The Power Hungry Podcast

Bernadette Johnson: Vice President of Strategic Analytics at Enverus

January 26, 2021 Robert Bryce & Bernadette Johnson Season 1 Episode 32
The Power Hungry Podcast
Bernadette Johnson: Vice President of Strategic Analytics at Enverus
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The Power Hungry Podcast
Bernadette Johnson: Vice President of Strategic Analytics at Enverus
Jan 26, 2021 Season 1 Episode 32
Robert Bryce & Bernadette Johnson

Bernadette Johnson is an energy economist at Austin-based Enverus, an energy-data analytics firm. In this episode, Robert talks to Johnson about the recent spike in Asian LNG prices,  the future of oil, the resource curse, and what she calls “the fundamental disconnect” between what many people like to believe about renewables and the reality of our hydrocarbon-dependent world.

Show Notes Transcript

Bernadette Johnson is an energy economist at Austin-based Enverus, an energy-data analytics firm. In this episode, Robert talks to Johnson about the recent spike in Asian LNG prices,  the future of oil, the resource curse, and what she calls “the fundamental disconnect” between what many people like to believe about renewables and the reality of our hydrocarbon-dependent world.

Robert Bryce  0:04  
Hi, welcome to the power hungry podcast where we talk about energy, power, innovation and politics. I'm the host Robert Bryce. Welcome to the podcast and I want to welcome my guest Bernadette Johnson. Bernadette, welcome to the power hungry podcast.

Bernadette Johnson  0:18  
Thank you. Thanks for having me.

Robert Bryce  0:19  
Bernadette is the Vice President of strategic analytics at embarrass, which is an Austin based company. But Bernadette, I warned you, I like to let our guests let guests on the podcast introduce themselves. So if you don't mind, tell us who you are.

Bernadette Johnson  0:36  
Yeah, absolutely. So I've been in energy for about 13 years. I'm an economist by training. So my expertise is markets and everything energy related to markets. So I cover natural gas, crude markets, natural gas, liquids, markets, also power markets. And so my mandate here and embarrass is really everything forward looking. So what happens next what what what a crude prices do what natural gas prices do? What does this increase electrification do for both? Maybe electric vehicles on the crude side, or natural gas specific around power generation, all of those things fall in my mandate. I've been doing this for, again, 13 years, I started my career at vantec energy. And we were kind of on the forefront of the shale revolution in the US and really have watched that evolve over time. I kind of like to say, I was lucky when I came into the industry when I did, and it was really more luck than anything else that I came in, right when everything is changing. And it's been incredibly fascinating ever since.

Robert Bryce  1:34  
Gotcha. By the way, I'm getting a little odd audio on your end. Are you close to your computer where it's Yeah, yeah, that's a little better. Okay. So let me just follow on from there. Because you said you started in 2008, which is remarkable given that That's right. When natural gas prices peaked, we had oil prices peaking. And since then the shale revolution has changed. I think you would agree the the cup the shape of global markets, global energy markets, what's the most important trend you see today in? And how has How have things changed over the last decade? Because of shale? Yeah,

Bernadette Johnson  2:15  
good question. I think, at the highest level, the US used to be a taker, a taker of energy, and a net importer of all of these things. And the last 1012 or 14 years, if you look back all the way at the beginning of the shale revolution. It's it's dramatically changed, right? We're a net exporter of natural gas of crude of refined products of everything. The vast majority of energy is produced from hydrocarbons today. And we're a major player in that market, not just as an importer, because we're using it, but also because we are now supplying the market. So what does that mean? It means the global flow of commodities has changed natural gas, we're one of the largest exporters of gas now. That's completely different than it was 10 or 14 years ago.

Robert Bryce  2:58  
And that's an exporter of LNG, predominantly, right, we're exporting far more in the form of LNG than via pipeline.

Bernadette Johnson  3:04  
Exactly. We're also exporting LPG. So liquefied petroleum gases are the liquid natural gas, commodity, propane, butane, ethane those things. Right. Exactly, exactly. And so that, so now we're a player. So what does that mean? It means that we are our economy and our energy market is directly impacted by everything that happens globally. So it's always been that way with the geopolitics of oil. But now, it's also that way for natural gas, natural gas in the US used to be a closed market, it was very easy to predict. It was one of the most pure markets because you transparency of data, you could see imports, you could see exports, you could see all this data on a daily basis. Now that's changed a bit because now we're part of that global market. We're directly connected via those imports and exports. So all of those things have changed just in 10 years.

Robert Bryce  3:54  
Well, let me talk about that, because that's one of the most interesting I think that's a really important point that you made about the US gas market now being linked to the global market. And as you said, it was just a constrained continental market. And and mostly just a US market we had some trade with with with Mexico and Canada. But now the Henry hub marker for natural gas in the United States, priced at the Henry hub terminal in Louisiana, has become the basis for pricing liquefied natural gas exports around the world. Are you surprised at how quickly that market matured?

Bernadette Johnson  4:28  
No, I'm surprised and I'm not I think I'm a free market economist. So I go always go back to the market always wins. And so what looks like a lot of chaos from the outside price volatility and things changing is actually pretty efficient. The market works, the market prices then where it needs to, you create markets where you don't have them and you'd have a need for buyers and sellers to come together. And so I think in some ways, because the energy market tends to be thought of as kind of antiquated, it's, it's always existed. It's kind of the old good old boys club type of thing. On the other side, the market always moves and the market drives it. So was this evolution? Probably inevitable? Yes. And did it happen faster than most people thought probably. It's also still evolving, even the global LNG market and the spot price. So the short term buying and selling, that continues to evolve and be a more important part of that market, where even five years ago, it didn't even exist. So I think yes or no.

Robert Bryce  5:27  
So you're not surprised that it moved as fastly as quickly as it did fastly as quickly as it did. But at the same time, you you made the point in markets when and that's the part that I think is really intriguing to me is how quickly American LNG has has pushed into the global market and then change that whole market is the structure of that we were going to be a big LNG. It's a point I'm making my my new book at some point that I think is still amazing. We were looking at importing 20 billion cubic feet a day of LNG 10 or 12 years ago, now we're exporting roughly 10 BCF a day in the form of LNG, which is, I think, is just truly remarkable. So what role does the US LNG play in that market? Now in terms of setting price,

Bernadette Johnson  6:17  
it depends on where you look, I think it's a it's a key part of it. And really, because it's so flexible, so this spot market developing, a lot of it is because of the flexibility of the US market. So cargoes out of the US moves according to supply and demand and price, right, there's a price pole globally, those cargoes will leave. If those prices were to collapse, meaning there was no spread between the US and Europe or the US and Asia, those cargoes would also cease to flow that that part that's on the spot market. So that piece, the flexibility is key. It's also key if you look at the oil markets, and why the US being a big player has changed the way the market behaves. It is that flexibility and the fact that our market, it's hundreds of active drillers, it's 1000s of operators operating oil and gas wells. And they can make decisions and they do based on pricing, the price isn't high enough, they don't produce if the price is is high enough, they even they spur additional drilling. So that flexibility is key. And it's very different from anywhere else in the world where you generally have large government oil companies or big global super majors that are dominating that supply piece.

