Big Digital Energy

0:00 Dun, dun, dun, dun, dun Welcome back BDE. We got Mark in the studio. In the studio. So where have you been? What have you been doing? I'm kind of been back and forth between Scottsdale and

0:15 here, just hanging out there for a while. Have you been to FB yet in Scottsdale? FB, what is it? So FB is the abbreviation for food and beverage. The, have you been to that restaurant yet? I

0:33 have not, I'll have to check it out. So I'm back in a week. One of James Beard Award, like three or four years ago, maybe even more, maybe seven, eight years ago. But anyway, I've been to

0:46 Scottsdale twice, once for the Super Bowl and just for the weekend, eight there both times. First time I ate there, top five meal in my life. Really? It was that good. I think I've seen it,

0:58 because it is - Kind of down an alley.

1:02 Is it off Scottsdale Road? I don't know, I don't know Scottsdale well enough. I don't drive when I'm in Scottsdale. It would definitely be Uber, giving my blood alcohol content, but anyway,

1:14 it's stunning. Got some really good Tex-Max and actually, it's kind of in Paradise Valley, it's called Julio-G's. No way, really. Like true Tex-Max? Yeah. Cool. Yeah. I was impressed.

1:28 Awesome So I went to Twitter or X and read all up in real time, given that we're gonna talk about Trump and tariffs, and you know,

1:45 it's kind of laid on us. Yeah, well now you go, dude. My only point is that's quite a dynamic story that any time Trump and a tariff comes out. Yeah, and you know, most of the focus was on

1:56 what's it going to do to energy, particularly crude and converging. with US was the forget what they call the Committee the OpEC OPEC market Monitoring Committee in anticipation of what they could

2:11 possibly do just given all this arm twisting that we've seen emerge since Trump took office but

2:22 I think as was expected they're like Dan Pickering described that he was on CNBC last night as kicking the can down the road they they had good good compliance in fact as jumping around here on the

2:37 order of the of the topics but they replaced the E I A and rice dad as their data sources for monitoring particularly the the member countries production stats and and what did that do cause I'm not

2:58 sure Iraqi recognize the the replacement companies. Just, I don't know these companies. Well, I have heard of oil X, which I think has got a pretty sophisticated

3:14 data infrastructure and technology. That's based on clearing out the cobwebs three or four year ago conversation about when I think they were standing up then. So I think they look at that as, and

3:31 this is just pure speculation is more granular, and if there is such a thing as real time, monitoring of production data using a triangulation of all kinds of sources. I think it's probably a

3:46 decision based upon timeliness and data quality and then for first reaction is, you know, in the headline, great, they've replaced their, They've replaced the EIA country data source and that's

4:01 political, I don't think it is, I think it has more to do with, they've just, they've just decided we're, we like the Kepler K, KPLER and oil X data sources better, no further explanation given.

4:17 But yeah, that's my sense. Yeah, the, the, you know, the interesting thing about, so he, he slapped a 25 tax on or tariff on Canada, 10 for energy. And then 25 on Mexico, Mexico's president

4:35 called this morning and supposedly they have a deal. She's going to send troops to the border to shut down 10, 000,

4:53 I think national guards, folks to shut down. I mean, the question is, one, how effective are they really going to be against the cartel? Wasn't that a very politically nice way to put it? And

4:54 then number two, you know, how permanent will that be? Because supposedly anytime. we ask and threaten anything. Mexico does it, but then it's short lived. Yeah, and the Canadian tariffs were

5:10 ostensibly the leverage for stopping or severely restricting the flow of illicit drugs, particularly fentanyl, across the border. And I saw someone say that ICE only recovered or DEA only recovered

5:29 like 43 pounds of fentanyl, crossing the Canadian border in

5:36 2024. 43 pounds doesn't sound like a lot, but when you look at what a two milligram lethal dose can do, if it's in its pure form, that's almost 10 million people that it can kill So, yeah, I

5:55 mean,

5:57 this is, you know, more muddying the waters around energy crude oil and energy stocks. The fundamental fact remains that we've got a market that on the crude side that's in fairly precarious or

6:18 tenuous supply demand balance, we're sitting here at 72. I think we traded well north to 74 overnight. It's backed off on the news or the announcement of this 30-day delay in the Mexican tariffs

6:34 with the deal making that President

6:40 Trump and

6:42 Mexico's President Chinebaum got to get some concessions on from the US side. Look, you need to do something about the flow of arms and weapons. And from what was our program that Obama started,

6:55 had sent the guns into Mexico I think it's like cold. I'm rewatching all the Narcos Netflix series, so I'm a little influenced by the dramatization of all that.

