Doomberg and the New Oil and Gas Markets Post Hormuz

[00:00:00] Speaker 1: Hello, everybody. Welcome to the Energy News Beat Podcast. My name is Stu Turley. I'll tell you what, yesterday we were scheduled for a fantastic Doomburg episode and the system was way late. So we're a day late and we are buckled up. And let's see if we can break the internet again today with my special guest, Oh Mighty Doomburg. How are you today, sir? [00:00:31] Speaker 2: Stu, you know, if at first you don't succeed, try the next day. And so that's what we're up to today. Great to be back with you, my friend. We had a vibrant pre-podcast discussion. Good thing none of it was recorded, but it does foretell a lively discourse between the [00:00:47] Speaker 1: two of us today. You know, when I can poke Oh Mighty Doomburg, poke you in the beak and then get you all riled up. I'm like, how dumb is that? Go ahead and stir you up. But let's get ready to rumble. Where do you see the global oil markets changing right now? [00:01:05] Speaker 2: So one of the big challenges right now for anybody observing the oil markets, and we obviously do that, and avatar notwithstanding, where people is the vast amount of misinformation, quasi-legitimate information, price information, inventory information that's flowing, makes it almost impossible to cut through the noise. So I'll just give you a small example, you know. So our mutual friend, probably more of a friend to you than me, but somebody that I'm certainly aware of, I believe it was with you that I was on a podcast with him, Chris Wright. Chris Wright was out with a tweet either yesterday or the day before, in which he said, effectively, over the past couple days, nine million barrels a day of oil has been flowing through the strait. And when you combine all the oil that's leaking out through all the other sort of assets that have been activated in response to Iran, basically the flow of oil out of the Strait of Hormuz is back to pre-war levels. Then you have Trump on the tarmac saying that the U.S. controls the interest rate. Prices didn't really respond to that in a way that I thought they might. Interesting. Like oil ignored Chris's tweet yesterday. You saw that tweet, right? You're aware of the tweet that I'm talking about. And so what to make of that information? So how would we handle that internally? And I will get to an answer to your question. First thing we do is we say to ourselves, well, that's an awfully specific lie for a guy like Chris Wright to put out there as a cabinet member. And look, you know, when you're in the government at high levels like that, you come from the private sector, it's a big deal to be in that job. You're a cabinet member of the 47th president of the United States. Whatever you think of Trump, whatever you thought of Biden, whether you prefer Trump 45 over 47, none of that matters. The history books will always record that Christopher Wright was secretary of energy during the period in which Venezuela happened and Iran happened. And so you're always at that level. And look, the guy's a billionaire. He's achieved everything in life. He's got nothing left to prove. All he has left to prove is history. So he's got an eye on the history books too. So when we saw that tweet, which runs counter to Javier Blas at Bloomberg, who we quite respect and read everything he puts out, who pointed out that tracking sites and vessel counters come up with about half that total. Well, now we have conflicting pieces of information that have just come our way from two very credible sources. And then we look at the price. The price does nothing all day. So there's a couple of conclusions one can draw. Chris is wrong. Chris is lying. Chris is right and the market doesn't believe him. Or Chris is right and the market is telling us that this is the steady state price of a long term siege by the US against Iran. And when I look at those four possibilities, the last one is the most likely because I rule out. I don't want to live in a world where Chris Wright goes on Twitter and overtly lies. I don't think he would. He's not a typical politician. So that leaves two possibilities. The market is pretty damn efficient. It's been pretty efficient throughout this war. Contrary to the hair pullers on Twitter, as our friends, or JJ would like to call them, market prices have signaled with very good information integrity where things are going. And so when you see Chris Wright say, all of the grandstanding from the IGRC, notwithstanding, the full weight of the power of the US military in combination with the US government has maneuvered the situation to where Iran's control over the Strait of Hormuz has been blunted enough to sustain a siege of Iran. Because just because the US is low on weapons doesn't mean it's low on all weapons, right? It's got financial weapons. It's got diplomatic weapons. It's got all manner of tools, as Ursula Wanderland would say, tools that can be used for the task. And so I take Chris's tweet on its face until proven otherwise. I take the market's response as an interesting piece of data. I still have in the back of my mind that if that much oil was flowing through, you'd think that Javier sources over at Bloomberg would be flagging that. We still have a little bit more to see, but that's where my head is today. And I wake up and see that oil is a bit under pressure. There's an awful lot of money on the line to get oil out of the Middle East. We've been, you know, we wrote all the way back in 2025, a piece called "Strait shooting" that closing Hormuz is a one-time cart. Once you lay it down, you're all in. And Besant was absolutely right, by the way, over the weekend, when