Robert Bryce  7:23  
I want to come back to that part because that's the part of the story that I think is really interesting about the US players in the various Well, the scale of it right and how many players there are. But before we get to that, I want to stick on this LNG thing for a moment or LNG topic for a moment. We've seen recently big spikes in LNG prices into jkm the Asian market, what's causing these prices? And how are those prices compare with the US market? What is what is gas selling for today in the United States, and what has been the price of LNG um, jkm, Japan Korea marker over the past few few days or weeks?

Bernadette Johnson  8:00  
Yeah, good question. So even this weekend, we saw a spike. So we saw record sending price on the spot market, I want to say it hit about $32. So there's a spot market short term cargoes that are delivered in the next

Robert Bryce  8:12  
$32 per million bt us correct?

Bernadette Johnson  8:15  
Yes. So same units that we'll talk about for the US. Okay, so $32, that's a record level. Recently, a couple weeks ago, it was trading around $7. And then a few weeks before that, or months before the winter really hit, it was trading lower than that. So this is a huge spike. So let's say it went from $4 to $29, in a period of weeks, Europe looks similar, not quite as high. But it's also been setting to some pretty high record levels, then you have the cargos that are scheduled for more than a few months out about price drops significantly. So come summertime, or even March, it's probably going to price around eight to $14. But these are these are significantly higher prices than we've seen recently. Compare that to the US, the US price today, about $2.70 per mmbtu.

Robert Bryce  9:02  
And so that spread is a 10 x difference between what American consumers are paying versus on the spot market versus what Asian consumers are paying.

Bernadette Johnson  9:12  
Exactly. And so what is that? Anytime you look at gas prices, and you're wondering what's going on. So first, first and foremost, commodities in general move in the direction of higher price. So you take a commodity from a cheaper location, you want to move it to a more expensive location. That's how commodities move. And that's always a rule that's kind of economics one to one. So what happens is the US has supply. Asian markets are very high priced European markets have very high price, why? It's all about the weather. So for natural gas, natural gas is a very weather driven fuel. So you're talking about whether it's cooling load, when it's really summertime, right, it's really hot, you need to use it for running, air conditioning, or power generation for air conditioning. And then in the wintertime, you're talking about heating load, so you need to heat homes. So in Europe you need to heat homes. Need to heat homes and the other the other fuels basically that go into heating industrial complexes or things like that. And so anytime the weather is cold colder than average in a winter, or you maybe start the season with less storage than you're used to of this commodity, then the price is going to spike. And that's exactly what we're seeing. On the flip side, if say winter failed to show up, it was very mild. It wasn't it wasn't setting record levels of weather, if that were to happen, you would see the price collapse. And so natural gas prices are heavily dependent on weather. And what you're seeing is the US winter, it's been pretty mild, right? nothing to write home about the ski resorts are wishing they had more snow. You look over in Asia or in Europe, they're actually having above average cold temperatures, which means they need a lot more gas. They don't have enough gas, the price spikes to signal to basically bring more supply into the countries.

Robert Bryce  10:53  
So you mentioned the ski resorts, you're in Denver, which is why you're you're mentioning this right. So okay, good. Actually,

Bernadette Johnson  10:59  
I'm in Denver, I have a place up in Winter Park. And we are we're crossing our fingers that we get more snow soon.

Robert Bryce  11:05  
Not just because you like higher gas prices? It's because Exactly. Exactly. So lower temperatures in Asia. But are there their political? My understanding was there was also China played some role here in that it was demanding more gas? Or was it was there one player in the Asian market that was asking for more fuel than others.

Bernadette Johnson  11:26  
So China's China is definitely playing a role here. There's some interesting dynamics happening between like China and Australia right now, there's geopolitics that impact natural gas, just like crude or other commodities. So that's certainly roll. think more broadly, the global LNG market, the import and export market that the amount of gas that moves around on ship, it's growing pretty significantly. So if we look, the last good full year, numbers I have are from 2019 2019. Our 2018, like that gas market that moves around on ships grew about 13 14%. So it's growing significantly. It's growing pretty fast. It's not a huge market. But there's there's three players that are the main suppliers, they supply over half that market. It's us, we're in third place, the US, it's Australia, and then it's Qatar. And so there's been interesting things happening with each of those countries and the geopolitics of the end users, the biggest end users, takers, countries that are takers of natural gas. For LNG, it's Asia. So Japan comes out on top, then you've got China and second in China and China, demand for LNG is growing double digits. So that's a big draw. Then you've got Korea, you've got India, you've got Taiwan, those five countries represent 62% of LNG, import demand. And so there's a handful of countries that really, really play a key role in this market and drive those prices.

Robert Bryce  12:49  
So I've seen projections about the continued growth in LNG, do you expect that that's going to continue then over the next four or five years? How do you expect that to play out over the over the next few few months and years?

Bernadette Johnson  13:03  
A good question. So I would say definitely, it's been growing double digit percentages for the past handful of years, five years plus, and we think that's going to continue. And one of the main reasons is that you do see this push this pressure from investors, but from the market on liquid hydrocarbons, so crude oil, and liquid petroleum products, that market is seeing pressure, right? There's a lack of investment, generally folks are shying away from it. You also have and you've touched on this a lot. This increased global electrification. electrification, natural gas is a key part of power generation, all around the world. So if we're going to increase electrification, generally, renewables are going to grow. We know that. But natural gas is very important in terms of balancing the load in terms of peaking in terms of energy efficiency. So natural gas is generally winning, when you think about pressure on the liquid hydrocarbons.

