Big Digital Energy

00:00:01 [Speaker 1]
Hey, everybody.
00:00:02 [Speaker 1]
Welcome to BDE live.
00:00:04 [Speaker 1]
And why is that?
00:00:05 [Speaker 1]
Because Vlad demanded it and whatever Vlad demands we give.

00:00:11 [Speaker 2]
V for Vlad.

00:00:12 [Speaker 1]
V for Vlad.

00:00:14 [Speaker 3]
I had no idea soon to be go for '20 seven, but Vlad is our number one.
00:00:18 [Speaker 3]
Our number one.

00:00:20 [Speaker 1]
There there yeah.
00:00:22 [Speaker 1]
I have no idea where Mark's going with all these hand signals.

00:00:26 [Speaker 2]
Just just kinda look.
00:00:28 [Speaker 2]
And g for gopher.

00:00:30 [Speaker 1]
Alright.
00:00:31 [Speaker 1]
Alright.
00:00:31 [Speaker 1]
I'm just saying.
00:00:32 [Speaker 1]
I'm just saying.
00:00:33 [Speaker 1]
Welcome back, boys.

00:00:36 [Speaker 1]
You know, at the risk of sounding like a broken record.
00:00:40 [Speaker 1]
And, Mark, you had the best idea.
00:00:42 [Speaker 1]
We we really should have a flock of seagulls.
00:00:45 [Speaker 1]
I ran.
00:00:47 [Speaker 1]
I ran so far away.

00:00:48 [Speaker 1]
Or do you remember the What?
00:00:50 [Speaker 1]
Name of the

00:00:51 [Speaker 2]
lead?
00:00:52 [Speaker 2]
Name of the lead singer?

00:00:54 [Speaker 1]
I can only see the haircut.
00:00:56 [Speaker 1]
I will not get his name.

00:00:58 [Speaker 3]
I saw them in Houston, like, three years ago at some crazy little place off of 59, and it was awesome.
00:01:08 [Speaker 3]
So but I don't know the name of the lead singer.

00:01:10 [Speaker 2]
Jacob, find that find that find find a photo of Flocka Seagull's lead singer name, m

00:01:20 [Speaker 1]
Score.
00:01:22 [Speaker 1]
M Score.

00:01:23 [Speaker 3]
All I know is

00:01:25 [Speaker 2]
used to get used to used to always kind of mix up flock of seagulls and the fix.

00:01:34 [Speaker 1]
So so do this.
00:01:36 [Speaker 1]
What was the other song they had?
00:01:39 [Speaker 1]
Obviously, Iran was the big hit, but, what was the other song?

00:01:43 [Speaker 3]
Dude, they have some great songs.
00:01:45 [Speaker 3]
I Wishin'

00:01:46 [Speaker 1]
I wishin' I had a photograph of you.
00:01:51 [Speaker 1]
So they always had two.

00:01:53 [Speaker 2]
I I I was I was going to another kind of, old pop culture thread from the wedding singer.
00:02:01 [Speaker 2]
If you remember when he's rushing to catch the plane to Vegas, the ticket agent had a flock of seagulls haircut.
00:02:11 [Speaker 2]
And the ticket agent asked, Adam Sandler's character Robbie, hey.
00:02:15 [Speaker 2]
Do you like, flock of seagulls?
00:02:17 [Speaker 2]
And he says, no.

00:02:18 [Speaker 2]
But I can see you do.

00:02:21 [Speaker 1]
Nice.
00:02:22 [Speaker 1]
Nice.

00:02:24 [Speaker 3]
Space age love song.
00:02:25 [Speaker 3]
Space

00:02:26 [Speaker 1]
age love song.

00:02:27 [Speaker 3]
Yeah.
00:02:28 [Speaker 3]
I mean, they had some hits.

00:02:30 [Speaker 1]
They had some hits.
00:02:31 [Speaker 1]
It was a good six months for, for flock of seagulls back in '83 or whenever that was.

00:02:38 [Speaker 2]
What what was their subgenre?
00:02:40 [Speaker 2]
Is that was that kind of, cleaner new wave?
00:02:43 [Speaker 2]
Or I

00:02:44 [Speaker 1]
think you'd go with new wave.

00:02:47 [Speaker 2]
B 50 twos

00:02:48 [Speaker 3]
For sure new wave.

00:02:50 [Speaker 2]
Such pistols, flock of seagulls, the fix.
00:02:54 [Speaker 2]
Yeah.

00:02:54 [Speaker 1]
It was that was really brought to us by OMD.
00:02:57 [Speaker 1]
So there we go.

00:02:59 [Speaker 3]
Wow.

00:03:00 [Speaker 1]
Yeah.
00:03:01 [Speaker 1]
Seen those guys seven times in concert.
00:03:03 [Speaker 1]
But, anyway, I'm sure Who

00:03:07 [Speaker 2]
who are your who are your mainline headline top top number of times seen seen live?

00:03:17 [Speaker 1]
Jack Ingram.
00:03:19 [Speaker 1]
I had a I had a run of seeing Jack a whole lot.
00:03:24 [Speaker 1]
Probably Nine Inch Nails, I saw a lot.
00:03:28 [Speaker 1]
Roger Krieger, I've seen a lot.
00:03:33 [Speaker 1]
Who else would rank in the, oh, obviously, Jewel, Thomas Rhett, and Lindsay l.

00:03:39 [Speaker 1]
Yep.
00:03:40 [Speaker 1]
So yeah.

00:03:42 [Speaker 2]
Yeah.
00:03:43 [Speaker 2]
Van Halen, eight times, four each, Hagar and DLR, Tom Petty and the Heartbreakers eight times.
00:03:52 [Speaker 2]
And then if we're if we're going if we're going, you know, kinda Texas music, Jerry Jeff at least 25.

00:04:00 [Speaker 1]
Yeah.
00:04:01 [Speaker 1]
The, so the the the Van Halen with me only saw him once with Sammy Hagar.
00:04:08 [Speaker 1]
I was always a Roth guy.
00:04:10 [Speaker 1]
They played monsters of rock at Rice Stadium, so I went and saw him with Hagar.
00:04:15 [Speaker 1]
I think I'd rather have Hagar as my next door neighbor, but, David Lee Roth fronting the band.

