Big Digital Energy

00:00:01 [Speaker 1]
Everybody, welcome to live BDE.
00:00:04 [Speaker 1]
We've gonna go to Mark with breaking news.

00:00:08 [Speaker 2]
Jacob, roll the clip.

00:00:13 [Speaker 1]
Your reaction to how they've done?

00:00:15 [Speaker 3]
Yeah.
00:00:15 [Speaker 3]
Well, look, anything that happens within a twenty four hour period is noise.
00:00:20 [Speaker 3]
And, you know, I I think that once the market understands that we are focused on fiscal consolidation and that we are, trying to bring the market back into equilibrium, in in a thinly traded market.
00:00:35 [Speaker 3]
I think, you know, I'm confident that bonds will continue declining.
00:00:40 [Speaker 3]
We've got a spike in oil prices today that I don't really understand.

00:00:44 [Speaker 3]
You know, our announcement is for, economic, action, and I think that the economic action will mean that oil prices will come down sooner.

00:00:57 [Speaker 2]
A way to

00:01:01 [Speaker 1]
Alright, Mark.
00:01:01 [Speaker 1]
What do we think?

00:01:04 [Speaker 2]
Well, I would never call the treasury sector stupid, but it's diesel stupid.

00:01:11 [Speaker 4]
Alright.

00:01:12 [Speaker 1]
Alright.
00:01:13 [Speaker 1]
Kirk, what do you think?

00:01:15 [Speaker 4]
Well, I mean, he ran the Soros Fund, and he's a macro trader.
00:01:20 [Speaker 4]
And I just think, like, guys like him look at, like, yield curves, capital flows.
00:01:30 [Speaker 4]
And I think about how, like, John Arnold, he didn't become a billionaire by reading the future curve.
00:01:37 [Speaker 4]
He he became a billionaire by knowing exactly where the gas was physically.
00:01:43 [Speaker 4]
How you know, what was what was, the storage cavern capacity in Mount Mont Bellevue, blah blah blah.

00:01:50 [Speaker 4]
But I went back and I started looking at, like, guys like Mark Rich.
00:01:55 [Speaker 4]
Do you remember him?

00:01:57 [Speaker 2]
Glenn

00:01:57 [Speaker 4]
Core?
00:01:58 [Speaker 4]
But before Glenn Core, he came out of Philip Brothers, and those guys were the masters at knowing exactly what the price of a barrel was in Nigeria versus in Rotterdam, and they actually traded physicals.
00:02:14 [Speaker 4]
And I think one of the things that bothers me is we always seem to go to the macro guys for these for these quotes, and we think about the guys that make all the money are the ones that are trading off the physical.
00:02:28 [Speaker 4]
So that's my take.
00:02:30 [Speaker 4]
It's it's not not short, but that's where my head's been this morning.

00:02:34 [Speaker 2]
Well, I'll I'll fill in a little little bit more of a cent history.
00:02:38 [Speaker 2]
He had three hedge fund blow ups and then became part of the marketing team at a fund of funds.
00:02:47 [Speaker 2]
So, Chuck, you were saying?

00:02:54 [Speaker 1]
Well, I I watched this clip and I'm reminded about my dear sweet oldest daughter, Charlie, when she was about three years old, used to break something right in front of me.
00:03:06 [Speaker 1]
And I go, Charlie, why'd you do that?
00:03:09 [Speaker 1]
Oh, daddy.
00:03:10 [Speaker 1]
That was a accident.
00:03:15 [Speaker 1]
And and I will say this, at least Charlie grew out of that.

00:03:19 [Speaker 1]
So

00:03:20 [Speaker 2]
So they've run out of runway on not understanding oil price spikes because, you know, since the start up until very recently, they've been able to run cover, jawboning crude, and looking at crude.
00:03:35 [Speaker 2]
And as we talked about last week and probably the week before, we have either flipped into or are flip or in the midst of flipping into a products led market particularly distillate.
00:03:46 [Speaker 2]
And so not understanding it, I don't buy that.
00:03:49 [Speaker 2]
I think, I think the cover of being able to focus everyone, particularly the media, on what's happening with Brent, you know, that that runway has has reached its end.

00:04:04 [Speaker 1]
I I will say this.
00:04:05 [Speaker 1]
He's still my, second favorite cabinet member behind Rubio.
00:04:10 [Speaker 1]
The fact that we have a gay secretary of treasury who lives in a pink house and has supposedly gotten into fist fights in the Oval Office is just, in my book, cool as shit.
00:04:22 [Speaker 1]
So I'm down.

00:04:24 [Speaker 2]
He did sell his pink house.
00:04:26 [Speaker 2]
And and where does Chris Wright rank, Chuck?

00:04:33 [Speaker 1]
Oh, fair yeah.
00:04:34 [Speaker 1]
Fair enough.
00:04:34 [Speaker 1]
I mean, I don't know.
00:04:36 [Speaker 1]
Chris is a little bit on the doo doo list for not coming and and at least wink, wink, nod, nod.
00:04:41 [Speaker 1]
Hey, guys.

00:04:42 [Speaker 1]
You know?
00:04:42 [Speaker 1]
Sorry.
00:04:43 [Speaker 1]
We got a banter about the lower prices.
00:04:46 [Speaker 1]
The, he could, he could definitely have done that.
00:04:50 [Speaker 1]
And he also could've shown up with the Chinese menu of, hey, man.

00:04:53 [Speaker 1]
I I'm gonna get you lower prices, but I'm gonna get you permitting.
00:04:56 [Speaker 1]
I'm gonna get you this.
00:04:58 [Speaker 1]
I'm gonna sell Anwar to you, whatever.
00:05:01 [Speaker 1]
I think Chris could've, could've done a little better in terms of negotiating this, but maybe he'll come on BDE, and we can chat about it.

00:05:11 [Speaker 4]
I mean, Chuck Chris Wright just texted me saying, hey.
00:05:14 [Speaker 4]
No more bottle of whiskey for Chuck.
00:05:18 [Speaker 4]
Tell him to watch his mouth.
00:05:20 [Speaker 4]
I don't know what that means.
00:05:21 [Speaker 4]
But

00:05:22 [Speaker 1]
No.
00:05:22 [Speaker 1]
You know what exactly that means?
00:05:24 [Speaker 1]
It's the perfect transition.
00:05:26 [Speaker 1]
Let's go to a $100 crack.
00:05:31 [Speaker 1]
Oh, guys.

00:05:32 [Speaker 1]
Come on.
00:05:32 [Speaker 1]
That was genius.
00:05:34 [Speaker 1]
I get that.

00:05:34 [Speaker 4]
That was so good.

00:05:36 [Speaker 1]
Thank you.
00:05:36 [Speaker 1]
$100 crack, Mark.

00:05:38 [Speaker 2]
I I'm I'm I'm so irritated at your preshow.
00:05:44 [Speaker 2]
I'm just kidding.

00:05:51 [Speaker 1]
I had to sell

00:05:51 [Speaker 2]
some software.
00:05:55 [Speaker 2]
A 102

00:05:56 [Speaker 4]
Well, let's break it down.

00:06:00 [Speaker 2]
Friday with quickly present you know, on any, we're

00:06:13 [Speaker 4]
stuck.

00:06:15 [Speaker 2]
And now, both not $19.96.
00:06:25 [Speaker 2]
And the intubilee and this is a bit of a problem is that you percentage of what remains under authorization.
00:06:46 [Speaker 2]
Not actually that we that that currently, you you know, 97 plus percent.
00:06:50 [Speaker 2]
I think Marathon, MPC reported, q two run rate of over a 100%, a 102% if I, if I recall the number correctly.
00:07:02 [Speaker 2]
So it's it's going to be interesting to see kind of the workout and the relief.

00:07:07 [Speaker 2]
I noticed that, you know, Bolero and PSX and others were actually treading off a little bit this morning.
00:07:12 [Speaker 2]
Bissent's going to come out, I think he has a speech or a press conference today where the economic v day via Iran or is you know, the the plan is going to be is going to be, unveiled.