Robert Bryce  13:54  
So are you in natural gas in general is going to play a bigger role in electrification? We've seen that and that's a clear trend in the in electricity markets around the world, particularly here in the US. But what about LNG to power? I've seen a lot of headlines about LNG to power in Bangladesh LNG to power in in Vietnam. It will this price spike slow those trends down or make that maybe make those projects uneconomic and force countries to use coal instead, how do you see that playing

Bernadette Johnson  14:21  
out? Good question. So that kind of goes back to the original question of the US when the US was thinking about building these LNG export terminals, and a lot of the conversation was around what is that going to do to pricing? There was one kind of chain of thought that said, as you as you introduce us, LNG to the world, it's going to bring us prices. Now, the other was the opposite. As you introduce it to the world, you introduce the world to a cheaper supply of natural gas, and you actually actually pull global prices down. We've actually seen the ladder right we've seen as you introduce cheaper supply sources to a country or to a region, you actually pull Pricing down. And so that's really more what we expect. So this this price spike, this price spike is the market behaving like it should. It's winter, we have strong demand. Asia in particular really needs net natural gas. So they're pulling it. But this is a short term thing. If you look, even at the forward strip, the future pricing contracts. It's not $29. It's not $20, right? It's eight to $14, and even lower $6 $7. And that's probably too high, it's going to come down from there. So this is a short term thing related to weather, the more typical average price is going to look a lot more like a look two months ago, which means much cheaper than it's been historically much cheaper on a relative basis than other commodity options and other energy sources. So we do believe that gas is here to stay. Are you going to see volatility? Certainly. And that goes back to gas is heavily dependent. The price of gas is heavily dependent on weather, and weather, right? We're always trying to predict the weather. Nobody's ever right. You have record of times cold and hot. And so will it be volatile? Certainly. But will it be? Will these prices that are here today, stick around? Absolutely not.

Robert Bryce  16:08  
So let me ask about that. Because I think that's a really interesting point, because I remember debating, in fact, the former head of the Sierra Club over this very issue about six years ago, and he was saying, Oh, well, you know, the oil and natural gas producers in the US, they're going to form a cartel, they're going to force prices up, it's going to be terrible for the consumer. And an exact opposite has happened. But But the other part of that it seems to be can you talk about the issue of LNG pricing relative to oil, as I understand it, that those a lot of contracts for LNG had been benchmarked to the price of oil and that practices not gone completely, but is less common? Is that fair? How describe that for me, please?

Bernadette Johnson  16:48  
That's fair, that's fair. And I would say that that is cyclical, just like anything else. So it used to be that LNG contracts were based off the price of oil, and it was an S curve. So basically, it peaked out at a certain level, and it never dropped below a certain level. But as the price of oil moved in that kind of middle s shape, then you would see the LNG price move accordingly.

Robert Bryce  17:08  
So that was where they generally linked to the price of Brent. Is that right? The North Sea Brent, it was generally a global price that that natural gas was linked to Brent prices, because that was an accepted price marker in the in the oil market.

Bernadette Johnson  17:22  
Yeah, exactly. Right. And so now, that worked for a long time. And it works for many reasons. But one of the reasons is because natural gas per mmbtu are energy equivalent, compared to oil, it used to be much tighter, and it used to be more predictable. So you always had that volatility and gas because of the weather. But it used that relationship used to be much more predictable on a six to one basis or something like that, then you have us shale in the US right, what happens? First, we start producing a lot of natural gas in the in the timeline of shale, it was natural gas first. So just like what you said, 2008, prices are very high, we introduced a lot more gas to the US through the shale drilling, we collapse the price, the price stays low, that collapsed price was relative to the oil price. But if you think back to 2008, the oil price was much higher. So now you had this disconnect between oil and gas. And so that this is when the conversation started around, should the LNG contracts be linked to oil because now all of a sudden, it's high relative to the price of gas or not? So then the debate is, well do you link LNG contracts to Henry hub, which is the US benchmark? Well, that is maybe the most volatile commodity price in the world. So that doesn't seem right. The oil price, on the other hand is still high. So these are conversations that have evolved over time. So what you saw is over the past decade, you saw some contracts being rewritten or as they rolled off, negotiated, some of them are priced off that old school contract type of oil, some are priced off of natural gas. In this timeframe, you also had the introduction of the LNG spot price. So this LNG spot price is pricing that's pretty liquid that you can trade. For short term LNG cargoes, zero to three months, this didn't used to exist, it didn't used to exist at all, then it started the existing sineva options. You can price this around

Robert Bryce  19:16  
before the contracts for LNG were long, long term contracts, multi year contracts, and they were linked directly to Brent and now instead. I guess in the last five years, is that right? We've seen that move to short dated contracts based on spot prices that are linked to Henry hub instead of Brent. Is that a fair?

Bernadette Johnson  19:35  
fair? That's a fair statement. But also I think I always go back to just because it's trended that way does not mean it will continue to trend that way. Meaning, like this year, right? If you're an Asian country, or you're an Asian utility, and you are looking at paying these high prices for gas, you we want to be able to accurately predict what gas prices do in the future. But this is a shock. And so now it becomes an issue like they're curtailing gas, they're they're

Robert Bryce  19:59  
wishing they had a long term. contract?

Bernadette Johnson  20:00  
Exactly. They're wishing they had it, maybe could they have locked in more supply for a higher price potentially? So then you start thinking, well, should we go back to the old contract? Should we extend the term and now we're going to have 10 or 15 or 20 year contracts, again, should we limit the amount we buy on the spot market, because it's not, it's not guaranteed, right? You don't know if a spot cargo will be available to be rerouted to Asia, no matter the price you're willing to pay. So this is very much like any market, it's cyclical. It goes in and out, depending on market dynamics, the contract structure today, you have more options. You can do the old school, long term oil linked contracts, you can do some that are short term based, you can do some that are linked to the LNG spot market, you have some that are linked to the US Henry hub market, even if it's long term, you have a mix. And I think you'll continue to have those options going forward. How people choose to execute those contracts will depend a lot on what's happening with the market. Are we short, like today? Are we long gas and the prices have collapsed? Again? Fundamentally, you have different risks, and different upside with each structure you take? And there is no single right answer, it depends entirely on the weather. So

Robert Bryce  21:12  
so it let's stay on gas for a moment. So in if you look back and think about it in terms of geopolitics, what is which country has been hurt the most by the rise of us LNG.

Bernadette Johnson  21:28  
So you would you would look at suppliers, right, because us LNG means generally pulling down the price. So if you have big projects out many of which Australia is a great example, or Qatar is a great example. They're the number one and number two global suppliers of LNG. So it used to be that you could you could invest in an LNG project, you're basically producing that gas for the purpose of LNG. So these are Greenfield projects, it's not like the US, or it's all connected to a bigger grid. These are projects like all of them in Australia, the Qatari projects, the projects that are trying to get off the ground in Mozambique, or even the Leviathan all these projects, right? If they look very similar, you produce a gas field. For the purpose of LNG. It used to be that you could count on a higher gas price to make the economics of your project work. And now you can and now it's significantly more volatile. So any supplier any any of the big suppliers that were dominating the market before the US? Those are the folks that have been hurt the most in this new new world?

Robert Bryce  22:30  
What about the Russians?

Bernadette Johnson  22:32  
The Russians? Yeah, good, great question. So we left them out. The Russians are also a key part of LNG, not as much LNG supply, but actually gas supply that moves on pipeline into Europe. And so them as well, right, I lower gas price, a lower crude price, right? They're being hit on all sides. And the US being the US growing as a global player, and the US cheap supply is a big part of that. So definitely Russia as well being hit by this.