he said in a few years, the Strait of Hormuz will be nothing but an empty body of water. Again, the spice must flow. Arteries get regrown. Pipelines get built. Stick them underground if you have to. And so there's a war of attrition going on right now. And one wonders whether Iran hasn't quite overplayed its hand or, as the hardliners inside of Iran would say, underplayed its hand. And so the last thing I'll say is it does increase the odds of a severe escalation, unfortunately, because if it dawns on the Iranians that they've been checkmated by Besant and Wright, who are two very formidable intellects. Let's not kid ourselves. Highly successful, highly intelligent individuals from the private sector, not your typical civil service employee, nothing against civil service employees, but nobody would confuse them with the likes of Scott Besant and Chris Wright. If the Iranians conclude that they've been checkmated, then there's always alternatives for them to try. And we note with interest that the new Ayatollah has shuffled the cards a little bit and a bunch of the hardliners have come to the top of the deck. And so even though oil is kind of steady at 80, one final conclusion is that maybe oil didn't drop on Chris's tweet because it's repricing the tail risk of blowing up all the assets irreversibly. And so that has to be baked in from a tail perspective. So I know that was probably a lot, but we did warn people I was a little fired up today. [00:07:47] Speaker 1: We did. Holy smoke. Did I poke the bear? Um, now when we sit back and take a look, you know, I, I think maybe he did get the wrong information or that heavier blogs is a cool cat. I do like all of his stuff. Um, but some of his stuff is also, I have to fact check heavier. Hey, he knows his stuff. I'm don't get me wrong. He is, he's, he's out there. I, I read his stuff, but when we take a look at the, um, straight of hormones is a one, you nailed it on that aspect that it is the cards been played. Pipelines are going on, but we have the Bab El Mandeb straight is down to less than a million, uh, uh, 0.5 barrels per day going through. So that's about a tanker and a half every other day or whatever the number is. It's a fraction of what used to go there. So the Houthis and the blowfish are very active there. Goldman Sachs three months ago said it'd be 120. Uh, the physical cost of delivery because of tanker fees and everything else is about 170. Yeah. So, um, Houthis and the blow [00:09:06] Speaker 2: ships, by the way, I saw that somewhere and we, uh, we, we, we quoted it in one of our piece. I wish I could give it attribution. Um, but you can go ahead and use that one going forward. Houthis and the blow ships. I love it. I I'm sorry. I never heard that one. You know, you got, if you can't laugh even in the middle of war, um, that was pretty good. I, again, I wish I could find who, where I first saw it, but it's one of those things that, that sticks with you. I can't call them anything else. Um, okay. Uh, we don't know how much oil is going through there. No. And, and so even you quoting that number is, uh, is, is interesting, right? Um, oil prices aren't confirming that, that, that, that the 7 million barrel a day escape valve from the east west pipeline is suddenly clogged and constipated and oil is overflowing in Saudi Arabia, but we don't see that. And so, you know, the Houthis stopped blowing up ships during the, the, the hot part of this war. They didn't really participate until like just now. Um, there's awful lot of money flowing from Saudi Arabia into Yemen, I'm guessing, um, billions. And you know, I love Doomburg. I love Stu love coming on this show. Somebody wanted to buy Doomburg for a billion dollars. I'm going to hit that bid. Um, everybody, everybody has a price. Don't kid yourself. Um, it's just, nobody ever offers it to us. And so we could strut around like we have some ethical compass. Um, if somebody wanted to buy Doomburg and turn it into a renewable energy mouthpiece, there's a price. I mean, nobody's going to offer to me, but I'm not as an old friend of mine used to say, you know, um, here is though freshly driven through snow. Um, but there's money flowing hands. Um, just because the Houthis say stuff on Twitter doesn't mean it's happening just because you see a video on telegram doesn't mean it's real. Um, the power of the information baked into price has never been more apparent. It's never been more powerful. It's never been more real. Um, then now ironically, because of the deluge of fake information and misinformation that's out there, the one thing about price, unlike a tweet or a Doomburg article or a stew podcast is big money went into that transaction on both sides. Right. And so somebody put their money where their mouth is somewhere. Now we do when we write because we lose subscribers if we're wrong. Um, but that's a second or third or fourth order effects. And it's hard to attribute, you know, cause and effect sometimes. Whereas when you buy oil, because you're, you think you have a view on the market and oil drops, well then, then you've hurt your yourself where it matters most. Right. And so, um, a bit of a long way to say, I have no idea what's going on in the land of the Houthis and the blow ships. Um, other, other than oil isn't really all that worried about it. Um, um, and so I, I take my cues from, from prices as you probably deduce from my, my dialogue surrounding [00:12:18] Speaker 1: Chris's tweet yesterday. Yes. I, Chris Wright is probably one of the most ethical humans on the planet and his caring about that. Uh, I'm going to, I'm going to hold the fact that he probably got bad information or something