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HomePodcastA masterclass in ‘How to shoot yourself in the foot’

A masterclass in ‘How to shoot yourself in the foot’


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In the mid 1400s, the head of the Byzantine Empire was a career politician with decades of experience who most people thought would be a capable leader.

Instead, through a series of hilariously terrible decisions, he managed to take his already weak empire off the cliff, and into the dustbin of history, in just a few short years.

And one of the ways he did that was by deliberately giving up the most strategic resource his empire possessed.

We’re seeing a similar story play out today– the people with decades and decades of experience are doing all the wrong things to vanquish one of the most strategic resources in our modern world: energy.

Think about it– the people in charge have demonized an entire industry. They punish oil companies with creative taxes and insane regulations. They refuse to follow the law and lease federal lands to oil and gas companies. They drag their feet in the permitting process.

They constantly antagonize energy companies and blame high fuel prices on the industry’s “greed”.

In short they do everything they can to destroy a critical resource that the nation depends on for growth and prosperity.

This is our topic for today’s podcast. We start off walking through the comical incompetence of Emperor Constantine XI from the Byzantine Empire… and then go through some key issues to know about in the oil and gas sector.

In short, supply is tight… and probably not getting better. Demand is increasing. It’s a really important trend to understand.

But we leave with some good news. This is fixable, both long-term and short-term. But the short-term fix is going to rely on a few surprising characters from our past that may become some of the most exciting economies in the world.


Today we’re going to go back in time to January 6 and the year 1449 to the city of Mistress and the Peloponnesian Peninsula of Greece. Now, at the time, Greece was a pretty important part of the Byzantine Empire. Byzantine Empire, as you probably know, was really just the continuation of the the ancient Roman Empire that had been around for a really long time. And at its peak, the Roman Empire encompassed virtually the entire known Western world, from Hispania, North Africa, central and Eastern Europe, Britannia, all the way to the Dardanellesh and modern day Turkey. At a certain point in the third 4th century, there was a formal demarcation of the Roman Empire.



And they said, you know what? There’s going to be two empires are going to be an Eastern Empire that’s based in Constantinople, modern day Istanbul, and a Western Empire that’s going to remain in Italy. And the two empires were basically two different empires. They had two different emperors, imperial courts, imperial armies, their own palaces. Everything was totally separate and distinct.



The thing is that while the Western Empire was in decline, right, the original Rome was in serious, serious decline. With the barbarian invasions and the tax farmers and the desertions and everything that they were suffering there, the Eastern Empire was thriving. It was growing. It was getting better and more powerful. And even by the time the Western Empire collapsed in 476, the Eastern Empire was really just getting started.



It hadn’t even peaked yet. The Eastern Empire wouldn’t peak for more than a century after the fall of the west, and it stayed very powerful for a very, very, very long time. We can actually tell this because the Eastern Empire, they minted a special coin. It’s called the gold solidus solidst coin. And the solids gold coin was something like reserve currency.



It was like the US. Dollar. Today we’re in the same way. You might have a merchant in India doing business with somebody in New Zealand, and they’d conduct that transaction in US. Dollars.



It was the same way that a merchant in China in the nine hundreds would do business with somebody in India, and they would transact in Byzantine gold solidus coins. So that’s a pretty powerful statement about the prominence of your empire when you have everybody around the world using your currency. And on top of that, they had still the cachet of Rome. And it’s actually a little bit confusing because it’s called the Byzantine Empire because the area where Constantinoble was built in ancient Greece was known as Byzantium. Byzantium is really the area, again, modern day Istanbul.



And it was a very strategic location. And the reason why it was so strategic is because Byzantium is on the Turkish Straits, where you’ve got essentially where the Mediterranean and the Black Sea meet. You’ve got this very thin strip of land that today you can drive across the bridge and you’ll see a sign that says, welcome to asia and you do a U turn and you go back the other way, it says welcome to Europe. This is essentially the land bridge between Europe and Asia. And across is a very narrow body of water that passes and you can pass all the way to the Black Sea.



Now, in an ancient world, this is a really critical transportation route whereas trade and everything really went through there. And so if you controlled the gardeners you really controlled a lot with respect to global trade at the time, really as far off as China. So people as far off as China could trade with Hispania and Britannia and everything. And if you control the Darden mills, you control that. That was really, really, really critical.



It was the strategic resource. And in ancient Greece’s era was called Byzantium, which is why it’s known as the Byzantine Empire. But really they consider themselves to be the Roman Empire because that’s how it got started was as the Eastern Roman Empire. And really after the fall of the west, they just viewed themselves as we’re the Roman Empire, we’re the second Rome. It just happens to be in Constantinople.



The other part to sort of add a little bit of confusion to that is that sort of culturally the Byzantine Empire was Greek. They adopted Greek ways, Greek customs, Greek culture and so they consider themselves they call they refer to themselves as Greek, yet they were the Romans, yet they were the Byzantine Empire. So it’s a little bit confusing. But for that context Byzantine Rome and Greek sort of all means the same thing in that case. So again, we’ve got the Byzantine gold, solidus coin as the reserve currency is a very powerful empire in the east based in Constantinople.



And it stayed powerful for a very long time. And then the crusades came. The Crusades started in 1095 and a lot of the Crusades really went through Constantinople. Constantinople was sacked and they also found themselves suffering a lot of the same bad leadership, bad policies, too much spending, too much corruption that had really plagued the Western Roman Empire hundreds of years before and a couple of hundred years after that. By the 14 hundreds, there’s hardly anything left.



To be honest, it’s amazing that it lasted as long as it did. When you think about the Eastern Empire, you know, the Western Roman Empire, western Rome and from the time it was republic to the time the Western Roman Empire collapsed was about a thousand years almost. And then you got the Eastern Empire lasted another 1000 years. That’s really impressive. Even in spite of all the bad policies and the spending and the currency debasement and everything that lasted as long as it did, it’s pretty amazing.



And the 14 hundreds, there was hardly anything left. Their big rival at the time, the big scary rival, was the Ottoman Empire. Everybody was terrified of the Ottoman Empire. And in 1422 the Ottomans actually laid siege to Constantinople. They said, we’re coming for you.



We want Constantinople. But they lost. The Byzantine were able to fend them off. They had very strong walls, and the Ottomans weren’t quite ready for it. And at the time, there was a pair of brothers.