Robert Bryce  22:56  
So that affects them Russia's ability to influence Poland, Germany, a lot of companies in Europe then is that and and also, I thought it was interesting now that that Chevron bought Noble. And so now Chevron owns Israeli gas, that could potentially have a pipeline connection into Europe through the East med pipeline. I mean, this these geopolitics, I mean, who would have predicted this 10 years ago? I mean, it's pretty remarkable change where gas suddenly has become a major issue in terms of geopolitics. Visa V, the US, Europe, Russia, China, all of these countries.

Bernadette Johnson  23:33  
Exactly. And more global supply of gas, certainly limits the kind of a stronghold that Russia held for many of these countries. But it's interesting, because if you look, there's four main paths into into Europe from Russia, one of those began service about a year ago in January.

Robert Bryce  23:50  
It's interesting, because that was what it was that Nord Stream, or what was that?

Bernadette Johnson  23:54  
It wasn't, it wasn't nordstream I think it was turkstream, he was Turkish. And so taking an indirect path, but going into Turkey, and some of that gas can be re exported to other countries, right. So there's four main paths today, there's a few more pipes that are being planned or proposed that could happen or maybe not. It's interesting, though, because Russian gas that hits Europe as a percentage of energy for Europe, it's actually a little bit higher now than it was a few years ago. It's about 40%. Oh, that's odd, right, you wouldn't think that that the Russian influence would have grown. And it's really because of that pipeline network and their ability to get those pipes done. Now, those a lot of those countries that have waterborne exposure, that can import LNG, they are importing from the US and others, the US cargoes today, they go primarily to Europe and primarily to Asia. And so we've become a bigger player in that space. But a lot of gas still comes over from Russia into Europe and even a new pipeline path within the past year or so. So, yes, it's a double edged sword. Over time, will Russia have less influence or Have a stronghold on those markets? Yes. But if you look at the data today, they're actually supplying more gas to Europe than they were a couple of years ago.

Robert Bryce  25:08  
Hmm. That's interesting. I didn't know that. So why did the shale revolution going back to now you've, you've had a front row seat on this and remarkable one, right? To be an energy economist, you're you've got a master's degree in International resource development is that I've got this somewhat.

Bernadette Johnson  25:27  
It's a mouthful. It's international political economy of resources.

Robert Bryce  25:31  
Okay. So you've had a front row seat on this? Why did the shale revolution happen in the US?

Bernadette Johnson  25:37  
A lot of it has to do with property rights. So if you if you're outside

Robert Bryce  25:42  
mineral rights,

Bernadette Johnson  25:43  
mineral rights, exactly. So the minerals who owns the resource under underneath the ground, who owns that resource, its land owners, right? In many countries, it's the queen or the government owns those rights. And you may own the surface land to build a home. But that's it. So in the US, it's very different than the US, it's individuals, landowners, others, investors, individuals that own the vast majority of mineral rights. So what happens is you have this environment that's very friendly for oil and gas drilling. So there are, it depends if you look past the past 10 years, today, we've got about 400 rigs running, we've had as high as 2000 depends entirely on the commodity price. They're drilling wells all over the country. They're negotiating contracts with the mineral rights owners. If you own the mineral rights in the US, and somebody decides to drill, well, you're going to get a check in the mail, you're going to get a royalty check for on average, about 20% of the value of that commodity over the life of that well. And that well could last.

Robert Bryce  26:42  
But generally, the minimum is 12 and a half right? An eighth is that is that's

Bernadette Johnson  26:46  
exactly. That's the government. If you're on federal land, for instance, 12 and a half percent is pretty common with what you'll pay the government, if you're in a competitive area, they're all negotiable, right in the market, this is another market. Generally, on average, it'll be about 20% royalty that the mineral rights owner gets. So there's a lot of direct monetary incentive to let folks drill on your link. So what happens is, you actually have a lot of areas in the country where a lot of oil and gas is produced, where land owners are actually competing to be the location where those oil and gas wells are drilled. And so this is very different from anywhere else in the world. Where, imagine you're in, I don't know, you're in Europe, somewhere, the resource belongs to the government, and you own a house, do you want a drilling rig next to your house? You don't? Right, so you have a lot more kind of local opposition landowner opposition, that generally doesn't exist in the US nearly to the same scale. On top of that, you've got the market. So you've got 1000s of operators, hundreds of active drillers, you've got a full infrastructure network of private and public, publicly traded companies that are building infrastructure to move this assets around the fact that the market, the capitalist market, in the US functions, the way it does is why the shale revolution was was able to take flight.

Robert Bryce  28:02  
So is it fair to say that it couldn't happen? Well, I'll ask it more directly. So why haven't other countries been able to replicate the shale revolution?

Bernadette Johnson  28:12  
It's all those reasons. It's how the market functions, easy entry and exit, the fact that the commodity price drives behavior and activity, all of those things, plus the mineral rights plus the infrastructure, plus the technical expertise, right. So if you think about that American capitalism, that the need to figure things out, even when the prices collapsed, the oil and gas producers in the US have a lot of incentive to get more efficient to produce, to have a smaller footprint to produce bigger wells, to use the right materials. All of those things are a function of the market here that allows them to kind of weather the commodity price fluctuations, that doesn't really exist anywhere else in the world. So I would say it's a very unique set of factors that makes trail successful here, and why you haven't really seen it take off anywhere else. Yeah.

Robert Bryce  28:59  
Have there been any other countries that have had any? Well, I know there's, there's there's some success with shale and Argentina, in the other place, besides that, that you can think of that's had any success.

Bernadette Johnson  29:09  
You know, they've discussed it in Poland. And the tricky part is now that we know now that we have the technology to unlock oil and gas from basically within rock, right, so you'll have all these little tiny pockets of oil and gas within a rock. And this hydraulic fracturing and horizontal drilling allows you to get that out. That's that's what the shale revolution is. That means that almost anywhere on Earth where you have similar geologic properties, you can do the same thing. You no longer have to look for these pockets of oil or gas far beneath the surface, drill a well that targets it pretty precisely, to pull it out. So that means there are definitely resources that could be developed and potentially are economically viable all over the world. Poland is one where they they've done some tests, done some test wells in the UK, you mentioned Argentina, there's a few places the challenge has not been is the recent Source there, the challenge has been local opposition, even government opposition to actually drilling those wells. So I think it's it's, it's a viable option all over the world. But I don't know that we'll ever see a take flight like the US.

Robert Bryce  30:14  
As I've said, I will. Those are good explanations, I just call it rigs rednecks and writes that there. It doesn't exist everywhere. They don't have the Okies and the Texans to come in and say, Well, this is how you run a rig. They don't have the mineral rights, and they don't have the, you know, the the steel, they don't have the rigs and are the pipelines and, and I've heard arguments that other countries, the rock isn't as good. But anyway, there was leave that for the moment. We hear a lot of claims lately in particular, now that Exxon and some of the super majors are struggling, that whole oil and gas sector is struggling, that at the end of oil is near and that the world is going to be dominated by renewables, and that we don't need oil anymore. What How do you respond to that?