else. He, uh, I will stand on that hill that Chris Wright is one of the most ethical humans on the planet. Well, I think we could agree that he believed what he wrote. [00:12:45] Speaker 2: Yes. Um, so like, that's what a Doonberg's brand promises. Like we might be wrong a lot. Um, but we 100, 100% believe what we write when we press send an hour later, it could, we could believe something else an hour before we could have believed something else. But when that button is hit, we believe that. Um, and I, I, and by the way, just to shoot back at you, because this is literally the chapter in the book I'm working on grading information. Um, he has access to much better information than you and I do. Oh, absolutely. So for us to just assume he's been told something incorrect. This is again, this isn't Donald Trump we're talking about here. I mean, whatever you think of Trump, this is, it's a guy with stops at MIT and Berkeley and a, a two time, you know, uh, founder of a, of a, of a energy unicorn. Um, that, that I take that with it much higher. [00:13:42] Speaker 1: Energy is one of the great, uh, great, uh, success stories. Um, I, speaking of that, [00:13:49] Speaker 2: I see they're, um, they're out drilling, um, shale gas in Australia and just put that on your, on your tote bag of things to carry around with you as you ponder what the next big thing might be. Uh, there's, there's, um, we wrote about this a few months ago, but there's enormous shale gas potential in Australia and if Liberty Energy is poking around out there, which they are, that's an interesting tell as we would say, but anyway, back, back to today's discussion. [00:14:18] Speaker 1: The, uh, Ron Gusick is the new CEO and I've interviewed him twice. He is an absolute great man as well. And when you take a look at a great example of a, uh, oil field service company, I thought Chris Wright was absolutely out to lunch when he created the electric flat frack fleet. But then when they went in and became a hyperscaler ahead of the curve, they were really early to the game to do that. And they're approaching the utility, like much like Toby rice up there at EQT. Great job guys. That's some serious man. I mean, look, we don't need to deify them, [00:14:57] Speaker 2: but I mean, they put pants on in the morning like we do, but at the same time, I mean, when they have that kind of a track record and you get to know somebody, um, again, Chris Wright's not a politician. Um, and so I, I genuinely, I would be stunned if he didn't believe what he wrote yesterday. And I would be stunned if he didn't have wildly better sources of information than we do. And we both know that he's capable of disseminating and understanding that information at a very high level. So I, I take that tweet to be true until proven otherwise. [00:15:28] Speaker 1: Um, with the pipeline change and you've mentioned, and you are dead on right on this, and I'm sorry for being nice. I need to be a more of a jerk sometimes, but when you sit back and take a look at the, the Iranians pulled the lever and when secretary, I would never want to go against secretary, uh, Scott Besson, that man is an animal. And when he said the straight will be, um, uh, absolutely irrelevant very soon. You're, you're all, we're already seeing the oil companies drilling outside of choke points. And we're seeing that play out in real time. But I also want to talk about your article coming out tomorrow because the geopolitical stuff has spread. Uh, little man in Ukraine has been lobbing drones everywhere. More refineries have been hit. Russia is the bear has been poked. This thing has gone nuts and now turkeys involved. This is nuts. [00:16:32] Speaker 2: Yeah. Thanks for the chance to preview what I described to you yesterday while we were waiting for stream yard to get its, uh, act together. Um, so we got a piece coming out tomorrow that we think would be a good one. Um, the, the working kettle right now it's in final stages of edit might get changed between now and then. I don't know. It's out of my hands. Um, is a minor detail. And the uh, social preview for the piece is something like amazingly Putin will decide whether Europe freezes this winter. And, um, we take a lot of digs at Europe. I get it. It's right up there with renewables bad. Like what are we going to write now? Well, let's go back to old faithful and we'll dump on Ursula for a bit. Um, but this is a real serious one. So, um, what's going on? Zelensky look, losing wars is hard. Forget about what you read in the financial times. Things are going terribly wrong for Ukraine. They've completely lost the air war. Um, they have no Patriot missiles left. The Russians can blow up anything they want whenever they want. And they are. And about a month ago, um, our pro Ukrainian sources that we follow lit up with excitement because a bunch of, uh, you know, Navy drones and regular drones were used to attack commercial ships in the sea of as off and, uh, among the ships that were targeted, um, were a bunch of grain ships. And this was struck us as a particularly odd escalation without getting into too much of the detail, the fate of grain coming out of Ukraine, mostly through Odessa using the black sea is a huge controversy in this war. It was a grain deal a few weeks after the war started brokered by the UN and Turkey. Um, and then the, you know, the Russians would tell you that Ukraine violated it. Putin never really closed Odessa much to the chagrin of the hardliners in Russia who are vehement that most of the Western weapons going to Ukraine that are used to kill Russians are coming through Odessa that Odessa needed to be destroyed and Ukraine needed to be sealed off from