There was Constantine and his brother John. Palai Logos was actually the emperor, sort of the de facto emperor was two brothers that were emperors. The other brother was kind of incompetent. So John was really the emperor, and his other brother Constantine was sort of like vice president, right? He was the guy sorry, constantine was the guy that ruled when his brother, the Emperor John, was away.



And he was away a lot. He was constantly in Europe trying to shore up support, saying, hey, guys, the Ottomans are coming. We need your support, we need allies. This is going to be a big deal, and it’s going to affect Europe. If we go down, this is going to be a big deal for Europe.



And so John was in Europe a lot, and so his brother Constantine was acting as the regent again. He was sort of like vice president. And even when John was back in town, back in Constantine noble ruling, constantine was, you know, he appointed him as head of certain armies. He set up trade missions and diplomatic missions and so forth. And so again, as we start our story on the 6, January 1, 2009, emperor John’s older brother had died.



And John, everyone knew that Constantine was his favored successor, and so they decided to make Constantine emperor. Now, ordinarily the coronation of the emperor of the Byzantine Empire was a really big deal. It would take place in the capital city and the famous cathedral, the Hajja Sofia. If you’ve been to Istanbul, you might have been to the Hagia Sophia. Today it’s a mosque, because, you know, the end of the story, it’s a mosque today, but back then, it was a cathedral, and so it would be all the people and all the nobles, everybody would show up for the coronation of the emperor.



But instead, on January 6, 1449, constantine pale locos was crowned emperor of the Byzantine Empire, way outside of Constantinople and city of Mistress and the Peloponnesian Peninsula in Greece. And it was a small ceremony, it wasn’t even a religious ceremony, where they normally have all the religious people come out and do a big coronation, and I placed the crown on thy head and all. It didn’t even do any of that. It was just really a civil ceremony. It was no big deal.



And they didn’t even put a crown on his head. Poor Constantine had to go out and find his own little wreath and put it on his own head to make himself the emperor. That sort of gives you an idea of the state of the Byzantine Empire at the time, where even the crowning of the emperor was just sort of no big deal, and it wouldn’t be long. He was obviously the last emperor, and it wouldn’t be long after that before the Byzantine Empire was done. The interesting thing about it, though, is if you look at Constantine, remember I told you he was basically kind of like vice president?



He ruled in place for his brother quite often. He was always he had a lot of experience, really decades of experience in trade and defense and foreign policy. He knew all the foreign leaders. Everybody knew him. He had this big reputation.



And so you kind of think, well, he’s a guy who knows what he’s doing, turns out, wasn’t really the case. And when Constantinibi was crowned Constantine II of the Byzantine Empire, and so the first thing that he did, and this was, you would think, maybe a reasonable move to make. First thing it is, he went to their adversary. He went to the Ottoman Empire, and he went to the guy who was the sultan, the head of the Ottoman Empire. His name was Mehmed II.



He went to Mehmed II, said, look, what are your intentions here? I don’t want to fight. I don’t have a problem with you. And mehmed said, you know what? I have no quarrel with you, sir, and I swear to Allah it will not be me who breaks the peace.



I won’t come after you if you don’t come after me. Don’t threaten my sovereignty, and we’re not going to have a problem. And you think, wow, okay, that’s great. I really dodged a bullet on that one. Now I can just kind of focus on shoring up my own internal economy and trying to survive here.



But no, Constantine said they went and they signed a little peace treaty, and before the ink was even dry, he said, I don’t trust that guy McMed, which really makes you wonder, if you don’t trust the guy, why would you even go through the trouble of signing a peace treaty to begin with? What’s the point? But they signed the peace treaty. Then immediately after, he went and said, I got to find another ally because I don’t trust this guy. I think he’s going to come after me.



So the interesting thing about it is that Constantine and the Byzantine Empire, they actually had another rival. Not just the Ottoman Empire. They had a lot of rivals. One of the other major rivals was the Republic of Venice. Venice was a major rising power at the time.



Dennis have really had a really peak. They were huge trade power. They’re huge economic power. They had a powerful navy. I mean, Venice was really something to be reckoned with, and they decided, well, maybe we can go to Venice and we can get them to be our ally.



But wouldn’t you know it, right before they went to Venice and started asking for an alliance, they actually went and raised a bunch of taxes specifically on venetian goods. And they said, all goods and all ships that come specifically and only from Venice are going to be subject to this huge tax, these huge tariffs. So any Venetian ship that comes into Constantinople is going to be this big tax, but only for Venice. And so, obviously, if you’re the Venetians, you’re thinking, hey, what the hell, man? That’s not cool.



And then all of a sudden, this guy comes with hat in hand and says, please back me up in my alliance, be in an alliance with me against the Ottoman Empire. And they say, no freaking way. In fact, we’re going to go do our own deal with the Ottoman Empire, and you can go pound sand. And that’s exactly what the Venetians told Constantine, the guy with decades of experience, who went to the Allies, all these people that he knew, that he had a reputation with, but he wasn’t able to actually negotiate a deal with them. So then he did something actually really petty, constantine, after he was snubbed by Venetians, which, you know, in fairness, the Venetians constantly just levied a big tax against them.



And so they weren’t particularly interested in doing a deal with a declining power when they could do a deal with the Ottoman Empire. So then Constantine went and tried to, quote unquote, retaliate by signing a new trade deal with this completely irrelevant city state that nobody has ever heard of. It’s called ragusa in Dalmatia. If you’re Croatian, you might have heard of it. But aside from that, nobody’s ever heard this.



This is kind of an irrelevant city state at the time. And it was just petty revenge that Constantine was playing. But he said, oh, this will show the Venetians, I’m going to go sign this sweetheart deal with this other city state. But the Venetians didn’t care, and the Ottomans didn’t care. So after he completely screwed up his relationship with the Venetians, then he went and really screwed up the deal with the Ottomans.



So remember, the Ottomans had already said, you know what? We don’t have any quarrel with you. We’re fine. We’re not going to invade you. Don’t worry about it.



But there was this kind of interesting card that Constantine was holding. There was a distant cousin of Mehmed, a guy who had originally come from the Ottoman royal family, and he was actually held captive in Constantinople. So this is a guy that Mehmed from the Ottoman Empire. He was actually paying a fee every year to Constantine and to the Byzantine Empire, and saying, hey, this guy’s my distant cousin. You guys.