00:04:21 [Speaker 1]
So

00:04:23 [Speaker 3]
Let's not get into that one, man.
00:04:25 [Speaker 3]
That creates a whole ex media storm.

00:04:29 [Speaker 1]
Yeah.
00:04:30 [Speaker 1]
Exactly.
00:04:31 [Speaker 1]
Well, kick us off, Mark.
00:04:32 [Speaker 1]
Take us to Iran.

00:04:34 [Speaker 2]
Well, guess what yesterday was?
00:04:37 [Speaker 2]
Yesterday was the expiration of the June 17 MOU that was signed in Islamabad.
00:04:45 [Speaker 2]
That was an MOU to give sixty days to get to a deal.
00:04:51 [Speaker 2]
And we know what's happened since then, which is the no ceasefire either side agrees is in a is even still in effect, and both governments have disputed the premise.
00:05:07 [Speaker 2]
Aragatschi's line all week, there was never a ceasefire to extend.

00:05:11 [Speaker 2]
The MOU was, quote, unquote, the end of the war, full stop, and The US broke it when strikes resumed on July 8 through the twenty fourth.
00:05:20 [Speaker 2]
Trump rebutted, not looking to extend, and he's floated declaring Hormuz US territory.
00:05:27 [Speaker 2]
And this is the real kind of, lightning rod, which, you know, various comments coming out of Iran and the IRGC in particular is digging in and saying that Hormuz will never return to anything but exclusive and supreme Iran control.
00:05:50 [Speaker 2]
We're going to set the rules.
00:05:52 [Speaker 2]
And so Trump Trump kind of needling that with we're gonna declare it as a US territory, I think is really a good indication of where we are.

00:06:06 [Speaker 1]
So, basically, we're sitting there with the, the Strait Of Hormuz on a Zillow listing?
00:06:14 [Speaker 1]
Is that where we are?
00:06:16 [Speaker 1]
I

00:06:17 [Speaker 3]
mean, is I think the danger here I mean, we're the most powerful nation in the world right now, But I don't think we really want to open this can of worms.
00:06:31 [Speaker 3]
I don't think anyone does.
00:06:34 [Speaker 3]
I mean, just because by the way, we didn't build it.
00:06:37 [Speaker 3]
We didn't dig it.
00:06:39 [Speaker 3]
We have no claim to it.

00:06:41 [Speaker 3]
I mean, we've parked our boats in it.
00:06:44 [Speaker 3]
It's like claiming we own the highway because we have the biggest truck, and that's sort of like it's the Cybertruck mentality.
00:06:52 [Speaker 3]
I think it's dangerous.
00:06:54 [Speaker 3]
I don't like it.
00:06:56 [Speaker 3]
What do you guys think?

00:06:59 [Speaker 2]
Well, I I I think the data shows that, you know, we're kinda back to or close to June trough levels of Hormuz traffic.
00:07:11 [Speaker 2]
And, you know, we've been living in really since the start of hostilities, we had a brief foray and crude above 100, well above it.
00:07:23 [Speaker 2]
But since then, we've had the, you know, some are crying manipulation, you know, the Chinese, demand lever, import lever that they that they hit really hard and really quickly, you know, kinda kept the market in balance.
00:07:39 [Speaker 2]
And what what's been dominating the the crude and products commodity complex is this is so far, because of the cover of the SPR globally, has been a crude led market.
00:07:53 [Speaker 2]
And so the, you know, the asymmetry and the volatility in crude really to the downside over these last couple of months, I think tells you that, you know, we've, we, if, you know, reports and stock levels and refinery, you know, blowups, in Russia, looking at diesel and overall Gulf Coast crack spreads, there is a there is a lurking, mechanism to really pivot the, the market from being crude led to being products led.

00:08:31 [Speaker 1]
I think number one on the list is holy shit.
00:08:35 [Speaker 1]
Who knew China had that much storage?
00:08:38 [Speaker 1]
I think that's kind of like one thing we've, we've learned from this.
00:08:43 [Speaker 1]
And then second thing, and I don't wanna steal your thunder here, Mark, but the IEA is to blame for this.
00:08:52 [Speaker 1]
Right?

00:08:53 [Speaker 1]
I mean, five, ten years ago, those guys those guys calling for peak demand in 2030 kept a lot of refining capacity from being built.
00:09:04 [Speaker 1]
You know?
00:09:05 [Speaker 1]
And, we can

00:09:06 [Speaker 2]
see Even more recently, within the last year, you know, we had Operation Midnight Hammer.
00:09:15 [Speaker 2]
There was no kind of forward looking, reporting done by the IEA, which I think was a catalyst event to maybe do a little research and do a little scenario of what, you know, what if is impacted in a meaningful way, which it wasn't during Midnight Hammer, but, you know, we're now in a situation where we're in the worst disruption in history, and, you know, maybe a little policy leadership in thinking in that scenario on the test case that was Midnight Hammer, knowing that things were going to be intractable with Iran.
00:10:00 [Speaker 2]
You know, we took aggressive actions against the, the nuclear sites with the with the with the, transcontinental bombing runs and then claiming the obliteration, but, you know, the market knew that it was gonna be much messier and longer term to get to that, you know, proof case that that, yes, the primary objective throughout all this as Trump has reiterated is Iran can't have a nuclear weapon, but we're not there yet because, you know, we're still aggressively, addressing, their stored nuclear material, all the other stuff that goes around it.

00:10:44 [Speaker 2]
So, you know, we didn't get there.
00:10:48 [Speaker 2]
And the IEA, you know, the IEA at least could have taken with some forward thinking from Midnight Hammer, could have said, okay, this is front and center in terms of a risk.
00:10:57 [Speaker 2]
It didn't happen this time, but maybe that ought to be something we ought to look at in a macro scenario, going forward.
00:11:04 [Speaker 2]
And here we are, and it's kind of the reactive, well, you know, SPR and, coming out of reestablishing the current policy scenario after a five year absence from the global energy outlook, you know, it's it's horses out of the barn type of behavior by particularly the executive director, Fadi Berrault.

