Robert Rapier is a chemical engineer with more than 25 years of international engineering experience in chemicals, oil and gas, and renewables, who writes for Forbes and Utility Forecaster. In this episode, Rapier talks about the ongoing diesel shortage in the U.S., the mismatch between domestic crude production and domestic refining capacity, his stock-investment strategies, Vinod Khosla’s stupid bet on biofuels, why cellulosic ethanol has never worked, and why he believes ExxonMobil is “going to be in business for a long time” to come. (Recorded November 15, 2022.)
Robert Bryce 0:04
Hi, everyone. Welcome to the power hungry Podcast. I'm Robert Bryce. On this podcast we're talking about energy, power, innovation, and politics. And I'm pleased to welcome back my friend and fellow Oklahoman Robert rapier. He is the editor of utility forecaster. Robert, welcome to your first appearance on the power hungry podcast.
Robert Rapier 0:22
Thanks, Robert. Good to see you again.
Robert Bryce 0:24
Now, I don't know why it took me so long now after more than two years to get you on the podcast. But we've we're gonna make it happen right now. I warned you guests on this podcast introduce themselves. So imagine you've arrived somewhere you don't know anyone and they asked you who you are. And you have about 60 seconds. Tell us who are you?
Robert Rapier 0:42
Okay, I'm Robert rapier. I grew up on a ranch in Oklahoma and decided that I wanted to do something besides that. So I went off to college, got a degree in Chemical Engineering went to work as a chemical engineer. I have worked all over the world. I've worked in Europe three times on assignment. I've worked in Oklahoma, Texas, Montana, Hawaii. And now I'm in Arizona. On the side I write as you noted, I write utility forecaster as well as to other publications for investing daily. And I also am a contributor for Forbes and you know, if I'm telling somebody overseas who I am I usually will identify Forbes because even overseas they know Forbes so that's you know, that's that's what I do. I have chemical engineering All right.
Robert Bryce 1:26
Gotcha. And Hugo, Oklahoma's your hometown. And let's get something out of the out of the search. Now. I think we maybe talked about this a long time ago. You know, I'm from Tulsa. Isn't it true that Barnum and Bailey Circus used to winter over in Hugo and didn't they lose an elephant one time and Hugo Oklahoma that went missing for months? Is this true?
Robert Rapier 1:43
So I think it's Carson and Barnes i There's a circus that does winter in Oakland, Hugo. And not only they lost the elephant, they've lost the lion before. I mean, they've lost we've got a big lake there and Hugo, and there's a lot of forested area around it. And that circus butts up against the wildlife area around the lake. So animals get out they've got pretty nice area to hide. Yeah. And those elephants are two elephants got out and they were they were there for like all summer before they got recaptured. They were enjoying themselves around the lake. And to this day,
Robert Bryce 2:21
I have to make the joke elephants on the lam and yeah, there's
Robert Rapier 2:24
a there's an elephant sanctuary there. In fact, on the voice the show The Voice, there was a Hugo, Oklahoma native on there. And Blake Shelton mentioned the the elephant sanctuary there. He said, I know the elephant sanctuary. He said we will make a lot of money. we'll donate money to the elephant sanctuary. There you go.
Robert Bryce 2:44
There you go. Okay, so now we got that out of the way I had you on because, well, one, I've been following your work for a long time. We've been acquainted. We've been friends for a while. You had a piece in Forbes just recently, and you're talking about the diesel shortages. And that had over 300,000 hits, which was a very large number for Forbes I write for Forbes as well. So bring us up to date. I want to talk a lot about refining today and about the refining sector because you have a lot of expertise there. So we're hearing a lot about the diesel fuel market now what's happening and why.
Robert Rapier 3:17
So there are several things that are happening. And as I explained in the article, there are two things that happen this time of year, every year, we go into high demand season. So let me take a step back. So our shortage right now is with distillates and distillate are a cut of petroleum, the makeup jet fuel, fuel, oil and diesel. And we're going into high demand season for that right now, because farmers are harvesting crops. So demand for diesel is up. And then people are putting in fuel oil from winter. So demand is up there. At the same time. This is when refiners do fall maintenance. So every year, usually in spring or fall, a refiner will take the take their plant down, and they'll do maintenance. And the reason they do it then is because it's shoulder season for overall petroleum demand, and the weather's nice. So you don't want to do, you don't want to do maintenance in the north in the dead of winter when demand is at the lowest. So they do it in fall. They do it in spring. So those two things happen every year. But a couple of things have happened over the course of the past couple of years that have exacerbated this year's crisis. So one is that we've lost a lot of refining capacity since the beginning of COVID. And I'm sure we'll touch on that a bit later. But the other thing that happened is when Russia invaded Ukraine, and we decided to stop importing Russian products, we lost a lot of not only oil, but we were importing heavy heavy oils, and diesel itself so we lost 700,000 barrels a day of imports that would have produced diesel and So let's in our refineries, and if you look, you know, people, people ask what's happened with gas prices? And I said, Well, a couple of things have happened. But if you look at what's happened since Russia invaded Ukraine, that's when prices really took off because we created a shortage. When we said we're not importing any more Russian Russian oil. And that created some disruptions in the market. refiners had holes in their products late they had failed. I've talked to a refinery manager in California that I used to work for. And he said, we've had a real struggle here, trying to meet demand for gasoline and diesel because this Russian embargo that we put on their oil has caused us to be short distillates. So we're trying to shift production to more distillates at the same time that costs us gasoline production. And so you know, it's kind of a no win situation there. They've got, you know, trying to fix the diesel situation contributes to higher gasoline prices.
Robert Bryce 5:56
So let's run through that if you don't mind. So you talked about diddle distillates, and I generally think of them or I hear the term middle distillates. But you mentioned jet a fuel oil, diesel, kerosene as part of that same cut, right? So kerosene and Jet A are about the same, a very similar product. So how is that? How is that different? If you said that you have to switch from and I know you spent a lot of time in refining. And this is one of the areas where the general public, I think, doesn't have very clear concept about how any of this works. So how is that trade off worked in between gasoline and diesel? Why is it producing more of one means less of the other.
Robert Rapier 6:35
So the gasoline and diesel, you can think about them in terms of a range of hydrocarbons. So a gasoline you can think about that as a an eight chain hydrocarbon roughly. But it includes, you know, butane C, four pentane, C five, and so it's a mixture. And there, it's not all straight chains. There's there's branched hydrocarbon, silver, diesel, the hydrocarbon chain gets longer in diesel, but there's some overlap. So you will have some of those gasoline components, the high end gasoline components will show up in diesel and the low end diesel components can show up in gasoline. And a refiner can shift a little bit of production back and forth. And also the way they operate the refinery, they can shift a little bit of production, it's not a lot in the refinery I used to work at it was about 5%. So we could take about 5% Gasoline production and shift it toward diesel production and vice versa. So it's not a knob that can be turned, you know, hugely one way or the other. But it's it gives a little bit of flexibility. Further, the kind of oil that you put through the refinery will dictate whether you're making more gasoline or diesel. And what we're getting from Russia tended to make more diesel. And that is
Robert Bryce 7:47
a is that a heavier crude? That's more suitable for diesel then yes. So like sweet as which is what we generally produce here in the US. And we import heavy sour, the light sweet is better for producing gasoline, whereas heavy sour is better, better, more conducive to producing diesel? Is that fair?
Robert Rapier 8:02
Right? Because like sweet tends to be shorter hydrocarbons. And so when you crack those, you end up with more molecules down on the gasoline range.