Bernadette Johnson  30:56  
I look at it. I think when you hear things like that, it's really a question of the science first, and also the scale. And so it's easy to think that if you don't have a really big grasp of what we're talking about with energy, energy is the world's largest industry. It's massive. Everything that happens on earth takes energy. And when you look at today, the energy mix, where does it come from? Well, 5% directly comes from renewables, then you've got something like 11% that comes from nukes and hydro, then you've got 84% is coming from hydrocarbons, whether it's coal, natural gas, or crude and petroleum liquids, at 4%. So is renewables growing? Or are they growing? Absolutely. Will they continue to grow? Yes. Are we anywhere near taking 5% to 100%? in our lifetimes, with today's science, with today's battery capability with today's land space? Could you put in enough solar and wind to offset what you get from hydrocarbons? You couldn't? So there's a fundamental disconnect between what people want when they hear clean energy, versus what is actually possible with the science and with how we use it, right? When you think about these things, that this is not an easy one to one replacement. It's actually completely the opposite. It's incredibly difficult.

Robert Bryce  32:14  
Very well said. Thanks. So the disconnect, though, I think that's a great fundamental disconnect is a good segue to this question, which is the some of these people are saying, Oh, well, the oil and gas sector, they're dead, you know, oh, Exxon Mobil, it's dead, they're never going to come back. You know, we don't we're going to train the Tesla is going to take over the automotive sector. This is all it's gonna, you know, that we're in this energy transition. But that energy transition bias, in my view is based on this idea. Oh, well, look at the oil and gas. Sure, look how much money they lost. And so here's the, the point that I'm making is, the sector has been incredibly successful at producing hydrocarbons and dreadful at making money at it. Right? This is the disk disconnect then. So last year, Deloitte estimated that between that since 2010, between 2010 and 2020, the US shale industry totaled 300 billion in negative net negative cash flow, and wrote down 450 billion in invested capital 200 bankruptcies. So the question I had is here, can the industry save itself from itself?

Bernadette Johnson  33:26  
Good question. I would say it can. And this is what I always go back to the market always wins, right? commodity prices. The good thing about so why is this happening? And what's happening today? Well, there's a lack of investor appetite for oil and gas makes total sense, given the numbers you just rattled off. Right? Of course,

Robert Bryce  33:44  
before you go there, so why, I mean, why did they? I think back it was now it's years ago, I think it was Nicolas Maduro said that the Venezuelan, the politician, there was a dictator or president or whatever his current title is, he made some claim that Oh, the Americans and the Saudis are conspiring to drive down the price of oil. And I thought, conspiring, you're going to go to Midland and tell these guys Oh, yeah, they're going to make some kind of cartel and they're going to conspire to drive prices down and drive themselves out of business. I mean, it's on its face. It's absurd. But there wasn't any discipline in the industry, like everyone. Everyone was drilling. Everybody thought they'd make money, and they didn't, right what they're doing. It's an amazing outcome.

Bernadette Johnson  34:32  
It is it's and it's also about supply demand. Right. So today, we've had two price collapses for oil markets in the past five years. So I would argue that going forward, are you going to have a net higher commodity price in the future because of that, because now there is more risk, there is arguably more risk that you were going to have series of price collapses from time to time, yes. But the market is actually really good at pricing those types of things in so what would that mean? It would mean that instead of it used to be That investors or operators would require a 15% rate of return for over the life of the well to decide to drill the well. Well, then it moved to 20%. Maybe now it's 30%. If you require 30%, before you drill a well, now you have to have a higher price before you decide to do it. Which What does that mean? It means you have the return on the invested capital,

Robert Bryce  35:19  
right? Return.

Bernadette Johnson  35:21  
Okay. Yeah. But I think what I always go back to is follow the money. That's how it works. investor sentiment, is there. Is there access to capital out there today for oil and gas? There is? It costs more, right? The cost of capital today is higher than it was. But I would also argue it should be because prices just collapse. We just lost a ton of money. There were a ton of bankruptcies. And if I'm an investor, do I need to? Am I going to require a higher rate of return? To give you my cash to invest? Absolutely. What does that mean? It means now you're going to need a higher commodity price. Because if I am anyone, if I'm Chevron, if I'm Exxon, if I'm with some of the smaller operators that are just us, if, if I am an operator, and I've seen these two price collapses, it means I'm not going to drill a well, I'm not going to drill a well, as soon as the price covers 15% rate of return, I'm not going to drill it when it covers 20, I'm probably gonna wait till 30. If I wait till 30, I'm going to recover my capital sooner, I'm not going to have as much price risk. If there's another price collapse. All of these things. This is how business works out. Right. This is how the market functions. So would you argue that you should have a higher risk premium built into commodity prices? Because of this? Certainly. But those things are all solvable. So do I believe that price will be higher? Yes. Do I believe that investors will show up to invest as soon as the price gets high enough? I do. There's also things like this is the world's largest industry, there's only so many places to put capital. It's a natural hedge against inflation. There's all these reasons why energy, and even oil and gas specifically, have been investable, and even primary investment vehicles historically, it's definitely out of favor today. But I think just like anything else, that's cyclical, the capital markets are cyclical, and they'll come back around to energy.

Robert Bryce  37:07  
So let me follow on that. So you pursued this as your career why, what what got you into you're a native of Denver. And, and we talked about this before we started recording, you're you're fairly, you're fairly unusual in my experience and being around the energy business as a young female Latina in a business, that's dumb, that's dominated. Let's face it by older Anglo dudes. So how does it how does that played out? And why did you pick it? And how is it? How is it playing out in your career now?

Bernadette Johnson  37:40  
Yeah, good question. So I think it's, it's really, it was lucky, it wasn't necessarily intentional. So when I grew up in outside of Denver, I went to school here, when I was looking at colleges, Colorado School minds, that was always going to be the school I was going to,

Unknown Speaker  37:55  
it was always going, why

Robert Bryce  37:56  
what why don't you just for golden Colorado with

Bernadette Johnson  38:00  
my course, my quarters, the breweries closed. A lot of it was I was I was drawn to math and science. And if you're in Colorado, there's no better place to be for math and science. In Colorado School of Mines. It's also a smaller footprint. It's very specialized and focused. When I started at school, though, I was going to be an electrical engineering. So of course, right? You're a kid, you know what you're doing? Start taking these I start taking these classes. I'm like, this is terrible. To not want to be an electrical engineer. Like this is great.