7:08 Kind of watching them in random order. I'm back to the Pablo Escobar days. You know, I've never watched that. I've heard that's a great show though. Gotta watch it in subtitles unless you're

7:22 bilingual, but it's really good. They're all really good, I think. Um,

7:31 just fast and furious. Fast and furious. Yeah, there we go. On the larger issue of tariffs, I would encourage, and I wouldn't otherwise be watching CBS on a

7:43 Sunday night unless I had been visiting my dad, but caught the segment with Bob Leitheiser, who is this term for Trump, kind of unofficial trade advisor, but he's a career. uh, trade attorney

7:59 and trade advisor, he was, uh, chief trade negotiation, uh, negotiator, I believe in the first Trump term. And there's just a good kind of discussion back and forth on tariffs and, you know,

8:14 what we're trying to accomplish here. And, you know, some of the unintended consequences in the short run, there was a case in there about the Stellantis, um, Belvedere, Illinois, plant that

8:28 shut down a few years ago after having one of its Jeep lines back in 2006, I believe, moved down to Mexico. And so that started the snowball that ultimately got Stellantis to move all of that

8:45 assembly and manufacturing down to Mexico. And the other data point was, you know, we invented the semiconductor. The US. produces now or manufacturers now 8. of the global total, and it brings

8:60 up a larger point about how much more substantial China's industrial manufacturing base is they have more manufacturing capacity across the board than the US, Germany, and Japan combined today. So

9:19 we're trying to force through tariffs a substitution from imported goods to domestic goods Now there's going to be give and take on prices, certainly on imports from China because we are a pretty

9:33 important customer, but the kind of - 'Cause that is the unfairness to Trump. The tariffs from the first term didn't show up in prices. I mean, we had low inflation during that time. Yeah, and

9:48 so there's adjustments that are made in what Bob Leidhitzer was saying is that American companies will ultimately figure out how to make the adjustment to become profitable, but in the short term,

10:05 there could be some noticeable pain in the form of inflation and job losses. They went over the US. steel case where when the imported steel tariffs were imposed in the first Trump administration,

10:23 I think the numbers of employment protection versus employment loss was it saved 1, 000 US. steel worker jobs, but ultimately for all of the consumers and customers of domestic steel, it resulted

10:41 in their numbers, 75, 000 job losses, which is not the kind of netting you want. But it's really at the most basic level, an attempt at resurrecting and catalyzing.

10:59 the rebuild of the industrial manufacturing base to be competitive in producing domestic goods and products and equipment that are otherwise, you know, a big part of the imported supply chain. Yeah.

11:16 The thing I found interesting, and I need somebody to explain this to me, maybe Roy or you come on the podcast or something, but basically a lot. And I'll just use that in quotes because I don't

11:30 know what the exact percentage is. But the oil produced in Western Canada, getting to refineries in Eastern Canada comes through the United States in a pipeline system. There's a little, there's

11:44 some small pipelines that you can get from Western Canada to Eastern Canada. There's a little bit of a rail option there too, but for the most part you're pumping it through the United States. But

11:57 most of those projects that were conceptually intended to direct link Western Canada with the more Eastern province refining and consuming areas all ultimately didn't happen or most of them ultimately

12:15 didn't happen certainly not at the capacity they need if they're traversing a lot of their crude from Western Canada and having to cross the border and then recross the border to get to the refining

12:27 centers most of those things were

12:32 stymied for the same reasons that we've been talking about frustrations on you know pace or even eventuality of development of things like mining roads or ports or I was thinking about it when we were

12:51 going through the inauguration week and the president visited LA and talked about the fires.