Robert Bryce 8:11
And when you say a shorter, shorter hydrocarbon chain, you're so you mentioned diesel has a longer chain hydrocarbon, right? So is that a C eight? Or what is the what's the basis of diesel?
Robert Rapier 8:22
So diesel would be more centered around maybe C 15, C 12, C 15? C eight teens. So just longer, you know, and it evaporates at a higher temperature. So if you put diesel in your gasoline car, it won't run because you're not getting the evaporation and your it takes more energy to combust the diesel, but then the diesel itself has more energy. And
Robert Bryce 8:47
is that right? So the diesel and gasoline pretty much on par in terms of their their energy content on an on a gravimetric? basis or diesels grab a
Robert Rapier 8:55
metric maybe but not not gallon? So per gallon, a gallon of gasoline has about 120 125,000 BTUs. a gallon of diesel has about 138. So, you know, what does that 10 10% More BTUs and a gallon of diesel. Okay, and one other thing you know, you can you can see how these products break down by the assay, you get an assay. And an assay will tell you when the processing refinery how this is all going to split out. And you can see that a light assay and a heavy assay will produce very different product slates.
Robert Bryce 9:29
Well, it's interesting I'm glad you made that point because I've been I've been presenting I do a fair number of lectures and speeches and I've been presenting on watt hours per kilogram right the energy density gravimetric energy density but choosing a volumetric energy density of diesel is higher than gasoline, gasoline may have a little bit higher energy density per weight. But per volume diesel would have a slightly higher well
Robert Rapier 9:50
and I don't I'd have to look and see how it breaks down but I like to use volume and there's a very good reason for that. People will promote hydrogen as having a very high energy density per weight. That's true, but as a very low per volume, and per volume is what you could put in a car. So you know, the weight doesn't really matter unless you have a stationary application where the weight isn't really important. It's what you can stick in a car or volume wise, that really matters.
Robert Bryce 10:15
Right? Well, okay, so Well, that's a good point. I'd argue it's both. But I mean, you don't want to hold I mean, there's one of the problems with electric vehicles, right, that battery weighs, you know, half a ton, right? So weight does matter. But I get what you're saying to you is, volume matters as well, because you got to put it somewhere.
Robert Rapier 10:31
Yeah, I mean, in a car, you're not you don't care about the weight of your fuel, you can only put so many gallons in the tank. That's it. Right? I mean, you're you're you are controlled by the volume.
Robert Bryce 10:41
Yeah, no, that's great. So what is the so we've been toying around this, and I know this is a term of art in the refining sector, what's the crack spread.
Robert Rapier 10:49
So the crack spread is, tells you what is the profit you would make off of off of a barrel of oil. So oil will will split into, and I think it's like they do three to crack spreads, and three or three to one crack spreads. They're each different breakdown. So like a barrel of oil might make. Or the three barrels rule might make two barrels of gasoline, and a barrel of diesel, or something like that, like three to one crack spread. And so you say, okay, for x input of oil, we've got three barrels, and it's going to cost this much. And we output this, what is the spread between the product price and the volume, and the input price and volume. And that's the crack spread, there's all kinds of crack spreads, because, again, there are different outputs from that barrel of oil, you might produce, you know, more more diesel for one and more gasoline for another. So you've got to know what crack spread is important here. So you know, WTI, might produce, you know, produce more gasoline. So you know, your three to one crack spread might be more applicable in that situation. Whereas for a different oil, you might have a different sort of crack spread that you're looking at. It's just a gauge of profitability of refiners, it tells you refiners are making a lot of money here, or they're not making so much money here, when the practice spread is really large refiners are making a lot of money, even though that specific crack spread may not define every refiner, it's a good proxy for profitability of a refiner.
Robert Bryce 12:20
And the crack spread will, will differ on the product being made. But more but more particularly as keyed to the type of crude inputs, or Arab light would be heavier, sour crude, or what are the Mexican I forgot what the Mexican marker the name of that but or North Sea Brent, these all these different crude grades have a different crack spread? Right. So let's talk about that, because that's one of the other things it to me is really interesting about the refining sector. And as I understand it, there's a mismatch. You know, we talked, we hear all this talk about energy independence. And you and I've written about this before. Well, I'll ask that question. First, is the US energy independent?
Robert Rapier 12:58
It depends on how you define energy independence. And I tell everybody that so what is what is your measure of energy independence, if you say, it means we produce as much energy as we use, and you say, Yes, we're energy independent, we produce more energy than we use. And that's been true, we've been trending that direction, since the shale oil boom really took off about 2008. We've been trending that direction ever since. But we reach that mark in 2020. And we lost some ground in 2021. But we still produce more energy than we used. Now, if you apply a different measure, and you say, energy independence means we don't import any oil. We've never been energy independent, then, because we import oil, we turn it into finished products, and we export it. So I always make people define their terms. And I say, you know, depending on how you want to define it, we are energy independent, or we've never been energy independent.
Robert Bryce 13:54
Well, so let's follow up on that, because that was one of the big keys of contention, Bones of Contention now here a few years ago, where the American Petroleum Institute fought very hard for think that there was a trade it was an outright horse trading on Capitol Hill where there were extensions of the production tax credit and and the investment tax rate if I'm remembering correctly, or maybe was just the PTC and in exchange, the oil industry got a reprieve or got a the law change that allowed crude oil exports, correct. That was but that was needed because we had a mismatch between domestic crude and what domestic refiners want Am I am I'm remembering this correctly. That is correct. And Tim, and tell me about why the crack spread then matters to domestic refiners. Because as I understand it, they don't want like sweet,
Robert Rapier 14:39
crude, correct. So we'll go through that. So Obama signed that law into place and people have asked me before, why are we exporting crude oil? Well, because Obama signed the law into place that allowed it to happen and our domestic producers want it to be able to export. Now why? Because for years, our oil has gotten heavier and heavier in the oil around the world. gotten heavier and heavier. So refiners have invested billions of dollars into upgrading the refineries to be able to process that heavy and sour oil sulfur in it, and they make more money off of that oil. And I used to work in the economics group of a refinery. And I could tell you, you know, it would cost us a lot more to process. Syncrude from Canada, we'd make a lot less money than getting the heaviest, most sour crudes we could from Canada, because we've invested in the, in the infrastructure to be able to crack that oil. And so
Robert Bryce 15:36
if I'm not going to interrupt just that heavy sour sales at a discount, then discount West Texas Intermediate, so the refiners can buy the crude at a lower price and try it into high value products, and then make a bigger crack spread. And
Robert Rapier 15:49
so approximately a barrel of heavy sour, will make about as much finished products as a barrel of light, sweet. But that barrel of heavy sour, you know, I remember when I was at the refinery, we could get that for $30 a barrel and the Syncrude was selling for $70 a barrel. So and we're making approximately the same slate of finished products. So you know, hugely profitable, but it takes a lot of capital investments to be able to achieve that. And so when the shale boom took off, and what was being produced out of the shale Fields was light, sweet crude oil, the refiners were like, we don't we don't want that, that we're not we're not paying for that, because we've already invested all this money into the heavy stuff. And so it makes more sense to export that crude. And let us keep importing the heavy stuff that that we've made all these investments for. And so that was really what happened with the allowing crude oil to be exported, then it allowed for a better match for the Croods that, you know, we're producing now can go to refineries, in places that can use it. And we can keep importing the heavy stuff that the refiners have invested in, to be able to process and to make more money. So then
Robert Bryce 17:02
is it fair? Is it well, I've used this term that we are energy interdependent, we employ Yeah, absolutely. We import a lot of energy, we export a lot of energy. If we just look at it on a on a mass balance or imbalance of trade, we'd say, well, it's a wash where, you know, we're independent, but no, we're actually maybe even more interdependent now than we've ever been, is that.