the, from the black sea. If you landlock Ukraine and then you take out the 17 bridges across the Dnieper, you, you basically, you know, won the war. Um, Putin didn't do that, um, for many years, but Ukraine starts attacking grain ships and maybe there weren't that many, maybe it was an accident, who knows? Russia focused on the grain ships and said, all right, gloves are off. Bombing the, you know, what out of Odessa, they blew, blow up a few commercial ships of their own, including one with the Turkish flag, by the way, which sunk. Um, and suddenly the port of, of Odessa is closed. Black sea is walled off from Ukraine, by the way, huge financial pressures inside Ukraine, tens of billions of worth of exports, landlocked grain rotting and in silos, the Europeans on the hook to keep the government prepped up in Ukraine already straining to do that with loans and seizing the Russian assets and using the interest off those assets and all kinds of bureaucratic shenanigans out of Brussels to float. Um, Zelensky, you watch Zelensky's videos on Twitter. He's getting more and more understandably desperate. Um, some would say a bit manic. Um, demanding that every Patriot missile on the European continent be immediately shipped to Kiev. Um, probably not going to happen. Okay. Now, Turkey doesn't like that. Turkey doesn't like Russia re-establishing itself on the Black Sea. Turkey, of course, controls the aptly named Turkish Straits, which ships in the Black Sea have to pass through. Um, Turkey has forbidden warships from passing through during this war, trying to sort of ride two asses with one you-know-what, as our friend Luke Grohman would say. Um, okay, this is all very interesting, Doomburg, where are you going? What does this have to do with the price of natural gas in, uh, in Berlin in the winter? Well, for all the happy talk about cutting themselves off of Russian natural gas, there are two wildly important inputs of Russian natural gas injecting directly into European storage right now. One is the Yamal LNG terminal, from which Europe has received effectively every freaking cargo that has been produced in 2026. I'm not exaggerating. To the tune of two and a half BCF per day, just to give it some numbers. But the second is TurkStream, which goes under said Black Sea, connects Russia to Turkey, um, enters Turkey near its border with Europe, and then two billion cubic feet per day go on to Bulgaria, Romania, Hungary, Greece, Austria. So that's four and a half BCF per day of gas coming from Russia to Europe, when Europe is sitting at 59% gas in storage, well below its, its, uh, target levels for this time of year heading into winter again. In 2023 it was at like 83%, just to give you some numbers, at this, on this day. And what does, what does four and a half BCF per day mean in the context of European energy storage? Well, there's another way to say it is to measure, um, gas storage, uh, in, uh, in terawatt hours, which is how the Europeans like to do it. Okay. So they have 670 terawatt hours in storage. Um, they'd like to be, you know, they were at a thousand in 2023, just again, just to give you some numbers. Well, that four and a half BCF per day is, is 40 terawatt hours per month. Wow. Okay. So Putin shuts off the gas because it escalates with Turkey, shuts off the gas and says no more LNG for you to boot. Uh, September, October, November, December, 40 times 4 is 160. By the way, for the first seven months, 40 times 4 is 280. So like 40% of the gas in storage could have theoretically come from Russia. I know it's not one for one, but that's the amount that Russia has been feeding into Europe. The amount that Russia has been feeding into Europe through these two inlets is equivalent to 40% of the gas it has in storage, shut that off. And that gives you a sense of the trouble Europe would be in. And so whether or not Putin does the fact that Europe is in a position that he can is, is proof of strategic bankruptcy. I mean, we're what four and a half years into this thing. And the man in Moscow can throw a switch. Then your tanks are empty. Good luck getting those cargoes from Asia, by the way, as the calendar turns and they forego because they're three, four or $5 a million BTU more expensive because the Japanese and the Chinese and the Koreans want it. Um, the last time they have to, to, to make up for it. And so he's got them in a vice Putin being he, and look, if, if, if, if you think Putin is the worst man on earth and you hate that Doomburg sometimes does analysis that treats Putin as a rational actor, then you ought to really hate this conclusion because he controls it, man. And so if the Black Sea gets out of hand, if Turkey and Russia, uh, if that relationship dissolves, we just saw Putin overreact to a few grain ships being hit by closing the entire freaking Black Sea might now be the perfect time for him to overreact economically and just turn off the knobs and stop feeding gas to Europe. By the way, it's like all the European looters do is talk about how they want to go to war with Russia. Why Russia keeps selling them this gas is one of the great mysteries in Moscow. So it could happen. We're putting it on people's radars. That's the piece. That's sort of a classic Doomburg piece. You see a headline about the Black Sea and you connect it back to, you know, um, a natural gas crisis that's coming to Europe, um, assuming, Oh, make matters worse. It's freaking dry in Europe. It's hard to get coal through the Rhine water levels behind the dams in Norway or at very low levels. And you can't run nuclear power plants in France because the rivers are too dry. There's also several other countries that [00:25:07] Speaker 