Robert Bryce  38:29  
Like the math, you didn't like the engineering, but

Bernadette Johnson  38:31  
it was kind of like, what I want to do this my entire life, like, Yeah, probably not. So then I'm like, Well, what do I want to do? Well, so I stumbled into my first economics course, because you had to you had to take economics 101 to graduate. And it just made sense, right? The how the markets work, and how things have evolved over time. And at the time, I wasn't studying primarily energy. We were We were focused on heavy metals. But it made sense those market dynamics and predicting what comes next based on supply and demand. I think economics is one of those things that you either love or you hate, like anybody you talk to, right? You say economics and folks will say, Oh, I hate it, or I love it. But there is no middle ground. It's kind of like beets, right? People ever lobbied for the hippies. Like there is

Robert Bryce  39:13  
no way I don't like beats. I've never liked beats. Either.

Bernadette Johnson  39:22  
It was kind of it just made sense. And so I went, I went to school minds. I got an economics degree. And the timing piece was incredibly just serendipity. Right? Did I know that I would be coming out of school. Right when the shale revolution is taking off? No. The first position I took was for bentek energy known on the natural gas side. This is Porter Bennett founded this company 20 years before that this company really started to take flight during that same period, because they were incredibly good at understanding what is the market going to do with this change? this fundamental change in shale and this has been a gasps Apply. And then you start building pipelines all across the US. And they were at the forefront of understanding. When you build a commodity, when you bridge to two markets, you have a cheaper market over here you have a more expensive, you build a pipeline, you bring those prices together, you have a completely different result, right? Whether you're the end user over here, and the price, you have to pay for gas, or you're the oil and gas producer over here. But predicting those dynamics, I was lucky I was it was timing and luck more than anything. But I got to come into the industry, with that company, under Porter, who is continues to be kind of a pioneer when you think about energy markets. And that's that's where I started. And I started there, I led analytics for a hedge fund doing the same type of thing, predicting future commodity prices. And then Porter and I came back together, we founded a boutique advisory firm. And we were on the forefront of predicting the oil price collapse back in 2014 2015. And so that causes an acquisition by embarrass, and my whole team and I have been embarrassed ever since. So it was it was a chain of events, probably more luck than anything else. And kind of stumbling into a part of the industry, or an industry that just fit right. It just made a lot of sense. You're right. I'm one of the few when I'm in a room with investors or clients or anyone, I'm very often the only female The only person of color. I think it's interesting because I do get that question a lot. Because the industry does have this reputation for being very, the good old, good old boys and old white guys, I've always found the industry to be incredibly welcoming. It I've never been kind of pushed out of room, I've never been marginalized in a room, it could be a function of who I am and where I sit, right? Because today, if I go into a room, I'm generally the most knowledgeable about something in the room. So it's a draw, right? They're calling me into the room, I'm not raising my hand asking to come into the room. So I think I'm lucky now. But it's kind of always been that way. And maybe it's as simple as Porter 13 years ago, having a very different mindset about the industry.

Robert Bryce  42:04  
And tell me about your family there. They're still in Denver. They're not in the they're not in the energy business.

Bernadette Johnson  42:11  
Not at all. And so I come from a family of lawyers. So my mom, my mother's a judge in Colorado, my father's an attorney, I think it was always expected that I would be an attorney. I'm the oldest child, I'm very stubborn and hard headed. And I immediately like on going a different path. So I'm the only the only economist, I usually find myself explaining things related to energy. Because I'm sure you encounter this a lot. There's, there's this renewables, right? I'm pro renewable. Everybody wants to renewables clean energy, when you start getting into the details, it's a lot harder than that. And so that's something that I've been faced with in my family or even others, we we had embarrassed serve a lot of power companies or end users. And even with that cohort of folks, I don't I don't think it's widely understood how this whole broader energy complex fits together and why it works. So it's it's an interesting time that we're in I find myself a lot explaining the world of energy to even my family. Well, let

Robert Bryce  43:12  
me follow up on that, because you just spurred a question. What's interesting to me now, and it's one thing that I see happening, obviously, as the the electric sector being much more heavily dependent on gas than ever. My first book was on Enron published now, gosh, what is 19 years ago? Since Enron collapsed, the amount of gas being used in the power sector has more than doubled. And so we're seeing a much closer link between electricity prices and natural gas prices. So what didn't exist before was this, this real heavy reliance of the electric sector on the oil and gas sector. Is that going to continue?

Bernadette Johnson  43:51  
I think it will continue. So if you look at what the energy mix of what what what do we use to produce power? You're right, it's it's generally trended much more towards natural gas, coal,

Robert Bryce  44:02  
as we see coal, as we see coal and nuclear retired, that generators are turning to gas, right, lower political risk, lower price, low carb, lower carbon, well, they're relatively low carbon compared to coal. But is this I interrupted?

Bernadette Johnson  44:18  
No, no, that's that's exactly right. And so the tricky part is natural gas as a backstop for renewables, they go hand in hand. So renewables are notoriously not dispatchable. Right. They're intermittent. They show up when they show you get solar generation, when it's sunny, you get wind generation when it's windy. But when they don't show up, they don't show up. And when you look at the demand profile, when do you actually need to generate the most electricity, it's actually when neither wind nor solar is available in the early and so what happens is you use the renewables when you can, but the other times you need to be able to bring resources on quickly and you need to be able to pull them back quickly. And that's natural gas. So natural gas is the most flexible when you're talking about power generation, natural gas and have historically, it's been the fuel that we use for peekers. Right? So peakers are the smaller plants that are meant to go up and down quickly. That's always been natural gas. So what you have here is everywhere you see, renewables being built in large quantity, you also see natural gas fired generation going in as well as a backstops, because we have the number one point of the electric grid is reliability, we need to keep the lights on, we need to keep electricity flowing. And what that means is natural gas has to fill in the gaps when you don't have renewables. And that's only going to increase as nukes retire as coal retires. Those are baseload. Those are the units that always run consistently. Well, that's gone away. So now you've got to generate that somehow. Well, it can't be wind and it can't be solar. So what's it going to be? It's going to be natural gas.

Robert Bryce  45:49  
Let me let me go back to your training and Resource Economics, internet, the international political economy of resources, because this issue of shifting gears here the issue of resource extraction, and the economics of it has been controversial for a long time. And this is a famous quote from Juan Pablo pedis. Alfonso, who was one of the Venezuelan who was one of the founders of OPEC. When a long with Iraq, Iran, Saudi Arabia, Qatar anyway, that from the early 60s in Cairo, Cairo yacht club meeting, and he called oil the devil's excrement. And this is one of the one of the founders of OPEC is Do you believe in the resource curse this idea that countries that are blessed with resources are inevitably cursed by it? You look at Venezuela today? It's a basket case. It's arguably the most corrupt and most impoverished country in OPEC. Well, okay, Nigeria might be in that league, too. But we've seen it just a collapse in the Venezuelan economy. So the question, do you believe in the resource curse?