Robert Rapier 17:24
Yeah, that's That's correct. I mean, we are exporting a lot of finished products, if you look at our net exports have steadily so so like in 2005. I think our net we net imported something like 13 million barrels a day, and shale shale oil started to put more and more oil on the market. And those net imports of petroleum petroleum products steadily declined until they went negative. And petroleum products, we went negative on that in about I think 2012 or 2013. So that means now we're exporting more gasoline and diesel than we're importing. But then when you throw crude oil into that, that went negative in I believe that was 2020 2019 2020 when that number went negative. So if you add it all up, you had the petroleum and petroleum products, We're now exporting more of those than we're importing
Robert Bryce 18:22
in Mexico is one of the big markets for that right we import a lot of Mexicans Mexican crude can can pay Gee, I don't know if it has a certain I'm forgotten the name for that that that blend of crude, but particularly from Pemex. PEMEX is short refining. And so they export their crude to the US we turn it into gasoline, send it back to Mexico, and is is that I guess it was true for Venezuela, but not true anymore. Is that right? The Citko has had to sell their refineries, or they did sell them or I'm losing track here. But the Mexico is that is that right on Mexico?
Robert Rapier 18:52
Yeah, I mean, they're Mexico is a big market for for our finished products. And for natural gas. I mean, natural gas to Mexico, is been booming over the years. So you know, as our as our natural gas has ramped up, Mexico has become a very, very important partner trading partner there. Right.
Robert Bryce 19:09
So we've talked about some of the mechanics here, and these are things that you would know if you're in refining, but I wrote this question down. I'm going to paraphrase it, I'm not going to read from it. But why is it that there is so much demagoguery around the oil business? I mean, we've seen this in particular, I'm not a Republican. I'm not a Democrat. I'm disgusted right. But this administration, I've seen more demagoguery more lambasted more vilification of the oil industry than any in administration. I can remember in my lifetime and I'm an old man now.
Robert Rapier 19:41
One thing is why is
Robert Bryce 19:42
the oil industry so or oil in general, so vilified and yet I mean, as I put it, we we love our cars and we love gasoline who hate the oil companies. What how do you how do you see this? You've seen it for a long time now.
Robert Rapier 19:57
Right? And you know where you don't see it? You don't see it over? sees you don't see it in the Netherlands where shale is a huge presence. You don't see them hating their oil companies over there. It's it's unique to us here. I have always wondered what came first the Democrats bashing the oil. And let me make it clear, I'm registered Independent. I'm neither Republican or Democrat, either. But you're correct. The Democrats, you know, the oil industry contributes more to Republicans, the Democrats bash the oil industry. And I always wonder what's happened first, the Democrats start bashing the oil industry or the Republicans contribute more to the party that doesn't bash them as much. I think it's that they make an easy target. And the public does not really understand, you know, see Biden stand up and talk about all these profits that the oil companies are making, and demands that they bring down prices. That's not how any of this works. And he either doesn't know that, or he does know that and he's just playing politics, because no companies aren't in charge aren't in control of oil prices, they're not in charge of finished product prices. That that may seem crazy. But it's not like an iPhone, you know, Apple makes an iPhone, they decide we're going to sell it for this, these products trade on open market. So I've said an analogy would be it's like asking Apple to lower their stock price. You know, you'd say, well, that's preposterous, their stock trades on open market. And so there's all and gas and and products, they trade on an open market. So it's not the oil industry, setting prices, if they were they'd never lose money. I mean, Big Oil lost $70 billion in 2020, they would never lose money, if they could just set prices, oil prices would have never gone negative in 2020, as they did if they could set prices. But I think the public doesn't understand very well. They think that, you know, Exxon Mobil and smoke in a cigar filled room is deciding you know, what to charge for gasoline this week. And, you know, they lick their chops, and, you know, oh, we got a shortage so we can charge more. And so politicians realize that's an easy target. It is true, that they're going to make a lot of money when when there are shortages. But that doesn't mean that they are you know, manipulating the market. They don't manipulate the market. I mean, there's been some some odd cases where, you know, BP got caught trying to create a shortage in a propane market is something right? There's some case like that, but there's nothing widespread. There's not collusion, collusion is illegal. But people imagine that it happens. They imagine that, you know, CEO of shale called CEO of Exxon Mobil, they get together and they decide, hey, let's, let's withhold production here and create a crisis. And that doesn't happen. That's, you know, I was in the economics group at ConocoPhillips, which is now the Phillips refinery in Billings, Montana. And we have meetings every week where we try to figure out where price is going. And how do we need to run the refinery, you know, going into fall now. Okay, we think diesel is going to be short this year, we're going to try to make as much diesel as we can. Where do we think it's going? What are our projections? We could have just call the CEO, right and said, Hey, where are you going to set prices? But it does nothing works like that. We look at numbers from the Energy Information Administration, we look at inventories. And we look at local the local market and we try to project this is where things are going.
Robert Bryce 23:22
Well, I'm glad you mentioned that because I think I've toured that refinery in Billings, it was a long time ago now when I met, I met one of the managers and he invited me to come and I thought, Heck, yeah, I love that big iron stuff and walk through it. But that was one of the other things that was gigantic this question the other day when I was presenting, and they said, Well, how is the US going to do in terms of energy policy? And I said, Well, US is a big place. This is a very regional business. And you made that point just now. So there are these regional refineries. There's one in Salt Lake City, there's one in Billings, they're serving a regional market. And they're not exporting necessarily. They're not selling their gasoline in Miami, they're selling it in the local marketplace. So that's the other thing. I mean, so I'll ask the question this way, these refineries? Do they have a certain set territory that they know that they're going to sell to? Or how often do they think, oh, we'll export this to the east coast or west coast? Or are they really focused on the areas around them and servicing those needs in that territory? How does that work?
Robert Rapier 24:23
So I'll take billings, for example. You know, Billings could get product down to Denver. It could get product insert to certain areas, because it's served by pipelines. But it can't get product in California. So it doesn't really matter how high price is going California billings refinery cannot get product to California. There's not the pipelines and what could happen is a jobber could buy a load of of gasoline and haul it to California. It's a product differential is great enough, but then California specifications are different. So essentially, that's an island unto itself, you'll see most of the product from the Billings refinery, you can draw a circle around billings, and it's mostly in that area. But some gets out a little further, you know, you do have these jobs that will buy, you know, a truckload of fuel and take it a little bit further afield if the product prices, they're warranted. But mostly, it's a very regional market. As you said, they're not there. And if you get closer to other refineries, like you get down into Texas, you've got plenty of refineries servicing that so the Billings refinery cannot get product down there competitively down to that area. It's it's, it's limited by the pipelines that go out. And the distance because you know, even you can't, if you don't use pipelines, you got to use trucks and rail cars. And the further you have to ship, you know, the more competitive a refinery in that area you're shipping to might be
Robert Bryce 25:52
right. So is that if there's a general ignorance about the liquid products market, but as that it does extend, let's broaden it out to just talk about energy more generally, because you and I've written about different parts of the energy sector, it just seems that the what will I'll ask it this way? What is the public misunderstand the most? Where is the ignorance of energy? The greatest in your view? I mean, you've you've dealt with, you've been writing about these for a long you have any ideas about that about why the why the why the ignorance is, is so, so big, and what what are the people just not understand about it.