1: are having to shut their nuclear plants down. Europe is in a real pickle right now. Now would be a real bad time for Putin to close the valves, wouldn't it? It would be. I got a question for you. If the war to Ukraine ends sometime soon, the at the end of 2026 and beginning of 2027, the all ban is supposed to kick in for the EU. Uh, do you see them turning on the single, uh, pipeline to, uh, the Nord Stream or reopening the Slavic countries? Uh, do you think that this is even going to be an option for them or are [00:25:49] Speaker 2: they too far gone? I think something's got to give and, and you can't do those things unless the politics is what gives. Um, so you can't do that with Ursula, Kayakalis, Macron, um, Mertz in power. Now you can't not do that and keep the EU together in our view. I think you'll see every sovereign for itself when the molecules are truly up for grabs. Right. And so if we were doing sort of a mental model around this, we would probably brainstorm around the assumption that since the EU can't break apart, even though we think it will, and the current political leaders can't make those decisions, even though they have to, then we have to change the political leader. So we would be short Mertz, maybe Macron leaves early, maybe Ursula resigns. Um, so that's the kind of like prediction that we would make and look, we, we don't get all of our predictions, right. Our hit rate is more, we get a lot of long shot predictions, right? So a 2% odd that we might get 15 or 20% of the time, this is still pretty valuable. Right. Um, and so we, we would be interested in a poly market contract on, on whether Mertz survives, um, you know, politically, politically, um, I don't want to get any sort of German intelligence on me. Um, no, but like there's a world where Mertz resigns and, you know, the CDU goes into coalition with the, uh, alternative for, for Germany AFD and, um, which is very Russia friendly, mostly composed of former East Germans who lived under Soviet communism. Um, and they strike a separate deal with, with, with Russia, either, you know, within the confines of a new EU leadership or, you know, Germany leaves the EU, which is unthinkable. So it has to be that these leaders get wiped out. That's, that's the least, the lowest friction option in our view. Um, because something's got to give, I mean, Putin's sitting there with a switch in front of him and, and he could, he could literally end the whole thing tomorrow just with the speed with which he ended Ukraine's economy. I mean, the Ukraine economy is not going to survive a full closure of the Black Sea. And unlike the Strait of Hormuz, nothing's getting through. Um, [00:28:07] Speaker 1: I can assure you, um, I've got about 19 questions for you here, but, uh, Turkey is an interesting animal as a member of NATO and the one that's also helping Iran that they are really trying to become the gas and molecule moving, uh, centerpiece, uh, between the middle East and the EU. I mean, it is a paradigm that I did not, I would not want to fight Turkey. They're just flat out great fighters. [00:28:37] Speaker 2: Ed Sheeran: Erdogan is a shifty character. Um, you know, he, he famously went to Moscow to apologize to Putin over some prior bill doing on his part. Um, Turkey's trying to ride both horses. Um, by the way, it can't be the market maker for natural gas without Russian natural gas, right? Because there's not just Turk stream, but blue stream props up the Turkish economy. Last I checked, the Turkish Lira is in trouble. Uh, Erdogan's on his last legs. It's not like he's allowed an obvious successor to develop. Uh, the stability of Turkey is another question on the board, um, for us. Um, because, uh, at last I saw Erdogan shuffling around the NATO conference, he didn't strike me as a pillar of good health. Um, and so, um, you know, uh, not wishing ill on the man, but just observing, you know, um, that he's been there for a long time. I already survived one coup. Right. And, uh, who knows again, when we talk about changing leadership, like the current situation [00:29:35] Speaker 1: can't stay the same, you know, did the new Saudi Arabia, uh, NATO style deal that got inked and then they got attacked, uh, with Pakistan, Turkey, and I believe one other country besides Saudi Arabia are signed onto this thing. And it really didn't do any good because the Houthis and the blow you up ship attacked anyway. I'm going to have to train you on that one. Houthis and the blow ships. [00:30:00] Speaker 2: Um, so again, you know, Erdogan's word has never been, uh, golden, you know, and so who knows what, what, what money changed hands for that signature. And then subsequently, who knows what that signature is worth. I must confess that that development caught us a bit by surprise. Can't say that I fully understand it. Um, one of the things that we, um, always try to do is when we lack knowledge to confess to it. So I don't have an intelligent analysis of that. Yeah. I don't either. Yeah. It's just something on the board that we're watching. Um, could mean nothing, could mean something too soon to tell that when you don't know, it's okay to let the world tell you, by the way. Um, that's one of our, [00:30:44] Speaker 1: yeah. One of our M O's. Uh, before we get to the next question, I want to give, uh, Dave Walker a shout out. He's a very staunch, uh, Doomburg fan. And also, uh, he reads my stuff and I, I absolutely love Dave Walker and his entire family. So I just want to give him a quick shout out. Yeah. That's [00:31:02] Speaker 2: good guy. Regular, regular commenter in the Doomburg, um, article feeds. Uh, yeah, I, I would be dead [00:31:10] Speaker 1: meat