Bernadette Johnson  46:53  
I do not. And I would say that that is a hot topic. And economics

Robert Bryce  46:57  
has been for a long time.

Bernadette Johnson  46:59  
Always. Right. And so you're gonna have folks that are on one side of the debate or the other I am firmly on? No, I think the fundamental issue, there is a lack of strong institutions. It isn't the resource, right? There's a wait a minute,

Robert Bryce  47:10  
can I can I say lack of strong institutions and just say corruption?

Bernadette Johnson  47:13  
Absolutely. And that they go hand in hand. Right. So the reason that there are other examples and other countries, that Norway, right, there are other examples where they didn't go down the same path, even the US, right, you would say, generally, access to resources, lots of different resources is part of what makes the US the US and makes the US the economic powerhouse that it's been. And what do you have there? That's different. You have strong institutions, you have management of these resources. Certainly, you can have diversification. Right. But diversification seems to be the problem with places like Venezuela, they their economy is only dependent on one thing. Well, that's institutions, right, you can set up an economy that isn't just reliant on one thing, if you manage it well. So I go back to it's about how you manage it. It's about the institutions, it isn't fundamentally about the resource.

Robert Bryce  48:02  
Well, I would feed back, I'm going to touch back on what we talked about earlier, which was individual rights, the property rights, right that the US. Well, I mean, I guess you could even go go back and look at individual states like New Mexico, where most of the oil and gas is owned by the government, instead of individuals as compared to say, Texas or other oil producing states, Oklahoma, maybe that those states are more prosperous. And I'm just thinking off the top of my head, because I've thought about the mineral rights issue for years, and mentioned it several times in things that I've written, but that that individual ownership of mineral rights has had profound effects and long term impacts on the health of even different provinces within the US. Am I does that make sense to you?

Bernadette Johnson  48:47  
No, that's exactly right. And New Mexico is a great example of that. So that the economy and being very heavily dependent on oil and gas, it's interesting what's happening there, because today, they're shifting towards being much more kind of pro renewable. I'm anti oil and gas in general. And you can see the impact that it's having on the economy. And if you go to New Mexico, and I've done a fair amount of speaking, even in front of their legislature, it's a it is a conundrum. So where they sit today, with commodity prices being where they are, they're already sitting at a significant budget deficit. And a lot of the policy that you see coming out of the state are being proposed, would actually just make that worse. And so that's a great example of when you don't have the same system in place where you don't have diversification and whether government local government is heavily reliant on one thing, you have the recipe for a not ideal outcome.

Robert Bryce  49:37  
Well, but how much of that is due to the fact that so much of the the oil and gas produced in New Mexico is on federal land and not on privately owned land, right so that the royalty is going to the Bureau of Land Management instead of to the county or the or the well, someone's going to the county but the royalties are going to the federal government, not to necessarily to the state is that

Bernadette Johnson  50:00  
A big chunk of it goes to the federal to the federal government, a large chunk still goes to the state, it's the largest piece of their budget is coming directly from oil and gas. Not some of it is on New Mexican land or private land where you're getting right. You also have settling anytime you have oil and gas drilling in a state, you also have a fair amount of money aside from royalties that goes into the local economy, whether it's the workers, the labor, the even not direct oil or gas, labor, but things like the skilled trades where you need electricians, plumbers, welders, you need those skilled trades, that is also a key part of their economy. And the challenge today is with commodity prices collapsing and less less drilling in general happening anywhere, that is also taking a hit. So you kind of have this perfect storm, where it's not just one piece, it's the whole thing that's causing people.

Robert Bryce  50:50  
Right. And so you said you've you've spoken in New Mexico, what have you What have you told him? What what have been your what's been your message, or messaging to the policymakers in New Mexico regarding this?

Bernadette Johnson  51:01  
Sure. Good question. So we get brought in really to provide a third party unbiased view of the markets. So what do we believe that will happen with the oil price? And why? What is the timing of that? What has that meant for? Generally other states, Colorado is a good example I live here. So I'm pretty familiar with what that means here. So we get brought in really at a high level to provide that market diligence. And to just comment on what does this mean for a budget or the ability to balance a budget? Or if you were to enact this policy? What would that mean for oil and gas? How would an oil and gas operators or investors think about that? And would that cause a pullback in their activity? And so those are the types of things and types of questions we get. And just like you would expect, if you create a an environment that's challenging for business, then you're going to see people vote with their wallets and invest elsewhere. So this is similar to what we're seeing in Colorado, we've been living through this in Colorado for years, every few years, a ballot initiative comes up that would dramatically impact the ability for oil and gas wells to be drilled. And what you see is that that even the fact that that environment exists, and now we're starting to see some increased setbacks, meaning how Where can you drill wells? How far do they have to be from homes or schools or other things? Plus, we're seeing new regulations on the flaring and the emissions in particular, even before the rules were enacted, and it was just a discussion. You did you saw real damage to the business environment. The worst thing if you're an investor is unknown. If you know what the rules are, even if they're strict, you can invest you you know, what the rules of the road are, you know what it's going to cost, you can decide to deploy capital. If you don't know, that's the worst thing. So we still have some of that going on in Colorado, New Mexico, I would argue that's the biggest problem is that there's unknown whether it's around the Biden presidency, and what it means for drilling on federal land, whether it's New Mexico and their local government, their governor, and the rules are putting around oil and gas drilling, even not on federal land. You combine all those things, it's a lot of unknown. And if I'm an operator, or I'm investing capital, that's the worst thing. So am I gonna choose to go to Texas instead and spend my money? Maybe, am I gonna go to Oklahoma, maybe anywhere else where I have rules in place, and I know what the business environment is, that's where I'm going to spend my capital.

Robert Bryce  53:17  
And that's fine. Because there's there's less political risk. Exactly, exactly. Right. Because the geologic risk, that technical, technological risk are relatively equal among all of those possible destinations. But the political risk is the one that's difficult to assess. Well, good. Well, look, my guest, Bernadette Johnson, we talked about this. See now I haven't been calling out embarrassing. We talked about what's the call to action in various.com is where you would find a lot of information about embarrassed their, their company, what they were, what they're doing in the markets. Just a few more questions, because we've been talking for about an hour and I don't want to take more than more than an hour. So I was interested. Reuters just published a story about China. And it said that, that coal production in China has now reached the highest level since 2015. And I'm quoting from the story it says production is rising amid surging industrial demand, and an unofficial restriction on coal imports aimed at shoring up the domestic mining industry. And then in December, coal output was up 3% from the same month last year. Why is coal been so percent? We've made a big shift away from coal in the United States, is we're seeing a big shift away from coal in Western Europe, not so much in Asia. Why is cold been so persistent for so long?