Robert Rapier 26:34
So I think what they don't understand is really how prices or products are priced. And so they see the product at all they care about, really, most people only care about our service station has fuel, and it's at a price that I like, and I will always see interest in my articles will spike when there's shortages, and the prices go high. And most of the time, people just don't care. You know, all I care about when I plug something into the wall is electricity coming out of it and, you know, electricity prices solar, I might start reading up and see, okay, what's happening? And I see that right now. The diesel shortage, you know, I wrote about that, because Okay, well, that's, you know, there's some interest there. And I can see from the keywords people are searching, I, you know, people hear about it on the news. And they go to Google, and they say, why do we have a diesel shortage? And that's why I titled my article why we have a diesel shortage. And so a lot of hits coming in on that. Yeah, I think it's just the retail market that they don't understand. They don't understand how product gets priced. They, they think it's something other than it is and they don't realize, you know, I wrote an article today about refinery shutting down Google, how can refineries shut down when they're making billions of dollars? Well, they don't have a crystal ball, they don't know where things are headed, they can see that our energy policy is pretty hostile toward oil and gas. And so if you're going to have to invest billions of dollars to upgrade your refinery, and you are seeing a declining projection for what you're going to be able to sell. Even though profits are good right now, you may say, well, over the next 10 years, though, they're more often than not not going to be good. And so, you know, we're going to shut this refinery down rather than invest a billion dollars to keep it running.
Robert Bryce 28:21
Well, let's talk about that. Because you reproduced an EIA chart in your piece in Forbes on refinery shutdowns. So we have 1.1 million barrels a day, less capacity refining capacity today than we did just in 2020. Right. So and this is a it's often referred to as a marginal supply business, right? So can you explain that why that? You know, that is I understand it, and it's that marginal bit of supply that determines the price. So even a very small change in in overall availability of supply one or 2% can have an outsized impact on price. Why is that?
Robert Rapier 28:57
Okay, so this was good question. Because I get this, sometimes people go, how can a 5% shortfall in supply, create a 50% increase in price? And I say, well, at what price? Are you going to stop buying gasoline? And somebody might say, well, you know, if it got to four or five $6 a gallon, I stopped buying gasoline. So how you're gonna get to work? Well, okay. Okay, maybe I might pay a little bit more than that. Well, tell me what price you will stop paying. And that's why a very small shortfall in supply leads to outsized increases in price, because demand is very inelastic in the short term, but in the long term, sure, you know, if you if you thought gasoline prices 10 years from are going to be $20 a gallon, you might make some very different choices right now, to be prepared for that. You might get an electric car, you might move closer to work there lots of different things that you might be able to do, but in the short term, you know, your hands are kind of tied.
Robert Bryce 29:57
Right? Well, and as you said that what You know, what price? Would I stop buying gasoline at? $20? Maybe I mean, to me, it's, you know that mobility, right? And mobility is the game, right? And I've thought about it a lot in terms of what is, well, I wrote about this just the other day, you know, this idea just stopped oil. And I wrote, well, if oil didn't exist, we'd have to invent it. And I wrote that in my fourth book power hungry now 12 years ago. And it's true. If it didn't exist, we'd have to invent it. But it's almost a miracle substance. And that's the part that to me is also really rather amazing. Is this, these continuing attacks on the industry? Which I get it? I mean, I've studied this for a long time, right. This is this is from the Democratic playbook. And I'm not saying this just to be, you know, I'm not a Republican either. But it's just, oh, well, we'll demagogue against the oil industry, because it's easy. And it's the same kind of with the electric utilities. So we'll just bash the electric utilities. They're there. And they're not gonna say anything back because they have to deal with us. And we're the regulators. But it's this willingness to just suspend any kind of credulity in terms of the what actually is behind this industry. That is incredibly complex. Well, let me let me ask this question, because we're talking. The other thing that seems to me about the oil industry, that's so remarkable, one, how big the industry is, in terms of the trading that happens around it addresses. Do you have any numbers on that with that value? Is it the most traded global commodity?
Robert Rapier 31:19
Oil? So oil is the most globally valuable traded commodity? And I've said before, you know, just getting back to the comment you just made. Can you imagine what would happen? If the oil industry just said, we're going to stop producing oil for a bit? I think people have no idea. Just how everything runs on oil, the whole world runs on oil. And if, if we didn't have it, and people people griping, they complain, but they can still hop on a plane and fly halfway around the world. For you know, not not a fortune, you know, but if that was not available, if you simply couldn't get fueled our whole way of life would I mean, people would start to starve. I mean, within 30 days, people will start to starve to death, because the whole global transportation infrastructure, and you know, many moving goods around here would all just cease, they would stop to move.
Robert Bryce 32:18
Yeah. And that's, that's, well, yeah. And I was flying out of Atlanta, I did a short video on this the other day, we write on rocket ships. And we just take it for granted. I mean, these airplanes we ride on are just incredible machines. And there, we put too, you know, 100 200 people on these things. And people complain, Oh, my ice isn't cold enough for I got the wrong seat. And they'd go ballistic. And I'm thinking, shut, sit down and shut the EFF up. You have no idea how lucky you are compared to the travel my grandmother did as a child. I mean, what are you doing? It's a miracle what we're able to do with our mobility, and it's all due to oil, because it's so energy dense. I mean, it's just a, a remarkable, a remarkable product. So tell me what you're bullish on this is so you know, you write for utility forecaster, which explain that publication and what that publication is about.
Robert Rapier 33:09
So utility forecaster, despite the name, we cover, investments in income in income sectors. So in addition to utilities, my best performers of the year have been the energy companies. So you know, my my best buys for most of the year have been Chevron and shell, the energy companies have made up a disproportionate amount of what I have these best buys and the growth category in the income category. And the energy companies have been a disproportionate part of that for probably a year and a half. And as a result, we've vastly outperformed the s&p 500 because we are overloaded on energy right now. And energy companies have done very, very well.
Robert Bryce 33:54
Utility. So to put it short stock utility forecaster is a stock tip newsletter,
Robert Rapier 33:59
it's we so we actually have I have a paper portfolio that we manage. I have recommendations on by sale, I have these best buys that I update every month, and that's based on Outlook and current price. And you have five in the income category. So we got an income portfolio and growth portfolio. One is, you know, income has higher yields, and lower, long range upside and growth has more long range upside. And so I'll have best buys in both those categories. But, you know, we cover you know, Archer Daniels Midland is one of my best buys and it's done very, very well this year. So, and I've got I got renewable companies in there, you know, in the long run, I am bullish on renewables. Despite that, you know, there's been a lot of fraud in that sector. And I, you know, I cut my teeth covering that sort of fraud but in the long run, I you know, I wrote an article in 2007. That said the future As solar in the long run, that's where our power is going to come from a lot of our power will come from solar, and it'll come from, you know, more nuclear. And, you know, the reason the US has had the largest decline in in carbon emissions over the last 15 years, and people say, I think it's renewables, it's actually natural gas. And I know you've written a lot about natural gas and the term the switch to natural gas. So I'm bullish on all of those I know a lot of environmental say, hate natural gas, and they would like to jump directly from coal to solar. But that's not that's not really feasible. So but but nuclear, if we went from coal to nuclear, natural gas and renewables, we continue to reduce our carbon footprint. So I'm bullish, I think nuclear, I think eventually, that's going to be enough, say, if we're going to do something that carbon emissions, there's no way to get there without nuclear power. And have I've written several articles for Forbes on that topic, and jigger Shaw, who's head of the Department of Energy's loan program, he chimed in and said, we've run all the numbers and we agree, and you can't get there without nuclear. And these people will pop up and say, Oh, yes, you can, we can do it all with solar. Now you haven't done the math, we have to have something like a nuclear power and China even more. So if China and India are to ever reach the sort of energy consumption that we have that that the only way they're going to be able to do that, without cooking the planet is nuclear power.