12:59 and remains to be seen whether all this water release from Northern California coming down to Southern California, which

13:09 I think there's some geologic and physical realities that don't make it that simple and straightforward. I haven't dug in enough to understand what the impact any, if at all, will be. But the

13:23 Coastal Commission in California, this has been at least a year and a half, two years ago, kind of put its final denial or ruling out of a major desalination plant on the coast is either Manhattan

13:42 or Huntington Beach, which

13:46 desalination plants are. You used in a lot of places without a lot of access to fresh water And certainly it's a viable technology can be done at scale, but that's something that could have. could

13:59 have been in place 10 years ago now, whether that would have made kind of the reservoir or available water difference.

14:08 But it is a pretty significant option that has been considered and ultimately rejected. So here's the get out question. So

14:21 let's go right now. We'll grade this. They're, let's give Trump a win with Mexico And we'll give Mexico a win too 'cause quite frankly, they're getting people, they're gonna get some help on the

14:34 guns and quite frankly, they need to engage and get rid of the cartels as much as we do. So, okay, we'll say that was a win-win. Ultimately, to be determined on Canada,

14:48 we're gonna win against Canada because we have an ace up the sleeve. Do you know what that is?

14:57 So we're gonna win the trade war with Canada 'cause we've got an ace up our sleeve. We have a heavy, heavy hammer to play if we want. Do you know what that is? Well, Mark, Mark, I'm not going

15:10 to answer because you'll just say wrong. This is another one of your - Yeah,

15:15 fair enough. The reason we will win, 87 and 12 of all Canadian toilet paper is imported from the United States And that's why we will win that trade war. All right, tell me what's going on in the

15:29 UK. Well, just to finish up on this is it relates to things that we spend most of our time focused on. You know, this has just added kind of,

15:41 it's muddied the waters, certainly around the commodities. I think if you look at,

15:50 we've talked about it before, as far as OPEC has concerned,

15:55 Russia needs.

15:57 higher as opposed to lower prices, because its ability to fund the war machine is disproportionately dependent upon

16:06 strong global crude prices are gonna find a market mostly in China for those sanctioned barrels. And then two, is this enough of,

16:21 I think it just adds more uncertainty on the equity side to a group that is, you can argue until you're blue in the face that, and Dan said it last night, he said energy stocks or value plays in

16:35 the midst of a huge momentum market. And so this doesn't take something like deep-seak to maybe jolt the tech sector a little bit, but there's not any improved clarity. In fact, it reduces clarity,

16:52 which I think makes the equity side of energy stocks. you know, continue to be a tough slog despite very attractive valuations, you know, Exxon beat across the board on Friday, Chevron missed.

17:07 And so more of the same. And I've used this term occasionally is tedious. And so the focus is going to continue to be elsewhere. And so I think we can expect more of the same in the way crude and

17:25 energy equity markets have been behaving here for seemingly forever. They always got a reason to hate us. There's always two and a half to three million barrels of OPEX supply. The thing that could

17:37 dislocate things is some material supply disruption. And we've been through a lot in the last three years since actually the last four plus years. And we haven't, you know, the markets have

17:48 continued to shrug that off.

17:51 All right, tell us what's going on in the UK and given the

17:56 a familiar situation, I may be very quiet during this segment, but go ahead. No, something we haven't talked about or I don't recall it being a point of discussion, back in I believe January 10th

18:09 or 15th centricate issue to storage warning because Europe had been beset with pretty early onset of cold and the storage top off that normally and a normal year occurs during December they struggled

18:28 to do that and then we saw a precipitous drop off as you know we broke into January and when centrica issued that that storage warning

18:40 I didn't realize the the the disproportionate disproportionate scale of storage across Europe by the major players but the UK has one seventh the storage capacity of Germany and so there are days of

18:54 demand cover went down to as low as 12 days. And so, that's a pretty thin margin. And now we've got this

19:06 early mild start to February and some of the headlines today were, looks like a mild or warmer than normal. February is gonna kind of bail things out.