Keep him in constant noble. Keep them out of sight, out of mind. Don’t let him anywhere near the Ottoman Empire. Don’t let him come anywhere near us, because if he does, it might be a civil war, and there are going to be people who think that he’s the rightful sultan, and I just don’t want to deal with that. So you guys keep him in constant noble, and here’s some money for your troubles.



And so Konstantin, after he had signed a peace treaty with the Ottomans theory, takes that risk off the table. Then he goes and gets snubbed by the Venetians, goes and raises a bunch of taxes on them, really pisses them off, hampers their economy. That goes with Hattonhand, tries to sign a license with them. They snub him. They go to the Olives.



Then he goes back to the autumn and says, hey, Mech Med, I got your cousin, but I want more money. And thinks that, like, oh, I got this guy over the barrel. I’m going to extort him into giving me a whole lot more money. Otherwise, I’m going to threaten to release his cousin, and then he’s going to have to deal with the civil war, and boy, won’t he be sorry. And he’ll just bend over and give me that money.



Well, it turns out that the guy with decades of experience, Constantine, completely misjudged the diplomatic reaction of Mehmed II. In fact, Mehmed sent a and this is actually a direct quote of the English translation of the response of Mehmed II. This is in 1051. And he said, quote, and remember, when we say Greeks, we’re talking about the Byzantine Empire. He says, literally, you stupid Greeks, I’ve had enough of your devious ways.



The late sultan, which was Macmed’s predecessor, was a lenient and conscientious friend to you. The present sultan, meaning himself, is not of the same mind. You are fools to think you can frighten us. If you think you can start something, then do so. But know this.



You’ll make no headway in any of these things, and all you will achieve is to lose what little you still have. So, needless to say, the guy with decades of experience gets this response back from his adversary and goes, oh, my God, we completely misjudged that. I can’t believe we are so stupid. And all of his advisors and counselors and consultants are standing and go, oh, jeez, you should do this or you should do that. But now the thing about Constantine is he was constantly waffling.



He could never make a decision. He was completely incapable of making a decision. And this is actually something that was very, very costly for them, because while he was twiddling his thumbs trying to figure out what to do next and not able to make a decision, mech men knew exactly what to do next. And he told Constantine. He said, well, you’ve threatened my sovereignty by making threats against me and giving me this ultimatum.



You’ve now threatened our sovereignty, so you’re in violation of the peace treaty that we signed, so I’m going to do what I’ve got to do. So Mechmed went and sailed a whole bunch of guys up right next to Constantinople and began working on basically a fortress. It’s called the Rumal Hissari Castle, and they built it literally across the river from Constantinople, right in, like, literally an ice shot right in front of Constantine. They built the Ottomans came and built this fortress, and by doing so, they took over. Control the Dardanelles.



Now, remember the Dardanelles this is this geographic location. The fact that you control the only waterway connecting the Black Sea to the Mediterranean, this is one of the most important geographic resources in the world, is a very, very, very precious resource. It is the source of your tax revenue. It is the source of your prominence and your power and your prestige. You must protect it at all costs.



The one thing that you cannot afford to do as the emperor of the Byzantine Empire is let control the Dardanelles. Go and that’s exactly what they did. It was right in front of his face. They literally built a fortress right in front of his face. And once you know it, as soon as that happened, they blockaded trade and Resupply and everything.



Because of their fortress, the Ottomans had in the garden ills. They blockaded all Resupply and so forth going into Constantinople. And it wasn’t long after that that, sure enough, the Ottomans and mechmed came with more than 800 troops in April of 1453 and laid siege to Constantinople. And it was you know, it was about six weeks. And by the end of May, on May 29, constantine himself fell along with his city, along with his empire, and the Byzantine Empire was no more, and Constantinova became the seat of the Oman Empire.



Now. That is by far not even begins to scratch the surface of being the first example of history where you’ve got somebody with decades and decades of experience that screws up the most critical. Most strategic. Most lucrative resource you have. The most important resource you have in your entire empire.



Your kingdom or your nation state. Your city state. That somebody with decades of experience goes and screws that up. Whether it’s deliberately or because of bad policy or whatever. We’ve seen this over and over and over again throughout history.



In ancient Mesopotamian. Ancient Babylon. We have Hammurabi and all of Hamurabi’s experts advising him on what to do with Sumerian agriculture. And it turned out they completely over irrigated Sumerian agriculture to the point that they intoxicated the soil with all these terrible minerals and ailments and completely destroyed the most critical resource they had in ancient Sumeria, which was their agricultural production. We saw the same thing in ancient Egypt, in the old kingdom, in the Six dynasty, completely destroying, failing to invest in the necessary irrigation technology at the time to make sure that they could maintain their agriculture production.



Completely screwed that up again, this was another leader of the Fare at the time who had decades and decades supposedly ruled until he was 94 years old. Decades and decades of experience managed to screw this up. We see this all the time, and of course, we see it today in our modern world. This is the situation we find ourselves with now with respect to energy, the people in charge, the experts with their decades of experience, are not only not doing the things that they should to prevent a crisis, they’re not doing the things that they should to fix a crisis that they’ve created, and they’re actually doing all the wrong things to make it much, much worse. We talked about this before.



This idea of something that I call this is sort of my thing. I categorize things into what I call the four forces of decline. You have the forces of history which speak to the natural rise and fall of empire, the forces of economy, the three DS debts and deficits and debasement of the currency. The forces of society are mostly peaceful protests and the intense social divisions and the censorship, and all the things we get from big tech and the cancel culture and all those things. But then there’s the forces of energy.



And we talked about this before. We did a whole podcast on this where we talked about uranium and nuclear energy. The importance of energy cannot be overstated. It’s so important. I considered a major part of the forces of decline because there is such a clear link between having cheap and abundant energy and human prosperity.



Those two things go hand in hand. We did a whole podcast about this before, but I am going to recap very briefly, sort of the history of energy. You can go all the way back to the agricultural revolution. It’s called the Neolithic Revolution. This is now 1012 13 00:150 years ago where people realize, oh, my God, I could actually plant stuff in the ground and it’ll grow.



And I don’t have to be a hunter and gather anymore. I can plant the seeds of agriculture and plant the seeds of civilization, and this is where civilization comes from. But for most of the last 150 years, since they figured out how to do this, all that work that was being done was being done with human and animal muscle. They used humans and animals to plow the fields, to work the fields, maintain the fields, to harvest the fields. They didn’t have machines.



