YouSaid · the spoken record

Morgan Downey

lines on the record: 56
first: 2015-07-19
most recent: 2015-07-19
sittings or episodes: 1
sources: podcast

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“Thanks, guys. And if you need to follow me on Twitter, I haven't created the fake all Naemi yet, but you can follow me at CommodityMD”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“He kind of has this love hate relationship with Wall Street. He kind of hates Wall Street, but he loves to write about Wall Street. But he writes really well. But that Flatch Boys is also grateful.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, the flashboys That's a great book, also. Yeah, I mean, he writes well very entertainingly. And again, he's kind of an interesting author in that I also think he's kind of a little bit of a bias.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And I like the way he kind of uses, he makes everything very accessible, like things like Moneyball and those other books are also, I like his kind of approach to looking at an issue or a story, but looking at it from a different angle, but without his first book, I believe it was his first book called Liar's Poker, written about the trading floor at Salmon Brothers back in the day. And that kind of got me, that was the book that inspired me to get, or one of the books that inspired me to get into financial markets. It made something, it just made it alive, turn that whole kind of space into made it very interesting and compelling. And obviously power support, I'm sure, were exaggerated and whatnot, but it just, you know, that book was one of the formative things that made me kind of want to get into the world of finance.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Interesting. One of the books that kind of got me interested in financial markets was Liars Poker, Michael Lewis. Great book, well written, very entertaining. He's a great writer. I love everything he writes.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And so he's obviously a critical guy. In terms of kind of analysts and people kind of in that published research and whatnot, there's kind of a whole ecosystem of these individuals. Gosh, one of the, and usually the interesting thing is that a lot of these people have a bias. So Al-Naimi is obviously a Saudi old minister. He has got a bias toward higher prices. People that work that do research at banks, there's good research produced by Citibank. I mean, it's kind of a lame thing to say on a kind of banks kind of a, but they produce some really good research. They've got a really good research team there.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And a lot of what people say on TV and whatnot is usually a very extreme thing to try and get a reaction or get a buzz. It's kind of almost like writing a headline. You need to say something sensational. So who do I listen to? Obviously, anything that comes out of Al Naimi, who's a Saudi oil minister, that is like you kind of, you have to listen to where is he going? So is he in China? Is he in Russia? Who's he meaning in China? What has he said in China? Saudi oil minister Al-Naimi is one of the critical people that anytime he says anything or just where he is.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It is him. No, I think it is. He actually, it's interesting. I could have actually written it into Oil 101, but one of the seven sisters they were called, there were this big bunch of companies that controlled oil from the 1930s to up until OPEC in 1970. One of those big companies was called Gulf Petroleum. If you look at right now, there's a few in the northeast of the US petrol gas stations or gasoline stations that sell Gulf petroleum, but T-boon Piggins was the guy that actually did a buyout of Gulf Petroleum. So he's actually a famous guy. In the oil industry for not just his stavens, but for the history of the industry, do I listen to him in terms of oil price predictions? I think he's a very colorful character.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“But I do that. But gosh, it's one of those interesting, and I know Teban Pickens, he say, obviously famous guy. I always, when I hear of T-Boon, I always remember that guy in the Simpsons, you know, the cowboy and the Simpsons. I actually think that it's based on him because Stephen Piggins was a big buyout guy before he was famous as he is for a hedge fund. He was famous in the 1980s.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“People would go, ah, I didn't realize that and make them kind of like interesting such that because there's nothing worse than reading kind of an engineering text of, okay, here's a chemical process. You got to say something interesting about one of the kind of little things like why is the acronym for oil in the oil market is BBL. But there's only one B in barrel, whereas the other B come from. And so it goes back to the standard oil and John D. Rockefeller's blue barrel, the original barrels that were standardized in the oil industry of 42 gallons per barrel were blue barrels and that's why everyone in the oil market today calls a barrel by acronym BBL and it comes from that little things.