00:07:28 [Speaker 1]
So the cool thing about hooking up all the transcripts to AI and having access to all this is I can do callbacks now whenever I want.
00:07:39 [Speaker 1]
And on episode two zero four of BDE, we said that 62 crack off of the Russian diesel ban was nosebleed territory.
00:07:53 [Speaker 1]
So think about that.
00:07:54 [Speaker 1]
We thought $62 or, $62 crack spreads were a scary number.
00:08:01 [Speaker 1]
Now we're hoping for a pullback to 62.

00:08:05 [Speaker 2]
And they were Hey, Chuck.
00:08:06 [Speaker 2]
Do you remember the dude that did the, do you remember the dude that did the ultra high balloon to the Weber Sphere and did a free fall?

00:08:20 [Speaker 1]
Oh, yeah.
00:08:20 [Speaker 1]
Red Bull, dude.
00:08:22 [Speaker 1]
Yeah.

00:08:23 [Speaker 2]
Yeah.
00:08:23 [Speaker 2]
Yeah.
00:08:24 [Speaker 2]
That's where we are.

00:08:27 [Speaker 1]
And that's what we're hoping for.

00:08:29 [Speaker 4]
We're hoping for the most part.
00:08:31 [Speaker 4]
I know most of our audience understands what this actually means, but Vlad asked me to put this into perspective and talk about how this impacts our beaver nuggets.
00:08:43 [Speaker 4]
So I'm gonna try to make that connection and and go for 27.
00:08:48 [Speaker 4]
Listen carefully.
00:08:50 [Speaker 4]
Let me break this down.

00:08:51 [Speaker 4]
A barrel of crude costs roughly, what, $84 today.
00:08:55 [Speaker 4]
That's the raw material.
00:08:57 [Speaker 4]
The diesel crack spread, which is the margin the refiner earns to convert that crude into diesel just hit a $102.
00:09:09 [Speaker 4]
So the refiner's paying 84 char and then is paying $84 for the oil for the barrel, charging another $102 on top of that just for the conversion.
00:09:22 [Speaker 4]
So the wholesale cost of a barrel cost roughly now a $186.

00:09:27 [Speaker 4]
So divide that by 42 gallons in a barrel, you get $4.43 per gallon at wholesale.
00:09:35 [Speaker 4]
This is before the truck delivers it, before the terminal adds its margin, before the state and federal taxes it, and before Bucky's adds its 3 to 7¢ on top of that.
00:09:47 [Speaker 4]
So by the time it reaches the pump number 14 in Baytown for all of us that have been been by it, you're paying $5.30 or more for a gallon of diesel.
00:10:00 [Speaker 4]
Oh, and by the way, when you're driving by that, you're also driving by the hammer on the left hand side.
00:10:07 [Speaker 4]
So out of that $5.30, only $2 is the oil.

00:10:12 [Speaker 4]
So break this down.
00:10:16 [Speaker 4]
Buc ee's is making less money on its diesel than they are in their beaver nuggets.
00:10:22 [Speaker 4]
I mean, this is unbelievable.

00:10:25 [Speaker 1]
And this is gonna harken back to a Kirk callback from episode one eighty nine of BDE.
00:10:33 [Speaker 1]
Kirk Kirk called the SPR a government price cap mechanism.
00:10:40 [Speaker 1]
Well, now the caps out of ink, you know, at 308 barrels or wherever we are lowest since 1983.
00:10:48 [Speaker 1]
It's no longer a strategic reserve anymore.
00:10:52 [Speaker 1]
It's a strategic suggestion.

00:10:56 [Speaker 4]
Thanks, Chuck.
00:10:57 [Speaker 4]
Yeah.
00:10:58 [Speaker 4]
Exactly.
00:10:58 [Speaker 4]
By that is we can't.
00:11:00 [Speaker 4]
Go ahead, Mark.

00:11:02 [Speaker 2]
Inn and Throat is now set to release a new little assistant called little Chuck.

00:11:11 [Speaker 1]
No.
00:11:11 [Speaker 1]
Fatty Speaks.
00:11:12 [Speaker 1]
That's what I want.
00:11:13 [Speaker 1]
Fatty Speaks.

00:11:17 [Speaker 2]
Go ahead, Kirk.

00:11:18 [Speaker 1]
I mean, it but but in all seriousness, you know, at the end of the day, if you want lower prices of something, you need to produce more goods.
00:11:27 [Speaker 1]
Right?
00:11:28 [Speaker 1]
We all learn that in economics 01/2001.
00:11:31 [Speaker 1]
How bad is it to build a new refinery in The United States where you see margins like this, five heading towards 10 times greater than they've ever been and not a peep out of we're gonna build a new refinery.
00:11:48 [Speaker 1]
It's literally we're just gonna run at a 102% of utilization.

00:11:53 [Speaker 1]
That right there is the point that free market conservatives need to be making to the American people.
00:12:01 [Speaker 1]
This is not socialism that's gonna fix this.
00:12:04 [Speaker 1]
We need to get in rid of these regulations.
00:12:07 [Speaker 1]
We need to get rid of this.
00:12:09 [Speaker 1]
It's the government causing higher prices.

00:12:13 [Speaker 1]
And that's a hard argument to make, but maybe we can all channel our inner Milton Friedman to, to make it because that's the point.

00:12:22 [Speaker 2]
And and the other I'm gonna

00:12:23 [Speaker 4]
hold my comments for our Phillips sixty six discussion a little bit later, but I do think we have some interesting the question I think that that we need to ask ourselves is is who's gonna do it?
00:12:38 [Speaker 4]
Who's gonna who's gonna build a refinery?
00:12:41 [Speaker 4]
Who's gonna add capacity at this point?
00:12:44 [Speaker 4]
And and I think you go back and Mark said it's not gonna be in The US.
00:12:49 [Speaker 4]
I think I was in episode, 02/02/2009.

00:12:53 [Speaker 2]
And and and mister wonderful came off that notion pretty quickly as we've discussed before.
00:12:59 [Speaker 2]
Refiners are hard, data centers are easier.
00:13:02 [Speaker 2]
One one thing that is in addition to the the conservative kind of free marketers message is and I I saw a few, expos from nineties random this weekend, And it was really on the theme of, you know, we're running these plants hard.
00:13:24 [Speaker 2]
We're deferring maintenance.
00:13:27 [Speaker 2]
And the harder you put push and the longer you go flat out full throttle, we know that, you know, the risk of incidents go up.

00:13:37 [Speaker 2]
And so there there's a there's an extreme amount of pressure being put on folks that are actually inside the fence.
00:13:45 [Speaker 2]
Operations managers at refineries are hearing it from outside the fence.
00:13:50 [Speaker 2]
Corporate executives are certainly hear it hearing it from the administration.
00:13:54 [Speaker 2]
But the people on the front lines in those plants, you know, that they're they're going all out to keep these plants running safely.
00:14:03 [Speaker 2]
And, you know, as an upstreamer, I spent a little bit of time in refineries through my consulting days and always was a little bit uncomfortable.

00:14:13 [Speaker 2]
You know, at least out in the oil field or offshore, you got a place to go.

00:14:19 [Speaker 1]
Yeah.
00:14:20 [Speaker 1]
And, you can apply this all along upstream, downstream, the old Jeff Curry line about you can't print molecules.
00:14:30 [Speaker 1]
I mean, there are real people generating these products for us.
00:14:34 [Speaker 1]
And, you know, it it ties back to the demonization we see at the industry all the time.
00:14:41 [Speaker 1]
Oh, they're making too much money.

00:14:43 [Speaker 1]
They're doing this.
00:14:44 [Speaker 1]
They're doing that.
00:14:45 [Speaker 1]
That's part of the reason we're not gonna open more refineries, people.

00:14:50 [Speaker 4]
I mean, it almost is I was I was thinking about this morning the the joke that if you look at your electricity bill, those of us in Texas that live in one of the bigger cities, but we have CenterPoint and Encore continuing to increase their transmission and distribution charges.
00:15:11 [Speaker 4]
Those are the those are that that's basically the what what the crack spread really is.
00:15:17 [Speaker 4]
But those charges are given to us no matter what they what we do.
00:15:21 [Speaker 4]
Right?
00:15:22 [Speaker 4]
And those continue to go up, and we have no idea what's happening because that's government.