without our, uh, patrons, sponsors and, uh, paid subscribers. Uh, absolutely love every single one of them. Um, where, uh, so we, as we sit here and we take a look at your, your article coming out tomorrow we look at where, uh, J I'm going to switch gears a little bit and move to the U S. Um, I, JPM has made some serious allegations that we have rolling blackouts rolling in. We have, uh, New York, uh, absolutely, uh, entertainment value, uh, at its, at its finest. And, uh, it's going to get interesting in the United States. What do you see coming around the corner there? Well, where to begin? Um, [00:32:03] Speaker 2: so I, I would say that, uh, uh, JPN's warnings, um, uh, this is the, uh, electric utility, not the bank. Uh, I assume, um, should be taken seriously. This is driven by a combination of, uh, accelerating demand for AI with a forced, uh, installation of intermittent renewables with insufficient thought, um, their efforts notwithstanding to convince lawmakers that, um, both these things can't go on concurrently. Um, and so, um, there's so much natural gas in the area. Um, it's hard to imagine that, um, a plan won't be assembled to allow the U S to cobble through. Of course, you know, the U S has many grids. That's a particularly important one. Um, but again, you know, the, the chaotic operation of, uh, utility grids is, is not a strength of ours necessarily. We think we have a pretty good understanding of how they work and certainly how they impact the demand for fuels. Um, but as you know, we wrote a long time ago that, um, a piece called irreconcilable differences, that the data center demand needs to go off grid. It hasn't gone off grid to the extent that we thought it would, but it's certainly going that way now. So I would point to Texas as a possible outcome, which basically they put a, um, uh, they put a moratorium on new data centers that aren't behind the meter effectively. Right. Um, and, uh, and so I think we'll have to see that as well. Like there's, there's ways to thread the needle. So you take an abandoned coal plant with interconnections and you build some new natural gas power plants there, like EQT is doing and you, um, keep the connection to the grid just for backup and maybe feed some extra, extra power into it. Um, and that's a nice sort of threading of the needle. You're still somewhat connected to the grid, but you're not really pulling, you're bringing your own new generation with, with the demand that you're building out for. But, um, look, the human endeavor is infinite compute. Um, the cost to infer from these open source models is dropping precipitously. Jevon's paradox says demand for such compute is going to moon. If you can't make money in the face of infinite demand, no matter the price, then you're a fool. Um, and so this is coming, it's a train, you know, let's talk about an axiom for brainstorming. That's a pretty solid one. [00:34:25] Speaker 1: Um, you know, uh, bring your own power and you have Texas ERCOT, Texas, um, you had New York and Texas, New York, Governor Kathy Hochul, um, uh, banned, uh, their, uh, AI data centers, uh, impacting five requests. Texas, uh, Governor Abbott last week did his ban on that while they reviewed it and it impacted eight, a thousand eight hundred requests to attach to the grid, or at least get in there. And a lot of those were data centers and everything else, significant, uh, impact in the Texas area. But do you think data centers are being oversold or overdone? Because we're not going to be able to [00:35:14] Speaker 2: build all of them. Well, let's, let's ponder why that might be, Stu. What's the big difference between those two areas? One of them's drowning in negatively priced natural gas. It's not, it's not more complicated than that. Um, testimony to the power of a sound energy policy is you have so much demand to build things in your state that, um, you have to put a stop to it temporarily while you figure out, um, who has the, the ability to pay off politicians the most. I mean, who has the, who has the soundest plan that will have the least negative impact on, uh, the environment and on water and on the, um, the local existing residents for whom I'm sure Governor Abbott cares greatly about. Um, so that's where we are. I think that part was pretty predictable. Um, we're going to see the same thing in British Columbia and Alberta, um, you know, uh, benefit there is it's colder. Um, there's a lot of talk about Australian shale to circle back to our little, um, plug for Liberty earlier. You know, there's, oh, there's not enough pipelines. There's not enough pipelines. Well, you don't need pipelines. You build a data center and, and, and, uh, you know, a transmission wire is a lot easier to write to build them. Um, you know, uh, well, that's even, you don't even need a wire tech. You build a data center and you just shoot it up to a satellite. You have natural gas going in one side of the building and data coming out the other. Um, so you don't need much in the way of midstream to do. We, we called them, um, uh, uh, natural gas pods, these giant buildings, gas goes in one side, data comes out the other. Uh, that's the ultimate sort of off-grid embodiment of the AI phenomenon. And now you need water and you need other things. At least you do now, who knows what technology is going to be invented to run these things. I mean, the physics of cooling is pretty well understood. If you have an infinite amount of natural gas, there's gotta be ways that you could run a refrigerator. Um, especially if you're in the middle of the outback and no, no, no, not nowhere else to do it. I mean, nothing else to do with it. Again, if natural gas is