The topics are around the global energy, oil, and gas markets. We talk about BRICS and its impact on the markets.
David Blackmon is an industry leader and has the Energy Question as his podcast. He is swamped between recording podcasts, contributing to Forbes in the energy articles, and running the Energy Aburdities on Substack.
R.T. Trevino is an E&P executive at Pecos Operating Corporation and his podcast The Crude Truth. His expertise helps the conversation with boots on the ground in the United States drilling market.
Stu Turley is the podcast host for The Energy News Beat podcast, and they are not sure what he does other than that.
Highlights of the Podcast
00:00 – Intro
02:32 – Talks about Corn ethanol
08:18 – Talks about OPEC and Russia Price cap
14:21 – Talks about Field Drilling
17:26 – Talks about China is releasing this zero COVID restrictions
21:04 – Talks about BRICS
24:06 – Talks about Venezuela the administration
27:19 – Outro
If you have any questions, please reach out to us. We want to answer all questions, and if you have what it takes to be a podcast host and you want your show reach out.
Also, sponsor slots are available. There is excellent reach with the four podcasts.
David Blackmon LinkedIn
The Crude Truth with Rey Trevino
Rey Trevino LinkedIn
Stu Turley LinkedIn
Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.
Stuart Turley: [00:00:09] Hello, everybody. Today is one of those days when you sit back and kind of wonder during the holidays, are you really worried about your uncle coming in to the front room and saying these three guys walked into a bar? Well, I happened to be here with two other those guys. [00:00:25][16.5]
Stuart Turley: [00:00:25] My name’s Drew Turley, President, CEO of the Sandstone Group, and I’m here with two compadres. We’re three podcasters walk into a bar. First around the corner is our Teach Our teacher menu is one of the head dogs over there at Paco’s operating country, and he is the podcast host for the crew of not just the Great Truth, the Crude Truth. [00:00:49][23.9]
Rey Trevino: [00:00:51] Oh, yes, I am. It is the Crude truth. But I’ll tell you what my other crude shoot today is that I’m just happy and excited to get back with the think tank years too early. And and David. So, you know, happy holidays. Merry Christmas, everybody. Hopefully we’ll knock out one more before Christmas, I’m sure, but. Hello, everybody. And hello from Paco’s country operating. [00:01:10][19.6]
Stuart Turley: [00:01:11] There you go next around the corner. Just I had to say that to wake him up. He’s so old. Moses is proud to call him brothers. All right. We got the David Blackmon. David is the CEO. Yeah, and he’s the CEO and president of DB Energy. And he has one called The Energy Question. And for our podcast listeners, he was having a hard time getting his head in the screen. He’s moving the camera around and everything else. So we are going to have a great show. [00:01:45][33.4]
Stuart Turley: [00:01:46] .We have got so much rich target rich environment for David. You run the energy absurdity of, you know, of the day. I’m sorry, my day is not made unless you’ve got a really good publication going out there. And I just sit there and wait at 4 a.m. for you to get up and get me in an energy observatory Day. What do you got going on with energy absurdities right now? [00:02:12][25.9]
David Blackman: [00:02:13] Oh, when we look at there’s so many of them, I forget which one’s current. What did I do today that go having a senior moment? Let’s go look here. [00:02:24][10.4]
Stuart Turley: [00:02:24] Let’s ask Moses. [00:02:25][0.6]
David Blackmon: [00:02:28] I’m sorry. I swear I’m going to get to this in just a second. Corn ethanol was my energy absurdity of the day. I noticed that the Democratic Party was changing its primary calendar to move Iowa back to a calendar in order to make it easier for Joe Biden to get renominated at the age of 82, 2024. [00:02:49][21.5]
David Blackmon: [00:02:52] You know, I’ve always been an advocate to move Iowa back down the calendar, get it away from the first first nominating contest just because of the ethanol subsidies. Right. And every four years, we have every presidential candidate of both parties goes to Iowa to bend the knee to the corn ethanol people when they promised to extend those subsidies. And it’s the biggest bunch of nonsense and the most used useless fuel we produce in this country. So, you know, I was just saying, I’m all for it, man. Move it down the calendar. Just do it for the right reason. [00:03:27][34.6]
Stuart Turley: [00:03:28] Wow. [00:03:28][0.0]