They didn’t have drone irrigators and all that. They didn’t have any of that stuff. It was human beings in the fields. And remember agriculture back then, even to this day, but much more back then, it wasn’t just about food. Agricultural farms grew not only food, but they grew industrial commodities.



They grew papyrus and flax and cotton, things that you could make textiles and business products from. They grew hanna from which they could extract dyes and herbs for their medical industry and all these things. And they could use all those industrial commodities to trade with other civilizations. And so, really, the wealthy civilizations in the ancient world were those that had a lot of production. They could produce way more than they needed to consume.



And that excess production, that excess the excess stuff that they produced that they didn’t need to consume, they could trade with other tribes and other kingdoms and so forth. And that excess trade that made everybody wealthier and better off. And so the truly wealthy civilizations that could produce a whole lot meant basically that they had access to the cheapest muscle and the most muscle available, the most people and the cheapest people available. And you probably imagine this is basically this is where the idea of slavery comes from. It goes back more than 150 years.



We can see this stories in the Bible. The Egyptian slaven of the Israelites, the code of Hammurabi, etc. Talks about all these things. And this is an institution that has been around for thousands of years. And it was primarily because of this energy system that people said, we need labor.



We need lots and lots of people working in the fields for very, very cheap. And so this is where this came from. And it was obviously a terrible scourge on humanity because there was no other form of energy. And all this finally changed in the Industrial Revolution. And suddenly the Industrial Revolution, there was, for the first time, an inanimate material coal, wood, something that could combust inside of an engine, that could power a machine, that could power a motor to make a machine go, or power a generator to produce electricity for the first time ever.



And they had entire factories. He had electrical generation plants and so forth, being able to do things to produce energy, to do things that used to require hundreds and hundreds of human beings, and now you can do it with a machine. And that growth, the ability to take coal or wood, and then later on oil and gas and so forth, to be able to produce electricity or to be able to power motors and machines, led to an unparalleled growth, an exponential growth in human development and wealth. So this is the link, really, between prosperity and having cheap and abundant energy. When we have cheap and abundant energy, we have prosperity.



We have everything. One of the most important ingredients in prosperity is having that. But now we don’t, because the world is on the cusp of a major energy crisis that the people in charge have been engineering for quite a long time. We’ve seen prices skyrocket. And if you’re in Europe already, that a lot of people in Europe that are worried about the wintertime thinking there’s not going to be enough energy or supply of fuel sources to actually make sure that people don’t freeze in the wintertime.



And that is not an invalid concern. And it’s easy. And all these world leaders, you see, everybody blames Putin, and he certainly didn’t help, and he made the situation much, much worse. But it goes a lot deeper than that. And it is so intellectually dishonest to just go, oh, Putin is bad, and therefore, this is why I have this energy crisis, because this was in the making for a long time, bad ideas and bad policy from people who have decades and decades of experience.



This is this is one of the one of the biggest reasons behind this. We’ve seen. For example. In Europe. If you’re in Germany.



You know. You’ve got all these environmental fanatics that have been in charge of your government for a long time that have been pushing people to get rid of a lot of different power plants and say. Oh. We need to spend billions and billions and billions of euros on solar panel technology in a place where the sun hardly ever shines. Because that makes a lot of sense.



No, it’s a terrible idea. And in exchange for that, you wouldn’t shove all these power plants, including the really clean and efficient nuclear power plants and all the coal power plants and all the conventional power plants, in exchange for things that don’t actually work. And now Germany’s facing a situation where they’re not going to have enough gas for the winter. So this is really a result of a lot of very, very bad ideas and policy decisions that go back 1520 years or more. They’ve dumped mountains of cash in places that are really bad energy investments that now, when it’s being stressed, it’s clear that that system doesn’t work in the United States.



I think you could probably argue it might probably even be worse. The President of the United States, while he was still a candidate, was already threatening the oil and gas industry. Then on day one of office, he said, well, we’re not going to do any more oil and gas leases on federal land. Well, here’s the funny thing about that. It’s actually required by law.



It’s not freaking optional. Title 30, section 226 of US. Code requires by law that the Interior Department of the federal government auction off mineral leases on land that is known to have proven oil and gas reserves. It’s not an option. It is literally required by law.



It’s been law of land for a really long time. So someone just comes in and obviously says, I’m just not going to do that. Then he gets sued. A federal judge says, yep, sorry, buddy. You don’t just get to decide.



You got to lease that land and lease it off to oil and gas companies. But he still decided not to fall. They still dragged his feet. And 20 months into the administration, there’s been very, very few leases awarded. In fact, they appealed the ruling, and they actually won a very bizarre victory back in August in federal court that said, yeah, it’s fine for the Interior Department to drag its feet and not actually wore these leases.



That doesn’t even scratch the surface. At the same time, I should say that the White House responds to this and says, well, Oil and gas companies already have a lot of acres that they’ve been leased by the federal government, and all that land is not being utilized yet. So why should we lease them more land if they’re not utilizing the land that they’ve already been leased? Spoken like people that have no idea how the oil and gas business works. If you’re in the oil and gas business, you don’t go, oh my, well just ran out.



So I guess I better start the process of trying to get a new lease and develop a new project like now that my other field just ran out. No, of course not. These people are responsible executives and they need to plan years and years and years in advance and so they know that we’ve got one project. So we need three years from now, we need to get this other project up and running. So we need to raise capital for it.



We need to get the leases, we need to get the permits, we need to start working on that now and then three years after that, five years after that, ten years after that. And they have long schedule for that. So of course there’s going to be land and there might be some land that they lease. They start jill and go, oh, it turns out there’s not really anything here, or it’s not as economically viable as we thought. There’s not enough infrastructure here.



We need to make more investments. We need to go and raise capital for that. There’s a million reasons why an oil and gas company might not be using all of the land that they have. And in fact, if oil and gas companies were using even 75% of the land that they have under control that they’ve been leasing, that would be a record for them to do that. It’s very, very common in the business and there are obviously a lot of very normal, common sense reasons why that would be the case.



They don’t use all the land that they’ve been leased, but that’s not a reason for the government to say, well, we’re just not going to follow the law then that’s completely ridiculous. But it just scratches the surface of all of the backlash and the pain that the oil and gas sector in the United States, the energy sector, really faces. I think you could look at permitting timelines, for example, which are up more than 80% to 80%. More time went from less than 100 days to more than 180 days to get a permit from the federal government. Then you’ve got state permits, local permits, and all these other things and it’s constant threats.