00:15:27 [Speaker 4]
But in this case, this is just the free market.
00:15:30 [Speaker 4]
This is the fact that our refineries are running at capacity, and they can charge what they can charge.
00:15:38 [Speaker 4]
This is them finally getting their profit.
00:15:40 [Speaker 4]
That's what the industry was built for, and we're demonizing them.

00:15:47 [Speaker 1]
Amen.
00:15:48 [Speaker 1]
Amen.
00:15:48 [Speaker 1]
Speaking of demons, should we go to the Straits Of Hormuz?

00:15:58 [Speaker 4]
So day one seventy six, that number deserves a pause because we've been living with a functionally closed Strait Of Hormuth for nearly six months.
00:16:10 [Speaker 4]
And the weekly transit count is 73.
00:16:12 [Speaker 4]
So the precrisis daily count was 73.
00:16:17 [Speaker 4]
Read those two numbers side by side, weekly versus daily.
00:16:22 [Speaker 4]
That's an 86% reduction in throughput, and the market has decided this is priced in, but the market's wrong.

00:16:31 [Speaker 4]
What say you, Mark?
00:16:37 [Speaker 4]
Oh, he's gone.
00:16:38 [Speaker 4]
Well

00:16:39 [Speaker 1]
Ah, there he goes.

00:16:41 [Speaker 4]
Iran is playing the oldest game in geopolitics.
00:16:45 [Speaker 4]
Selective access is leverage.
00:16:48 [Speaker 4]
So let the Iraqi tankers through, block everyone else, grant exceptions on your own terms, which I don't actually, you know, I don't, you know, blame them for actually doing it.
00:17:05 [Speaker 4]
This is not a blockade in the traditional sense.
00:17:09 [Speaker 4]
It's a toll booth with a bouncer, and the bouncer has ballistic missiles.

00:17:15 [Speaker 1]
Nice.
00:17:16 [Speaker 1]
I like that.
00:17:17 [Speaker 1]
They, oh, I was gonna sit in for you just a second, Mark.
00:17:21 [Speaker 1]
They, but, glad glad you're back.

00:17:26 [Speaker 2]
Answering another phone.
00:17:28 [Speaker 2]
We have the pregame, the set and his staff talking about what's coming in terms of d day and what that all entails.
00:17:40 [Speaker 2]
I sent a a clip of Jake talking to me about what's balls and kick those punks off campus.
00:17:57 [Speaker 2]
What do you intend to do, sir?
00:17:59 [Speaker 2]
Delta's already on probation.

00:18:01 [Speaker 4]
They are?

00:18:02 [Speaker 2]
Yes, sir.
00:18:06 [Speaker 2]
Oh, then as of this moment, they're on double secret probation.

00:18:16 [Speaker 1]
Nice.

00:18:17 [Speaker 2]
Put it here first on BDE.

00:18:18 [Speaker 1]
That that there we go.
00:18:21 [Speaker 1]
That definitely outranks my joke.
00:18:23 [Speaker 1]
I was gonna go Trump's had more deal as close than I've had first dates that have resulted in second dates.
00:18:31 [Speaker 1]
Both tend to end up with somebody launching something that that

00:18:37 [Speaker 4]
So, Mark, you were re and actually a comment And despite the fact that collide.
00:18:43 [Speaker 4]
Go ahead.

00:18:47 [Speaker 2]
No.
00:18:47 [Speaker 2]
I was just curious.
00:18:48 [Speaker 2]
And despite the fact that Jacob

00:18:53 [Speaker 4]
No.
00:18:53 [Speaker 4]
No.
00:18:53 [Speaker 4]
No.
00:18:54 [Speaker 4]
We keep colliding.
00:18:55 [Speaker 4]
No pun intended.

00:18:57 [Speaker 4]
But you're reading a comment from Peter Brecht on Clyde that that Besant is at 2PM eastern.
00:19:05 [Speaker 4]
We're going to have the fed versus treasury, and how that plays out for oil prices in the general economy will be interesting.
00:19:12 [Speaker 4]
So you're playing right into that.

00:19:15 [Speaker 2]
Yeah.
00:19:16 [Speaker 2]
And so, you know, had had commented last week about the opt you know, and for bond market.
00:19:36 [Speaker 2]
Given Now up, like, you know, what's going on with products.
00:19:52 [Speaker 2]
But I I think we're on a collision course between what markets and how the bond market markets read that.

00:20:05 [Speaker 4]
Hey, guys.
00:20:05 [Speaker 4]
We have a question.
00:20:07 [Speaker 4]
Can you guys talk about which countries might experience the biggest diesel shortages this winter?
00:20:16 [Speaker 4]
Here's my take on that.
00:20:17 [Speaker 4]
Follow the dependency, not the geography.

00:20:20 [Speaker 4]
So the countries that seem to get the worst hit are the ones drinking from the Russia tap or the Hormuz tap, and both of those taps are off.
00:20:32 [Speaker 4]
So I'm thinking Germany is damn.
00:20:35 [Speaker 4]
Germany cutting off coal.
00:20:36 [Speaker 4]
Just they screwed themselves, man.
00:20:39 [Speaker 4]
So they're getting a third of their diesel from Russian refineries, so that's gone.

00:20:43 [Speaker 4]
No spare domestic refining, and heating season starts October.
00:20:48 [Speaker 4]
So that October is gonna be a big one for us, boys, because we have a lot of we've said everything is coming down to October, including agriculture.
00:20:57 [Speaker 4]
Secondly, I'm going Turkey and Brazil.
00:21:00 [Speaker 4]
Between them, they've absorbed over half of Russian seaborne diesel.
00:21:04 [Speaker 4]
That tap shot.

00:21:06 [Speaker 4]
East Africa, Kenya, Tanzania, Mozambique, zero refining capacity, and the highest dependency on Middle Eastern product in the world is there.
00:21:17 [Speaker 4]
I'm going Japan, South Korea.
00:21:19 [Speaker 4]
They're very sophisticated refiners, but a 100% of their crude arrives by tanker, and 84% from Hormuz, goes to Asia overall.
00:21:32 [Speaker 4]
So, boys, what say you?

00:21:35 [Speaker 1]
So I'm gonna go with the Jerry Maguire take on this show me the money.
00:21:40 [Speaker 1]
At the end of the day, refined products will go to the highest bidder.
00:21:46 [Speaker 1]
And so what that usually means is Americans will pay more, but we'll get our diesel if we want it.
00:21:55 [Speaker 1]
Europe will grumble.
00:21:56 [Speaker 1]
They'll pay more.

00:21:57 [Speaker 1]
They'll get their diesel.
00:21:59 [Speaker 1]
And what we're gonna wind up doing, like we always do in this world of undersupplied energy, is screw the poor people.
00:22:07 [Speaker 1]
And I think that's what we're gonna wind up seeing.
00:22:09 [Speaker 1]
Because at the end of the day, ships can head any direction you want if there are dollars out in front of them.
00:22:16 [Speaker 1]
So I think, I think your point's good on, you know, follow the, the demand.

00:22:22 [Speaker 1]
I think it's also gonna be follow the demand to the person that has the checkbook.

00:22:28 [Speaker 4]
Hey.
00:22:29 [Speaker 4]
We got a just a follow on to this, Chuck.
00:22:31 [Speaker 4]
That was a really good point from DAP Fan on YouTube.
00:22:35 [Speaker 4]
Looking at Australia and Southern Africa's countries with little to no diesel refining and large procurement from Middle East.
00:22:45 [Speaker 4]
That was kind of on top of that.

00:22:47 [Speaker 4]
So any any thoughts on Australia, or Yeah.
00:22:54 [Speaker 4]
Southern Africa?

00:22:55 [Speaker 2]
We we've talked about Australia before.
00:22:58 [Speaker 2]
Duhmerg's written about it a little bit, but, you know, they've, called us to say, we didn't shoot ourselves in the foot in the foot.
00:23:07 [Speaker 2]
We emptied the whole dang clip.
00:23:09 [Speaker 2]
The Australians currently run about a million barrels a day of demand.
00:23:16 [Speaker 2]
And over the last thirty years, their refining their domestic refining capacity has dropped to right around 200,000 barrels a day.