Rey Trevino: [00:03:30] Well, you know what? You. You’re right is the right reason anymore, David. That’s really the question. You know, everybody has their own reason and everybody has their own thought in their own truth, so to speak, on it. You know what is true? I can’t I can’t disagree with you at all. I mean, the way that these people, they focus on the corn, It’s like when they actually go back and look, it actually takes more oil to make a gallon of gasoline with ethanol than it does just to make a gallon of gasoline with oil. So, you know, that to me is an absurdity right there. That that here we are trying to get corn. [00:04:09][39.5]
Rey Trevino: [00:04:10] And not to mention also the fact that we’re using a product that we eat on a normal basis to make energy. We have other great ways to make, you know, cheap, reliable, abundant amounts of energy. Right. You know, let alone if I know I remember one time and I’ll get on this quick story. We were in Mexico many, many years ago. And my my my father was there, my mother’s there, my grandfather was there. This was 1989. [00:04:40][29.7]
Rey Trevino: [00:04:42] And my grandfather came from a village that there really there was like one electrical light bulb in the house, barely any running water. And one of the aunts asked my father because he was already doing some oil and gas at that time. And he goes, Is it true that you guys use gasoline excuse me, use corn not only to used to do make gasoline, but also feed the cattle. And my dad goes, Absolutely. [00:05:12][30.4]
Rey Trevino: [00:05:13] And she got appalled. That’s like, well, that’s one of our main sources of food and nutrients. It’s like, why are you all wasting all that is like, if America has too much that, why are they not sending it to us in other countries? So that something that sticks out with me as well, being able to see that growing up it had an impact going, Wow, what are we doing to where we’re taking our food sources and turning them into energy at a time when there’s no need for that at all? [00:05:43][29.7]
David Blackmon: [00:05:44] Yeah, it’s crazy. Yeah, it’s crazy awesome. [00:05:45][1.7]
Rey Trevino: [00:05:46] So anyway, I just think that’s really such a great thing, you know? Still, what do you think about, you know, all these once again, they’re doing this? [00:05:52][6.3]
Stuart Turley: [00:05:53] I think one of the things that I really enjoyed was I had a podcast with Deborah Wall, and she’s the CEO over at Green Lily, and they’ve got out of Europe. They’ve got technology that they make biodiesel and ethanol without having to use all those extra resources. And it’s coming out of trash and it’s coming out of it. You sit here and go through all their stuff. That’s real biofuel. It’s not using food. I’m like, Whoa. [00:06:29][36.1]
Rey Trevino: [00:06:30] So basically what you’re saying is we got back to the future part two in real life, where you had that go in there, the empty beer, the beer cans dressed into the vehicle. Could you imagine if that we could actually make that, like just a real thing, what we could do with actually all the trash and talk about renewable energy and reduce, reuse, recycle. Right?. [00:06:53][22.9]
Stuart Turley: [00:06:54] It’s here. It’s now. And we got. [00:06:55][1.8]
Rey Trevino: [00:06:56] Well, we just once again, you know, I know there’s other forms of energy out there, and I am once again, I’m all for them, but they need to be reliable and affordable. [00:07:04][8.6]
Stuart Turley: [00:07:06] You bet. If they and here’s the thing about their renewable stuff and I’m going to get off of this one, but their renewable stuff does not need tax subsidies. Oh, they can compete with power and ethanol and biodiesel. So biodiesel guys has what? $2 additional. Whenever you have diesel and you have to add bio to the word bio, it gets $2 per gallon. I think something like that right now, they don’t need the tax subsidies. They don’t need the extra waste. Wow. What’s up with that bad dog? [00:07:43][37.9]
David Blackmon: [00:07:45] Well, if you’re not going to become a ward of the state, a rent seeking industry, then the politicians are going to support you. I mean, it’s all a game about political power and money. Oh, yeah. You know, the companies that are willing to become wards of the federal government are the ones that are going to get the feed at the trough. And it’s a big trough right now. [00:08:06][20.8]
Stuart Turley: [00:08:07] And I think, hey, as Dan Bongino would say, it’s a porkulus bill. All right. Hey, Artie, what about OPEC? Let’s turn this bad dog over to OPEC and Russia. Price cap. What are you hearing there? [00:08:22][15.6]