More taxes. They just passed this methane charge for oil and gas companies in the Socalled Inflation Reduction Act. That’s not a charge, it’s just a tax. And it’s a tax that specifically goes against oil and gas companies. They’re also talking about there’s actually legislation that has been introduced into congress for a windfall profits tax for oil and gas companies.



Just go and take privately acquired profits and turn them over to the government because we just don’t like this sector. Probably the most hilarious one was if you remember last year when gas price was really going up and the government said, ah, we figured out what the problem is. The problem here is greed. And so what we’re going to do is we’re going to take the Federal Trade Commission, we’re going to send the Federal Trade Commission to go and harass all these energy companies and oil and gas companies. And they decided actually the problem was that there were too many mergers and acquisitions of momandpop gas stations, as if apparently the last line of defense of higher gas prices was some momandpop owned gas station.



So we need to send the federal government in to prevent a momandpop gas station being acquired by Berkshire Hathaway. And this is the reason why energy prices are going up. It’s so completely out of touch and disingenuous. It’s obvious. Either these people are completely making it up and shouldn’t be trusted, or they have no idea what they’re doing, in which case they shouldn’t be trusted.



But all this is clearly a very inhospitable environment for oil and gas producers and yet and yet despite this inhospitable environment, the constant threats, the regulation, the taxes, the threats of more taxes, all these things they got to do with being demonized in the media, all the things with the pandemic that they deal with because of public health policy. Now you can’t get any of the infrastructure, you can’t get any of the labor anymore, and yet the government has the nerve to blame the oil companies. Citing greed is the reason why gas and oil prices are so high. And then even still, then they go and say, okay, but we really need you to produce more. It’s like, so the government created this problem and then they demonize the industry and then they demand that the industry go and solve the problem that the government created.



It is completely and totally ridiculous. But even with all that, it’s not just the government. And one of the other major problems is that you’ve got all these green woke capitalist fanatics, starting with the poster child for all this, larry Fink, who runs BlackRock. BlackRock has more than $10 trillion under management. $10 trillion under management.



That’s 40% of us. GDP. And it’s not their money. It’s not like they’re just a super rich firm. It’s not their money.



BlackRock manages other people’s money. It’s their clients money, pension funds, banks, etc. You might have money invested in BlackRock without even knowing it. If you have an IRA or 401K or a pension or something like that, a lot of that money might be investing some BlackRock’s funds. BlackRock has a lot of ETFs, etc.



People go and they buy into those SP 500, ETFs, something like that. Well, guess what? BlackRock now is managing your money. And they weaponize this money. They weaponize your money and everybody else’s money that they have under management to bend businesses to their will.



So they decide, we like Green. We like all this woke capitalist nonsense. We want to make sure that everybody, every board of directors has to have a hearing impaired, pansexual Muslim eskimo on your board of directors. Otherwise we’re going to take the money away. And this is the constant threat of we’re going to take the money away.



We’re going to torpedo your stock price. We’re going to dump your stock and make sure nobody ever buys it ever again. And of course nobody wants to do that. So everybody just goes along with it. And so one of the things BlackRock has been responsible for is the demonization of the oil and gas companies.



And so they push big banks say, hey, we don’t think you should be lending as much to these oil and gas companies. And the banks complied. So you’ve got J. P. Morgan, Wells Fargo, they cut their oil and gas lending by at least 20%.



UBS cut their oil and gas lending by 70%. Ing in the Netherlands ended oil and gas lending altogether, 100% decline in their oil and gas lending. Then you’ve got, which I think is hilarious, the European Development Bank, which is a multinational kind of sovereign development bank that’s owned by the sovereign member states of the European Union, germany, France, Italy, etc. They all own the European Development Bank. These governments.



And the European Development Bank said, we won’t make any loan to any oil and gas company. So even if an oil and gas company wants to go green and make like a huge wind farm somewhere and wants a loan from the EDB to do it, european development mixes, nope, we’re not going to give you that money even to do some big green project. It’s so completely ridiculous. It’s impossible to take these people seriously. We also have seen a big decline in not just lending, but private equity.



So private equity is private money that goes into private companies, private equity funds that invest money into private companies. This has been previously traditionally, it’s a big source of capital for oil and gas companies because a lot of them are private, especially at first. They’re exploration, discovery companies that go out and they discover a big fine. They need capital to develop that into an actual producing field. And so they go to private equity companies and banks and so forth.



Private equity companies, just like banks, have been pulling their money out of the industry. So for example, in the first half of 2021 saw the lowest private equity activity with respect to mergers and acquisitions in the oil and gas sector in a decade. And it just got worse. If you compare, for example, 2019, the second quarter of 2019, there were 30 private equity deals valued at a total of $32 billion with oil and gas companies. By Qtwo of 2022, it was seven deals and $2 billion.



So it went from $32 billion in private equity to $2 billion in private equity. That’s a major decline in the amount of capital in this industry. And so this is an industry that needs money. It needs capital because it’s very capital intensive. It takes a lot of money to find oil and gas, to produce oil and gas, to actually develop the infrastructure and everything that’s necessary for that stuff.



It’s very capital intensive. It needs the cash. And the cash has been running away from the sector. Meanwhile, you’ve got all these stakeholder woke capitalism ESG funds, which ESG stands for Environmental, Social, and Governance. It’s just code for woke capitalism.



And you got all these record number of ESG funds that are investing in whatever Greta Thunberg’s dreaming up. But all this money going out of the oil and gas sector and into the ESG funds. And, you know, obviously this this doesn’t apply to China. All these big companies, no BlackRock, they do whatever in China, doesn’t matter. They don’t wag their finger at the Chinese and say, oh, you’ve got to get out of oil and gas.



You got to be green. You gotta do this stuff. They don’t do that in China because they know they would get laughed. That would be their last day that they ever operate in China. And everybody, they got to just bow to the Chinese, oh, we can’t offend the Chinese.



And so they don’t ever say any of that stuff. They save it for the United States. They say, oh, America, you’ve got to do these things that are economically disastrous for you. Only the United States has to do these economically ruinous things. The Chinese, of course, can keep on doing what they’re doing.



