 22 million barrels of oil per day so as far as energy independent you do the math 13 minus 20 million is still seven million barrels we're still importing a lot of oil every day so so let me interrupt too while you change slides that so as we we have the price of oil fairly low and then we had the bankruptcies and stuff because all of a sudden the demand for oil was low and we had surplus oil now the demand for oil is ramping up but we don't have the infrastructure the resources to pull back online and just react like that to produce oil again in our country yeah we we don't we physically don't have the drill rigs they just don't you know they're not here and if you ask the the drillers right now one of they can ramp up production they're talking about next year and you'll say why do I got to wait till next year well because it maybe we'll build enough rigs between now and then but we're not going to be able to build a thousand rigs I mean anybody licking that will say you know who know between now and next spring I don't know how how many we're going to be able to build and that goes back to with all these different supply shortages so the other thing is is when these guys start drilling you won't see that oil for six months I mean it takes six months to bring it online and if we're not drilling it today we're definitely not drilling it today we don't have the rigs maybe next year we'll start ramping it up but as soon as you'll see any relief from the United States you know for more oil here in the United States drop some of these fuel prices is probably 2023 and it's just because we just don't have the drill rigs to do and and roughly how many of how much percentage of the oil production in the United States is I don't know if you'd call it small business but not your big mega drillers like Shell or you know are they are there a lot of 80 percent yeah 80 80 percent small medium businesses so 80 percent of them are small medium businesses and who was hit the hardest by all this jockeying around with COVID and no driving and then all of a sudden we're driving again and we're flying airplanes again and and you know they're the ones the ones who went bankrupt were basically the heart and core of our production capability what with a lot of the public doesn't realize about large corporations large corporations are really financing them so if you're a large integrator we'll come to like Exxon you have a lot of subcontractors you've got drillers people that provide all different kinds of services essentially Exxon the top of Exxon is really just a financing one and if you go to for example a General Motors or a Ford you'll find out that General Motors and Ford are made up of all these tiny little companies that make all these small little components and really all Ford and GM do is they just assemble all the small components to build a car so almost all industry in the United States is built that way and it has to do with because that's the most adaptable structure it's just so happens in this case we've got like I said we had that crash in the oil market that pushed a lot of these companies that have been under distress for about six years and then on top of that the regime the government we have in there right now is not friendly to the hydrocarb business so I can get you go to fly number four okay so that picture right there it's kind of a busy one but it's got a couple key things so it says Cushing, Oklahoma so since we're not producing as much of that crude oil the shell oil the oil that we produce in the United States is a oil it's called sweet means it's low in sulfur content and the main export terminal is a place called Cushing, Oklahoma they send the oil there then eventually it goes down to Corpus Christi or down the gulf to be loaded on supertakers and that there right shows what says 27 million barrels it's actually 25 but the point is the United States we could burn through Cushing, Oklahoma in a day and a half but we're not exporting oil right now we haven't been exporting oil for probably the last three or four months the other important column there is something called distillates okay yet crude oil distillates gasoline of course Cushing not distillates what is that that is diesel and jet fuel our economy runs on diesel okay so that there is telling me now the top red line that's the maximum amount of storage we have and you know that 125 is telling me 125 million barrels of diesel and or jet fuel they don't break it out to just say distillates so I don't know what that is but that tells me right now the amount of diesel fuel we have here in the United States as well now that's the fuel that powers that semi-truck that delivers all those goods to Walmart that's also the same fuel that powers the front loader that digs up the coal dump trucks locomotive trains etc okay that is the heart of the economy so but yeah we're not we're not exporting enough fuel if I can get you to go slide into five and that there just is another confirmation that we're not refining enough crude oil propane when you're at a refinery they have what's called a fractionary tower the top of that it's like a big steel basically the top of that big fractionary tower is a big pipe coming on the top of it and what comes out of there is propane and butane and right now our levels are propane or critically low so if you live out in the country and you have a bot propane ad or if you already bought propane you know the propane's getting very expensive