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Well, actually, it was kind of an interesting thing in that the researching, because I knew a lot about the oil industry originally, I had done a lot of background reading and I had exposure. I know a lot of people, and I actually worked in the oil industry. So there was that. But the actual writing of Oil 101, I think the end book was something like 380 pages. And I don't consider myself to be a natural writer. And so I had a whole bunch of people help me with editing and all this kind of stuff. But the original version, I remember I printed it out one day and it was something like 1,800 pages. And I kind of looked at it on my desk, went, hmm. And it took me about three years to edit it down. And a lot of that was due for readability. And so I would hand it to, I would hand it to someone who had no idea about anything about the oil industry. So I would hand it to my mother and say, here, read this and tell me, is it entertaining first? Because, and so I tried to put in what I call them, like knowledge bombs, like put in little things in every page that.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Kind of kneeling down common terminologies because one of my pet peeves is when people say gas and I hate that phrase just gas because in my mind I'm thinking oh you mean natural gas or oh no if you mean gasoline or do you mean aviation gasoline or motor gasoline and so I usually like to use one phrase and use it very precisely so there's motor gasoline there's petrol is kind of a slang for motor gasoline or gas in the US is slang for motor gasoline but it's one of the challenges with riding oil 101 was binding that kind of common terminology of which one of which I probably didn't explain as well as I should have was that fracking and tight oil as a distinct process from making oil out of shale which is you take a rock and kind of cook that rock into by adding hydrogen and whatnot also make”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Very tight little pores, and you've got to blast through those pores to link them all using water pressure. And so all this fracking oil is coming from what's called tight oil reserves. A lot of that tight oil is in a type of rock called shale. And so that's kind of fracking, the fracking industry. Separately, there's a type of rock called shale, which is immature oil. And it's basically oil that if you leave it cook for another several million years, it will eventually turn into liquid oil. But it's basically called shale. And so that technology is very expensive to actually make oil out of that immature rock.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Time going deep offshore and then with fracking, the amount of energy required to be spent to get energy out of the ground has been increasing. So the energy return on investment has been decreasing. So in other words, it's becoming much more energy intensive to get usable energy out of the ground. So it kind of sounds like a strange thing, but it's basically at its core the cost of supply on energy has been increasing over time and will continue to increase. So that's kind of one concept is called energy return investment. But the other thing is that on shale oil, and so in writing that the book, I kind of slightly regret using the phrase shale because what I should have actually referred to, fracking is actually what's called tight oil industry because basically the oil is like”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And so the energy return on investment is that to get a unit of energy out of energy out of the ground, you have to spend energy to get that. So the easiest way to think about it is that if you're to drill a well, you've got to power that diesel generator to drill that well. You've got to burn energy to get to the energy. And so over time, drilling on dry land has got a high return energy return on investment because you don't have to helicopter things out. You don't have to build an offshore oil rig. You don't have to build any of these kind of deep underwater pipes. You just can build a simple rig on dry land using very little energy and yet the return is huge. You get a lot of energy out of the ground from oil. So basically over time.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, yeah, yes. And people try and find efficiency in if it were cheaper trade oil in euros in terms of the bid ask right. Every time you have to buy and sell euros, it's a tiny fraction at scale more expensive to do that than it is to buy and sell it in dollars. And so the reason the oil market trades in dollars is because it is the most liquid actively traded currency. It's not because anyone tells anyone. And if you know... But it does trade as, you know, if you have, if all things being equaled, it's just classic economics, if the dollar is stronger against the euro and other currencies, then the oil should sell off also in dollar terms.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Basically, it is a currency. And if the dollar has been strengthening a lot over the past six months, year, if the dollar does continue to strengthen, then oil will likely sell off in dollar terms. So it does definitely trade as a currency. And I remember back a few years ago, there was this big push to trade oil in euros and trade oil in yen and all this kind of sort of trade oil and rubles or Chinese yuan. And the problem with that is that no one tells the oil market trade oil and dollars. Like the US government doesn't say, hey, you must trade oil and dollars. There's no edict. The reason oil is traded in dollars is that it's the most liquid currency. And markets trying to...”