negative, that opens up all kinds of, uh, solutions that are unworkable, uh, elsewhere. Um, and so the spice will flow if, again, one of the strongest mental models that we've had that's been operating for years is that the human endeavor is infinite compute. Ray Kurzweil was right. Um, go back to the singularity is near. Look at his plot of the world's most powerful supercomputer on a log curve and forward projected out 20 years. And it's right on the number. Like I'm the guy is right. It's just a very important point. When we say a mental model is operative, it means that that model is making accurate predictions. It doesn't actually have to be right. So I even, I just misspoke in the language that we like to use when we're being precise. Um, the human endeavor is infinite compute is a strong mental model that has a profoundly accurate track record of making predictions that are useful to, uh, thinking people and investors alike. [00:38:09] Speaker 1: I left you speechless today. No, I'm sitting there thinking about how, how this is rolling through. When you, when you take a look at the pipeline difference between the putting, uh, you've got Chevron, you've got several data centers here in Abilene. There's like eight data centers being built right around Abilene against star stargate right here. Um, and in the data centers, it is absolutely nuts to see how much is going on around here. And when you take a look at the build outs, I, I think that there is going to be a gigantic, uh, falling out of investors that are wanting their money back on AI type build outs. [00:39:02] Speaker 2: All right. Here's the analogy. Look, I don't mean to cut you off. I love it. You know, please treat me like a husband. Yes. You could have went the other way with that, which was, uh, which would have been, I suspect a bit more dangerous. Um, I don't want to get smacked in the back of the head. So, um, these are the arguments for people that people were using against shale. Oh, it's going to destroy a bunch of equity capital. Oh, it doesn't make any money. It's never going to return. Oh, we have a glut of gas. What are you drilling gas for? Yeah. 30 BCF later. Here we are. Um, yes, companies will go bankrupt. Yes, equity will be destroyed. Heck, bondholders might lose a few times. And U.S. shale is still a really big freaking deal. That's how I feel about AI and data centers and compute. This thing is moving so rapidly. Look, the doubling time on the power of these models is shrinking. Look, one of the great profound takeaways from Kurzweil, um, when I first read it, it must've been in 07. And if it published after that, then I'm a liar. Um, that's my memory of when I wrote it, when I read it. Um, you put, you read the first chapter and you put, put it down and then you go for a walk and you think, whoa. Okay. So one of the most profound lines in that book is that the doubling time of technology is shrinking and soon it will be a day. Let's look at the doubling time of the power of AI. How long did it take for the first chat GBT to get twice as good? Not that long. How long did it take for the appearance of Claude, for the appearance of DeepSeq, for DeepSeq 2.0, for opening eyes latest? Pick your favorite. Somebody comes out of left field. Oh, we've added this feature. We've done this thing. Um, the power of these things, the doubling time I would argue in the power of AI models is down to about three months. Down from decades before, right? Um, it's trending towards a day. So literally there's a world not that far from now where every day these models are going to get twice as good as they were the day before. By the way, these are just the models that are being released. Huh? There's a reason why every techno nerd that we know in Silicon Valley is, um, living in an alternative universe to the ones, to the one you and I are. Um, because they're seeing things that, that we're not to bet against that trend. Somebody might lose money in the chaos of what's coming. Absolutely. It doesn't mean that the chaos is going to stop. It's the, the, the human endeavors, infinite compute, man. Like with you to bought gold at the beginning of Weimar, just to give you the power of exponential. Um, and just held it two things. You would, you would have exited it much wealthier than everybody else, except for those who borrowed money to buy factories that produce necessary assets. Um, because debt, you know, monetizes away to zero in such a circumstance. Um, but the other thing is you would have had to have enormous courage to hold your gold as it drew down by 20, 40, 80%, 15 times over those six years. If you, if you pull up the gold price during Weimar, during a true singularity, you know, that was a singularity moment in the sense that the number of German Deutschmarks it took to buy an ounce of gold went to infinity. Um, and it did because the currency went to zero, you know, infinity and zero are philosophical constructs. You need both of them to make mathematics work. Um, there were lots of occasions where you thought you were brilliant and boy, should I sell it now because it can't go much higher. Look at how many Deutschmarks I could get from my gold. And then it drew down 80%. You felt like a fool for not selling it and off it went. I tell this story because this is what's happening in AI today. This is a singularity. The doubling time is shrinking and sooner will be a day. Kurzweil gets full credit for writing that 20 years ago. Wow. Um, and I know he's considered a bit out there and he's taken all kinds of supplements because his conclusion, which is a natural one, by the way, is that his goal is to bootstrap his way to the singularity because