00:11:30 [Speaker 3]
By the way, this is a great moment to talk about one of our sponsors, the IEA, that, thanks for announcing.
00:11:39 [Speaker 3]
But what's going on with the market?
00:11:41 [Speaker 3]
So the market is doing what the market always does.
00:11:46 [Speaker 3]
They're pricing the press release, not the physics, because crude pulled back on the MOU talks.
00:11:53 [Speaker 3]
Meanwhile hard.

00:11:55 [Speaker 3]
Meanwhile, 55 commercial vessels just got rerouted, and it shows my data I'm looking at shows traffic grinding to a halt.
00:12:06 [Speaker 3]
And what is our next story, Mark?
00:12:09 [Speaker 3]
I just set you up for it.
00:12:11 [Speaker 3]
What's happening to the diesel crack spread?

00:12:16 [Speaker 2]
Yeah.
00:12:17 [Speaker 2]
NYMEX three two one, I think it was yesterday, all time high of 72 a barrel.
00:12:25 [Speaker 2]
And we are in humankind in global oil and gas market unprecedented territory.
00:12:33 [Speaker 2]
It's quarterly record, 20¢ shy of the 2022 post invasion record, and q three is on pace to blow through it.
00:12:43 [Speaker 2]
And what's different from 2022 is that then it was almost an entirely diesel and ultra low sulfur distal distillate story.

00:12:55 [Speaker 2]
Diesel versus WTI crack briefly topped a 100 then.
00:12:59 [Speaker 2]
Both product cracks are stretched, which is broader, but structural tightness signal more of a structural tightness signal than a single product spike.
00:13:08 [Speaker 2]
So the diesel crack specifically, fresh record, zero hedge indicated just excuse me, just shy of a $100.
00:13:19 [Speaker 2]
And B of A's analyst called it a perfect summer storm.
00:13:23 [Speaker 2]
Diesel materially disrupted in three of four major regions globally.

00:13:27 [Speaker 2]
And so when you kind of extend the out the field of vision here, we've been talking about, you know, how, seemingly fragile the good behavior of inflation has been.
00:13:42 [Speaker 2]
I think this is, you know, this is something that bears refocusing attention on as, you know, we don't have any long term fixes for, you know, Russia's impaired state and its diesel export ban that it, I think, initiated last month and, you know, just all the normal product movement out of out and into Hormuz or through Hormuz where, you know, we're kinda running into, ultra tight situations, particularly as it relates to diesel fuel.

00:14:14 [Speaker 3]
I mean, just normalize it for for for us, Mark.
00:14:18 [Speaker 3]
What is normal what's a normal diesel crack spread?

00:14:22 [Speaker 2]
I'll normalize it in the in the three two one composite.
00:14:26 [Speaker 2]
It's, you know, we're kind of long term right around 20, so it's more than triple.
00:14:34 [Speaker 2]
So we're at 72 now, call 20 the baseline, normalized.
00:14:39 [Speaker 2]
We're we're well more than tripled.
00:14:41 [Speaker 2]
I mean, we reached triple a month ago when we first talked about it.

00:14:46 [Speaker 1]
The,

00:14:47 [Speaker 2]
And and and diesel is is the absolute workhorse of the global economy.

00:14:56 [Speaker 1]
So, you know, given that we got this from Zero Hedge, are we gonna use the old Matt Simmons line on Zero Hedge?
00:15:04 [Speaker 1]
They're right twice a decade.
00:15:07 [Speaker 1]
Is that kinda?
00:15:10 [Speaker 1]
Rest in peace, Matt.
00:15:11 [Speaker 1]
I always liked Matt.

00:15:12 [Speaker 1]
He was good.
00:15:13 [Speaker 1]
No.
00:15:13 [Speaker 1]
The, you know, I mean, we the history of the refining business is we had all those guys in the nineties grow at any cost, doing everything, and they all wound up getting fired because they lost a lot of money.
00:15:30 [Speaker 1]
And they got replaced by the CFOs, and the CFO's job was to not spend any capital and quite frankly and cut costs.
00:15:40 [Speaker 1]
Exactly.

00:15:41 [Speaker 1]
And that's what they've done ever since.
00:15:43 [Speaker 1]
That's why we don't have a ton of new capacity online, and those guys are just profitable as hell.

00:15:51 [Speaker 2]
And the special I did with Arjun Murthy, several weeks ago, with a particular focus on refining and his historical perspective covering the integrateds and the independent refiners, You know, he went through that era and that complete, kind of reordering of the hierarchy of what are the best businesses in the energy complex.
00:16:13 [Speaker 2]
And for the last little while, it's been the refiners because of the discipline and the consolidation.
00:16:20 [Speaker 2]
And they're kind of ruthless, cynicism that, you know, we're we're not like, you know, some EMP behavior in the past, you know, betting betting fervently on structurally higher commodity prices.
00:16:35 [Speaker 2]
They design and operate, for the razor thin margins at those normalized levels of crack spreads.
00:16:44 [Speaker 2]
And so, you know, they're running hard into this opportunity, and you look at the stock performance of the refiners and the the more refining heavy kind of, integrated like PSX, Bolero, etcetera, their year to date performance has been extraordinary, and it's led it's it's led the subsectors in energy.

00:17:08 [Speaker 1]
You know, back in the day, anytime a refining deal walked into the office, there was always that collective groan.
00:17:17 [Speaker 1]
You know, who who set up this meeting?
00:17:19 [Speaker 1]
Why do I have to go and all that?
00:17:22 [Speaker 1]
If I'd only bought refineries instead of that plane, I wouldn't, I wouldn't, I wouldn't be, as financially strapped as I am these days.

00:17:34 [Speaker 3]
Yeah.
00:17:34 [Speaker 3]
So If

00:17:37 [Speaker 2]
go ahead, Mark.

00:17:37 [Speaker 3]
I'm just jumping in.
00:17:39 [Speaker 3]
I I think what's interesting is the WTI is no longer the story anymore.
00:17:44 [Speaker 3]
It's the crack spread.
00:17:46 [Speaker 3]
It's now that that is now the leading indicator.
00:17:50 [Speaker 3]
And if you look at at least August that we're in, the story for August 2026 is about inflation is all diesel, 100%.