Bernadette Johnson  54:34  
Good question. I think today, why are we seeing that bump up and that increase in coal and China, a lot has to do with their internal infrastructure, and now they're able to move it around within the country easier.

Robert Bryce  54:45  
With their trains, their train infrastructure, the railroad infrastructures improved.

Bernadette Johnson  54:49  
Exactly. And that's a key point. Why so your bigger question, why does coal persist? A lot of it is transportability. So even natural gas, right folks are moving in that gas. Now gas requires infrastrutture You cannot move Nat gas outside of a pipeline, or ship specially built for it. Or whether that's gasification, turning it into LNG, or re gas on the other side, turning it back into a gas, it takes infrastructure, and that infrastructure is expensive. And really you need it right? You can't move gas without it. Sure, coal is different, right? coal is easy to transport. So you produce it. Depending on the type of coal, it can be challenging to produce. If you're talking about mines, subsurface, or if it's surface coal, it's very easy to produce, you put it in a train, you transport it, it's very easy to use as fuel. So that's the number one thing, it's easier than than crude petroleum products. It's much easier than gas. And I think that is, that's why the rate at which those economies are growing, the rate at which energy demand is growing means that ease of use and ease of transport ability is what makes coal so sticky, right? So hard to displace or why it's, it's picking up the marginal energy demand, because you can't do it with gas and crude today,

Robert Bryce  56:02  
because they can't they can't scale as quickly.

Bernadette Johnson  56:05  
Exactly, Yep, exactly. It takes it takes time to build all that infrastructure. And it takes longer to build that infrastructure for hydrocarbons, like crude and natural gas than it does for coal.

Robert Bryce  56:15  
So it was cool here to stay.

Bernadette Johnson  56:18  
That's tricky. A lot of that will be government policy. So we'll see. Because China even is signaled pretty strong, later that they don't like they are beginning to care more about their environment and put more rules around it. And you've seen them set limits to how much coal can be produced. And when the country reaches that level, they basically turn it off, and you see the coal price globally actually change as a result. So I would say, I don't know that coal is here to stay forever. But coal is a significant part of the global energy mix today. So are we going to see that go to zero overnight? No, we're over five years. No, we're not. Are there going to be pockets, even particularly places like India, even where you might actually see that continue to increase relative to other cleaner burning fuels or renewables? Probably. So have we seen peak coal? Probably not. I also don't believe that we've seen peak crude oil. So all of these things, right. It's it's a, it's a race against economic development. Your economies are growing fast, you need energy.

Robert Bryce  57:15  
So you think hydrocarbon demand is gonna continue growing globally?

Bernadette Johnson  57:19  
I do. I do. I think so. I think even with electric vehicles, when you dig into that it's a it's a hairy question. So what are the what are the types of electric vehicles we have today? Well, Tesla is only about 20% of the global market. So there's some big Chinese Chinese players in there. But those are generally luxury vehicles. Those are not the types of vehicles that really begin to take off. As soon as an economy, a country's economy reaches kind of middle class or more folks have access to vehicles. They're not going out buying Tesla. They're going out and buying very small passenger light vehicles. Those are still predominantly run off of hydrocarbons, whether it's diesel or gasoline. Tesla, why is it expensive, a large part of why it's expensive is a battery. So we just heard Elon Musk's battery day, they're anticipating in three years at being able to cut the price of those batteries dramatically and lower the price point of those cars, which will significantly open the market. But battery day in that three years. It was predicated on a step change in battery chemistry, basically a breakthrough in battery chemistry. Well, breakthroughs are hard to predict, can I say that's going to happen in three years, no could happen in three years could happen tomorrow could happen in 30 years. So that's the piece I think with electric vehicles, that isn't maybe as as understood as it could be is you cannot replace the vehicle demand that we have today. With the electric vehicle technology we have, the cost just doesn't make sense. It's a it's really a luxury vehicle market. And that's a really small, small part of the global vehicle demand.

Robert Bryce  58:48  
And we haven't talked about what that increased electricity demand would mean in terms of grid upgrades, transformers, high voltage transmission and the rest of it. So but that's that's a little bit further deep dive than I want to go into. So last things, here to the last two questions. My guest Bernadette Johnson, is the I'm sorry, the Vice President of strategic analytics at embarrass and Austin based company that is a software as a service provider for the energy sector. What are you reading? What do you what do you like to read when you're not thinking about energy markets and the resource curse? Or maybe you're

Bernadette Johnson  59:29  
just starting to get the podcast but I will say I am when I read on my off time, because I read a lot for work, right? Whether it's news and articles and research and even in investigating battery tech and battery chemistry, I read a lot for work when I'm not at work, and I'm not reading energy focus things. I am a big fan of fiction and honestly spy novels, like he, like I've every major spy novel author that has a series of the character. I read all the books, so I probably read 200

Robert Bryce  59:57  
Tom Clancy that that whole genre The whole exactly

Bernadette Johnson  1:00:04  
jack Reacher jack Reacher Mitch Flynn. I think that's his name. So there's, there's those are my Those are my books. I think I, I always question I'm like, well, 20 years ago, did I take a wrong turn? Maybe I should have been a spy, but

Robert Bryce  1:00:20  
instead of an energy economist,

Unknown Speaker  1:00:21  
exactly.

Robert Bryce  1:00:23  
Last question then Bernadette, what gives you hope?

Bernadette Johnson  1:00:27  
What gives me hope. So I think if they the world that I live in an energy, energy focus, even hydrocarbons as as much of a bad guy as they are today, there's really been nothing that's brought as many people out of poverty and advanced economies move people into the middle class than hydrocarbons. Right. So this has been a game changer. What gives me hope is that the science is the science and the things that are happening are generally noise. What also gives me hope is that the market always wins. We can do a lot of things with policy, we can do a lot of things to push renewables or to retire hydrocarbons. But at the end of the day, the market always wins. It's it's a much stronger force than anything we have happening in one location or another. And this this need for more energy has continued development of people, folks moving into the middle class. It's all positive pro energy pro kind of pro people, I guess at the end of the day.

Robert Bryce  1:01:24  
I like that. I would I agree pro energy and pro human that's those are two things that I am unreservedly unreservedly in favor of pro human pro energy. Bernadette Johnson, it's been a great, great conversation. We're right about an hour so I want to stop here but you've been very kind with your time. Again, my guest Bernadette Johnson, the Vice President of strategic analytics and embarrass you can learn more about her company and her [email protected] Tune in the next for the next episode of of power hungry podcast. If you like this one, give it to 612 14 star rating on your favorite podcast outlet and maybe pick up a tom clancy novel on the way so Bernadette can lend you one. Okay, so we'll stop there. Thanks again. Y'all. Talk to you in the next episode of the power hungry podcast.

Bernadette Johnson  1:02:16  
Thank you