he'll live forever. You know, he's just going to download himself on a computer because the subtitle of that book, which most people overlook is when humans transcend biology. Um, AI is like way, way, way smarter than me and you already. Um, of course. Well, yeah, I went to Oklahoma state. I can barely read. Right. I mean, okay. Well, take the average of us. Um, I get what I'm saying again, didn't mean to get too metaphysical with you, but, um, I did when I hear people skeptical of the need for data centers or whether this money gets paid back, man, get long something and hold it. No, be careful what you buy, but that's like saying shale gas will never be economic. You're just making a massive short bet on human ingenuity soon to be super powered by AI ingenuity. And that's kind of the doubling time is shrinking Stu. And that has one thing humans are not very good at is modeling exponentials. We live in a linear world. Darwin dictates that cause and effect are, uh, in very close causal relationships, right? I mean, do put hand on stoves, hand hurts. Don't put hand on stove going forward. Like it's, it's not more complicated than that. That's linear. Exponential is hard for us to model it. It, it, it accrued no Darwinian survivability credits to be able to accurately model the knee of an exponential. Um, there is no greater exponential in the history of humanity, which is, I think approaching its final days, um, than the advent of AI and it's rapid [00:45:19] Speaker 1: doubling time. Um, almighty Doomburg, I do want to give you a shout out. Um, I am a subscriber, absolutely love all of your stuff. And I want to point out over here on doom casts. I absolutely love the fact that you have, uh, put energy news beat in here. And anytime that you're on here with the capital cosm folks or solar financially or BTC sessions, this is on doom cast on doomberg.com. And I want to highly recommend that everybody go to doomberg.com and pay for a subscription. [00:45:57] Speaker 2: Stu, you're, you're a kind man. Always appreciate coming on and, uh, really enjoyed this one in [00:46:02] Speaker 1: particular. We had a lot of fun. Oh, uh, you know, the, the fun thing is I don't always agree with you, but you're right a lot more than you're wrong. And that's, and that's the fun part. [00:46:16] Speaker 2: Look, can I get that on a loop and I'll, uh, play it for my, uh, for my spouse. [00:46:21] Speaker 1: There you go. Uh, you know, I, I have to play that for my wife when I go in and she, uh, next in two weeks, uh, I'll be married 40 years. Uh, one of those was a good year. And so may it be the next one. May it be the next one. Oh, I can't wait to use that one. So we've got your story coming out tomorrow and that is going to be on doomberg.com. And I cannot wait to get it. Cause you gave us a great tease on that rascal, but what's coming around next week? Uh, well, one thing we're working on for [00:46:55] Speaker 2: our doom zoom, you know, last month we did a, uh, we did our doomberg pro talk on, um, on China through the lens of energy, a bit of an update from one we did two years ago. We're doing something different this month. At least that's what I have in the hopper. Um, we're going to do a, the first of what we think will be a series of company deep dives. Nice. Um, we're not an investment house, but people like to invest in things. And, um, so we're going to do a, like an hour long deep dive on Chevron. Oh, sweet. So I think that'll be fun. You know, in the classic doomberg style, um, it's not going to be a wall street, you know, buy, sell, hold stock recommendation. Um, it's going to be, uh, an interesting look starting with a, with a summary of what a super major is and what they're not, um, how they become super majors, how they soak up everybody, how they're the exit liquidity for the entire industry, for example, and how they use their stock as currency to do that, to protect their balance sheets. And, right. You know, um, and then the various ways that you could be exposed to Chevron, its bonds, its stock, collect the dividend. Um, and, uh, then we're going to do a around the world tour of all of its major resources and really, you know, Chevron's as a super major, it's in a lot of interesting places. It's in the Permian, of course, the back end. It's in, um, Venezuela. It's in Guyana now through the Hesse acquisition. It's in Argentina, been there for a while. It's in Israel and Egypt. It's in Argentina. Uh, it's in, um, Australia for LNG. It's in West Africa, of course, [00:48:26] Speaker 1: some exciting. It's going into, uh, Iraq. It's in the, uh, and it's also in Kazakhstan. Don't forget [00:48:32] Speaker 2: that with the whole war in Ukraine and the black sea that we've been talking about. Don't kid yourself that Mike Wirth isn't spending an awful lot of time and attention on the Russia-Ukraine war at the moment. Um, so anyway, it'll be a fun one. We think I'm literally like in the middle of putting it together. It'd be a different thing from Doonberg. Hopefully people like it. Um, and that's what we've got going on today. And then of course, you know, when it comes out, I'll come back on and [00:48:56] Speaker 1: we could talk through it. Well, this is very exciting. And again, thank you for allowing me to, uh, um, ask you, uh, at least entertaining questions and, uh, remind me not to poke the bear. I mean, get you riled up before the show. Next time I'll try to like, calm you down ahead of time. I don't think it worked out. All right. You know, uh, that's funny. All right. Well, thank you so much for stopping by Doonberg and go out and be epic tomorrow. Will you? You bet. See you. [00:49:33] Speaker ?: Thank you.