19:17 Part of this weather pattern we can ask our good friend, Chris Marks, to provide expert commentary I read something about the

19:26 North Atlantic Oscillation, potentially setting up another period of Dunkelflaut or Doldrums, which certainly impacts Germany because of their reliance on wind generation. But you've got kind of

19:43 what's the path forward here? Are you gonna continue to play the weather casino year after year or winter after winter? and with what's going on here, politically. and competitively in the US,

19:57 both as regards energy and tech and Duberg had a piece out on UK Prime Minister's pronouncement that we want the UK to be an AI superpower. And

20:13 the analysis of the piece was really centered on the argument of, you know, how can you do that if you basically can barely keep the lights on? Yeah And so it's a good question. It would just

20:24 import more from France. And 30 of the UK power is still guest fired generation. So

20:36 get roughly 50 of it from domestic supplies, mostly North Sea. So it'll be interesting to see what happens here because UK consumers are facing another rate increase that I believe started last

20:51 month I think on the order of something between. 1 in 2

20:56 on top of what we've seen since the real abyss of the energy crisis, what, four years ago?

21:08 Can they turn that around and create more security around certainly a fuel that is still a very prominent part of the UK, both generation and heating stack? And it's crazy over there 'cause they've

21:23 done way more with smart meters and we have, I think I told you that when we go over to the girlfriends hometown and we go over to her best friend's house, I mean, you got the meter sitting there

21:35 right there watching it. No, it's expensive, let's turn down the heat or it's cheaper, maybe we can warm it up. So it, I just kind of throw that out there 'cause I wanna tell the story about

21:49 standing in front of a friend Lucy's house. And I must have been shaking and Laura came up to me and kind of hugged, oh, how's my sweetie? And I was like, I just want to go home and get a taco

21:60 where it's warm. So they cannot afford to be without their natural gas.

22:08 But yeah, I know that the AI pronouncement was like, come on. Seriously, I mean, I know that sounds great, but it's all powered off electricity And I hope we in the United States learn this

22:23 lesson too, and we've got to build energy infrastructure to keep up with it so we can have AI. Yeah, and you don't want to cede that to the Chinese and the Russians. To your

22:34 several months ago, point talking about how the political leverage really resides with big tech. If they want to get it done, it's going to get done And so I think Chevron being the most recent.

22:53 player to announce large-scale generation plans, which are heavily heavily concentrated natural gas. The point is that they see the opportunity, you get some regulatory relief, and a lot of this

23:10 is going to be behind-the-meter stuff, which we also addressed last week with some of the other announcements that have cropped up, but there's just, you know, I don't see how this arms race, at

23:23 least in the next five years, is one that you can even enter much less when, without having the magic molecule, because it's scalable, it's reliable, you know, it is cleaner than coal. China's

23:40 going to power the vast majority of its part of

23:46 the AI arms race with coal-fired generation, they're still building, we're commissioning one or two a week.

23:53 And so, you know, what path do you choose? Look, if you want to be in AI superpower, you better think hard about reversing your energy policy. Yeah. Oh, by the way. And it's going to take you

24:06 what 10 years to get nukes? Yeah, at least. By the way, Duke's Hotel is undergoing a major refurbishment. So the hotel is actually closed, but the bar is still open. So long as the bar stays

24:18 open. And don't refurbish the bar. If I've got a video Definitely don't mess with the

24:26 martini recipe. All right, bud, Brigham is just baller. Let's just cut to the chase. Go ahead. Go ahead. So a conveyor belt. And you use this stuff in mining, you know? So you're in the

24:40 middle of the Congo, you'll build a conveyor belt to get from here to there 'cause you got terrain, you gotta get over and all that. He's doing it with frack sand.

24:51 42 miles, so he's gone from basically Kermit into Lee County, heart of the Delaware Basin to do this. 13 million pounds a year, it'll move. You can off take the sand at any point. And how crazy

25:07 is that? And they have something like, I think the number is 86, 000 pounds of dry storage along the route. I don't know what intermediate or trans shipment sand storage looks like But, you know,

25:20 it's a pretty ingenious logit - 400 million bucks, right? It's all electric.

25:27 You reduce traffic, which is a big safety and congestion problem in that part of the world. Yeah, truck's a certain nightmare. Sand trucks, especially. So, yeah,

25:40 I called it the

25:47 42 mile roller coaster But this was in a January feature in the at least the. piece that I saw was tipped off by some

25:55 Twitter threads this past weekend. I hadn't seen it, but it's supposed to be online in the fourth quarter of this year. Hey, bud, we want to come out and we'll bring a camera crew and we want to

26:06 shoot it. I mean, let's go out there and let's do a B-D, there we go. I'm sure that violates every OSHA regulation.