00:18:02 [Speaker 3]
And and what's interesting here is the FedEx and everything rides on a truck.
00:18:09 [Speaker 3]
So diesel every product we have, whether it's your vegetables you bought at the store that gives you sickness now because those well, that's a separate story.
00:18:21 [Speaker 3]
Everything rides on a truck, and the FedEx and UPS fuel surcharge surcharge, excuse me, tables are doing something really interesting.
00:18:32 [Speaker 3]
They're actually inflation laundering.
00:18:35 [Speaker 3]
So even if pump diesel falls to $4 tomorrow, the surge charge table locks a higher effective rate from 24 to 24 and a half percent versus 21%.

00:18:50 [Speaker 3]
So what that means is the net fuel surcharge per package goes up 40% year over year, and that's a ratchet.
00:19:00 [Speaker 3]
And even though if diesel prices fall, those surcharges are staying high, which is an incredible strategy to make money.
00:19:08 [Speaker 3]
But it's actually just means prices are gonna be high, and we've been talking about the October surprise, and we keep talking about it because all this is leading to a really bad fall.

00:19:21 [Speaker 2]
And you you had an excellent 40 and slip surge charge.

00:19:29 [Speaker 3]
Yeah.
00:19:29 [Speaker 3]
The there's a double entendre now.

00:19:32 [Speaker 2]
It's kinda what it triple would triple for you.

00:19:35 [Speaker 3]
Yeah.
00:19:36 [Speaker 3]
Unfortunately.

00:19:37 [Speaker 1]
I I just love the the the fact we're running around talking about crack, and I can't even make a dirty joke about it because I've lost my fastball.
00:19:46 [Speaker 1]
This feels like such a missed opportunity.

00:19:49 [Speaker 3]
Hey.
00:19:49 [Speaker 3]
I don't know if you heard the story that just dropped about Penn State fraternities being cocaine suppliers.
00:19:56 [Speaker 3]
Yes.
00:19:57 [Speaker 3]
Did you did you see that?
00:19:59 [Speaker 3]
These kids are making a shitload of cash now to go into federal prison for for doing it, but still, I thought that was pretty hilarious.

00:20:06 [Speaker 2]
Hey.
00:20:06 [Speaker 2]
So quick programming note.
00:20:10 [Speaker 2]
Crystal wanted to remind everyone that, people can ask questions live, and, you know, we'll be able to

00:20:18 [Speaker 3]
I mean, because we go from we go from crack to cocaine to speed balls to crystal.
00:20:25 [Speaker 3]
I mean, what are we doing here?

00:20:28 [Speaker 2]
All all of which have a surge charge associated with them.
00:20:33 [Speaker 2]
Touche.
00:20:34 [Speaker 2]
Right.
00:20:34 [Speaker 2]
I mean, the the ATRI, which is trucking data, you know, average operating cost per mile hit a record 2 spot $3.03 $6 per mile in 2025.
00:20:46 [Speaker 2]
That that was 2025 up from 2026.

00:20:50 [Speaker 2]
You had diesel round tripping in this period, of Hormuz disruption and shows you how sensitive it is to to headlines, you you you got a low of $4.58 per gallon on July 6.
00:21:07 [Speaker 2]
And by by July 0, twenty seventh, it was back to $5.31.
00:21:12 [Speaker 2]
I don't know where the national diesel average is now, but it's it's well above 5.
00:21:22 [Speaker 2]
Oh, and here here's here's the refiner equity performance year to date.
00:21:27 [Speaker 2]
Marathon and Valero are both, they both doubled year to date.

00:21:30 [Speaker 2]
PSX is up 66%.

00:21:32 [Speaker 3]
Do you know what today's diesel crack spread is, boys?

00:21:36 [Speaker 1]
Drumroll.

00:21:37 [Speaker 3]
Hit today?
00:21:39 [Speaker 3]
$102.

00:21:40 [Speaker 2]
There you go.

00:21:42 [Speaker 3]
The crack spread is larger than the actual price of the crude.
00:21:47 [Speaker 3]
It's this is unbelievable.

00:21:50 [Speaker 2]
So the thing to watch coming into you know, as we come out of summer driving into the fall shoulder is what happens to those product inventory levels in key, commercial inventory reporting regions.
00:22:05 [Speaker 2]
Never mind the, you know, the the the baked in demand for crude that's going to ultimately show up fairly long term as, you know, strategic reserves, get get rebuilt over time.
00:22:21 [Speaker 2]
And and most of I think this is right.
00:22:23 [Speaker 2]
Most of Europe's, SPR is is refined product, not crude.

00:22:32 [Speaker 1]
The, if you think about it, crude and refined products have gotten a divorce, and crude got the house and is staying home with the children and being the responsible adult.
00:22:47 [Speaker 1]
And refined product is wearing bling, out hitting the club, dating a 20 year old, rocking and rolling.
00:22:55 [Speaker 1]
That's where we are.
00:22:56 [Speaker 1]
Who to ever thunk?

00:22:58 [Speaker 3]
Yeah.
00:22:58 [Speaker 3]
So so Remember when ConocoPhillips spun off Phillips because those lower margin refining business is terrible?
00:23:09 [Speaker 3]
Who's laughing now?

00:23:11 [Speaker 2]
So so I guess Matt Smith modeled the the wrong hydrocarbon.

00:23:17 [Speaker 1]
Yeah.
00:23:18 [Speaker 1]
Maybe so.
00:23:20 [Speaker 1]
Maybe, maybe so.

00:23:23 [Speaker 3]
Hey.
00:23:23 [Speaker 3]
We got a question from beyond the grave since we're in the silly segment from T Boone Pickens.
00:23:29 [Speaker 3]
This is his question.
00:23:31 [Speaker 3]
I spent thirty years telling America natural gas was the answer.
00:23:35 [Speaker 3]
Now Amazon is burning burning 80,000,000 cubic feet a day to train a chatbot, and the diesel crack is at a 102.

00:23:45 [Speaker 3]
Did I win or did I lose?
00:23:48 [Speaker 3]
Nice.