Robert Bryce 36:30
Agreed. And in fact, I just wrote a piece that's going to be published, I think, tomorrow on coal demand in China and India, India's increasing their coal fleet by their the size of their coal fleet by about 25%. They're adding something like 50 gigawatts, and China is building a new coal unit a week, I mean, it for all, I thought that growth had slowed down, but apparently it has not.
Robert Rapier 36:47
It took a little stumbled during COVID. But long range is still they're gonna they're gonna use a lot of code.
Robert Bryce 36:54
So you're in talking about utility forecaster, you're a stock analyst. How do you go about that? You How much of this is by your feeling? How much of it is your deep dive? You know, you chemical engineer, but are you are you trained as a stock analyst? How do you know which ones are the right socks? And how what? Use? I don't know, I can't double check your performance. But apparently, it's doing well. How do you? How do you how do you? How do you pick them?
Robert Rapier 37:19
So let me let me take you all the way back, take you Okay, back to growing up poor in Oklahoma, okay, and watching my grandparents, you know, they retired with nothing but Social Security. And it's an impoverished region, most people don't get out. And I thought as a kid, I don't want this, I want something I want to be able to build wealth. And I was in algebra in ninth grade. And our algebra teacher showed us compounding. And that's the first time I ever said, I'm going to be rich someday. I've got the time. And even with a very modest rate of return. If I'm disciplined, I can build wealth. And I started out in the 1980s, investing in the stock market. And I was investing in mutual funds before I got out of high school. I was there for the stock market crash of 87. I was I've been picking stocks for a very long time. So no, I'm not trained as a stock analyst. But I've been doing this for a very long time.
Robert Bryce 38:14
So since your days in middle school, in Hugo,
Robert Rapier 38:18
in high school in high school in in Hugo, I was you know, I was fascinated with the market's ability in the long run to build wealth. Because if you look at the long term performance of the s&p 500, you can get rich on that performance. If you are in for the long haul. You don't try to jump in and jump out I answer these questions people all the time. Oh, my stock went down 20% Should I sell? No, you shouldn't sell the long term fundamentals of the company are good. So you ask how much of it is feeling? None of it? i It's all I have a ranking system. And it's all based on estimates and analysts. And so I've got I've got an institutional investor ranking. I've got an individual, like a Goldman Sachs ranking on companies like those kinds of brokerages that rank companies. We look at Target prices, we look at safety of dividend, all those things go into an objective array ranking. And so I, every month, I will rank all the companies and the five best buys or the top five companies and I don't I don't mess around with that. I've got an algorithm that works and has outperformed the market for a long time. And, you know, sometimes we'll have hiccups, you know, shell in 2020 that cut their dividend even though they were ranked very highly and that you know, that hurt. But even then Chevron was ranked higher. So Chevron, we stuck with Chevron Chevron has performed very, very well. That's the objective ranking. You know, they simply rank higher. So
Robert Bryce 39:49
is one metric given more weight than like price to earnings ratio is kind of one of the you know, the standard metrics that people use them to, to, you know, value stocks. Is there one metric that you have higher weighting than any other.
Robert Rapier 40:03
You know, I tend to I tend to look at estimates, I, you know, the companies will give guidance, and then analysts will come in and they'll tweak that. And they'll so so when I look at a company, I'm looking at maybe 20, analysts looking at that company, and saying, you know, here's our, here's our estimate on the company, and the company themselves saying, you know, usually a company's guidance is pretty, pretty Correct. Sometimes a company will, will drastically reduce guidance, and that slams the company, but there are things like that, is there one factor? You know, I've got, like five factors that go into ranking them, and one is not really above the other one, I look at distance to fair value. So I'm looking at how undervalued a company is. So where's the price relative to? Where is the fair market value, which is what these analysts are doing? They're looking at, you know, here's, here's your fair market value is based on cash flows. And, and so that's, that's something that's very important to me cash flow, I look at cash flow. So a company can can, you know, massage earnings, they can do all kinds of things with earnings. And sometimes you'll see an old company report a huge loss, which wasn't really a loss, because they just wrote some reserves off the books, so it didn't affect their earnings at all. They can put them right back on the books, depending on oil prices. But cash flow tells you everything cash flow says, How much money do we bring in? And how much did we spend? And so that's a
Robert Bryce 41:28
bit vary. So EBIT. Does that is that key metric, then?
Robert Rapier 41:32
Yeah, but even then there are things that they can do with Depreciation Amortization, that will, can distort page numbers. So yeah, so I look at I look at the cash flow, what's what revenues how revenues go, and revenues are everything because sometimes a company can outspend the revenues significantly. But the bottom line is cashflow. If a company that is increasing cash flow, and they can cover their dividend is not a company that's going to go bankrupt. It's a company that's going to continue to do well. And I'm not looking, I've had some very, very big performers. Oh, in ED investing daily, Darko New Energy is a poly silicon producer out of out of China, that was a 10 bagger that I picked solar age is a solar inverter manufacturer, they were a 10 bagger that I picked, some of these companies been very, very well. But more often than not, it's the companies that make, you know, long term returns 10 to 20%. And you can get rich in not not, too, you know, too long it those kinds of returns. The other thing is, so I'm targeting an 8% overall yield. And I do that by selling covered calls on these companies. I don't know if you're familiar with covered calls, but you know, you're you're selling somebody the right to buy your stock at some, some price higher than it currently is. And so when I compare the dividend yield, which could be 2%, and add in the covered call yield, which might be six, I'm trying to target an overall yield of 8%. And I've done that I yield more than 8% on these portfolios by selling covered calls. And we'd been very successful with that. There was a study done a few years ago that said a covered call strategy will outperform the market under nearly every condition, the only condition where it underperforms is in a sharp upward move and a sharp upward move, the share price will go past your strike price. And so if the market moves up 20% In six months, you're going to underperform the market. But every other time lower performance have that flat performance down performance. You're going to underperform the market. So outperform the market sorry, with covered calls. So investing Danny launched a new product called income accelerator that I'm that I write. And first year, we tripled the performance of the s&p 500. We've we've done very well, we consistently over every timeframe. Of course, we've been in a bear market for most of the time that we've had this thing launch, but we've significantly outperformed the s&p 500 I've had stocks that went down 20% That we're up 20% on just because we've sold all these covered calls so you can see us stock price go down and still make decent money with the strategy.
Robert Bryce 44:17
It's interesting. You mentioned the cash because it brings to mind now it's 20 years ago, in fact, 20 years ago last month, I published my first book, which was on Enron and the some of the best advice I did 200 interviews when I was writing that book and one of the best things maybe the thing that the a bit of advice I got from an accountant who had worked at Enron wasn't there anymore. He said, it all comes down to cash. He said you have to follow the cash and you have to find out where the cash is and if they're making cash because that will tell the story. And that was what led me then to read every every fine every every quarterly report and find out you know, they were cashflow negative for 19 out of the 20 crimes.