26:17 So we've seen declining rig count. What did we see the contemporary peak, I believe, was September of '22. So rig counts drifted down, you know, not an insignificant amount since then. We've

26:30 gotten more efficient. We're drilling longer laterals. The conversation has moved pretty substantially to four mile laterals. And so against that backdrop since 2019, sand volumes are up 50

26:45 against,

26:48 you know, what. conventional wisdom before we started counting frack fleets and complete stages or effective frack length

26:58 and productivity correlations, you're using essentially 50 or sand. And so I've, makes all the sense in the world, they, you know, one of the comments in there was, you know, we see a pretty

27:13 balanced market long term

27:17 And so making this type of fixed cost investment and doing things that on the margin are friendlier from an admissions and safety standpoint, seems like pretty good business. I was talking with a

27:31 friend of mine from back in the day, if you remember the story of Carbo ceramics and then it was all Wisconsin white and then we learned we didn't need the Gucci prop it And so, you know, here we

27:46 are with, I guess this will be the world's. longest conveyor industrial conveyor and they got the they they gotta go by there is a decommissioned lignite facility outside of Austin that they visited

28:02 and talked to the people that ran that conveyor that conveyors twelve miles long and they're using the same the same technology that that that that lignite conveyor uses or used I should say as so

28:16 call for a forty two mile conveyor belt I mean that's a that's a dress industry continues to do yeah then some Ads of air now that said Huntsville alright bud we want an invitation out there so we can

28:30 shoot content on it because that's cool and that's a story that needs to be told nape this week so Wednesday at five O'clock the George R Brown They're doing the Nape Charities Concert I had at Brooks

28:44 Yates and Grant Johnson on the Podcast and they got dropped in on Friday And it was just like boomerville us talking about nape back in the day and handshake deals and all that. But the Josh Abbott

28:58 band will be doing the nape charities concert. So if you buy a ticket for that, all the proceeds go to veterans charities, which is really close. When's the last time they played a 5 pm. set?

29:09 That's true. Maybe kept playing from the night before, maybe. But anyway, so we'll be there. We're actually going to shoot some video of

29:18 that So we'll have that and then all day Thursday, me you and funk with Jacob will be running around nape. And we're going to try to shoot as much cool content as we can and interview people and and

29:30 all that stuff. So that'll be fun. I've already hit up a couple of people for segments. Nice. That'll, uh, that'll be fun. The, uh, so cool. Um, final thing and just this is just this is

29:42 this is a derivative category of finger of the week

29:47 I don't even know what this is. I was, it was, so Friday night Lauren and I had gone to Ucheko and, you know, sat at the bar like we do and all this and they kind of kicked us out of there at

30:01 midnight. Hey, we closed at 11, it's time for you all to leave. And on my, I got, I started looking at Twitter and boom, there was a trade, Anthony Davis, Luca Donchit, makes no sentence why

30:17 Dallas would give up 25 year old superstar Luca for, and who's arguably the third best player in the league. Maybe if he's playing really well, you can kind of call number two, I knew you were

30:31 going to ask that and I'm blanking The guy

30:37 from Oklahoma City, the Thunder is number two

30:43 and then number one is the Denver Center. What's the big pudgy guy?

30:49 I think that was part of the rumor around Luka was he he's very much yeah he hasn't played since Christmas because of calf strain but there's there's all kinds of conspiracy theories about why this

31:03 all went down but I tend to think that you know way more about the N B A today than I do but

31:11 facing the the prospect of keeping him with a was that a three hundred and twenty five million dollar Supermax contract so is this a sign that the new owners are not not not seeing not seeing the the

31:30 the economics that they thought they would see so so human still has a piece of the team right I think I think that tried although he says he wasn't consulted on on this transaction nor was Jason Kidd

31:43 I Dunno if you saw Jason Kidd in the press Conference But

31:50 That looked like a hostage crisis in him Morse coding. Get me the hell out of here. But you, so, so Lucas number three, you trade him Anthony Davis, what? 20th best player in the league right