00:23:51 [Speaker 1]
Still still the greatest still one of the greatest moments on Twitter when Drake tweeted out something to the effect of the first million's the hardest, and Boone retweeted it and said, no.
00:24:03 [Speaker 1]
The first billion's a lot harder.
00:24:07 [Speaker 1]
Well, whatever that what Jacob, if you can find that tweet, that was epic.

00:24:14 [Speaker 2]
I I'm still sticking with my number one draft pick.

00:24:17 [Speaker 1]
There you go.
00:24:18 [Speaker 1]
Natural gas.
00:24:19 [Speaker 1]
There you go.
00:24:21 [Speaker 1]
Speak speaking of, should we go to Louisiana?

00:24:24 [Speaker 2]
Yeah.
00:24:25 [Speaker 2]
This is, in the populist uprising theme of the, you know, data center world.
00:24:34 [Speaker 2]
This one is particularly interesting because it is not, it I think it was a bit of a hybrid of on grid and BTM because it involves Entergy as the, the builder operator of all the, natural gas plants that are going to be added to both support and enhance, both support, Meadows Hyperion Giga campus.
00:25:04 [Speaker 2]
And then ultimately, there's a lot of promise that rate payers are going to be insulated, if not enjoy, you know, rate relief.
00:25:13 [Speaker 2]
In addition to all the things, I I think teacher bonuses have already, you know, been paid, at levels that

00:25:22 [Speaker 3]
well, levels

00:25:24 [Speaker 2]
no levels nobody's ever seen before.
00:25:27 [Speaker 2]
So, there there's there's kind of a, two pronged uprising between consumer advocacy groups and Earthjustice.
00:25:37 [Speaker 2]
And the crux issue is here that, you know, the the number of plants, plant additions that were really in the base case, that was three.
00:25:50 [Speaker 2]
And now Entergy and Meta are looking to spot seven more And and the biggest and they wanna fast track those.
00:26:01 [Speaker 2]
And so basically, truncate the approval process, which kinda cuts the public, public commentary period out as I understand it.

00:26:13 [Speaker 2]
And really, really embedded in this issue is that there's there's claims, and there's been no documentation to prove otherwise.
00:26:23 [Speaker 2]
There's claims that the associated capital, that is behind the need for seven more plants has not been, reconciled with what Meta's Hyperion actual demand growth profile looks like.
00:26:43 [Speaker 2]
So I I I guess for, you know, a layperson, who is subject to paying, you know, rates that are calculated based upon a a rate a rate case and a rate base, how much of this capital, you know, this capital push, the surprise capital push is ultimately gonna work its way into the the rate base?
00:27:08 [Speaker 2]
I think I understand it correctly.
00:27:10 [Speaker 2]
So And and ultimately manifest in higher higher rates for residential consumers and not lower.

00:27:15 [Speaker 1]
So so Mark, you're being totally unfair.
00:27:18 [Speaker 1]
Meta did give Entergy a pinky promise.
00:27:23 [Speaker 1]
So

00:27:23 [Speaker 2]
Uh-huh.

00:27:24 [Speaker 1]
Yeah.
00:27:24 [Speaker 1]
And, yeah, the I've also seen SPACs do more due diligence than it appears that Entergy's done.
00:27:32 [Speaker 1]
But, no.
00:27:34 [Speaker 1]
Yeah.
00:27:34 [Speaker 1]
I mean, when you're matching up a fifteen year even if they had all the numbers like they should, you're matching up a fifteen year contract with, with an asset that's thirty to forty years.

00:27:47 [Speaker 1]
Right?
00:27:47 [Speaker 1]
And so who's on the hook for that, you know, twenty five year tail period?
00:27:54 [Speaker 1]
It's the rate payers.
00:27:56 [Speaker 1]
So the this may be the death of, of, of these type deals, and we just see all of them going behind the meter kinda like what we saw with Kilby and what Amazon's out doing in in West Texas because this just won't end well.

00:28:15 [Speaker 3]
Let me check.
00:28:16 [Speaker 3]
Let me let me look at the, my wind hold on.
00:28:19 [Speaker 3]
Right up my window, I can see the wind farms off of the Nantucket South Shore.
00:28:24 [Speaker 3]
Yep.
00:28:25 [Speaker 3]
Those, those those wind farms that aren't even moving, by the way, I'm paying for even when they don't work.

00:28:34 [Speaker 3]
So I know exactly where this is going.
00:28:37 [Speaker 3]
There's a reason these monopolies call their clients and customers ratepayers.
00:28:44 [Speaker 3]
They're not clients.
00:28:45 [Speaker 3]
They're ratepayers.
00:28:47 [Speaker 3]
Their job is to pay us, and our job is go ahead.

00:28:52 [Speaker 2]
And you're paying for when they just randomly decide to shed a, a turbine plate into the water.

00:28:59 [Speaker 3]
Well, they didn't mean to for that to happen.
00:29:01 [Speaker 3]
It just happened even though they claimed it would not.

00:29:06 [Speaker 2]
So at the risk of making this kind of a a weekly, installment in the series of evangelism for behind the meter, the, the, the what's showing up in Texas with, with Abbott on top of SB six with the stop audit, Vivex policy pronounce pronouncements in a very populous tone that we talked about last week, now Hyperion and Meta.
00:29:36 [Speaker 2]
When you when you have this this idealistic notion that's dated based on utility, you know, slow moving, slow growth, lot of lot of certainty, well behaved, grid based power prices, the game has completely changed.
00:29:55 [Speaker 2]
And for the hyperscalers and the NeoClouds that are looking at that and using that old lens and that old framework, they're running into things that not only, I think, ultimately end up costing more, but the delay in actually getting energized is, you know, incalculable in terms of opportunity costs.
00:30:13 [Speaker 2]
If, you know, if we can derive what we think the economics are of putting models to work twenty four seven.
00:30:21 [Speaker 2]
The faster you can get them online generating revenue and cash flow, it would seem that the overall kind of full cycle economics of whatever these data center, investments look like, and they're not trivial because they're all in the tens to hundreds of billions of dollars, you know, the urgency to get energized And, you know, as we get more sophisticated with power system design, the quality of the power, and I think ultimately the total cost behind the meter, particularly at scale, is gonna prove to be not only competitive with grid power once once you can get an interconnect, I think it's ultimately gonna be lower for better quality for better quality of power for for the the purpose built for inference, for training, for redundancy, for all those things.