Rey Trevino: [00:08:23] Yeah, no, I’m hearing there that they are getting ready to. Oh, no, They just approved a price cap on the Russian oil at $60 a barrel. So that means now that that’s the most everybody’s going to be able to pay for Russian oil. If I’m correct, where theoretically they would, we’re at $77 oil, which is a perfect number for operators. And, you know, people that invest in oil and gas, 77 is perfect. [00:08:51][28.1]
Rey Trevino: [00:08:52] So now they’re going to be able to go buy it from somebody else who’s forced to sell it at $60 oil. So that’s a concern of mine. But then also, I want to ask you to guys, you know, as an operator working out in the field every day, is that something that our government could ever force us to do is to force the price of WTI to be sold at a certain price or for Brant to be sold at a certain price. Is that something we could ever possibly see here in America? [00:09:20][27.6]
Stuart Turley: [00:09:22] David, I’ll let you answer and I’ll give you my one and a half cent. [00:09:25][3.1]
David Blackmon: [00:09:26] Well, I mean, not if we’re observing the Constitution and the laws, but this administration, you know, has a pretty long track record already of ignoring both. You know, can they do it? I don’t really see how they would be able to do such a thing. It would require the cooperation of the United States government and all these other governments to refuse to buy production, you know, from an American company at a price above a certain level. And, you know, right now they’re trying to do this to Russia through the G7 and the European Union governmental entities. But but there’s all kinds of exceptions to it. [00:10:11][45.9]
David Blackmon: [00:10:12] For example, Japan is part of the G7 in Japan. But Japan pledged on Monday that they’re going to enforce this price cap except for oil coming to Japan from Sakhalin Island. Russia’s operations, which is where Japan gets most of its imported oil from. Right. Right. So it’s it’s it’s just nonsense. It’s unenforceable. Russia has always already figured out workarounds. You know, the cap is supposed to be at $60. Russia was selling oil in Asia the day it went into effect at $79, $19 above the cap. And these you know, it’s a farce. It’s a bunch of politicians trying to convince their constituents that they’re being tough on Putin while they’re really not doing anything very effective at all. [00:11:04][52.8]
Stuart Turley: [00:11:05] And except poking him. [00:11:07][1.9]
David Blackmon: [00:11:08] Yeah, it’s just a typical government farce. And I don’t know what else to say about. [00:11:14][6.2]
Stuart Turley: [00:11:15] You know, David and Artie what got me all worked up this weekend. As you know, this is one of those things I get all worked up on. It’s the they’re putting sanctions on the insurance companies in the U.K. for insuring shipments for tankers that covers 95% of the traffic out there. So if you’re a insurance carrier and you try to insure a shipment and they are transporting it more than $60, that’s who they go after is the insurance company. [00:11:57][42.1]
Rey Trevino: [00:11:58] Right. [00:11:58][0.0]
Stuart Turley: [00:11:58] And so if we look at BRICS, BRICS has in there, they have a new thing where they’re creating an insurance company and and holding groups so that they will be able to pull all of this insurance way from the U.K. and all of a sudden going, now it doesn’t matter. Sanctions won’t matter anywhere they go. So this is all a farce. [00:12:29][30.4]
David Blackmon: [00:12:30] Well, and who are the biggest customers of Russian crude exports right now? China and India, both of whom are part of the BRICS alliance. [00:12:38][7.6]
Stuart Turley: [00:12:39] In India today at December six signal that will continue to buy oil from Russia. [00:12:44][5.1]
Rey Trevino: [00:12:46] And then India. [00:12:46][0.4]
David Blackmon: [00:12:46] Has already been buying oil from Russia at a discounted price in the 60 to $70 range. Right. Right. So, I mean, it’s already right in line with the supposed cap. And, you know, it’s just Russia has said Russia’s response was that they won’t honor the cap. They’ll find a ways to work around it. And if they can’t sell all their crude at market prices that are negotiated between two willing parties, then they’ll just withhold the oil from the market. [00:13:17][31.0]
Rey Trevino: [00:13:19] Well, you know, and who am I to be somebody to force somebody to pay more for something when there’s an option for it to be paid and to be purchased at a lesser price? In fact, you know, you talk about this administration. I would be surprised if we ended up buying that discounted Russian oil to fill back up the strategic reserve down the mountain either. [00:13:38][18.8]