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So you've got just looking, and it kind of is a currency in that in some parts of the world, oil is used as a barter. People sell, you know, give oil to get goods. And so it actually is kind of a currency in itself. But one thing, unlike you mentioned, a fiat currency where you can just print double the currency in circulation, you cannot do that with oil. It's limited supply. And also, there's not that much in storage of say the world consumes 95 million barrels of oil per day. And it's a just-in-time real-time operation because oil companies Exxon and BP and Shell, they don't like to sit there with tanks, huge, huge tanks full of oil because that costs money to buy that oil and store it and to, and it doesn't, it doesn't sit well for too long in tanks. It degrades relatively quickly. And so”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We're expecting huge drop off in oil demand. It hasn't been as bad as expected. And then Libya, after a little lull where there was a stable situation, they actually kept getting even worse again. So now all that Libyan oil that was hitting the market is no longer hitting the market. And so we recovered back up to $60 or $55”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“In order to support prices. So it was a very, that whole confluence of things was very unusual. What happened since then is that demand growth wasn't as bad as people had expected it to be. So oil prices kind of hit the 40s. You had a collapse in US fracking. So all that new source of supply, US oil supply had been growing at almost 2 million barrels, an additional 2 million barrels per day. And to put in perspective, the world consumption grows around one and a half to two million barrels per day, but the growth in US supply stalled completely stopped. If you look at the numbers come out every Friday called the Baker Hughes drilling rig numbers, rig utilization has kind of been collapsing. So the growth in US supplies stalled. You had a demand was not as bad as it had been expected to be. So this is a demand from last August.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“They were looking at the growth of US and Canadian oil production over the past few years. And since 1973, the Saudis have controlled the price of oil, or at least have tried to. They've sometimes lost control of it. And they do that by withholding production. And the only way you can do that is that you've actually got to be the margin, you've got to be the only guy out there with that excess supply. And so what they've tried to do is they basically are trying to wipe out the US fracking industry. All these guys that are $75 per barrel, $80 per barrel, they're trying to wipe them out and remove them as a source of supply such that Saudi Arabia is the marginal oil producer. And so for does that make sense for them to do that or economically or whatnot? There's a whole debate around that, but basically they've said it much more clearly since November of last year. They basically have said we're going to cut oils production.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Common analogy back in the Soviet Union days, people look at all peculiarity and so you kind of read these articles, you look for certain kind of phrases or keywords. And it basically came out that the Saudis in particular,”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“In fact, we can't because we kind of need the money and technically it's difficult during the winter. It was a nonsense type statement. But if you're in that position, you should never say that publicly. Never say we're going to continue to produce and we're not going to support OPEC. So basically you had a confluence of Libya, the dollar stronger, the slowdown in economic growth, so still growth, but a slowdown in economic growth all in August. Then in November you had an OPEC meeting that where OPEC itself and none of the ministers, Saudi oil ministers, said nothing. Russia said negative things almost forced the oil market to fall even further. And so we drifted down to the low 40s. And then you started to hear all these kind of things about Saudis who were saying, well, why aren't you cutting? What's the logic here? And basically kind of came out in the whole series of articles and whatnot over, you know, it's kind of almost like cremat.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“To bounce it and stop prices falling. So that's kind of the underlying logic of going into that OPEC meeting in November. And Al Naimi said nothing. An OPEC said nothing. And it was kind of cricket. So you could hear the chirping of the crickets in Vienna where OPEC is based. And one of the most interesting things is that the Russian oil, one of the CEO of one of the Russian oil companies went to this meeting as well. And Russia's not part of OPEC. They're a similar size oil producer as Saudi Arabia and the US, but they're not part of OPEC. But one of the heads, and supposedly he's Putin's number two guy, the OPEC meeting, just to kind of listen in and participate. And he came out of one of these meetings and he said, you would expect them to say something supportive of oil prices as in, we were looking to help OPEC cut supply. Instead, what he said was we, Russia, we're not going to cut...”