00:23:27 [Speaker 2]
And so they are structurally import dependent.
00:23:31 [Speaker 2]
You know, fortunately, they're not too far away from places like Singapore.
00:23:36 [Speaker 2]
But, you know, it's it it's an impairment, particularly for Australia.
00:23:41 [Speaker 2]
I'm I'm not as or at all fluent on what's going on in in South Africa.
00:23:47 [Speaker 2]
But, you know, we've we've made decisions a couple of decades ago, and now we're, you know, in the, you know, kind of the amplified impacts of the unprecedented disruption of, you know, the the waterway that accounts for a lot of the, the transcontinental mill ultimately in products.

00:24:10 [Speaker 2]
Another point on products that and I was reading a little bit about this this weekend and and thinking about it more.
00:24:16 [Speaker 2]
We've got a super El Nino apparently coming up, I guess, in the fall, and that may portend a warmer than normal winter in in some parts of the country and in the world.
00:24:29 [Speaker 2]
But as you look at the transition from summer driving season, the, the end of this, that comes in, you know, late August and September where agricultural diesel demand, for example, is is is pretty high.
00:24:46 [Speaker 2]
You know, with with the tight inventory situation, the, waterborne arb opportunities that are certainly going to open up, particularly I think.
00:24:57 [Speaker 2]
What does that mean for the build you need to be about in low low sulfur distillate that is ultimately going to be heating oil for Northeast?

00:25:09 [Speaker 1]
The you know, my whole thing with Australia is kinda the same thing as West Texas.
00:25:16 [Speaker 1]
I mean, I know people out there think it's beautiful and all, but talk about just a lot of land in the middle of nowhere with nobody around, and you could build as many refineries as you want.
00:25:28 [Speaker 1]
That's Australia.
00:25:30 [Speaker 1]
I mean, I've been to the Northern Territory.
00:25:32 [Speaker 1]
People there are great.

00:25:33 [Speaker 1]
I love Darwin.
00:25:35 [Speaker 1]
Darwin has very much a Midland vibe, good people, all that.
00:25:39 [Speaker 1]
But, you know, we could bulldoze and just build as many refineries there as we want, and they could be exporters of all this.
00:25:50 [Speaker 1]
They were actually the closest, allied port to Japan during the war, and they could play that role again today with diesel.

00:26:02 [Speaker 4]
Look, Chuck, I'm I appreciate I I want Australia's great surf.
00:26:08 [Speaker 4]
I actually worked for BHP, the big one of the big Australian mining companies, And I can tell you that them going from eight to two refineries says a lot about sort of the mindset of that country.
00:26:25 [Speaker 4]
You know, Australia is one of the largest has one of the largest, sources of uranium.
00:26:35 [Speaker 4]
But inside of BHP, when I was like, man, think about what we could do with that uranium, it was a nontopic.
00:26:42 [Speaker 4]
Like, it's a no go.

00:26:43 [Speaker 4]
Like, no one wants to talk about nuclear.
00:26:47 [Speaker 4]
It's scary, but a lot of their thought process and decision making makes absolutely no sense.
00:26:54 [Speaker 4]
So I would love the concept, never get passed by the people.
00:26:58 [Speaker 4]
And coming from a nation filled with, you know, thieves and prisoners, I you would think that they would be the most innovative.
00:27:05 [Speaker 4]
But in in many cases, they almost are going the German the German path, which is shoot themselves in the foot, no to nukes, no to, you know, precious resources they already have in the ground, which is a very large source of coal.

00:27:21 [Speaker 4]
I know a lot of it's lignite, but but it's effective and dense.
00:27:26 [Speaker 4]
I just don't see them turning it around.

00:27:29 [Speaker 1]
They are one of the only places on the planet ever to reverse a frack ban.
00:27:35 [Speaker 1]
So we, we do have to give credit where credit's due.
00:27:38 [Speaker 1]
The Northern Territory.

00:27:42 [Speaker 2]
I think that.

00:27:43 [Speaker 1]
Beetaloo, baby.
00:27:44 [Speaker 1]
Come on, Brian Sheffield.
00:27:46 [Speaker 1]
But, yeah, at the, at the end of the day, you're right.
00:27:50 [Speaker 1]
I mean, it's just stunning for a penal colony to really think like that.
00:27:54 [Speaker 1]
I mean, go back to COVID, and they were locking people in houses.

00:28:00 [Speaker 4]
Oh, yeah.
00:28:01 [Speaker 4]
I was Yeah.
00:28:02 [Speaker 4]
I was not yeah.
00:28:03 [Speaker 4]
I got I I ran into some of that because I was supposed to go down there for some meetings, and it was just a no one can travel here.
00:28:12 [Speaker 4]
I mean, we're just and I really wanted to go.

00:28:15 [Speaker 4]
So I wanted to hit some, you know, tasty waves and a cool buzz, but it just didn't work out.

00:28:21 [Speaker 2]
And if we think this and if we think this, refined product crunch and the associated arb, the waterborne arb is going to be different this time, unless there's things like export bans.
00:28:38 [Speaker 2]
We we had a fairly recent, precedent that gives a bit of a playbook.
00:28:43 [Speaker 2]
If you remember back in the I think it was winter of twenty one, twenty two, winter of the European winter crisis went down.
00:28:52 [Speaker 2]
If you recall, there were countries in the global South like Pakistan that were repeatedly getting, I think it's called no bid, on spot card because of LNG because labs in Europe were buying everything that was on the water that was unaccounted for or unspoken for.
00:29:13 [Speaker 2]
And and so I think we're going to see the same thing for Western countries who are short opening up, you know, a bidding war in the form of the the waterborne arbitrage.

00:29:28 [Speaker 2]
And, you know, there are pretty heavily diesel dependent countries in the in the global south, you know, do we see a repeat of what happened with natural gas and LNG?

00:29:37 [Speaker 1]
Yeah.
00:29:37 [Speaker 1]
Totally.
00:29:38 [Speaker 1]
Hey.
00:29:39 [Speaker 1]
Let's do this.
00:29:40 [Speaker 1]
I had old man coffee this morning, which means I drank too much coffee and I've had two Coke zeros just so I can keep up with you two superstars.

00:29:49 [Speaker 1]
Why don't y'all jump to Philip 66 and marathon, and I'm gonna go run to the bathroom.

00:29:55 [Speaker 2]
Let's do that.
00:30:00 [Speaker 2]
So, this is a bit of a segment tease for the special I'm doing with Sean Maher tomorrow, who is the, vice president of investor relations and chief economist at one of the most significant, refining and midstream and basically physical logistics players on the planet.
00:30:23 [Speaker 2]
I had the pleasure of having Sean on, various times as cohost.
00:30:29 [Speaker 2]
I know he's done some of our 10:00 central, and it'll be a a option of BDE.
00:30:42 [Speaker 2]
We're gonna drill into some of these things.

00:30:44 [Speaker 2]
But Phillips sixty six is interesting here, Kirk, when you look at, you know, what's been in the chatter about merger talks.
00:30:53 [Speaker 2]
We know Elliott has been pretty aggressive with sixty six and wanting to, and to spin out the midstream.
00:31:03 [Speaker 2]
Philip sixty six I think has been very consistent and very vocal, with respect to the the, the benefits of more integration than, you know, I think when you look at them with the refining peers, you look at what's happened with Victor and the stock performance year to date.
00:31:25 [Speaker 2]
There's obviously more pure play leverage, just in terms of diesel and and what's going on in Valero.
00:31:33 [Speaker 2]
And then when you look at the midstream peers, it's certainly not as pronounced of the case.

00:31:38 [Speaker 2]
But it seems here they've got a massive buyback that they've announced.
00:31:47 [Speaker 2]
And, you know, think having the the the, control and the data points all along the physical supply and value chain has been, you know, really beneficial in terms of providing outlook inside as to what this unprecedented event is all all about and really giving you know, dropping some good knowledge about what what act actually is going to happen and what has to happen to work out of all of these, you know, supply, transportation, and delivery points in the chain.
00:32:30 [Speaker 2]
And so I think Phillips sixty six, and particularly Sean, is well positioned to talk about that.
00:32:36 [Speaker 2]
So that's that's a little, unabashed Pro Memoirs BDU special.