David Blackmon: [00:13:39] You know, nothing this administration does would surprise me. [00:13:41][2.5]
Stuart Turley: [00:13:41] No, actually, I think we’d be buying back, what was it, synoptic that Hunter Biden we sold a million barrels to. [00:13:48][6.2]
David Blackmon: [00:13:50] Just getting up. Yeah. [00:13:51][1.4]
Stuart Turley: [00:13:54] Sorry. Okay, that one. Anyway, so as we go along down the road here. Arty as an MP operator here in the U.S., What are you seeing coming around the corner? You said the magic number of 70 $75 is good for you as you’re pumping oil right now and you’re trying to build everything up for you. What are some of your hot buttons in the field drilling right now? [00:14:20][25.9]
Rey Trevino: [00:14:21] Oh, wow. My hot button right now is service cost. You know, the pipe, the cost, the service cost and not necessarily all service companies in their cost. But let me let me be more specific. Material cost. My material costs are still at over $100 price material. And so what I am a little worried about as an operator and EMV, of course, is exploration, and production is what MP stands for. What I’m worried about is will those prices go up and these service companies that are also still high, will they go back up again? Because here we are at $77 oil. I am prepared mentally and physically for oil to go back up to that 95 to $105 range in the next six months. [00:15:18][56.9]
Rey Trevino: [00:15:19] Wow. I do think we’re going to get there. And so for us at Pecos Country operating, we are waiting right there to start, you know, start producing and really take advantage of what will probably be at that point, 12 to 18 months of hundred dollars oil again. But that’s my hot button right now because, see, the prices haven’t come down to match where the price of oil is. However, that being said, the supply has not gone up to match the demand that we have this price right now and why I think the prices are going to go back up. Is this is a the Mafioso word fugazi. This price is not real. The $77 oil. [00:16:04][45.4]
Rey Trevino: [00:16:05] Why? Because we’re still importing from our strategic reserve to cover the demand and add to the supply that we don’t have. So at some point, these prices will realign and we will shoot back up to 90 $505 oil. So right now, again, my hot ticket is really the fact that I’m paying $100 prices, $100 oil prices at 77. Now, I see one more thing. You know, I’ll get off of it. I do think that $77 or $75 oil is the perfect number for this U.S. economy to really thrive and grow when we see $75 oil. We’re looking at somewhere between an average of $2 and $2.50 in gasoline and which means the economy can travel. [00:16:54][48.5]
Rey Trevino: [00:16:55] Our prices go down on goods services across America, and more importantly, in my industry, I’m making a dollar. You know, when we go down and things like that, you know, everything does change. And that’s the truth. $75 oil is the perfect place where the economy grows and everybody is making money. So, yeah, yeah, there’s my little hot ticket. [00:17:19][23.9]
Stuart Turley: [00:17:19] I’ll tell you. That’s fantastic, Art. David, I’m glad you moved. I thought we were going to have to put your glasses under your nose there to see if you’re still alive. [00:17:26][6.9]
David Blackmon: [00:17:27] So the other thing about the price, you know, the other bullish factor that’s about to happen is China is releasing this zero COVID restrictions. And in a lot of parts of the country now, because of the mass protest that they had, the government is backing off from some of those restrictions. And when that happens, demand for crude in China is going to go back up very substantially very quickly. And, you know, unless OPEC as well, to jump in and raise production, which they have a very limited ability to do right now, it’s going to be hard to contain prices. I think below, you know, the Brant price at least would probably be approaching the $100 mark again in the first quarter of next year. [00:18:17][49.8]
Rey Trevino: [00:18:18] You bet. You know, David, you mentioned China and how OPEC will probably, you know, what, China’s going to really ease the restrictions so their demand is going to go up and that OPEC, you know, will bear, will they not? Release more production. I do. I did hear today that they are actually the president of China and the group out of Saudi Arabia were supposed to meeting today or tomorrow to be discussing what alliance they will have. And they will have the alliance. And I want to touch on that, if you don’t mind, for a brief section, because, Stu, you mentioned this two years ago when you and I met for lunch. This was part of your whole deal with Russia. And I want to start and I want to want people to salivate over that and start over with David, you know, David, what do you think will come out of this meeting between China and Saudi Arabia? [00:19:13][54.8]