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Then OPEC was in November of last year. And one of the most unusual OPEC meetings ever in that they all met and everyone always listens to what the Saudis say and there's a Saudi oil minister. His name is Al-Naimi. He's famous in the old world. And he usually everyone hangs on. He's like the Jana Ellen. Everyone hangs at every single word. And how his facial expression and all that kind of stuff because Saudi Arabia is the only country that deliberately tries to manipulate prices. They withhold oil that they could otherwise produce. And so usually oil drops $25 a barrel. You expect OPEC in the Saudis to say we are going to support, we're going to cut our production by, you know, because Libya has increased by a million and demand was expected to grow next year by 2 million bars per day. Now it's only going to grow by one and a half million. So someone has to take 1.5 million barrels per day of supply out of the market.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The other one is the IEA. And when they do their big demand forecast, they use IMF and World Bank economic growth forecasts. And so if you look at starting in August of last year, people start to ratchet down global demand, economic growth for 2016. And so that whole kind of because of mainly a lot of it was due to China, but then it was kind of the class of all the BRIC countries, Brazil, Russia, India, China. People had to expect some to grow at 8%. Now they're only going to go at 6% per year. So they're still growing, but just not as rapidly. And all of those, that confluence of Libya, the dollar starting to tick higher and global economic growth forecasts being all being reduced and being reduced by decent, big amounts, that kind of pushed oil down to say 80, 75 dollars from $100. So it'd been five years stuck at $100. Now we're down to $75.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Make it get out of the ground at 80, sell it for 81. You had the dollar started to rally and oil is kind of a currency. So it's kind of, you know, when I talk to fellow oil traders and whatnot, we don't talk about the top line stuff in the oil market. We always look under the hood. And so oil is a currency. And so the dollar starts to strengthen everything against the dollar, including like the euro, all other currencies, including commodities, started to sell off. So you had a sell-off in the dollar, stronger dollar, weaker oil prices. So you had Libya recovering kind of unexpectedly out of nowhere. You had the dollar starting to strengthen. And if you look at a chart of the dollar index that tickers DXY, you can kind of see that. It started off in August. And then the third thing, which was kind of one of the more critical things, was that there's two big organizations that do oil demand forecasts. One is the EIA.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Actually, that used to be the case many, many years ago. And if you have oils in that first chapter of old 101. But these days, everyone produces flat out, including Libya. And usually the reason they wouldn't produce flat out is because of a war. And that was a situation in Libya. And there are a whole bunch of other countries where just because of Iran, it's because of sanctions, they're producing about a million, million half bars per day less than they would like to. They would actually like to, but they can't buy the proper pipes, the pumps, do the seismic tests that they need to do because operating under sanctions. The only country out there that actually deliberately withholds oil from the market is Saudi Arabia. And so they do it under the auspices of OPEC. They can point a finger at someone else. But it's pretty much Saudi Arabia's the only country. Every other country and every other company in the world produces as much as they can if they can make a dollar out of it.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Their oil industry, but during the months of August, September, October of last year, oil production doubled within a few weeks or a few months. And they're not a huge producer, but everything in the oil market kind of moves at the margin. They went from just over a million barrels per day to over 2 million barrels per day. So that was that. That was a kind of a first thing that kicked off everything. Then you had...”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Oil market for five years. And there was a whole bunch of dynamics underneath that behind the scenes kind of in the oil market, the stability of oil at $100 enabled the fracking industry to flourish. It basically said, you know, you can get your oil, it costs $80 per barrel or $70 per barrel, but look, oil is $100 and it's been stable, there at $100 for, so it encouraged all this new supply, which the oil is just pure economics. The oil market needed to encourage that high-cost oil to come out of the ground. And so you had that kind of creation of that whole new industry, the fracking industry. And so up until August 2009, and then what happened in August 2009? You had a few major things happen. One is you had Libya, a decent size oil producer. Those guys had gone through a whole bunch of turmoil.