00:31:10 [Speaker 1]
I am nothing but a problem solver, and I think I have the solution to this.
00:31:18 [Speaker 1]
Here's what we're gonna do.
00:31:20 [Speaker 1]
You have Zuck and and Meta.
00:31:24 [Speaker 1]
They've signed their agreements with Entergy.
00:31:28 [Speaker 1]
On behalf of the rate payers, I think we should let the wink Winklevoss twins negotiate for them.

00:31:38 [Speaker 1]
Right?

00:31:39 [Speaker 3]
So There we go.
00:31:40 [Speaker 3]
Chuck.
00:31:41 [Speaker 3]
There we go.

00:31:42 [Speaker 2]
So so we have a we have a we have a comment in the chat.

00:31:45 [Speaker 3]
There's been a lot of refineries blown up, which is great point.
00:31:49 [Speaker 3]
I'm glad this we don't even know who it is.
00:31:52 [Speaker 3]
So I'm asking our hey.
00:31:54 [Speaker 3]
Producer, chime in.
00:31:56 [Speaker 3]
Who was this?

00:31:57 [Speaker 3]
This is the question or comment.
00:31:59 [Speaker 3]
There have been a lot of refineries blown up in The Middle East and Russia this year, So product markets globally are really tight.
00:32:08 [Speaker 3]
No idea what percentage of global capacity if offline, I think, is offline, but the product barrels will find the best prices globally, not just a US problem, without regulatory intervention.
00:32:22 [Speaker 3]
Also, your drug reference fit well with a refining discussion.
00:32:26 [Speaker 3]
They're also refined products.

00:32:29 [Speaker 2]
Yeah.
00:32:29 [Speaker 2]
So on this, I I think I I think the latest number I saw is that we've had an impairment of roughly six and a half percent of global diesel capacity.
00:32:41 [Speaker 2]
And the the point is right because we've we've seen it in the past when certainly when exports authorization opened up, the transatlantic arbitrage is a real thing.
00:32:53 [Speaker 2]
And so if we're looking at a tighter European, diesel situation, it does put pressure on The US, wholesale and retail prices in diesel because, you know, the refiners are going to to act on that arbitrage opportunity, and we're gonna see more exports.
00:33:14 [Speaker 2]
So you're gonna see a price lift because of the, the price competition for scarcer physical barrels of diesel moving to other parts where, you know, the the physical supply demand balance is a lot tighter.

00:33:33 [Speaker 1]
Yeah.
00:33:33 [Speaker 1]
No.
00:33:34 [Speaker 1]
I I just went and searched it.
00:33:37 [Speaker 1]
JPMorgan's actually saying 9% of world refining capacity has been taken taken offline this year because of the wars.
00:33:46 [Speaker 1]
And so

00:33:48 [Speaker 2]
Yeah.
00:33:48 [Speaker 2]
Anyone who anyone whose middle name is Pierpont is way better than than than my source.

00:33:56 [Speaker 1]
But but but, you know, the bottom line, if it's seven, if it's eight, if it's nine, guess what?
00:34:00 [Speaker 1]
Prices are going up.

00:34:02 [Speaker 3]
Yep.
00:34:03 [Speaker 3]
And we got actually a good question from from someone that's that's famous and in the news from Sophie Cunningham with the Indiana fever.

00:34:14 [Speaker 1]
Oh, nice.

00:34:15 [Speaker 3]
She I didn't know she was a fan.
00:34:17 [Speaker 3]
She she wrote in, quote, I asked how we save our farmland from dumb data centers and got 8,000,000 views.
00:34:25 [Speaker 3]
You told me golf courses use more water, fair, but my question is simpler than all of your BCF a day and crack spreads.
00:34:34 [Speaker 3]
When the aquifer is dry and the server farm moves to the next county, who is left holding the deed to the land that will not grow anything?
00:34:45 [Speaker 3]
Because where I come from, the farmer is always the last one to find out.

00:34:49 [Speaker 3]
Wow.

00:34:50 [Speaker 1]
Well, Sophie, I would be glad to address your concerns over dinner at Saint Elmo's Steakhouse in Indianapolis.
00:35:00 [Speaker 1]
Just just hit me up on Twitter, and we'll get that scheduled.

00:35:04 [Speaker 2]
Cooling solutions are rapidly mitigating certainly groundwater and aquifer, potable potable water and agricultural water sources rapidly reducing the, the the ultimate call on water resources.
00:35:25 [Speaker 2]
There are closed loop systems that basically have a water reserve that is cycled over a ten year period without needing to refill.
00:35:40 [Speaker 2]
Now you gotta control kind of the night versus day, geothermal type advantage in the storage that you're using, but it's a one time fill that doesn't happen again in ten years.
00:35:53 [Speaker 2]
And there are a lot of specialty kind of legacy, industrial HVAC experts that are coming up with brilliant solutions that reduce significantly or, in some cases, entirely eliminate, the threat to groundwater.
00:36:14 [Speaker 2]
Furthermore, we've seen with both, Amazon and Kilby, there there was front and center explicit commentary about using brackish water, which is not potable.

00:36:26 [Speaker 2]
These are deeper aquifer horizons and produced water, from oil and gas operations, which will have a beneficial effect ultimately, particularly in the Permian, which is injecting about 25,000,000 barrels a day of really nasty water, formation water that comes with oil production.
00:36:45 [Speaker 2]
If if you can find a way to take significant volumes away from, just straight saltwater disposal, treat it, and use it in a in a cooling intensive or a water intensive cooling process for data centers, you you've you've you've taken care of a of a big and growing problem and, defined as what's going on with, kind of unabated, saltwater disposal, particularly out in the Permian.

00:37:12 [Speaker 1]
You know, Mark, you're a dear friend and a great guy, but that might have been the worst bit of wingmanship I've ever seen from another dude after I made my pitch to Sophie.