Robert Rapier 44:51
And you can't do that and there's another very important lesson from Enron and that is diversify because there is one very in Got a very important story there out of Enron. There was a secretary there that took all of her stock options and everything in Enron stock. And on paper, she became a multimillionaire. And she wrote it all the way to zero. So, you know, no diversification all eggs in one basket. And that's the other thing about my publications. In my income accelerated we diversify, tried to equally diversify across all 11 Major s&p 500 sectors. So we will see, you know, the technology sectors gotten just brutalized this year. But our energy sector has helped us offset that. You know, we've had some sectors have done okay, some have done better than yesterday 500. But overall, we've we've significantly done better than the s&p 500. And I tell people, you know, the safe haven trading options risky. So we're not trading options, we are selling calls, that is less risky than owning stocks, because you are reducing your cost basis. So if I, if I, if I have a stock trading $18, and I sell a call on it for 2020. That means if it's above 20, I have to let my shares go, but I get paid for that. So it reduces my cost basis from 18, to maybe 16. So instead of buying the shares for 18, on the market, I bought them for 16, because I offset. And the only consequence there is, if shares are above 20, at expiration, I lose my shares at 20. That's why in a sharply upward market, if the market if the stock is 24, in six months, and I've sold that call it 20, I still have to sell my shares at 20. So it's a really good, nice strategy. It's a conservative strategy. I'm still people that's very conservative strategy.
Robert Bryce 46:41
Gotcha. So let's go back to the discussion about fuels and so on you. And I first I think became acquainted, excuse me in writing about
Robert Rapier 46:51
ethanol and biofuels, and I cut my teeth.
Robert Bryce 46:55
And I've been a longtime critic of this whole concept of biofuels. And yet it still is continuing and in fact, is gaining speed. There was a recent report from I think it was JP Morgan about and particularly oil seeds and about the oil seeds, and how the push for more renewable diesel could overwhelm that market. And that this because it's just distorting the entire market for edible foodstuffs. What is the what's happening today in the ethanol market? And then I want to ask you about Kiowa and Vinod Khosla. What's, what's happening with corn ethanol? And and and the second question, why hasn't cellulosic ethanol ever taken off?
Robert Rapier 47:33
Okay, so those are good questions. The ethanol market in the US, you know, we've got the Renewable Fuel Standard, which is a mandate that we have to use renewable fuel. So we, the ethanol industry is propped up by that mandate. And people ask me, what would happen if you took the mandate away? Well, the ethanol market would probably get cut in half in the US, there is a natural market for ethanol as an octane in Hampshire. You know, we would bite sometimes a conical Phillips, if we needed to boost the octane of gasoline. There are other octane enhancers that aren't ethanol, but ethanol is competitive in that market. But that's that's only worth like, three to 5% of the overall gasoline market, instead of the 10%, which is the mandate. So, you know, the Renewable Fuel Standard helped create an ethanol market, but it's also created a larger market than would exist without that standard. And
Robert Bryce 48:31
so let me ask you about that. Because the octane boosters because this is one of the things that, you know, I've gotten some hate mail and some longtime haters who continue to come back to me, but oh, how they hated my book or, you know, published you, what, 14 years ago, something like that. But but you don't necessarily need ethanol to make high octane gasoline. Is that Is that what you're saying?
Robert Rapier 48:52
That's right, correct. I mean, there are other octane enhancers, such as well, methanol is a perfectly fine octane enhancer, but the ethanol industry, it's funny to watch them. You know, when you bring up methanol, they'll tell you all the reasons methanol is terrible. And it's simply a matter of, you know, you can produce methanol for cheaper and it's a good octane enhancer, but tagliolini is what we would use it ConocoPhillips sometimes timing is a really good octane enhancer. And there are certain things that
Robert Bryce 49:23
it's very volatile, isn't it? Why I mean that you use that as a solvent in well, I use some and getting some, you know, some adhesive off or something here in my you know, my house the other day, it's a very volatile substance, though, right?
Robert Rapier 49:35
Not when mixed with gasoline. I mean, it's, you know, butane can exist state, stably and gasoline. If it's mixed at a certain concentration, it exists in gasoline. But butane, you know, can't exist as a liquid in an open vessel out in the air because it'll evaporate but in gasoline it can exist.
Robert Bryce 49:54
And butane is an octane enhancer. And so,
Robert Rapier 49:57
now butane is so So butane, what happens with butane? Because it has a very high vapor pressure, it tends to be blended in low concentrations in the summer and high concentrations in the winter. So this is another refining thing. Yeah, people ask why prices go down in the winter, there's two reasons. One is demand goes down. But the other is, we can blend butane in the winter at higher quantities. And that increases the gasoline supply. So instead of the 2%, you could blend in the summer, in the winter, because the temperatures are lower, we could put 10% in there in the winter, and that boost gasoline supplies every every winter,
Robert Bryce 50:32
and butane is less costly. It's an it's an butane, natural gas liquid.
Robert Rapier 50:37
Right? It's cheaper to it's cheaper to produce gasoline in the winter, for that reason.
Robert Bryce 50:41
I see. Okay, so tell you, then then you can make methanol, there's a fairly easy technology to turn natural gas into methanol, as I understand it as well, right? That's correct.
Robert Rapier 50:49
And most of that's how most methanol was made. And California had a methanol program for 25 years, and they shut it down when the renewable fuel standard was passed, because they said, well, we can't compete with that mandate. So methanol would be trying to compete, you know, on equal on with ethanol, which has a lot of advantages because of legislation. Right. Now, you asked about cellulosic so yeah.
Robert Bryce 51:13
Okay. Well, let me let me just ask one more question about ethanol. So the part that sticks in my craw is, are there a couple of things one is the low energy return on energy invested in ethanol, which, you know, I've studied literature and might be a wash. Right. And, to me, there's a lot of discussion and Ted, Patek and others, this is just BT you laundering, you put in this many BTUs, and you only get that many BTUs, that we're not getting some significant increase. How important to you? Is it or how significant is the turning of food into motor fuel? Does that bother you?
Robert Rapier 51:41
Um, you know, if, if there's enough food, I guess it's okay. You know, if there's enough food, then then you know, you can use some excess and energy return on energy invested, I think, I think ethanol is close to one, but it's probably positive. But it's not positive in the way like gasoline is positive. I mean, gasoline is, you know, that's a 10 to one energy return on energy invested, or five or 110. To one, ethanol's maybe 1.3. So it's down there pretty, pretty low. So your question about cellulosic ethanol, right? And
Robert Bryce 52:14
tell people walk us walk us through the the cellulosic ethanol story, because this is now eight years ago, roughly, or maybe 10 years ago, there was a craze around F around cellulosic ethanol, some of it I would argue, started with Amory Levin's back in the 1970s. But it reached a crescendo about 10 or 12 years ago, and there was a lot of money put into the state and federal level, including into a company called Kiowa. So I just wanted to set the table for you on that. Go ahead.
Robert Rapier 52:41
Right. So yeah, I think Vinod Khosla was probably more responsible than any other person for pushing this cellulosic ethanol onto the public and for getting it into the renewable fuel standard. And I saw some of his projections, and he's basically assuming Moore's law, the computer law, which says, you know, computers get faster and faster and cheaper and cheaper. And he used that and he said, we're going to make more and more corn per acre, and it's going to cost less and less, and we're going to produce more and more gallons per bushel, and he created out of thin air 200 billion gallons of cellulosic ethanol. So we're gonna run the whole conference on St. Louis getting off.
Robert Bryce 53:20
And coastal Just as a brief aside is made a lot of money in Silicon Valley as an investor with Kleiner Perkins, I think the firm right, yeah. Okay.