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so the oil industry has always got all these conspiracies surrounding it. It was that whole thing in the 1980s where people think that the Soviet Union was ultimately collapsed by the US Ronald Reagan telling the Saudis to pump as much oil as possible and let's get these, let's crush the Soviet Union. So there's always kind of these kind of underlying conspiracy theories. But at the end of the day, it actually, there's just pure economics. There's nothing really, you know, politics does play a certain is a certain part of the story, but it's purely economics. And so what happened was up until August of 2014, up until August of last year, for the prior five years since 2009, oil had been, and I'm talking about oil as WTI crude oil, which is the US kind of benchmark. WTI crude oil had been around $100 a barrel, give or take $10. And for five years, that is an incredibly stable.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Of those majors, the exons, and they're very well run companies, and they are correlated with the price of oil, so you have to be willing to roll with some fluctuations and oil price correlations. But I would say that they're almost a less leveraged version play in oil than the oil services companies. The oil services companies, they get hit when oil prices fall. starts cutting oil services almost, it's a more exaggerated or more levered version of the oil majors.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“To flat price oil movements. And so I would almost argue the opposite, that it's the oil majors are much more closely correlated, the price of oil. And that's not a bad thing. That's a good thing that their correlated price of oil, one of the biggest things in the oil market in the past few years has been all these ETFs for oil services funds and ETFs for trying to track the underlying price of oil. And there's a big famous one called USO. And the problem with all some of these ETFs is that they use futures contracts, oil futures contracts, and it doesn't really work that well, at least my opinion. And if you look at the performance of those ETFs, it doesn't really work that well when you have an ETF based on oil futures because oil futures themselves are kind of, there's a whole bunch of transaction costs involved with them and whatnot. But if you wanted the most pure play for on the oil industry is obviously just one.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Unfortunately, I think it's even more vulnerable. And one of the reasons for that is that if you look at obviously fracking over the past few years, Slumberjay Halliburton, if you're doing a frack job, as in Exxon don't do the fracking of the well themselves, they hire Baker Hughes, Lumberjet or Halliburton to do that fracking for them. And a lot of those companies have gotten hit in or hurt their stock price, those oil services companies have got hurt because they've lost a lot of that fracking business when oil moved down to the 40s and 50s over the past few months at the end of last year. And so I would almost argue that oil service firms like those Halliburton and Slumberger Baker Hughes, they're almost more levered version of exposure to oil prices. And companies like BP and Shell and Exxon, they're much more closely tied to the price of oil.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“At least that to their detriment, they burn, wasted a lot of energy and obviously people going east during that thing to get to oil. So oil is a very strategic thing. And so people are cautious about what they say.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“To that comment or whatever, yeah. I mean, the thing about the Saudis that I don't want to kind of necessarily pick on Saudis, but their entire economy is 100% dependent on oil. Of the 94, 95 million barrels per day of supply in the world, just over 10 million of that, it comes from Saudi Arabia. And so it's something where politically, obviously oil is a very strategic commodity just because everything, some jets, military machinery all operate in oil. I would almost argue that every war since 1900 has been won and lost and a lot of the strategic decisions were based on oil. Japan going down to try and get to Indonesian oil. That was their reason to push down and try and knock the US out of the Germans going into Eastern Europe to get to the oil fields in Russia.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A lot more dynamic things going on. And there's also, there is a definite progression of technology on the supply side. But it's much more difficult to predict the supply side than it is the consumption side. And so I just think he's probably saying it obviously for maybe things where the world's going to become more efficient, but history has shown that it's not ever been the case with the will.