00:32:42 [Speaker 4]
Well, here's what I know is that Elliot didn't invest $2,500,000,000 into streamlining Phillips sixty six to make friends.
00:32:53 [Speaker 4]
And they have gone quiet, but activists that go quiet just just means something that the issue is not resolved and they're waiting.
00:33:02 [Speaker 4]
So and one of the things, which is a great opportunity, Mark, tomorrow, and I'm very curious, is filled '66 is printing money because the diesel crack spread is a $102.
00:33:15 [Speaker 4]
Like, how can they not make money?
00:33:18 [Speaker 4]
The question that I want to pass on to you is whether management treats this as structural or cyclical.

00:33:27 [Speaker 4]
And the $10,000,000,000 buyback tells you which camp they're in, in my opinion.
00:33:32 [Speaker 4]
But I think they're wrong, and here's why.
00:33:34 [Speaker 4]
The $102 number will come down.
00:33:37 [Speaker 4]
Hormuz normalizes.
00:33:39 [Speaker 4]
Russian exports resume.

00:33:41 [Speaker 4]
The number compresses, but it compresses to 40 or $50, which going back to Chuck's point from earlier, not back to 15.
00:33:50 [Speaker 4]
So but here are the conditions that produced a $102 crack spread, and I say they're structural.
00:34:00 [Speaker 4]
So let's let me just go through some of my my feedback here.
00:34:04 [Speaker 4]
The last greenfield refinery permitted in The US was in the late seventies.
00:34:10 [Speaker 4]
A new one takes four years and $15,000,000,000.

00:34:13 [Speaker 4]
Name the CEO who pitches that to a board after a decade in the penalty box for overspending.
00:34:21 [Speaker 4]
Nobody.
00:34:23 [Speaker 4]
Number two, global refining capacity is down 5,000,000 barrels a day.
00:34:27 [Speaker 4]
The refineries that closed during COVID are are not reopening.
00:34:32 [Speaker 4]
The Russian refineries that Ukrainian drones hit are not back online next quarter, and the regulatory environment guarantees no new builds.

00:34:42 [Speaker 4]
And BP just left an entire country over a 78% tax rate.
00:34:47 [Speaker 4]
Nobody's permitting a refinery anywhere a congressman lives.
00:34:53 [Speaker 4]
So going back to Chuck's point, again, Chuck, you're onto something.
00:34:58 [Speaker 4]
Finally, meanwhile, diesel demand is not declining.
00:35:03 [Speaker 4]
Trucks run on diesel.

00:35:05 [Speaker 4]
Farms run on diesel.
00:35:07 [Speaker 4]
Construction runs on diesel.
00:35:09 [Speaker 4]
Data center backup generators run on diesel.
00:35:13 [Speaker 4]
The US military runs on diesel.
00:35:16 [Speaker 4]
Demand's growing.

00:35:18 [Speaker 4]
Capacity's shrinking, no new builds, no permits.
00:35:21 [Speaker 4]
That's not a cycle.
00:35:23 [Speaker 4]
That's a structural deficit.

00:35:25 [Speaker 2]
You you you left out the, the massive fuel consumption of global mining equipment for all of the, Green Revolution components, namely batteries and other things.
00:35:39 [Speaker 2]
As Mark Mills said back in '21, every energy consuming and producing machine that's ever been built started by digging something out of the ground.
00:35:52 [Speaker 2]
And I think that's no more true today or it's it's more true today if if, you know, we're going to go off on different kind of transportation technologies.
00:36:03 [Speaker 2]
You're gonna be using a lot of diesel to get that done along with just the base load economy and and, you know, standard of living and subsistence things you need to do in the form of agriculture and, you know, getting 15 Amazon deliveries, work with from a distribution, center, a diesel burning 18 wheeler.

00:36:26 [Speaker 4]
Alright.
00:36:27 [Speaker 4]
Well, you you Alright.
00:36:28 [Speaker 4]
So set up for tomorrow.

00:36:30 [Speaker 1]
So I'm I'm I I I am back from the bathroom.
00:36:33 [Speaker 1]
Sorry about that.
00:36:34 [Speaker 1]
The one joke I had in here, which is why I could run to the bathroom and let you two geniuses, talk about this.
00:36:42 [Speaker 1]
And I say this with love to my dear friend, Sean.
00:36:45 [Speaker 1]
Asking IR whether the merger's dead, dead, or just pause is like asking your ex if we're just on a break.

00:36:54 [Speaker 1]
Sean, blink twice.

00:36:59 [Speaker 2]
There'll be no stock discussion, no forward looking statements.
00:37:02 [Speaker 2]
This is all macro industry.
00:37:05 [Speaker 2]
And we can talk about the quarter.
00:37:07 [Speaker 2]
Back to your point, Kirk, about Elliott, they're on a pretty significant winning streak.
00:37:13 [Speaker 2]
They don't lose very often.

00:37:15 [Speaker 2]
You look at Southwest Airlines, you look at BP, our friends, you know, finally got them at least back to kinda sanity with the, with the brilliant strategic and and functional structure of upstream and downstream.
00:37:33 [Speaker 2]
And so, you know, it's interesting.
00:37:36 [Speaker 2]
The the Phillips midstream spin off, I believe, has been labeled Streamline 66.
00:37:43 [Speaker 2]
So Right.
00:37:45 [Speaker 2]
You know, stay tuned.

00:37:47 [Speaker 2]
I I think you're I think you're right.
00:37:50 [Speaker 2]
The quote, unquote Elliott done this before as good activists have.
00:37:55 [Speaker 2]
So, you know, I I don't have a dog in the hunt, and, I I I just think there's more to come on that front.

00:38:06 [Speaker 1]
Yeah.
00:38:06 [Speaker 1]
Shout shout out to Birch Resources if the rumors are I guess that deal got announced, didn't it, with Crescent.
00:38:14 [Speaker 1]
So, another Elliott win there and a big Elliott win there.
00:38:19 [Speaker 1]
So go Birch.
00:38:23 [Speaker 1]
Alright.

00:38:24 [Speaker 1]
AI flaring.
00:38:26 [Speaker 1]
Mark, you wanna take that?

00:38:30 [Speaker 2]
Yeah.
00:38:30 [Speaker 2]
This is a this is a fun one.
00:38:31 [Speaker 2]
This this is a Kirk segment.
00:38:34 [Speaker 2]
I think Saturday.
00:38:35 [Speaker 2]
Right, Kirk?

00:38:37 [Speaker 2]
You posted That's right.
00:38:39 [Speaker 2]
About, about token waste and and the associated waste of your in using all the things that you set that up for us a little bit.
00:38:54 [Speaker 2]
And I I guess what was your

00:38:58 [Speaker 4]
I mean, so, you know, I'm active and, I have a software platform.
00:39:03 [Speaker 4]
I have a bunch of users on it that and I have AI tools, but I also code using a lot of the AI tools.
00:39:11 [Speaker 4]
I use Claude.
00:39:12 [Speaker 4]
I use there's the you know, Cursor is my main platform to to develop in, You know, the, SpaceX just just bought them.
00:39:25 [Speaker 4]
But what I found is all the AI bots, they drift, and they get off track.

00:39:33 [Speaker 4]
And you can create these rules and structures to try to keep them sort of governed, but they but they keep they automatically always seem to drift, and you have to be very cognizant about them not.
00:39:47 [Speaker 4]
And this has been a growing issue.
00:39:50 [Speaker 4]
I called it or, actually, Mark, you called it AI flaring.
00:39:55 [Speaker 4]
So you were brilliant in reading about this.
00:39:58 [Speaker 4]
But this has become a big issue.

00:40:00 [Speaker 4]
Like, Microsoft internally has warned its engineers against token maxing.
00:40:06 [Speaker 4]
And and so they're telling their people, like, stop doing that because Silicon Valley has been rewarded for for for token burned.
00:40:15 [Speaker 4]
But what that means in a lot of ways and what I have learned, because I've been measuring how accurate my bots are running, is that they're burning a lot of cash of my tokens on drift.
00:40:30 [Speaker 4]
And so and what Drift means is you basically give it a command, and it doesn't do what you ask it to.
00:40:36 [Speaker 4]
It it goes off on tangent, which is burning tokens, which means it's basically just gouging me for more money.