David Blackmon: [00:19:15] Well, probably nothing formal yet in terms of Saudi Arabia joining the BRICS alliance, but I’m sure that’s a topic of discussion. The Saudis have been making moves in that direction now for over a year and with the Biden administration. You know, it’s pretty obvious overt hostility toward Saudi Arabia. I think that just pushes them inevitably into that posture. But, you know, I would expect them to make some some announcements about China’s intent to purchase more oil from Saudi Arabia in the months to come as their demand ramps back up. And they’ll probably make some some agreements in terms of economic development opportunities between those two countries. And, you know, so it’s just we’re we’re in the United States. Our government is pushing the most important Middle Eastern oil producer into that China orbit. And it’s a very, very dangerous thing for America’s future energy security to be doing it. [00:20:24][68.9]
Stuart Turley: [00:20:24] You know, and David, those are great, great points. And and when you take a look at BRICS and BRICS plus in China’s orbit, you see only the United States, Canada and a little bit of Europe in the rest of the world is red. And that means that the and that’s 50% of the population of the world will be orbiting around China and it’s not very far off. [00:20:54][29.6]
David Blackmon: [00:20:54] Yeah. I mean, the inroads China has made in Africa and South America are just incredible. [00:20:59][4.8]
Stuart Turley: [00:21:00] Over the. [00:21:00][0.2]
David Blackmon: [00:21:00] Next decade. [00:21:01][0.4]
Stuart Turley: [00:21:01] And they own South America. [00:21:03][1.2]
David Blackmon: [00:21:03] Yeah. Yeah, it’s. [00:21:04][0.7]
Rey Trevino: [00:21:04] Scary. If I may, Stu, please, for our listeners out there, what does BRICS and BRICS Plus stand for? Again. [00:21:10][6.2]
Stuart Turley: [00:21:11] It’s what you don’t want to have you drop on your foot. Oh, no. BRICS is it is the. So there’s four. There’s the country’s for it. David, What are they? [00:21:25][13.2]
David Blackmon: [00:21:25] Israel, Russia, China, India, China and South Africa. [00:21:29][4.1]
Rey Trevino: [00:21:30] Right. [00:21:30][0.0]
Stuart Turley: [00:21:30] Britain is BRICS and then BRICS plus is another 23 or four. I think even more affiliated countries. [00:21:39][8.7]
Rey Trevino: [00:21:39] No, I did not. I did not know there were that many loosely affiliated countries. So, you know, there was kind of like a spelling bee just now BRICS, Brazil, Russia, India, China, South Africa, BRIC. [00:21:54][14.2]
David Blackmon: [00:21:54] And, you know, you had Saudi Arabia to it. You just had another s at the end for now. [00:21:59][4.8]
Stuart Turley: [00:21:59] And then you I you know what I was doing. [00:22:02][2.1]
David Blackmon: [00:22:03] David But you think about that. So you’ve already got China and and India are the second and third largest economies on Earth. India just surpassed Germany. Brazil is the largest economy in South America on the South American continent. South Africa is the largest economy on the African continent. Why you add Saudi Arabia, the largest economy in the Middle East to that, and you have a set of economies that is every bit the rival to the G-7. And, you know, from a geopolitical standpoint, they’re already really in a severe superior posture to the G7. When you look at all the inroads China has made in places like Venezuela and Brazil and all over the African continent, it’s really a very dangerous, dangerous thing, very frightening. [00:23:01][58.3]
Rey Trevino: [00:23:02] I think I want to be able to kind of bring that up here. I know I’ve got some other good in it. I think that needs to be something needs to be mentioned on a daily basis for the next few months. I mean, that’s you know, David, when you say it like that, that is that is, dare I say, Zen Zoo or the Art of war positioning yourself. And I butchered his name. I apologize. But who sends you songs you should write? There is is textbook one on one the Art of war, of positioning yourself for a takeover without losing one man. And you know what else Africa is? There’s this large academy of I didn’t even think of it from that aspect, but they have now every continent largest well, except for North America and Europe. [00:23:56][53.6]