If we look around actually, the last thing I want to mention about this I should mention this before this is actually completely absurd. On top of this retraction of capital that’s coming out of oil and gas companies, so people don’t want to invest in oil and gas companies. Banks aren’t lending. Private equity is not coming in. Then you’ve got these funds.



And these funds now are becoming activist investors in oil and gas companies, trying to turn oil and gas companies into green companies. And there’s this really, to me, bizarre case of a hedge fund called Engine Number One. That’s the name of the hedge fund company. And they bought this tiny, tiny, tiny piece of ExxonMobil, literally zero zero 2% of ExxonMobil stock, a very teensy, tiny little piece of ExxonMobil. And yet they made such a stink, they jumped up and down and they waved their hands and said, oh, oil and gas, evil, green, green, and we got to save the world, and so forth.



And so what did they do? They made this big stink and this election for directors and they put their own directors in front and nominate their own directors for the board and they won. And they got so this company that owns 0.02% of ExxonMobil was able to get three out of eleven board seats. So almost 30% of the board seats went to a company that owns Zero, went to a single shareholder that owns Zero, 2% of the company. It’s completely obscene.



And of course now they’re agitating to get the ExxonMobil board to push the company, do all this green stuff, and then they go and they set their sights on all these other energy companies too. And now we can see Total and Chevron and Shell and all these companies that are saying, oh, we’re going to go green now, we’re eliminating our carbon footprint, we’re switching purely to green sources of energy, we’re going to be completely renewable, we’re getting out of the oil and gas business and so forth. So the big oil companies are feeling the existential threats to their business and they’re shifting with what they feel like are the times. And the times they think are, well, we’ve got to go to green energy now. So they’re getting away from fossil fuels and going to green energy.



And that’s really a terrible idea. And the reason that’s a terrible idea is because I’m not antienvironmental, I’m extremely proinvironmental. I like the idea of having clean energy, clean water, clean air, clean everything. I like this. But there are smarter ways to do it.



And what we have are policymakers that seem to deliberately ignore the intelligent ways to do this. And again, they just go to these really dumbass ways that they think are saving the world and they’re not. They’re actually making it much, much worse. We’ve talked about energy economics again in that previous podcast I did a couple of weeks ago. This concept of energy return on energy investment.



The basic idea is you’ve got to put energy into something if you want to get energy out. There’s no such thing as free energy, right? So if you have solar panels, well, you got to put energy into mining the minerals that go in and producing the photovoltaics and transporting the solar and installing them. All that takes a certain amount of energy. If you’re drilling for oil, you’ve got to have enough energy to run the pumps and run the generators and all that stuff takes energy.



And the idea is that you put some energy in and you get a lot of energy out with oil, basically, for every unit of energy you put into oil, you hope you should get around 20 to 30 units of energy out of it. So that’s a really high return on investment, basically getting a 30 to one benefit on the energy return on energy investment. With solar, if you’re being actually really honest about it, you’re looking at five to one, six to one, maybe eight, nine to one energy return on energy invested. Biofuels, by the way, are even dumber biofuels. You’re getting less than one to one.



So when people take, for example, corn, and they turn corn into fuel that you put in your car, not only you’re destroying your engine by putting a bunch of corn ethanol in your car, but you’re also actually losing energy in the process. Corn ethanol is one of the dumbest ideas. It’s a terrible, terrible idea. And you’re also contributing to you’re taking food at a time when grain supplies are really tight and there’s not enough of it. In a lot of countries right now, you’re taking grain out of the agricultural supply and putting into something that loses energy.



It’s a horrible idea, but Greta Thunberg likes it, so I guess everybody has got to go along with it. So the end result of all this, if we think about oil and gas companies, we’ve got all these government challenges, the taxation, the regulations, the permitting, the complete rejection of the rule of law with respect to landlords, and say, oh, we’re not going to follow the law, we’re just not going to lease any land to you because that’s what we feel like. You’ve got all the pandemic related issues we talked about with labor shortages and supply shortages. You’ve got the loss of capital from banks, the loss of capital from private equity funds. You’ve got activist investors that are going out and saying you’ve got to be a green company now because I own zero zero 2% of your business, so forget about the other 99 8%, 99, 98% of your investors.



Forget all those people, you know, the minority rules and we say you’ve got to be green, so you’ve got to be green because we own zero 0%. Totally insane. Then you’ve got all the constant negativity in the media and the stigma. And of course now the big oil companies are bowing to all of this and oil and gas companies are trying to still make it happen, yet somehow they’re still being blamed for this and say you’re greedy and this is all your fault. It’s so ridiculous.



Again, it’s impossible. I think when you actually look at the data and the fact to take any of these policymakers seriously, the next thing we need to talk about, if we’re trying to figure out where is the puck going to be, is longer term supply and demand issues. And if we’re talking about supply, one of the big things that we’ve really got to recognize is that OPEC, the one that everybody thinks of really is Saudi Arabia. You’ve got OPEC, which you’ve got Kuwait, and you’ve got UAE, et cetera. But really, we’re talking about Saudi Arabia.



Saudi Arabia’s pretty tapped out and they quite shockingly revealed that they could increase their production, their production capacity. Not they were going to increase their production. They actually said they were going to decrease production, but they want to increase their capacity. They want to have the ability to produce more if they want to. But even then their ability to produce more, their capacity, they said they could only get to 13 million barrels a day, which is only a little bit more than where they are now.



And what they said is, once we get to 13, we’re done. We have no ability to produce more than 13 million barrels per day. And that was a pretty shocking revelation because Saudi Arabia is not transparent about anything. And so for them to sort of come forward and say, we can only get to this much and then we’re done, that’s a pretty big deal. And people ought to be paying attention to that.



And it does show that these places that people thought for long and ever that they’re going to have oil and they’re going to be pumping out oil and very cheap and inexpensive oil forever and ever, until the end of time, well, that’s absolutely not true. Then you’ve got one of the other ones that people have always have relied on for really most the last ten to 15 years. If you think about us. Oil production back in the 1970s was quite high and then started enter a period of decline. And really by 2007, oil production in the United States was just 5 million barrels per day.



And this was going to to be, be a pretty big problem because a lot of the conventional fields in the US. Were just mature and it dried up. But in the late 90s they came up with this idea of hydraulic fracturing and horizontal drilling and so forth. And by the early two thousand s, this was really leading to a new renaissance in oil production because of what they could extract through the shale fields. And this shale bonanza created really just a boom in oil production in the US.