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Just Yeah, yeah. And it's kind of one of those things that I'm very much because I come from the trading world. I'm a very much of look at supply, look at demand. And it's an adding the numbers up type game and that you can actually, oil demand is actually relatively easy to model mathematically because it's the law of huge numbers. You've got 6 billion people. And people, when you get up to those scale of numbers, people behave very predictably. And so you've got, and when you boil it down to people drive to and from work every day, to and from school. And at scale, it's very easy to model consumption. And the supply side is kind of the more difficult thing to model for oil markets because you do get these lumpy and also technological shifts. You do like fracking only really took off in the US in 2009 because it required oil to be at $100 to start that whole, to kick off that industry. And so the supply side, you've got...”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Become much more efficient. And there's a famous thing in, you know, obviously oil grows pretty much with population, so it kind of relatively steadily has grown over the last 155 years. And so maybe people are, you know, one of the, I'm trying to reverse his logic here or try to go through his logic, maybe saying.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Find cheap onshore oil, but where is that cheap onshore oil? I don't know where that is. I mean, there's some cheap onshore oil, but not enough to meet the demand growing at 1.5 million brass trade. You're saying that also that fracking is going to go international, that you'll have fracking in Saudi Arabia and Europe, in Russia. That hasn't happened yet. And there's a whole variety of reasons why fracking is kind of uniquely a US thing at the moment. But basically, you're making an assumption that you're going to see all these sources of supply that are going to come out over the next five to ten years that are going to be under $100 per barrel. I don't know where those sources exist. So on the supply side, he needs definitely wrong. There are no huge sources of oil that are coming in online under 50, 75 dollars a barrel. There's just not that. Then maybe he's saying that demand is going to collapse, that oil, people are going to...”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It's entirely dependent on oil. There's no other industry there. There's no tourism. I mean, there's a tiny amount of tourism, but there's no kind of at-scale type industry. And Saudi Arabia is obviously the leader of OPEC. They're kind of the de facto leader of OPEC. And OPEC's ambition in the world is to have higher oil prices. And so they try and reduce supply occasionally to try and prop up prices. So the challenge I have with a statement that we'll never see a hundred dollar oil again is that, okay, so where is this additional, you know, I kind of, you know, a guy that looks at numbers and physical supply and demand, where is the, so you're going to have demand has continued to increase every year it grows by one to one and a half million barrels per day. We're up to the mid 90 million barrels per day of consumption right now. Where's all this additional supply going to come from? And, you know, to say that we'll never see $100 oil, that means you're basically by default saying we're going to.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So it's kind of interesting. You know, it's kind of like if you're a kid of a rich family, everyone thinks that your opinions are much more weightier and deserve credibility where that may not be the case. And so everyone thinks that everyone in Saudi Arabia knows everything about oil. It's kind of like saying everyone in Idaho knows everything about potatoes or things like that. Obviously he's a billionaire and he made a lot of his money, not in oil. He made it in other areas in finance and a whole bunch of other things. But obviously Saudi Arabia is a very unusual country.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“On where the fracking is occurring. And so we've moved from conventional onshore, which peaked and began to decline in 2005 globally, not just in the US or other countries globally. We moved to deep offshore, which is kind of US Gulf Coast, obviously the North Sea and all that kind of stuff. That's around $50 oil. But that's not enough supply there. So then we were moving higher to fracking supply and fracking And so our supply ceiling, and we had to force the market up to pay for the newer higher price oil, which was offshore and then fracking oil.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“To meet the continued growth in demand. And so we've shifted to an even higher cost supply, which is all this fracking. And fracking is actually a natural gas technology. It was primarily way back. It's kind of an old technology. It's obviously controversial somewhat in the US because people are concerned about what the oil leach into groundwater and the chemicals used in fracking fluids. It's a very good technology to use for nat gas and it was developed from the nat gas industry for where you drill down and you turn the drilling pipe sideways, you drill sideways and then you later on you frack the rock with water, but it only really started to take off in 2009 because oil had reached the price where this new source of supply, it's a very expensive thing to frack for oil. And oil fracking costs 70 to $90 depend.