31:59 now? I didn't realize he was in like an 11 time All-Star. Yeah, yeah, no, I mean. I didn't even realize he'd been around for a little bit. I mean, when you have Davis and you have Kyrie Irving

32:11 and you've got a, what's this face? The former

32:17 Thompson, the former Golden State Guard. I mean, you have basically the All-Star team from 2018 on the Mavericks right now. The problem is it's just seven years later and they're all gonna get

32:29 hurt. So orthopedic surgeons in Dallas are beside themselves with Glee on this 'cause the best rumor I've heard is that

32:41 the owners bought the Mavericks because they want to build a casino in Texas. and the Mavericks new facility. Facility

32:53 playing center would be

32:56 the base of this. And they just haven't had any luck with the Texas Legislature, you know. So does that ultimately mean? Me moved to Vegas. Vegas gets a basketball team. Vegas gets a basketball

33:08 team. And they can't move a team that right now just went to the championship last year is selling out in Dallas, Fort Worth. I think it's the fourth largest TV market. Ratings are through the

33:21 roof and Dallas right now for the team. So this is the tank so that we can move the team to Vegas. Yeah, I think you're gonna see a lot of pro sports franchises moving around for this type of

33:34 opportunity. I heard something this morning that Barry Larkin, who's a Hall of Fame shortstop from the Cincinnati Reds, has joined an organization in Orlando that is trying to bring a major league

33:46 team. Orlando, which I didn't realize, kind of the, the TV market that is Orlando, they don't have an NFL team. They do have an NBA team. Right. So I think you're going to see a lot of

34:03 jockeying and competition where

34:07 we'll see some surprising moves. Yeah. I hope the Mavs don't move to Vegas. Yeah But maybe Dallas will know how Minneapolis felt when the legendary North Stars got poached and moved to Dallas. All

34:20 right. Big event this weekend. What is it?

34:24 The big event this weekend. Yeah. Coming up. The Super Bowl. Wrong. Ah, there you go. I knew it was a set up. It's a trap. There we go. Pictures and catchers report this weekend. Oh, nice.

34:34 There you go. I'll be back out in Scottsdale for

34:40 part of the Cactus League If you've never experienced spring training in Arizona, it is a. Fantastic experience we did with the Kids cause we were astros fans and they were always in kissimmee we

34:52 used to do that periodically humid and it rains a lot Yeah but it was still cool to go to I mean the the the laid back vibe you can do where you can actually talk to the players and stuff I think is

35:04 really so have you taken Sunday I repeat or how can you bet against the chiefs at this point that they just seem to be a team of destiny soon as I say that I've jinxed them Plus I Hate the Eagles I

35:20 Can't Say I Like I Can't Say I like the Cowboys much and we talked about what's his name that now did you see the memes popping up after the dissect trade a Jerry Jones and Stephen Jones were just

35:34 gleeful because now we're not that stupid we're not so stupid as gyms in Dallas I did like the trade the the I saw a meme somewhere that Said This Maverick's trade is so bad that it must, whoever the

35:50 GM is, I forget what his name is, Harrison. Harrison must be up for chief trade negotiator for Donald Trump. Yeah, and there's kind of the NBA

36:01 conspiracy theorist about, you know, not really surprised he ended up with the Lakers. Yeah. Yeah. Yeah, everybody. Kind of the way you need to start thinking about the Dodgers Yeah, as well

36:15 with their gazillion dollar payroll. Yeah, so. Exactly. All right, we've got one last thing and I sent the video. So hopefully it doesn't have the best audio on it, but our biggest fan at BDE,

36:31 local Richmond police officer Vlad, who listens every week and each morning at coffee, gives me notes on the show, what he likes then like, was actually awarded officer of the year. by the

36:46 Richmond Police Department. So congratulations to the, congratulations to the Vlad and we've got a statement from Vlad that we'll pay now. Meeting Vlad is on my bucket list. There we go, we'll do

36:58 that. All right, Mark, good seeing you. Good seeing you. Back next week.

37:08 The only thing I have to say, I'll be seeing the award by the grown up here, to give me the award for the best possible year. I'm the grown, I'm the best looking officer. So I need to send the

37:20 award back, maybe a piece of tape to call the whole year for the best looking year. I just want to deny your name all this.