Production doubled. It got up to now it’s 12 million barrels per day. And most of that growth from 5 million in 2007 to 12 million today, most of that growth in 15 years was really because of shale. The thing about the shale though, is that a lot of these shale regions are actually mature and they’re declining or about to decline from their peaks. And so the idea that we can rely on in the United States, all this extra shale coming online, is actually not entirely true.



And so the two sort of big forces, saudi Arabia and shale oil in the US. Are not two things that could really be counted on in terms of constantly creating more and more supply, especially in the United States. When you consider that you’ve got all these headwinds with the regulation and the lack of capital and so forth in the industry, and then we want these shale producers to produce more, it’s just not feasible, it’s not a realistic expectation. Then you’ve got actually even moving on from the actual production itself, moving into refining. Refining is when we actually take the crude oil and we turn it into a usable product by consumers in the end.



So we take crew and we turn into gasoline or diesel or jet fuel or heating oil or whatever else. And that refining capacity is really, actually falling. Refining capacity is really important because the more refining capacity there is, the more oil can be processed into finished goods. Refining was always a fairly low margin business. People had to have a lot process, a lot of volume in order to make up for it.



It was very steady, but fairly low margin business. Nobody was going to have some big tech company valuation being a refiner, but it was a very important business. But now refiners starting to realize, you know what, oil and gas and gasoline is not an industry with a big future. You know, we look at Gavin Newsom in California decreeing that there will be no gasoline cars sold in California after 2030 or whatever. I mean, this sort of thing, who would want to be a refiner knowing that your product that you make is going to be obsolete?



Nobody’s going to want it by 2030. So we’re starting to see refining capacity decline in the US. This is a big deal. In April, there’s a big refiner in Houston. That refines has a capacity for 2630 barrels a day.



And they said we’re going to close next year in 2023, in May, the following month, a Phillips 66 refinery, I believe, in the state of California that has 1200 barrels per day capacity, said now we’re going to shift to biofuels again, the fuel that you literally lose energy on, that’s what we’re going to do, though it doesn’t make any sense. Only to Greta Thunberg does it make sense. But that’s what we’re going to do, because that’s the idiotic direction that the world is headed. Because these people with decades of experience who are making decisions, are making all the wrong decisions. So little by little we’re losing refining capacity in the US.



It’s definitely worth thinking about. Do the shale fields, are they peaking? Maturing a lot of oil company executives, if you read the Dallas Fed Quarterly Oil survey, there’s a lot of executives in the field talking about the shale fields that are peaking. And we’re starting to see some of this in the data from the Energy Information Agency of the federal government. So this is another concern really to think about longterm supply and demand.



It’s not even just on the crude side. It’s actually further down the value chain where you’re talking about the ability to refine the crude into a finished good that the consumer can actually use. So losing not only the ability to produce crude, but the ability to refine it. So this is a pretty big deal. And then if we think about demand, obviously demand tends to rise over time because of population, wealth and changing demographics and so forth.



And to illustrate that in 1952, global oil demand, global oil consumption was twelve, 4 million barrels per day in 1952. Today it’s 101,000,000, right? So that’s an eight times as much difference, right? We consume eight times as much oil today as we did in 1952. The population has also increased, but the population has only increased by three x, from two 6 billion to seven 8 billion.



So that’s a three times growth in population, but an eight times growth in oil consumption. The difference, of course, is that we have other countries now that are wealthy. So it’s not just the US. And maybe the UK and Canada, et cetera, back in 1952. Now it’s China and people across India and all over Africa, etc.



They have air conditioners, too, and they have computers and they have devices and so forth. Technology helps bring that down. If you think about the electrical consumption of an individual appliance, a refrigerator, a television, etc. Back in 1952, they probably consumed a lot more power than they do today. Today our appliances are a lot more energy efficient, but we have so many more of them, right?



Instead of just having a refrigerator and a toaster in the kitchen, we got 100 different things, and coffee machines and juicers and all those things, and they all take electricity. Instead of just having one TV in the house, we got five TVs and 18 different electronic device. Instead of one car for the family, we’ve got three cars in the household and all these things. So we end up, even though technology helps us consume less per device, we have so many more devices because that’s one of the effects of wealth. And we have so many more people that have entered into that wealth, into the middle class, from developing countries.



And that’s why we go from a three x increase in population to an eight x increase in energy consumption. And this trend, you can only imagine, will probably continue. And so if we have a supply that’s basically flat or decreasing, and we have demand that keeps rising, that pretty much tells you what’s going to happen with energy prices. You can make a very strong case that energy prices probably going to continue rising, and it’s not because of Putin and all those sorts of things. Although, again, he has definitely made the situation a lot worse.



He’s another guy with decades of experience that managed to screw it up for everybody. But it’s not just that. And it’s not to say that I would bet you that if the war in Ukraine ended tomorrow, that there would be a significant decline in oil prices and so forth. But it doesn’t solve the problem because you still have these major supply constraints. You still have the fanatics and all these issues and the rising demand and so forth.



That’s a big problem. And it’s something that absolutely has the potential to continue making energy prices much, much more expensive. The good news is there are some ways out of this, so I don’t want to leave you feeling really dark about it. I would think if we’re skating to where the puck is going to be, I think we should probably expect higher energy prices. But there are some ways out of this.



And one of those I can’t have a discussion about energy without mentioning nuclear. Again, that technology already exists. We’ve got generation two, generation three technology that already exists. They’re working on generation four nuclear reactors that have an even higher energy return on energy investment. Nuclear energy return on energy investment is extremely high.



Generation four reactors are looking to be even higher than what they are now. It’s a cheap source of energy. It has a lower carbon footprint than even solar. I mean, it really ticks all the boxes. And so the fact that you don’t have the highest level political policymakers taking this very, very seriously shows that these people just have no idea what they’re talking about.



On top of that, though, is an area of the United States called the Green River Basin. That’s in Wyoming, Colorado, Utah. This is a very unique shale deposit that is a monster. The US Geological Survey estimates that there’s up to 6 trillion barrels of shale oil in there. That at least one 5 trillion that would be recoverable.



And to put that in context, there’s been a total of about 1 trillion barrels of oil consumed in all of human history across the entire world. So we’re talking 50% more oil recoverable than has ever been consumed in all of human history just in this Green River Basin area in the United States. So that’s a lot of oil. The problem, of course, is that right now it’s a very unique, it’s very unique chemistry, it’s very unique geology. And so the technology right now doesn’t really exist to be able to extract that.