00:40:43 [Speaker 4]
And that's happening all over the map.
00:40:45 [Speaker 4]
I mean, I was telling you about that gas trader where they use a lot of AI to run models.
00:40:50 [Speaker 4]
Same thing.
00:40:51 [Speaker 4]
There's a lot this is happening.
00:40:52 [Speaker 4]
Silicon Valley is just basically gouging everyone using AI models to maximize the revenue.

00:41:01 [Speaker 1]
Yeah.
00:41:01 [Speaker 1]
I'm a talk out of both sides of my mouth here real quick because on one hand, you know, the the token burning is because we went through the evolution of every company saying, oh my god.
00:41:16 [Speaker 1]
You can't use AI.
00:41:18 [Speaker 1]
And then everybody said, well, maybe we shouldn't do that.
00:41:22 [Speaker 1]
And they said, let's do our Copilot experiment.

00:41:25 [Speaker 1]
Let's do our chat GPT experiment, our cloud experiment.
00:41:29 [Speaker 1]
And they said, great.
00:41:31 [Speaker 1]
Start using it.
00:41:32 [Speaker 1]
And then they said, oh my god.
00:41:33 [Speaker 1]
You can't code.

00:41:34 [Speaker 1]
And then they went, yes.
00:41:35 [Speaker 1]
You can.
00:41:36 [Speaker 1]
So they allowed people to to code and then to create user adoption, which is very, very important.
00:41:43 [Speaker 1]
I mean, changing user user behavior is the big deal here.
00:41:48 [Speaker 1]
They put, you know, minimum amount of tokens you had to burn, and then they all see the token bills come out, and now it's like, oh, shit.

00:41:58 [Speaker 1]
We've gotta rein this back in.
00:42:01 [Speaker 1]
That being said, I actually think changing, user behavior, leading to user adoption is really important.
00:42:10 [Speaker 1]
So I would invest money in that today.
00:42:12 [Speaker 1]
So I'm okay if my people are burning burning some tokens.
00:42:16 [Speaker 1]
The second thing I'll say is I actually think this is really good signal.

00:42:21 [Speaker 1]
If you're an oil and gas company and you've got five people that come up with a frac interference program that they wanna run, the different, you know, geographic groups are doing things, That's probably where you should spend some time, energy, and effort because that's an important element since five people chose to, to build stuff.
00:42:44 [Speaker 1]
So I I'm still on the, the side of spending some money, but at the end of the day, I guess I've always been a an explorationist at heart.
00:42:53 [Speaker 1]
So

00:42:54 [Speaker 4]
Well, here's what Mark said.
00:42:56 [Speaker 4]
Mark, you said it called it AI flaring, and I want us and you to take credit for that because it's the right analogy.
00:43:05 [Speaker 4]
And it's not just a clever phrase.
00:43:08 [Speaker 4]
Flared gas is a resource you already paid to produce, then burned off because you had no no one to take away the capacity or no economic incentive to capture it.
00:43:21 [Speaker 4]
And so the Permian flare is anywhere between four hundred and eight hundred million cubic feet per day.

00:43:28 [Speaker 4]
And we spent years on this, and the regulatory and investor scrutiny eventually did catch up to it, and flaring intensity is a real metric.
00:43:37 [Speaker 4]
I think token burn

00:43:40 [Speaker 2]
It's a value it's a it's a value product.
00:43:42 [Speaker 2]
You know, routine flaring and, you know, to the credit of the Permian operators, routine flaring or that that flare volume of, call it, six to eight hundred million a day is down by a lot.

00:43:56 [Speaker 4]
And It's

00:43:57 [Speaker 2]
a value product it's a value product for the royalty owner too.

00:44:01 [Speaker 4]
Absolutely.
00:44:02 [Speaker 4]
And the the math the math here is an energy story, but token burn is identical shape.
00:44:08 [Speaker 4]
It's it's compute you already paid for, spent with no output, and and it's actually I've got Microsoft's own EVP sent an email telling engineers to stop.
00:44:20 [Speaker 4]
Uber's COO said publicly it is getting harder to justify the spend.
00:44:25 [Speaker 4]
So CEOs that are bragging about tokens consumed are eventually gonna be held to be accountable.

00:44:32 [Speaker 4]
And what's interesting is every token burn requires electricity.
00:44:37 [Speaker 4]
Every megawatt of electricity in most of America requires natural gas.
00:44:41 [Speaker 4]
So every molecule of a natural gas in the Permian is either piped to the market, flared, or consumed behind the meter by a data center.
00:44:50 [Speaker 4]
When Microsoft tells its engineers to stop burning tokens, Microsoft's telling engineers to stop burning gas.
00:44:58 [Speaker 4]
So here's my I have a prediction here.

00:45:01 [Speaker 4]
I want it on record because within a couple of quarters, I bet they're gonna start tracking tokens to outcome or some version of that ratio.

00:45:12 [Speaker 1]
I will add to this, though.
00:45:14 [Speaker 1]
Token maxing is not what we are optimizing for.
00:45:18 [Speaker 1]
Might be the most Microsoft sentence ever written.
00:45:22 [Speaker 1]
You know?
00:45:22 [Speaker 1]
So true.

00:45:24 [Speaker 2]
Well, well, Kirk, the kind of the the chain that started your rant, you know, I I thought about it in terms of the drift electron.
00:45:34 [Speaker 2]
Well, the drift electron works all the way back to the to the generator, and we're talking about gas fired generation.
00:45:42 [Speaker 2]
So you are flaring the molecule physically at the generator, but you're burning it and wasting it as a drift electron.

00:45:55 [Speaker 4]
Yeah.
00:45:55 [Speaker 4]
Brilliant.
00:45:56 [Speaker 4]
Absolutely.

00:45:57 [Speaker 1]
Okay.
00:45:58 [Speaker 1]
So the one joke I wrote for this little bit so we can, get on and move.
00:46:03 [Speaker 1]
If your KPI is how much compute you set on fire, You haven't built an AI strategy.
00:46:10 [Speaker 1]
You've reinvented the nineteen eighties Austin Chalk.

00:46:15 [Speaker 4]
You put it Shut up.
00:46:17 [Speaker 4]
Hey, Doug.
00:46:18 [Speaker 4]
Great question from Joseph Batere on Clyde.
00:46:22 [Speaker 4]
Drift is well known, but Drift compared to token usage is an important piece.
00:46:27 [Speaker 4]
How can you pull in the drift?

00:46:29 [Speaker 4]
Is this a user error problem, model still evolving, or something else?
00:46:35 [Speaker 4]
Is there a way to stop the AI flares?
00:46:38 [Speaker 4]
Joseph, great question.
00:46:42 [Speaker 4]
Use Collide.

00:46:45 [Speaker 1]
I walked right into that.
00:46:46 [Speaker 1]
I'm gonna take that soft pitch when I get it.

00:46:49 [Speaker 4]
Shameless plug.
00:46:50 [Speaker 4]
You know, I

00:46:51 [Speaker 1]
Shameless plug.

00:46:52 [Speaker 4]
I'll give you a good example.
00:46:54 [Speaker 4]
GrokBot just launched, on Cursor over the weekend, and I started, testing it.
00:47:01 [Speaker 4]
And GrokBot basically is their own machines, their own little bots that can look at your code, look at sort of what you're doing, and try to maximize it and run all night to make your code better or if you're building something new, make it better.
00:47:20 [Speaker 4]
And what I turned what I realized is it turned I had a few agent bots running.
00:47:28 [Speaker 4]
It opened 18 other bots.

00:47:30 [Speaker 4]
So I had 20 bots running, and it all seemed like, wow.
00:47:35 [Speaker 4]
This is actually really efficient, and it's gonna be real interesting.
00:47:39 [Speaker 4]
What I ended up realizing was it started burning tokens like it was going out of style, and I had to cut it off Because did it drift?
00:47:51 [Speaker 4]
Did I give it the right instruction not to drift?
00:47:54 [Speaker 4]
Number one is I don't think the models are are are powerful enough or written.