just because our levels of propane are at a critically low level that's being noted there by the Department of Energy they've noticed that is at a critical critical level right now but that's telling me we're not refining enough crude oil to make gasoline and diesel now as to the precise cause of that I'm not exactly sure but I'm guessing it has to do with some kind of a policy change that happened in Washington DC okay if I can get you also you mentioned that um we have or if we could import more oil would we be making diesel and and gasoline and aviation fuel out of oil that's coming out just oil that's coming out of the middle Middle East or is we do make we do make we do make fuel out of the oil that comes out of the middle east is it the same quality though that and that's what we're going to go into next we're going to talk about the quality issue okay and and this goes back to and I just remember the type of oil that we that we produce here in the United States is low in sulfur content so that means it's easy to refine into diesel and gasoline and jet fuel and stuff like that but a lot of the other oil like we're going to talk about coming out of the Middle East is what we call high sulfur content oil it's what we call sour and you and I are going to have a discussion about what's going on on Saudi Arabia what's causing but but anyway the United States us not producing that light crude oil that really grew good it's actually pretty good crude oil and we're not exporting it right now and that's having an impact on the world's economy a very negative impact and it's it's causing repercussions and things like for example natural gas a lot of the high natural gas prices you see in europe and asia has actually caused by this oil and when i put all the pieces together you're like boy this is like the perfect storm and that's what we're going to discuss so i can get you to go to page number six okay what that says right there is g china is struck struck with a diesel shortage so and understand this is this diesel shortage is actually tied to this whole natural gas shortage issue and europe is a little more complex is that's that's a he's dealing they're dealing with latin reputant and russia but china they're actually struck by a twist and it has to do with shipping okay now where the shipping comes in and it impacts the lng shipping so for this diesel shortage inside of china has to do with well first of all since we're not exporting oil in the united states they're having to use a lot more oil out of the middle east okay and a lot more oil out of saudi arabia and that is a type of oil that's heavy and sulfur and the next page we're going to talk about what what that means but the big thing that was impacting a lot of this was three years ago there was something called the im o 20 plump and that is a fuel standard for the large cargo container ships now three years ago a lot of the big car container ships the super tangers they burned what's called bunker if you want to know what bunker is and i don't stand those old bunkers there's a joke in the business and what that joke is you take a 55 gallon barrel you drape a sheet over it and you pour crude through it that's bunker pretty close it's pretty raw stuff well literally the bottom of the barrel literally the bottom of the barrel so and it's pretty nasty burning stuff and that they in those car container ships there's a diesel engine there that is huge it's five stories tall so some of the largest engines in the world right but they burned this bunker in these big giant ships well anyway a number of years ago they started having problems with a lot of the countries including china or these countries you could come up to near the border of their shore and they make you shut down the engine they come up with tugbo to drag you in they wouldn't let you run that engine all the way up to the port okay and it had to do with just the belching pollution coming out of that because they're burning that high sulfur bunker fuel they required you to buy their electricity all your import because they don't want you polluting their their countryside with your bunker oil yeah and understand even china was doing so with the international maritime organization the iml came up with as they came up with a fuel standard now they floated it in 2008 it was proved in it into international law in 2016 so notice how i'm saying this international law the coast guard when they see your ship they have this uv camera and they'll take a picture of your ship and they can tell how much sulfur is coming out of the stack and there's too much crap coming out of that thing they'll do a heave toe jump on board ship they might take your captain in a custody but they'll arrest your ship according to international law right and i've never been a police officer i know you've done that done that stuff stan but i'm pretty sure they'll make your day pretty ugly bad day for burning that stuff so the imo came up with this fuel standard it took effect january 1st of 2020 so the big card container ships they had three choices choice number one put a scrubber in that ship which is a 20 20 million dollar mod per ship not only that but you then you had this hazmat issue you got to deal with every couple years because of that scrub option number two convert over to liquefied natural gas okay another 20 million dollar mod per ship but now you have to worry about do all the terminals have refueling liquefied natural gas refueling for