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And conventional oil production has actually peaked and is declining. That's onshore where you just drill straight down and it's cheap oil. It's like 15 to $25 per barrel. And we've shifted up to a newer source because we have run out of our running out of that easy, cheap onshore oil. We've now had to move up the cost curve. And if you're familiar with economics, you move up to more and more expensive cost curves when you burn through your low cost supplies. And so we've moved up to deep offshore and offshore oil is a $50 per barrel business. That's where it kind of starts. And yet is there more oil at that price? Yes, but it's much more expensive if you want to repair an oil rig. You need a wrench 50 miles out of water, you kind of have to, that wrench becomes a thousand dollar wrench because you've got a helicopter of the thing out and back. So offshore oil production is very expensive. And then we've kind of offshore oil production has not grown.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“There's nothing really out there, any kind of scale at the moment. And even if you do get a ramp up in solar and wind and renewable generation power generation, that's primarily for use in the electrical grid. If you need a car, you're going to have battery technology is going to have to improve hugely and dramatically to try and offset oil. And one of the interesting things you mentioned was that 50 years from now, there'll still be a demand for transportation. People still will need to get from A to B and get move goods from A to B. But I think the major challenge is going to be on the supply side. And we've only now started that big shock in 2005 when oil went from 20 to 150. That was not speculators. That was purely because conventional, easy onshore oil has begun, the production has become. And there was this whole movement called the peak oil movement a few years ago. Everyone was kind of saying oil production is going to decline forever type of thing.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and one of the interesting things that people, when people talk about energy, renewable energy, oil is kind of its own bucket. Whereas if you look at electricity, almost zero oil is used to produce electricity just because oil is so expensive and is so energy dense and is so valuable in its use as a transport fuel, you can jam a huge amount of energy into a car tank or in an airline's wings or a train. Whereas if you look at electricity, electricity production almost all around the world is roughly coal, not gas, and nuclear and in a small amount of hydro and wind and other kind of renewables. So there's the world of electricity, which is kind of one part of the energy world, and it's all those kind of coal, that gas and nuclear. And then you've got the world of oil. And the two are not really not fungible. You can't, people are trying to solve the renewable world. It's trying to solve the electricity issue. But in terms of there being an alternative to oil,”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Cars, trucks, everything uses oil. And there's no real competition for that at the moment. And should there be competition? Yeah, I think it would be a great thing if battery technology evolves and we can kind of ramp up solar and wind renewable energy. But the big challenge is that the scale of oil consumption is so huge that it's kind of baked into our modern society. There's no real alternative out there at the moment.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“No, I don't see it happening. I mean, oil, as I mentioned in the book, it's essential to the modern way of life. And people say, oh, well, modern kids these days are using Skype more so you don't have to fly or using or chatting online so you don't actually have to physically visit someone or you're ordering something off Amazon. So you don't actually have to drive to the store. But even with all of that, oil demand is still growing pretty strongly. It's one of those things that people have to get to and from the office, have to get to and from work and school. And, you know, people have said, oh, well, suburbia is ending, even if suburbia ends, you know, you've got a huge amount of things need to be transported around the world every day. And the only fuel that is used in transport is pretty much oil. Shipping, airlines, trains.”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And unfortunately for renewables, but fortunately for the oil industry, there's almost no alternative at the moment. I mean, you do have electric cars and electric aircraft, that small plane flying around the world just trying to set a record at the moment that electric solar powered plane. So you do have electric cars, but they are a tiny, tiny fraction of the transportation world. To put kind of renewables in transportation in perspective, this year there should be roughly 16 million cars sold in the US, just the US alone, but there's huge numbers internationally in China and in Europe and whatnot, with 16 million in the US. Number of electric cars to be sold this year in the US is just around 20,000. So, you know, and obviously Tesla and all these guys get a lot of hype and buzz, which they rightly should. It's good to have innovation. But the scale of renewables in the transportation field is...”
2015-07-19 · We Study Billionaires · TIP 044 : Oil 101 - w/ Morgan Downey (Investing Podcast) · IDENTIFIED FROM THE TRANSCRIPT