00:47:59 [Speaker 4]
They're written by people, and they're written by people that actually are not super intelligent, by the way, but they don't have their own governors.
00:48:08 [Speaker 4]
And so they're not self regulating, so you have to keep it regulated.
00:48:13 [Speaker 4]
But even if you have it regulated, it still decides to go off on its own tangents.
00:48:20 [Speaker 4]
I'm kinda mad at Grok because I think they did it on purpose.
00:48:24 [Speaker 4]
Like, they've launched these bots running ad nauseam to burn tokens.

00:48:30 [Speaker 4]
I think right now it's a ploy to make money.
00:48:33 [Speaker 4]
I don't I think they have the capabilities to create rules that will stop the drift, but they're deciding that they don't want to.

00:48:44 [Speaker 2]
What do you say?

00:48:45 [Speaker 1]
We all were in junior.
00:48:47 [Speaker 1]
We were all in high school, and the drug dealer gave you the drugs for free to get you hooked.
00:48:52 [Speaker 1]
So

00:48:55 [Speaker 4]
And that might be the strategy.
00:48:56 [Speaker 4]
That's a good point, Chuck.

00:48:58 [Speaker 2]
The let let let's put a vote on this with a couple of our light do that.
00:49:05 [Speaker 2]
It's kinda the two cities.
00:49:07 [Speaker 2]
So you have two eight two eight build 7.6 gigs right next door.
00:49:26 [Speaker 2]
And so there's a, there's rumors of no confirmed deal yet.
00:49:33 [Speaker 2]
It was surf Freedom of Information Act emails, re reported by to anchor anchor a data center at at the old acres up to four to 4.5 gigawatts of gas fired, a $10,000,000,000 build out with EQT exclusive gas supplier.

00:49:55 [Speaker 2]
So things are moving in Pennsylvania faster than their own permit, that line.
00:50:01 [Speaker 2]
And so AWS in bulldozer mode and, you know, putting up multi gig gigs.
00:50:12 [Speaker 2]
One one other there's, you know, still kinda been batch queues and other types of, audits, which we'll talk about here in a minute, related the latest going on in ERCOT.
00:50:25 [Speaker 2]
So what say you guys is about, this apparent mega gift facility that, Amazon likely wants pretty closely on the heels of GW Ranch?

00:50:39 [Speaker 1]
Turn turns out energy transition transitions to whatever the data center wants.
00:50:45 [Speaker 1]
Right?
00:50:46 [Speaker 1]
I mean, wasn't this supposed to be the, the, the the transition to solar and wind, and let's shut down this, nasty coal thing.
00:50:59 [Speaker 1]
So, interesting.

00:51:01 [Speaker 4]
Well, Amazon just did the Permian playbook on the East Coast.
00:51:06 [Speaker 4]
So same model, old industrial site, dedicated gas supplier, multi gigawatt behind the meter, except this time, it's a coal plant, not a ranch, and EQT, not Permian associated gas.
00:51:22 [Speaker 4]
So if this closes, Amazon will operate private utilities on two coasts.
00:51:28 [Speaker 4]
So this is not a tech company, if you will.
00:51:31 [Speaker 4]
That's a power company that happens to run servers, and it's something that I talked about this was, I mean, almost eight or nine years ago when Amazon was trying to hire a whole team on the power side.

00:51:46 [Speaker 4]
So sounds like, they've gotten really smart really quickly.

00:51:52 [Speaker 1]
And I'm gonna go ahead and take I'm gonna go ahead and take credit with this, and I don't think I'm betraying any great secret.
00:51:59 [Speaker 1]
But, about three, three and a half years ago, I did send Toby, Rice a text message and said, hey, man.
00:52:08 [Speaker 1]
When's the last time you went to Silicon Valley and, stopped selling natural gas and started trying to sell them electrons?
00:52:16 [Speaker 1]
So I'm taking full credit for that.

00:52:18 [Speaker 2]
And if you I mean, most

00:52:19 [Speaker 4]
of the big news stories in energy have come out of BDE.
00:52:24 [Speaker 4]
So let's just call it back.

00:52:27 [Speaker 2]
This is an interesting kinda second bite at the apple by Amazon.
00:52:33 [Speaker 2]
If you remember, I think it was two years ago, they got entangled in a, some type of FERC appeal on their plans to build a site next to I think it was Susquehanna nuclear or Susquehanna power.
00:52:52 [Speaker 2]
But lot of uncertainty and pushback over, you know, this is going to essentially disadvantage, the residential and business consumers who rely on on the grid power in that area.
00:53:05 [Speaker 2]
So now they're coming back to Pennsylvania, and they're building an island.
00:53:09 [Speaker 2]
And so if you didn't didn't recognize it from the last two weeks, this is a kind of a quick hit sermon from the pastor of BTM.

00:53:20 [Speaker 1]
Nice.
00:53:22 [Speaker 1]
Alright.
00:53:22 [Speaker 1]
So the, the one last joke I wrote just to, to get out of this is the coal plant died.
00:53:29 [Speaker 1]
It's coming back as four and a half gigawatts of a gas plant.
00:53:32 [Speaker 1]
That's not energy transition.

00:53:35 [Speaker 1]
That's the witness protection program.

00:53:40 [Speaker 4]
Thank you.
00:53:41 [Speaker 4]
Thank you.

00:53:42 [Speaker 2]
That That was

00:53:42 [Speaker 4]
the best one yet, John.

00:53:44 [Speaker 2]
That that was the alpha.
00:53:45 [Speaker 2]
We'll close out with the omega ERCOT.
00:53:48 [Speaker 2]
Now has date certain on when the audit will be wrapped up, and that is in December.
00:53:57 [Speaker 2]
They're gonna start sending requests for information to the bat bureau qualified, sponsors starting late August and September, And that came from Utility Dive.
00:54:10 [Speaker 2]
They wanna they wanna fast track a, I think what's a big hairy audit as laid out in in Abbott's executive order.

00:54:19 [Speaker 2]
And I might take the over on on December, but, you know, the longer this thing is paused, the faster or or the more states like Pennsylvania widen the gap on, on Texas and ERCOT.

00:54:35 [Speaker 4]
I mean, 474 gigawatts in the queue, five time Texas peak demand, 90% of its data centers.
00:54:45 [Speaker 4]
And ERCOT says it'll audit it, all 300 projects, by December 10.
00:54:51 [Speaker 4]
I mean, you're talking about a a quasi government entity.
00:54:54 [Speaker 4]
These guys are going to barbecue.
00:54:56 [Speaker 4]
What is it?

00:54:57 [Speaker 4]
What's the barbecue place in Taylor?

00:55:00 [Speaker 1]
Louie Miller's.
00:55:01 [Speaker 1]
Louie Miller's.

00:55:02 [Speaker 4]
Louie Miller's.
00:55:03 [Speaker 4]
They're not do they're not doing one project a day.
00:55:06 [Speaker 4]
Impossible.
00:55:07 [Speaker 4]
Impossible.
00:55:08 [Speaker 4]
This is not

00:55:09 [Speaker 2]
And and I and I think I'm sure that November 5 comes before December.

00:55:16 [Speaker 1]
Well, I would I would actually take the other side.
00:55:19 [Speaker 1]
I I think they can do this because, I've seen me after a bottle of wine on Tinder some nights.
00:55:25 [Speaker 1]
And so, you know, swiping through 300, you can do that.

00:55:31 [Speaker 2]
So what what's the, what's the the term of of the, clog cutters?
00:55:37 [Speaker 2]
And you've seen it, chocolate collide.
00:55:40 [Speaker 2]
Just they become vampires because they sleep.

00:55:45 [Speaker 4]
Oh, yeah.
00:55:46 [Speaker 4]
Yeah.
00:55:47 [Speaker 4]
Oh, yeah.
00:55:48 [Speaker 4]
There is a term for that.
00:55:49 [Speaker 4]
So that's where someone in the audience.

00:55:51 [Speaker 2]
That's what ERCOT's project reviewers are facing here over the next, I don't know, two and a

00:55:57 [Speaker 4]
half, three months.

00:55:59 [Speaker 1]
Exactly.
00:56:00 [Speaker 1]
Exactly.

00:56:00 [Speaker 4]
One, listener, Mark, said that you need to get Starlink so that your Internet connection stops freezing.