David Blackmon: [00:23:56] And Australia. And Austria. [00:23:58][1.2]
Rey Trevino: [00:23:58] Yeah. Wow. [00:23:59][0.5]
Stuart Turley: [00:24:00] It’s going to get ugly. Did Hey. [00:24:01][1.6]
David Blackmon: [00:24:03] Before way before we changed. One last thing about that is Venezuela the administration just eased sanctions on Venezuela. Yeah, well, who are two of Venezuela’s most biggest strategic partners now? Russia and China? Right. And so if you if you’re using sanctions on Venezuela, you’re easing sanctions on Russia and China. [00:24:23][20.0]
Stuart Turley: [00:24:24] You’re exactly right, David. And Chevron basically was not very happy because Biden said, oh, we’re going to give you six months. Yeah. And Chevron was I looked at some reports and it will take a minimum of seven years of investing in that dilapidated fields because of all the equipment that banning. You’re going to have to get everything restarted. Oil and gas does not come back online very easily. So you sit back and kind of go, guess what’s been happening? Russia has been coming out and delivering ships and they sell to Venezuela and Venezuela has been selling it somewhere else. David, you nailed it. The traffic is already there. I, Leon, figured out how to avoid sanctions. Russian and Putin went, hey, that’s pretty good. They went in and they are teaching Iran other run around sanctions. [00:25:27][62.3]
David Blackmon: [00:25:27] Well, I’m so old. I know who Iran learned that all from. Right. I used to work for him. His name was Oscar Wyatt, the CEO of Coastal states, who figured out how to get around all of the sanctions in the late 1970s purported effect by the Carter administration. [00:25:43][15.7]
Stuart Turley: [00:25:44] And, you know, so and yeah, and you know, and, you know, Putin was over there going, hey, that’s pretty smart. But yeah, I would not want to play chess against Putin. He’s when he’s fighting a bunch of own armed opponents in a chess match. [00:25:57][12.8]
David Blackmon: [00:25:57] Yes, he is. Yes, he is. And intentionally of armed opponents. It’s it’s pretty astonishing. [00:26:03][5.1]
Stuart Turley: [00:26:04] All right. We’re about out of time and we can have about another 5 hours. We got it. Is Beard 30 somewhere now? Our team. Give me your last. That’s coming around the corner. You actually had two really good ones right now. And I think three may give you a headache. [00:26:19][15.8]
Rey Trevino: [00:26:21] You’re absolutely right. I’m going to I’m going to I’m going to I’m going to save the rest for the rest of the year. You know, I’m excited to finish 2023 strong are 2022 strong and start a good positive 2023. I know I’ve got some good episodes of the Crude Truth about to come out and I’m already lining up some great stuff for 2023. So I’m just excited as always. And as I would say as an operator, let’s drill, baby, drill to drill ourselves out of this economic issue here in America. [00:26:55][33.5]
Stuart Turley: [00:26:55] You bet. David, your last thoughts. [00:26:57][1.5]
David Blackmon: [00:26:58] Yeah, I’m just going to advise everybody to enjoy the low gasoline prices while you still can maybe take a little road trip after Christmas between Christmas and New Year’s and enjoy them. They’re probably not going to last that long. And I hope everyone has a happy holidays and merry Christmas and Happy Hanukkah. And, you know, whatever your religious beliefs are. [00:27:18][20.2]
Rey Trevino: [00:27:19] There you go. [00:27:19][0.3]
Stuart Turley: [00:27:19] Absolutely. And you know what? I’d like to give everybody a shout out and thank you for our great listeners. And we’ve gotten some great feedback. We encourage everybody to subscribe. Like and when you’re listening to this on the podcast channel, any of your favorite channels, give us a review, tell us we’re great. [00:27:40][20.6]
David Blackmon: [00:27:40] We would be nice. [00:27:41][0.7]
Stuart Turley: [00:27:42] But be nice. Yes. And if and when? If you want to spell our t’s name, it’s r t. Now I have to give everybody a shout out because our t was finally getting some good things on me right before the show here today. And our t I am so proud of you that you’re just getting to the point where you’re able to think about comebacks. I am so proud of you. This is a big day in our relationship. So with that we will say thank you and look forward to visiting with you guys again soon. [00:28:13][31.4]
Rey Trevino: [00:28:14] All right. Thank you. Various. [00:28:14][0.0]