your ship so guess what option they chose stan option number three nothing diesel oh yeah diesel they chose to burn diesel that's an easy conversion yeah so that is the same diesel that's in that 18-wheeler class a semi truck the front loader the locomotive the dump truck that everybody else burned so they increased the demand for diesel by almost double so they doubled the demand for diesel fuel but nobody bothered to upgrade the refinery capacity so coupled on top of this the united states are the amount of oil we're exporting has dropped something like two to three million barrels per day we're not exporting of that really good nice sweet stuff that was easy to refine in the diesel so so anyway uh what here's one of the effects of this hat so one of the things stan and we're talking about so four years three years ago if you were going to ship a 40-foot car container from asia to the united states okay it would cost you about four thousand dollars to move that container stan was the latest price today closer to 20 000 yeah yeah it's gone up five times that's the fuel that cost is affected a lot of things let me give you some examples if i'm shipping product from say china to the united states more likely that product is going to be valuable product like flat panel screens computers stuff like that so there might be a couple million dollars worth of hardware in that 40-foot car container so 20 000 that's a you know that makes sense but here's the question we in the united states what do we export what do we export yeah what do we export that's worth 20 000 for 40-foot car container got me on that one yeah well so does everybody else because out at the port of long eastern los angeles that's really what the pile is there's a pile of empty containers and nobody's exporting anything and so in asia they have assurances of containers because none of them are coming back because we just don't have anything that economically makes sense to ship back to asia 20 000 per container right so it's it's turned in that so this whole thing is snarled by that whole fuel thing that's what i'm getting at okay so and that's also complicated the liquefied natural gas situation overseas okay so if i can get you go to page number seven page number seven this is where everything collides so that is what's called a block engineering diagram it's what we engineers use and the key to that little thing well you don't have to know a whole bunch of technical stuff about really all you need to do is you take that thing you print it out you pull out your little yellow hind leg hot your yellow highlighter and highlight everything on there that says h2 and you're going to figure out your oil refinery they use a lot of hydrogen that that order from and actually it's blue hydrogen they make it from natural gas you say dan what the heck they use all the hydro for that oil refinery removing sulfur from the prop now so one of the you know so here in the u.s. we have that low sulfur crude oil in the middle east they get a lot of the high sulfur crude oil and that's coming out of Saudi Arabia so a lot of the natural gas right now because they're using that high sulfur rate crude oil in the middle east right through the refineries in Asia that's Japan Korea China etc and even including Europe they're consuming a lot of natural gas just refining that heavy sour crude oil in a diesel gasoline and jet fuel and that's caused a shortage of natural gas liquefied natural gas uh so the number one consumer of hydrogen in the world happens to be an oil refinery and that's one of those old deal nobody I mean everybody talks about most of the hydrogen is blue hydrogen but they won't tell you what it's used for who's using well it's an oil refinery the number two on that list is any place that makes hand hydrism when you fertilize okay so that's where the liquefied natural gas the middle east have basically collided with that heavy sour because we're not exporting that light sweet now on top of that something that came out today and it's something I've known about for quite a long time but you don't come out and say this but today Saudi Arabia finally admitted that they're not able to produce as much oil as they did in the past and what I mean by that is at best Saudi Arabia is probably able to only produce about eight million barrels of oil a day the other thing about that crude is it's very high and sulfur now the reason why I can say I suspected it is simply this when an oil deposit when you start hitting near the bottom the stuff in the bottom well basically it's asphalt you know that's the stuff for near higher the molecules get really long and sticky and it's full of sulfur so if you've measured any of the crude oil coming out of the Middle East out of Saudi Arabia over the last probably 15 years you've noticed the sulfur levels are just steadily going up and that tells you that you know that the time is coming you know it's probably going to have immediately the production there in Saudi Arabia is slowly dropping up so we're just going to have the world is looking into the mouth of just plain less crude oil not only that isn't less crude oil but it's less quality crude oil that crude oil will consume ever more amounts of natural gas to turn it into fuels so if you want to know how severe that shortage is becoming like here in the United States if you looked at some of the slides in pollprice.com it'll show natural gas here in the United States is roughly like $5.50 per