Robert Rapier 53:29
And so I emerged early on as a critic of yours, because I said, this is not how any of this works. And I said further. I said, we've known how to produce cellulosic ethanol, and what is what is sales ethanol. So cellulose is a long chain, polymers, sugar, and it's, it's, it makes up the structural material in wood. And if you break that down, like adding strong acid or enzymes, you can chop that up in sugars, you confirm it that and you can produce ethanol. So it sounds simple enough, in reality, it's pretty hard to do. And so, in 1920, in the US, there were two commercial cellulosic ethanol plants. They knew how to do it, they knew how to break the wood down in the sugars for a minute, and then produce ethanol. The problem is, that is very expensive. It's very energy intensive. It's the yields are low relative to sugarcane or corn ethanol, right? So where you might be able to produce corn ethanol for a buck a gallon, you probably talking, you know, six, eight $10 A gallon for cellulosic ethanol. And the reason is, when you when you go through all the steps, not only are there more steps and it's more energy intensive, you know, you got to cut a tree down, you got to chop it up. You got to process it with acid you got to and then in the acid, you get all kinds of cats and dogs. So you're trying to ferment the sugars in the presence of all this other stuff. And you end up with something that's like a really weak B You're, and I tell people, you want to really understand the issue of cellulosic ethanol, go to the supermarket, buy, buy a case of Budweiser, and there's your fuel, get the fuel out of there, get the ethanol out of there. That's what you're dealing with the cellulosic ethanol, you're dealing with a three or four or 5% solution of ethanol, that has to be extracted at great energy cost. And it just, it's not viable. And so I pointed out these problems, these plants in the 1920s, they shut down because economics were bad. We know how to produce a low ethanol forever. It's just, you know, if there was a Moore's law, it was exhausted 100 years ago, and this is what I tried to convince coastland and, you know, we still produce, you know, relatively No, next to no cellulosic ethanol today. And if not for subsidies, we produce absolutely nothing. I mean, mostly still in the lab. And people are always hyping. You know, different breakthroughs but you know, in, in, in
Robert Bryce 56:00
it, it's just a poor feedstock. It's just a dilute feedstock, that, that that energy, that form of energy coming in the factory door, whether it's wood pellets or sawdust, or trees or whatever, it's just a bad feedstock. High. density is low, the best of the best of the line, I heard on that note, I think he's forgotten his name off the top of my head, he was a University of Denver, he said, Look, if you if you know, for all of human history, we've been fermenting stuff, right, and potatoes and grapes, and you know, apples and you know, fruit of all kinds to make alcohol. He said it, don't you think if we'd learned how to do this out of sawdust, we'd be doing it by now, you know, who was he was laughing about it saying, you know, if we could make it out of this, you know, low grade or lawn clippings or other we will hell yes. We'd be making beer. We're not instead, we're still on grapes, and apples and all these other things, you know, plums and all the other things that we used to make, make booze from I think that was actually the term that he used. So then what is happening? You were involved in the litigation that was against kosher? What has happened to that you were an expert witness. I mean, there's a long time ago now what? How did that case get resolved? And he gets sued by the state because
Robert Rapier 57:09
he got sued. And he settled with the state.
Robert Bryce 57:12
No, he did. So that litigation is over. Now it's over. Okay.
Robert Rapier 57:15
He was sued for making all kinds of false representations. You know, they took I think, 75 million from the state of Mississippi. The state hired loggers.
Robert Bryce 57:26
And this was Kiowa. Right. K i o was the name of the company. And that's also there were companies that were so similar, right that were claiming
Robert Rapier 57:34
many companies maybe I don't think I don't think coastal has ever made any money on biofuels. You know, Keeler was the company that they called me. 60 minutes called me to interview me. They had him on they had me on. And I'll never forget the first question. Lesley Stahl asked me, she said, Benoit Costa is a very smart man, how could he be so wrong about this? And I said, He is a smart man. I said, Would you let him operate on your heart? And she said, No. She said, Okay, I get it. I get it. He's a smart man out of his field. And so he's making all kinds of representations that are true. And she asked me, then what's going to happen with Chiara and I said, I think it'd be bankrupt by the end of the year. And they didn't play that clip. But they were bankrupt by the end of the year.
Robert Bryce 58:16
Right. So that's been resolved. So I lost track of that. When did these settle? And was it a sealed settlement? Or do you recall?
Robert Rapier 58:24
Yeah, I think, I think so the lawyers got to ultimately, and they said, Destroy everything that I've gotten related to the case and, and don't talk about anything that I've saw. I saw my name repeatedly in their, in their internal emails, they were trying to figure out how to discredit me. That was, when I was criticizing the company, they were, they were sending emails back and forth, and saying, you know, how can we discredit this guy? This guy's out criticizing us, and how do we, how do we address this and that was was hilarious to see those emails, you know, as an expert witness, I'm flipping through they're not seeing my own name coming up in their in their documentation.
Robert Bryce 59:03
So was that when your were you writing about it for Forbes? Or was that oil price? Or were you were you writing for that?
Robert Rapier 59:08
I started I started writing about that on the oil Grom back in like 2005 2006. And I wrote a lot of critical articles coasts offered me a job at one point he he he reached out to me on Twitter and said, you know, if you you know, you've been critical, but if you want to come help us make this work, you know, the doors open and, you know, but but then But then after a while, he blocked me on Twitter, I'd forgotten he existed. You know, somebody brought his name up the other day, and I was like, is he still on Twitter? And I looked and he's still there, but I'm still blocked.
Robert Bryce 59:39
Well, let's mention that for just a second. A quick station break because we're almost at an hour now. My guest is Robert rapier. My friend and fellow Oklahoman Robert rapier. He's on Twitter at our rapier at our rapier R A P I E R. He's the editor of utility forecaster. He also writes regularly for Forbes so even I just wanted to touch back on on you mentioned utility forecast or any stock tips, then you use you've already mentioned Chevron shell you any your your long hydrocarbons? Is that what I'm what I'm gathering you saying?
Robert Rapier 1:00:12
So So right now, hydrocarbons. So I'm clarifying, you know, and in the long run, I realized we've got to get off of oil. I know this. I mean, I see the co2 increasing atmosphere, and I am very concerned about that. So there's the part of me that's realistic and realizes we're going to be on oil for a while, there's a part of me that says, Absolutely, we have to move away from oil. This is, you know, we the co2 increase in the atmosphere is causing a problem. And we do have climate change. And we are dealing with that. The practical side of me says, we are going to be on oil for a while. And this is where I run a foul with a lot of environmentalists they say, you know, you're writing about like the need to have the Keystone pipeline, and that just keeps the oil pipeline going. I said, No, the issue is, if we still need oil, and the Keystone pipeline is not there. We're gonna get that oil from Venezuela and Saudi Arabia and those countries. And if we don't need oil anymore, and the Keystone pipeline is there. Well, guess what? You know, the company just lost a lot of money building that pipeline. So have that in there as an as an insurance policy? So am I bullish and bullish for the, for the short term on on, you know, the Chevron's and shells. In the long run, I think those companies have to change their business model, but it's going to be a longer time. And then a lot of people think I mean, ExxonMobil is going to be business for a long time to come. And so I tell people, there's things that I wish and there's things that I had practically, practically speaking, I would say Chevron is a company that's going to continue to do well, for a long period of time, it's not going to bankrupt anytime soon. At the same time, I wish there were economic, you know, I wish we were all driving electric cars. I would like to see that. But I don't see it happening anytime soon. And so the practical side of me says, Buy Chevron, and for people who are complaining about gas prices, I told him, I said, you know, if you bought Chevron stock back, you know, when gas price started rise, you could have offset what you paid in gas, just by the games in Chevron stock. So that's a hedge against high gas prices. You know, if you don't like high gas prices, join them, you know, buy an old company and enjoying them. I said before that this divestment move that's happened over the years has cost universities so much money. I mean, you know, Bill McKibben led this divestment, you know, divest of Chevron, divest these companies. Do you know how well these companies have done in the last two years? And how much money that has cost? All these endowments and costs are tremendous. And nobody has I haven't seen anybody talk about that. Just go back and look at
Robert Bryce 1:02:49
it interesting. I haven't thought about that in a long time about the diversity that divesting movement and what that? Yeah, I guess you could do some calculations on what because the universities and the endowments are very proud of this. Oh, of course, we don't want it. You know, these are like tobacco stocks or whatever. Right? So what energy analysts do you follow? Who do you like? What do you what are you reading? Who do you seek out who you think has a good handle on the markets and on the business in general?