Doing so would prove completely uneconomical. And at some point it’s going to be possible, but it’s just not possible to do that just yet. So that leaves us with an interesting situation. We talked about supply. We talked about demand.



Demand is increasing, supply is constrained. We’ve got all the fanatics that are trying to tear down supply and make it more and more difficult and pushing people into these completely ridiculous solutions, these renewables that just don’t work, but saying, no, we don’t want nuclear. The solution that does work, we want to go with biofuels like corn ethanol that is completely stupid. And solar power in places where the sun doesn’t shine. It’s so ludicrous.



These are the people with decades of experience and the decisions that they’re making. However, there are a couple of places on the list where there’s serious untapped potential, and the three in particular are Iraq, Iran, and Venezuela. And the reason for that is that those three countries are in the top five, and quite possibly even. The top three in terms of proven oil reserves in the world. We’re not talking about anything fancy.



We’re not talking about generation four nuclear reactors or any green stuff. This is just hardcore old school oil and gas, conventional energy, the stuff that everybody hates. But you know what? If you want to avert an energy crisis, you can’t just go cold turkey and stop oil and gas right away. The way to do it, obviously, would be, well, let’s embrace nuclear.



Let’s embrace a lot of these other things that actually make a lot of sense. Let’s not embrace corn ethanol and other biofuels. Let’s get out of this business where we’re incentivizing solar power, and especially in places where the sun doesn’t shine, etc, etc. It’s totally ridiculous. So there are technologies for this, but in the meantime, there’s a transition period there to be able to do that.



You can’t just build a nuclear power plant by tomorrow morning. It takes a long time. In fact, with the generation four stuff, they’re not even going to have that out in commercial viability until at least 2030. So we’re way out from some of these things. The generation two and generation three stuff still exists, but there’s got to be at least a decade or two of actual oil and gas, old school oil and gas that’s being used if you want to afford a serious, massive economic crisis thrust upon us by the people with decades of experience.



And the three place on the list, the top oil producers, the top oil reserves in the world, the number one in the world is Venezuela. It’s not Saudi Arabia. Saudi Arabia is supposed to be 258,000,000,000 barrels. Venezuela 303,000,000,000 barrels, according to the US. Energy information Agency.



The Saudi Arabia numbers are you have to treat with extreme skepticism. Is that really 258,000,000,000 barrels? Potentially something that’s I’ve seen a lot of calculations that put it at a lot less than that. And again, the Saudis themselves are saying that they’re going to tap out at 13 million barrels per day. So it’s hard to have a lot of confidence that the Saudis have 258,000,000,000 barrels and reserves.



If they’re saying we’re going to have limits on our capacity, it doesn’t really make any sense. But again, the big ones on the list here, iraq, Iran, and Venezuela. Venezuela is number 1303,000,000,000 barrels. There’s so much potential there, and I think especially for the US and North America, it’s extremely interesting. I did another podcast where I talked about I call it the Barbarian Kingdom Theory, where you’ve got instead of having one single superpower, you have a lot of powers, a lot of different regional powers, and sometimes people band together.



And the concept of a North American union where the US and Canada and Mexico sort of get together as a single trade bloc, and I could actually see Venezuela being part of that. If I were to have a conspiracy theorist, I would consider the possibility of even an invasion of Venezuela at some point. Just given the examples in the past, most recently, obviously the invasion of Iraq in 2003, which in theory was based on the pretext of weapons of mass destruction and liberating the Iraqi people from Saddam Hussein. But it turned out to be very much about energy and oil with Venezuela. It’s entirely possible that a very desperate oil star of the United States goes after that 303,000,000,000 barrels with a similar pretext of we’re liberating the Venezuelan people from this evil dictator and so on and so forth.



There was another precedent, though, set 100 years, almost 100 years before that, with the liberation of Panama when Colombia was first made independent from Spain, and one that’s independence from Spain, panama was part of Colombia. And a bunch of people went down to Colombia and tried to plead with them to say, let’s do a deal. Let’s build a canal, and so forth, and the Colombians weren’t having it. And so at a certain point, a bunch of US. Financiers, led by literally JP.



Morgan, the man himself, staged a coup in Panama, financed a revolution, and helped engineer the independent republic of Panama, whose first order of business as a new government was signed a deal with a bunch of US. Banks to finance the Panama canal project. And over time, obviously, they built the US. Built a canal. The corps of engineers came in, the military came in, they built military bases, and this became the Panama canal zone, which remains sovereign US.



Territory in Panama for decades and decades after that. It’s possible that energy prices, energy markets get so far out of balance that the US. Gets desperate and stages find some excuse to go into Venezuela and creates a kind of a Panama canal zone in Venezuela to take over a bunch of oil fields there and get a big piece of that 303,000,000,000 barrels of oil reserve. Maybe so, but either way, even without such imperialistic intentions, I think it’s entirely possible. I mean, Venezuela is a place that has reached rock bottom.



They don’t have food. They don’t have medicine. They’ve got a massive refugee crisis, people fleeing Venezuela, going all over the world, actually. It’s heartbreaking to see. However, with that much oil, it’s impossible to ignore the potential of that place.



And I think that if they’re able to get rid of this government that they have and get something that’s just not evil, something that’s just not horrible, it doesn’t have to be the most efficient government in the history of the world. It doesn’t have to be the most righteous and just government, history, world, just something that’s not so evil and terrible as they have. They can become extremely wealthy, frankly, in relatively short order. And the precedent for this, I mean, you just look at the growth of Dubai, for example, which in the early 1990s even, was nothing. And within 15 years, it was this hotshot place to be with all this wealth and glitz and glitter.



I mean, Caracas again, this used to be a really, really welldeveloped place. Very wealthy and lots of opportunity. And I think it absolutely can be again. And I think there’s a case to be made that Venezuela could potentially be one of the most exciting places in the world, when he’s sitting on 300 plus billion barrels of oil in a time where the oil markets are really tight and the people in charge don’t have a clue what they’re doing. There’s a lot of potential there.



Not yet, because they still have this huge problem. But there’s a catalyst there that once that government falls, and history would tell us that that’s most likely going to happen at some point, there’s a serious amount of potential in Venezuela. I think we’ll go ahead and stop there. I really appreciate your time and attention to listening today, and I will speak to you again soon.




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