million BTUs or something like that I was looking at the contract in Japan the spot market price in Japan right now the Russians have opened up the spigot they're dumping a little bit more gas into the into the Japanese Korean area right but even then a million BTUs of liquefied natural gas in South Korea and Japan right now is $30 per million BTUs England right now it looks like they haven't released it but it's still about $42 per million BTUs in Europe okay and some of that is tied back to the Germans need to get off their tail in and approve Vladimir Putin's Nord Stream 2 pipeline to pump more gas in Europe and they're pointing a lot of fingers at this guy but when I look at the capacity he's got he's got three running pipelines right now he's pumping up max capacity okay they're saying he's not cranking enough gas and I'm looking at the numbers from the system he's pumping max right now so it's kind of annoying they're pointing fingers and making that the big bad guy when this isn't his doing it's just well I mean just to be honest this is plain poor planning on their part you know and it goes back to what Stan and I knew about we need to go to renewables but you've got to have some thought about how you do this and you have to plan this thing and if you don't plan it out and you just worry about politics this is a truck that will run you over and it's merciless so this is where all those things come together and it's the perfect storm and not only that if you notice what I talked about ammonia ammonia anarismonia China stopped exporting and ammonia and urea that's fertilizer fertilizer that affects foods that means your food prices are going high just so you and this is all tied back to because you know we're not drilling enough of that show well providing that low sulfur crude and now it's impacted liquefied natural gas and natural gas it's even affecting natural gas here now we got lucky right now here in the united states believe or not shanae and some of the big lng exporters they're not able to export as much gas because of some technology so i can get you go to the next page page number eight that's steel it's already impacted steel production right there's a crash in the world so the steel market because of this issue with uh with liquefied natural with natural gas the energy price is going high and if i can get you to page number nine and this is uh coal running out of coal here in the united states and what that has to do with something i already talked with stan about and that is if you're burning brown coal in your coal far power plant and it's late night as brown coal's less than 40 percent carbon content remember that front loader that digs up the coal it burns diesel your dump truck burns diesel your locomotive tree burns diesel the diesel price will make brown coal uneconomical which means you can't burn that stuff in your power plant you can't do it economically and what will drive that out of business is simply just the price of diesel so the bigger story here about this whole story the bigger picture and it's something we're going to have to address and it'll take a little time for the powers to be to sort of piece all these pieces together but really what this means is we need to diversify out of some critical elements that are using diesel now one of the possibilities out there i know kenworth has a hydrogen powered semi truck they did a lot of work with with toita on a hydrogen powered kenworth class 8 semi truck right and i don't know what anybody's doing unlike front motors and that type of equipment it's a lot easier to move that equipment onto hot and alternative fuel like hydrogen then going back trying to retrofit all those cargo container ships and and super tankers okay so but we as a country i mean you may not understand what i'm saying hopefully people play this video a couple more times and chew on what i'm telling them but but but eventually eventually that's the path we're probably more likely and more likely that's the path we're going to have to work in so that's about all i've got there stan well yeah and we're running complete in the fact we're running a little bit over time but um i thought it was important to let you wrap up there and show that coal is impacted steel is impacted all transportation getting goods and services to and from ports and places where they're sold is impacted fertilizer fertilizer for growing crops is impacted equipment for raising crops and dealing with it's all impacted so if you think that inflation is temporary here and you think how much energy costs impact inflation we're in for a long haul here and that was kind of the main point of this whole show so Dan i'd like to thank you for being on and taking us through that that maze i'm sure a lot of people haven't really thought about all those implications and the price of oil and and the impacts of trying to decarbonize the world in a week um it just can't be done you've got to really plan it out you got to think it out you got to do it the right steps to make it work so thanks for your uh your your detailed explanation today Dan and i hope that so some people will look through this a few times especially policymakers and begin to understand what they're doing when they when they come to some of these conclusions so until next week let's say aloha to Dan and we'll have him back on for sure because he and i talk about a lot of stuff together but till next week Tuesday stan energy man signing off aloha thanks stan