Robert Rapier 1:03:16
So I follow several, and I read, I read all your stuff. I don't always agree with you. Okay, I said before, I think you're the guy that likes to wear the black hat. You kind of relish being the bad guy. I don't I don't like being the bad guy. But sometimes sometimes I am the bad guy.
Robert Bryce 1:03:31
Well, it's interesting. I don't necessarily think it is a bad. It's just I'm just trying to call balls and strikes, what is actually happening on the ground? What are the things that are real that aren't being? Because I see not being reported? I just wrote a long piece about about coal that, you know, these are the real stories. And it hasn't changed that much in the like, eight years since I wrote power hungry, and we'll explain why coal is going to stick around. So I don't necessarily think you know, I'm relish being the bad guy, but I relish I do realize trying to tell it as truthfully as I can, but anyway, sorry. Go ahead.
Robert Rapier 1:04:03
So it's I do follow you on Twitter. Jeffrey Stiles, I don't know if you follow Jeffrey. Yeah, sure. Yeah. He's probably the person whose views are his views are very close to my views. And so we've we followed each other. Andrew Holland is somebody else that I follow. You know, some of the Forbes writers, Chris Hellman, the energy editor there, I read his stuff always. And then, you know, I will I will read the energy news on CNBC and Reuters and so forth. And you know, a lot of sources that I get information from,
Robert Bryce 1:04:39
yeah, Javier blas, I think is really good. I think he's very in John camp at Reuters. I think he's really good as well. So just the last couple of questions, Robert, because we've been talking about for more than an hour and I want to I don't want to take your whole day. So what are you reading what I know you've been had some challenges lately and your family life and so on when and what did what books do you are you turning to What's on the top of your book list?
Robert Rapier 1:05:01
So I, I like science fiction a lot. I mean, I, I like things that cause me to feel like my mind is expanding, like, like, I'm thinking about new possibilities. So I read a lot of science fiction, I'm reading a book called Seven Eve's right now. Which is, is, it's about the end of the world, basically. And it's about humans, it's kind of preposterous to think the world is ending. And we moved and thrived in space, it's kind of preposterous to think about that, because I think if the world was ending in the next two years, and that's what happened in the book, the world was ending in two years, but they had this big program where they got people into space. And then 5000 years later, there's a thriving colony around the world. I don't think that could possibly happen. But it's interesting to think through what it would take. And so I like books like that I like books that cause me a paradigm shift, you know, to think about what might things be like in the future, I like books that focus on genetic engineering and where the human race might go, and I don't read so many energy books, I've read so many energy books over the years that, you know, I, I am still halfway through the prize I, every time I go fly somewhere, I take the prize with me and I read a few more pages. So you know, I guess everybody should all energy, people should say yes, I've read that I've read, I've read half of it. Yeah, I make it a little bit further through there every time I go and get on an airplane. Well, we've talked
Robert Bryce 1:06:41
about Europeans books and other podcasts, but I will recommend his book, the new map for read just one chapter. And it's the book of the chapter around the nine dash map, which is, explains why China claims in the South China Sea, you know that the other parts of the book are very interesting, but that part, I think, is just really remarkable. And that explains why China has this claim on the South China Sea. So last question, Robert, what gives you hope we, you know, you we do face a lot of challenges today, what makes you hopeful for the future?
Robert Rapier 1:07:10
Um, you know, the country split, we got a lot of challenges, but still, you know, our labs are still pretty good. You know, overall, we still, you know, I'm able to do all the things I want to do. And if you if you look back in like 2005, there were predictions that we'd be in the stone age by now. And if you hit
Robert Bryce 1:07:34
that we were running out. This is before the shale revolution. I remember and I'm not gigging you here, but you were very pessimistic on future oil supplies, and then the shale revolution happened and was different.
Robert Rapier 1:07:44
I wasn't as pessimistic as some that I was. I know, I was. On the old drum. I was considered an optimist. Because I was saying, you know, I think there's a 90% chance we have Peak Oil within five years, but there were people saying there's 100% chance we had pickle right now today. I said no, I you don't know the future. It's uncertain. I, I was in battled at the older on I had people telling me I your projections are ridiculous. There is no hope beyond 2010. You know, I got a lot of that. But no shale boom did happen. We haven't battled our way through. I think we face a lot of challenges. I think, you know, I worry about the impact of climate change. I I worry about where things are headed. You know, Kim Stanley Robinson, I read his book when I had my, you know, I had surgery a few months ago, and I was laid up for a week and I, I read his book about climate change. And it was, it was spared. I mean, to think about the Ministry for the future. That's it. And in the beginning of the book, there's a heatwave that happens in India. That is devastating. I mean, you talk about people being unable to cool themselves off and what actually happened. And you wonder, is that where we're headed, but, you know, so far, I'm optimistic we muddled our way through. And I always suspected, and I always told people who the Stone Age people I said, I think we'll muddle our way through and we'll make sacrifices, we still have a lot of discretionary energy consumption. We'll make sacrifices. We'll muddle our way through and I see a hopeful future for humanity. And I hope that, you know, I know people that think the US is going to fracture and we're going to need civil war and I like that. I don't think that's going to happen, I think, you know, we'll continue to muddle our way through and, you know, we'll continue to make medical advances you know, I you know, what makes me hopeful listening and you know, this I was diagnosed with ocular melanoma in the summer, and the first thing I heard was, you probably don't have five years to live. And I went to the to the ocular oncologist, and she measured the tumor and everything and she said, I have peace. well with your situation that had this surgery 40 years ago, and she said, It's very optimistic. She said, It's lucky you were born in or you're in 2022 and not not to 22 because she said, 1922 this would have been a death sentence. And 50 years ago, you would have lost your eye. And here I am, you know, I had a one week treatment, it was very painful treatment, but a one week treatment, and they said, You're cured. So that makes me optimistic. Those kinds of medical advances make me very optimistic for the future. And, you know, I it's it was a it was a setback, but it hasn't impacted my life dramatically, you know, and that's because, you know, medical technology has advanced and, and is getting better, better treating a lot of things. And, you know, those are the things that make me optimistic.
Robert Bryce 1:10:51
Well, that's a good place to stop then. I like that story of medical optimism as well. That is key. And one thing that is remarkable. Well, Robert, it's been a pleasure talking to you. apologize for not getting on the podcast sooner. Well, this is all great to get a rundown on refining in the energy business and also covered calls.
Robert Rapier 1:11:12
So we talked about that some more later, because
Robert Bryce 1:11:15
I can tell you're fully engaged on it. That's great.
Robert Rapier 1:11:18
I am I am. Well, Robert,
Robert Bryce 1:11:19
thanks for being on the power hungry podcast. You can find Robert rapier on Twitter, our rapier. You can look him up at utility forecaster and on Forbes. So thanks again, Robert. Thanks for all you and podcast land for tuning into this episode of the power hungry podcast. Come back for another podcast real soon. Thanks again. See ya