00:37:23 [Speaker 3]
Dude, you totally I mean, you can't

00:37:25 [Speaker 1]
Wow.
00:37:27 [Speaker 1]
No.
00:37:27 [Speaker 1]
Wow.

00:37:29 [Speaker 3]
Shit.
00:37:29 [Speaker 3]
Hey.
00:37:29 [Speaker 3]
I I, I actually got a text from, I'm not gonna name him.

00:37:34 [Speaker 2]
That was pretty harsh.

00:37:36 [Speaker 1]
Yeah.
00:37:36 [Speaker 1]
Well, sorry.

00:37:37 [Speaker 3]
But he's a senior executive at, finance guy.

00:37:42 [Speaker 2]
He's sitting here with my watermelon.

00:37:46 [Speaker 3]
And this is what he wrote.
00:37:48 [Speaker 3]
I'm reading his the diesel crack just hit a 102, and nobody's building a new refinery.
00:37:56 [Speaker 3]
A refinery takes four years and $15,000,000,000, if not more.
00:38:01 [Speaker 3]
If I announced one tomorrow, would Wall Street reward me or punish me?
00:38:07 [Speaker 3]
And does the answer to that question explain why nobody is building one?

00:38:12 [Speaker 3]
That's actually a really good damn good question.
00:38:14 [Speaker 3]
And he doesn't want me to say who it is because it's probably a question a lot of the of the, super majors are discussing.
00:38:24 [Speaker 3]
What say you guys?

00:38:27 [Speaker 1]
I mean, in the quarterly quarter to quarter business we we live in, I think you get punished if you announce a refinery in four years and billions of dollars of capital and environmental studies and and all that.
00:38:44 [Speaker 1]
I think it I think it's tough.
00:38:46 [Speaker 1]
I don't I don't think this happens in The United States with US public based companies.
00:38:52 [Speaker 1]
This gets built, overseas somewhere by by people not necessarily friendly to The United States on any given day.
00:39:02 [Speaker 1]
So I think this is a real problem.

00:39:05 [Speaker 2]
Yeah.
00:39:06 [Speaker 2]
I I think, I think the first order of business, because the, you know, the impairment of the global refining system, particularly in Russia, is not a quick fix.
00:39:17 [Speaker 2]
I mean, we we have damaged, or destroyed critical refinery producing assets that, you know, are gonna take, I I guess, on the inside, a lot of months and multiple years on the outside to bring back online.
00:39:36 [Speaker 2]
And when you look at what, you know, what Chuck just alluded to, I take the case of Mr.
00:39:42 [Speaker 2]
Wonderful, who, if you guys recall, it's maybe been a year ago, maybe a little more than that, was out, you know, strongly pushing the notion of raising capital and building the first greenfield refinery in The US and getting that done pretty quickly.

00:39:59 [Speaker 2]
That was part of the, I think, the the coattailing on the Trump Energy Dominance, mission.
00:40:06 [Speaker 2]
But now he's he's completely consumed.
00:40:08 [Speaker 2]
He's put that aside, and he's completely consumed with building a a data center campus the size of Manhattan and Utah.
00:40:16 [Speaker 2]
Refining is really hard to Greenfield.

00:40:19 [Speaker 1]
So let's let's bring this all back to Chuck and Sophie going to have dinner.
00:40:24 [Speaker 1]
If you really think about it, she got fined $400 for that takedown, but she made millions off it in ad endorsements.
00:40:37 [Speaker 1]
That's a crack spread right there.
00:40:39 [Speaker 1]
So that's way more than a $100 a barrel.
00:40:44 [Speaker 1]
Thank you.

00:40:47 [Speaker 3]
There's a lot I could have said after that, especially after you said crack spread, but

00:40:52 [Speaker 2]
you could be my wingman anytime.

00:40:56 [Speaker 1]
We'll we'll see if she reaches out.
00:40:58 [Speaker 1]
My DMs are open.

00:41:00 [Speaker 3]
So

00:41:00 [Speaker 2]
Bullshit.
00:41:01 [Speaker 2]
You can be mine.

00:41:05 [Speaker 1]
Oh, man.
00:41:06 [Speaker 1]
The, yeah.
00:41:08 [Speaker 1]
No.
00:41:08 [Speaker 1]
I I I think we've got real energy issues here.
00:41:13 [Speaker 1]
Because, I mean, the one thing we didn't say, yeah, it's gonna take Russia a while to repair it, but it's gonna continue to be bombed by Ukraine, and they're getting better and better with their drones every day.

00:41:25 [Speaker 1]
And so I think I think if you told me the over and under about how much to get Russia back to, you know, prewar capacity, I would definitely take the over in terms of time because, this war isn't stopping anytime soon, and and Ukraine seems to have found something they do and do really well.

00:41:50 [Speaker 2]
There's there's one related kinda quick lightning round point that addresses crude and something I hadn't been paying attention to.
00:41:58 [Speaker 2]
But if OPEC plus continues with the 188,000 barrel per day unwind pace that it's been on, they did it in August.
00:42:10 [Speaker 2]
If they do it in September, the April 2023 voluntary cuts will be completely unwound.
00:42:17 [Speaker 2]
And so you have that optic and that and that psychological of, you know, we had whatever the April voluntary cuts were, we've got that in immediate reserve in the crude market.
00:42:28 [Speaker 2]
So with SPR draining, with commercial inventories draining, with US, E and Ps just now picking up, you know, kind of strong representative rig count numbers.

00:42:40 [Speaker 2]
They're finally responding to, you know, this is more of a structural thing at least out a couple of years, so I can be confident in in my, my drilling investment, price decks.
00:42:53 [Speaker 2]
But, you know, that all has a lag effect in terms of of kind of accelerating, beyond kind of the, restrained level of growth that that we've seen in the Permian over the last couple of years and certainly what we're expecting this year.
00:43:09 [Speaker 2]
So there there's more I I think there's on the margin, there's more supply side support, supply tightness support coming for crude if, you know, all of the OPEC, reserve capacity for from the April 2023 cuts gets unwound.