00:56:09 [Speaker 2]
Well, there's a story here.
00:56:12 [Speaker 2]
I'm moving into a new house as we speak.
00:56:15 [Speaker 2]
I have my AT and T self install kit for for a gig speed, And in classic AT and T fashion, I'm in this infinite circular do loop trying to register under an existing AT and T account, which I've had since the days of Singular Wireless, if you guys remember that.
00:56:39 [Speaker 2]
And it doesn't recognize either of the two.
00:56:43 [Speaker 2]
So I'm on my hotspot.

00:56:45 [Speaker 2]
GT.
00:56:47 [Speaker 2]
It's on it's on my hotspot.

00:56:51 [Speaker 4]
Well, it sucks.
00:56:52 [Speaker 4]
Get get Starlink if you don't have to have that issue anymore.

00:56:55 [Speaker 1]
Yep.
00:56:55 [Speaker 1]
Yeah.
00:56:56 [Speaker 1]
We can get you Starlink.
00:56:58 [Speaker 1]
Alright.
00:56:59 [Speaker 1]
The, the only other joke I wrote about ERCOT was talking about, you know, 474 gigawatts in the queue against an 85 gig peak.

00:57:08 [Speaker 1]
That's not an interconnect queue.
00:57:09 [Speaker 1]
That's my fantasy football league.

00:57:14 [Speaker 2]
That's a good under.

00:57:16 [Speaker 4]
You win.
00:57:17 [Speaker 4]
You win.

00:57:18 [Speaker 1]
Thank you.
00:57:19 [Speaker 1]
The, you know, you sent me we're on a show the night before.
00:57:22 [Speaker 1]
I can get going, particularly when I'm on the on the plane and have a couple of, cocktails.
00:57:27 [Speaker 1]
One one last close I wanna do because this was, this was great.
00:57:31 [Speaker 1]
So, my dear friends up in Telluride, Christopher and Seth.

00:57:36 [Speaker 1]
Seth called, last Monday and said, dude, you gotta get to Telluride.
00:57:42 [Speaker 1]
Chris is emceeing the local theaters troop burlesque show.
00:57:48 [Speaker 1]
And I was like, okay.
00:57:50 [Speaker 1]
And he goes, I wanna surprise Christopher that you're coming up.
00:57:53 [Speaker 1]
So, anyway, I show up to this saying, here are the two quotes from that night that were just great.

00:58:00 [Speaker 1]
I I told Seth, I said, hey.
00:58:02 [Speaker 1]
For the record, when your husband was wearing a blonde wig on stage singing Lady Gaga, I did not have a boner.
00:58:12 [Speaker 1]
And Seth said, I'm doubting that.
00:58:15 [Speaker 1]
Fair enough.
00:58:16 [Speaker 1]
The second thing is my friend Annette has two kids.

00:58:21 [Speaker 1]
Danica is maybe, like, 24 and Colton, who's 21 or 22.
00:58:26 [Speaker 1]
After the show, I'm like, hey, Colton.
00:58:27 [Speaker 1]
How you doing?
00:58:28 [Speaker 1]
He goes, dude, I just sat through a drag show with my mother, my sister, and my godfather.
00:58:35 [Speaker 1]
Will you please buy me a drink?

00:58:37 [Speaker 1]
So I bought him a double.
00:58:39 [Speaker 1]
And that was my weekend.

00:58:43 [Speaker 2]
Alright.
00:58:43 [Speaker 2]
I'm gonna

00:58:44 [Speaker 4]
Alright.
00:58:44 [Speaker 4]
Bravo, Chuck.

00:58:45 [Speaker 2]
I I I'm gonna call an audible here.
00:58:47 [Speaker 2]
I don't think we closed out with a, you know, we we should we should miss this tribute in Enmorium, A legendary Richmondite or Richmonder which is it, Chuck?

00:59:02 [Speaker 1]
That's a good question.
00:59:03 [Speaker 1]
I think it's a Richmondite, but

00:59:07 [Speaker 2]
You're you're you're the man.

00:59:08 [Speaker 1]
Ask Vlad.
00:59:09 [Speaker 1]
We'll ask Vlad.

00:59:12 [Speaker 2]
The legendary drummer of that little old band from Texas, Frank Beard, passed away last week.
00:59:18 [Speaker 2]
So Yeah.
00:59:19 [Speaker 2]
Rest in peace.
00:59:20 [Speaker 2]
There's one left, And, you know, Billy keeps trucking us.
00:59:24 [Speaker 2]
So they did a I think they did a show last night with a new drummer.

00:59:28 [Speaker 1]
Yeah.
00:59:29 [Speaker 1]
Yeah.
00:59:30 [Speaker 1]
No.
00:59:30 [Speaker 1]
Frank Beard Frank Beard's mother was actually the long term, secretary at the music school of Rice University.
00:59:37 [Speaker 1]
And so we'd see Frank periodically on campus.

00:59:41 [Speaker 1]
He'd come down to the Willie's Pub, the bar on campus, and he'd buy all the kids drinks and hang out and take questions.
00:59:50 [Speaker 1]
And so, yes, definitely a rest in peace, Frank.
00:59:56 [Speaker 1]
Alright, everybody.
00:59:57 [Speaker 1]
We enjoyed this.

00:59:59 [Speaker 4]
Last comment from the, from the peanut gallery is is someone said, Chuck, you need to download Grindr.
01:00:07 [Speaker 4]
That's your app.

01:00:11 [Speaker 2]
Lovely.
01:00:12 [Speaker 2]
Lovely.

01:00:12 [Speaker 5]
Let me do some housekeeping.
01:00:14 [Speaker 5]
Yeah.

01:00:14 [Speaker 2]
And First off And and don't let Mort be your wing wingman.

01:00:20 [Speaker 5]
First off, I went to, Richmond, Virginia, and there you can see, the the, denim is Richmonder.

01:00:28 [Speaker 1]
Well, that means we would not do it because, we're Richmond, Texas, but go ahead.
01:00:34 [Speaker 1]
So, you know, Richmond, Durham maybe.
01:00:36 [Speaker 1]
Second off, we mentioned this earlier.
01:00:38 [Speaker 1]
We got

01:00:38 [Speaker 5]
the community call tomorrow where, hopefully, Mark, isn't on hot spot Internet and, is able to have a great conversation in full quality.

01:00:49 [Speaker 2]
Yeah.
01:00:49 [Speaker 2]
It'll be it'll it'll be a great time.
01:00:52 [Speaker 2]
Sean and I have been friends for a very long time.
01:00:55 [Speaker 2]
We, we had the pleasure of of working side by side, when we were both on the buy side.
01:01:02 [Speaker 2]
He was the midstream MLP rock star, and I was the, the one trafficking in small and micro cap E and Ps.

01:01:11 [Speaker 1]
Exactly.
01:01:12 [Speaker 1]
Alright.
01:01:13 [Speaker 1]
And then hopefully, we're kicking these things off Tuesday at 10AM central going forward.
01:01:19 [Speaker 1]
We'll try to get into a more regular schedule.
01:01:21 [Speaker 1]
Yep.

01:01:22 [Speaker 5]
Tuesdays, 10AM.
01:01:24 [Speaker 5]
Upgrade's coming.
01:01:25 [Speaker 5]
Mark is gonna be flexing on all of us with his new Internet, his new laptop, his new cameras.
01:01:30 [Speaker 5]
We're gonna we're gonna beef him up, and then Kirk is next.
01:01:33 [Speaker 5]
Alright.

01:01:34 [Speaker 5]
Power my wind turbines.

01:01:36 [Speaker 4]
Hey, everybody.
01:01:37 [Speaker 4]
We're still live.

01:01:39 [Speaker 2]
Yeah.

01:01:39 [Speaker 1]
You know this.
01:01:39 [Speaker 1]
Right?
01:01:40 [Speaker 1]
Right.
01:01:40 [Speaker 1]
Yeah.
01:01:40 [Speaker 1]
Hey, everybody.

01:01:41 [Speaker 1]
Appreciate you joining us before we, talk more.
01:01:46 [Speaker 1]
Peace out.

01:01:47 [Speaker 2]
See you, boys.