00:43:26 [Speaker 3]
A buddy of mine just texted me, which is this is interesting, and he's right because I haven't heard this in a long time.
00:43:33 [Speaker 3]
He said, refiners are supposed to make money when products are scarce.
00:43:38 [Speaker 3]
That's the market working.
00:43:39 [Speaker 3]
Why is everyone acting surprised that the business designed to profit from scarcity is profiting from scarcity.

00:43:48 [Speaker 2]
Yeah.

00:43:50 [Speaker 1]
I do think this points out who the star of the show is.
00:43:53 [Speaker 1]
Kirk keeps getting texts, and I haven't gotten one.
00:43:56 [Speaker 1]
So I'm feeling a

00:43:58 [Speaker 3]
I'm feeling a little weird.
00:44:00 [Speaker 3]
Live.
00:44:00 [Speaker 3]
My Twitter's live, man.

00:44:02 [Speaker 1]
Yeah.

00:44:03 [Speaker 3]
That's true.
00:44:04 [Speaker 3]
Know that I've told them that, hey.
00:44:06 [Speaker 3]
Give us some good questions.
00:44:08 [Speaker 3]
So, you know, I've run out of friends.
00:44:11 [Speaker 3]
So next week, it's gonna be dry.

00:44:14 [Speaker 1]
Oh, perfect.
00:44:15 [Speaker 1]
Perfect.
00:44:17 [Speaker 1]
One thing to close the show on, a really sad note, a very, very great human being, OJ Brigance, who played high school football in Willow Ridge.
00:44:29 [Speaker 1]
So he's a Fort Bend County boy, like me, drank from the river drank from the water of the Brazos River growing up, was my dorm mate, at Rice University, lived across the hall from me.
00:44:45 [Speaker 1]
Really good dude.

00:44:46 [Speaker 1]
Went on and had a great career in the CFL, had an NFL career, wound up getting ALS, and made it twenty years with the disease.
00:44:58 [Speaker 1]
So he's in the upper 5%, and that is not surprising that he's in the upper five percent of people living with that disease because he was a fighter.
00:45:09 [Speaker 1]
And just one of the single best humans on the planet, even when he was stricken with this horrible disease, was always optimistic.
00:45:20 [Speaker 1]
The Ravens, the city of Baltimore really adopted him because he won a CFL title, with the Baltimore team.
00:45:28 [Speaker 1]
He was a Raven, and, they made him player development guy, after he retired.

00:45:36 [Speaker 1]
And Baltimore just loved him.
00:45:38 [Speaker 1]
And, when Baltimore won the Super Bowl a few years back, the coach or the owner said the person that gets to hold this trophy first is OJ Brigance.
00:45:48 [Speaker 1]
Rest in peace, my friend.

00:45:51 [Speaker 2]
Rest in peace.
00:45:52 [Speaker 2]
Wow.

00:45:55 [Speaker 3]
Thanks, Scott.

00:45:56 [Speaker 2]
On on ALS, you guys know I'm kind of a baseball obsessed.
00:46:03 [Speaker 2]
There is a young, brilliant UChicago educated, statistician and analyst, named Sarah Langs.
00:46:15 [Speaker 2]
And she was diagnosed at, I think, age 27 back in 2021, and it's a compelling follow.
00:46:26 [Speaker 2]
So it is twenty years for mister Bergants is is is just incredible.

00:46:35 [Speaker 1]
Yeah.
00:46:36 [Speaker 1]
Yeah.
00:46:36 [Speaker 1]
No.
00:46:37 [Speaker 1]
Just a a horrific, horrific disease.
00:46:42 [Speaker 1]
Well, boys, as always, I enjoyed it.

00:46:45 [Speaker 1]
And, I look forward to doing this kinda every Tuesday morning.
00:46:48 [Speaker 1]
And we'll, we'll go figure out how to do this live, how to get better about it, how to doing this live.
00:46:58 [Speaker 1]
It's a lot of fun.

00:46:59 [Speaker 3]
And we'll reserve the last question from who who t's eight next week.
00:47:06 [Speaker 3]
We'll open we'll open with their questions.
00:47:09 [Speaker 3]
So let's do that.

00:47:10 [Speaker 2]
Can you can you give a topic, topic teaser?

00:47:14 [Speaker 3]
Yeah.
00:47:14 [Speaker 3]
It's nuclear versus refining capacity, which gets built in The US first.

00:47:20 [Speaker 2]
And I That's a great question.

00:47:23 [Speaker 3]
It's a great question.
00:47:24 [Speaker 3]
And I'm surprised, Mark, you didn't bring up another person that passed this week who I've known a lot of baseball players to get surgeries, Tommy John.

00:47:33 [Speaker 2]
Yes.

00:47:35 [Speaker 3]
I mean, that was wow.
00:47:37 [Speaker 3]
How many baseball players do you know?
00:47:39 [Speaker 3]
I know a dozen that have had that surgery.
00:47:43 [Speaker 3]
He he made their way into golf the way I know him is because it killed their career, and they had to figure something else out.

00:47:51 [Speaker 2]
He he had posted, posted a message of gratitude, I think, in kind of his final days in hospice.
00:47:57 [Speaker 2]
And so, I I did catch, what was it, a couple of days ago he did pass.
00:48:04 [Speaker 2]
So, what a legend and what a and and and there is a there is a humorous story related to Tommy John.
00:48:11 [Speaker 2]
He was the first one to get the procedure.
00:48:14 [Speaker 2]
And if you guys remember the brilliant and eccentric Brent Strom, who was the pitching coach for the Astros during the, kind of the Halcyon days and the World Series runs, Brett Strom was actually the second person to receive the procedure.

00:48:32 [Speaker 2]
And he said, think it would think of what it would have been had I been the first.
00:48:38 [Speaker 2]
BS surgery.

00:48:39 [Speaker 1]
BS surgery.
00:48:41 [Speaker 1]
Nice.
00:48:42 [Speaker 1]
Nice.
00:48:43 [Speaker 1]
Rest in peace, Tommy John.

00:48:45 [Speaker 2]
Rest in peace, Tommy John.

00:48:47 [Speaker 1]
Alright, boys.
00:48:48 [Speaker 1]
We will see you next week.
00:48:51 [Speaker 1]
Jacob, take us home.

00:48:52 [Speaker 2]
Peace.