Bonus episode: At CERAWeek, big tech and big energy cozy up

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Jeff Mower:

Hello and welcome to a very special episode of the Oil Markets Podcast. I'm Jeff Mower, director of Americas Oil News, and I'm here with Dave Ernsberger, who is co-president of S&P Global Commodity Insights.

 

Dave Ernsberger:

It's great to be here. Thank you very much. I just ran all the way down from the fourth day of CERAWeek to be with you here for this podcast, so I'm very excited.

 

Jeff Mower:

Yeah, excellent. Yeah, because we were both at CERAWeek. I was only there the first three days but got a lot out of it.

 

Dave Ernsberger:

I did the longest run I've ever done. I did four days. And I'm flying back to London tonight.

 

Jeff Mower:

Oh, very nice. Okay. Yeah, it dies down by day five. It's an excellent conference. And I've been-

 

Dave Ernsberger:

I believe there's a day five. There's a rumor of a day five, but when I was leaving CERAWeek just now, I don't know who's there to attend it. I'm sure there's some folks who are going to go all the way through.

 

Jeff Mower:

Yeah, I mean, just a mention on that before we even get to the content. You've been to a bunch of CERAWeeks.

 

Dave Ernsberger:

Sure.

 

Jeff Mower:

I know I've been to a bunch of them. Every year, it gets bigger, right?

 

Dave Ernsberger:

Yep.

 

Jeff Mower:

I'm not wrong in that. I mean, whatever, 10,000 people there this year or something like that. It's just-

 

Dave Ernsberger:

Yeah, the tally is 10,000 delegates, plus or minus, obviously, and 80 countries represented. And size and quantity is a yardstick, but actually I'm more interested in the quality of what's going on and the quality engagements. And I don't mean that as some sort of a two-dimensional commentary. It's important that the content is good, and I was impressed that actually the content also improves. And I don't think it's coincidental the numbers go up as long as the content stays strong.

 

Jeff Mower:

I completely agree. So what were your takeaways from the conference?

 

Dave Ernsberger:

Well, let me give you my first takeaway, Jeff, and I'd love to hear yours. I was kind of amazed by how Big Tech arrived on the scene this year and interacted with Big Energy. Big Energy, oil and gas and other forms of energy, has always been a feature of CERAWeek for as long as I've been going. Big Tech began to appear maybe a couple of years ago with different kinds of software solutions and AI. This year they showed up looking for electricity supplies, and we'll maybe talk a little bit more about that.

 

Jeff Mower:

Mm-hmm.

 

Dave Ernsberger:

But I'll tell you my first observation. Big Tech and Big Energy are not naturally in love with each other. I was in a lot of rooms where I saw some folks, you know, pretty senior folks from the tech industry, asking for their power stations tomorrow, and folks in the energy industry kind of leaning back in their chair and having a good old chuckle saying, "It's going to take me a while to get some permits, my friend."

But the takeaway is this, Big Tech is getting together with Big Energy, and when they sort those issues out, what they're going to give birth to is a whole new power industry. And what is that power industry going to be? Is it going to be made of nuclear power? Is it going to be gas-fired power? Is it going to be grid-connected or not? I was talking to people about energy islands and energy connectedness. And there's a whole new language that will come out of the coming together of these forces, and it's going to unfold this year, next year, and the year after it.

But it's not going away, Jeff, because unless there's a dramatic increase in efficiency in data centers and AI and how AI generates demand for that capacity, we're going to see a big pop in requirements here. And that has a massive effect for the energy industry, and actually people that just buy and sell, or just buy, electricity for their households. So there's a storm coming, man.

 

Jeff Mower:

And would you say permitting was the number one obstacle from the energy company side?

 

Dave Ernsberger:

I would say so. The first obstacle for Big Energy delivering on the requests from Big Tech... And you would think that as a supplier of energy, you'd be delighted to see a big customer show up asking for investment, with dollars to spend, by the way. The money is there, the capital, the financing, the appetite. What isn't there is the capability to get the permits to build the enhanced infrastructure, both power stations, transmission, and distribution all together. That seems to be the big issue. So a lot of folks are talking about nuclear as being a solution. When I really dug into that with some experts in nuclear, what they told me is if you really dig into it, you can put another couple of units on site at an existing nuclear power site, but you can't start a whole one greenfield from scratch. Now, is that going to meet the needs, kind of incrementalism? Is that going to meet the needs? That's something we're going to find out.

 

Jeff Mower:

Now, was the permitting issue mainly in the US, or outside the US as well?

 

Dave Ernsberger:

Well, I would answer it this way. Most people from tech that I met with feel like the US is the best positioned country to deliver on their Big Energy needs. So the conversation wasn't really about permitting in Europe, or permitting in India, permitting in China, permitting in anywhere else, it was about permitting in the US.

And actually, that takes me to an interesting point about this, before we go to other observations. It was fascinating to me to hear energy being talked about in connection with AI data centers and that power demand, because if you listen carefully, the real conversation that was going on was how will the US win the AI war with China? And there were some comments being made by the energy secretary, by the secretary for the interior around how, actually, energy is part of a bigger conversation now. And let's call it cheap energy. It's not cheap for everybody, but it's cheap compared to some global markets. Cheap energy in America will actually supercharge America's race to win AI, kind of like how America won the race to land on the moon. So we have a kind of Kennedyesque 1960s situation going on. Here in 2025, not the moon we're shooting for. Its advanced AI.

 

Jeff Mower:

Yeah, I thought that was interesting when Doug Burgum spoke, the head of the Department of Interior. And that was a big part of his pitch, was just this sort of big group they have going. The... What is it called? The Council of Energy Dominance, US Energy Dominance, something like that.

 

Dave Ernsberger:

Yes, that's right.

 

Jeff Mower:

And he's the chair of that. And what they want to do is find a way to streamline all of these sort of regulations, these sort of redundancies, and so on and so forth. And I thought that that was interesting. And also just that it seems like every part... I don't know when was the last time this happened. Every single element of this administration is on board with that. Even the EPA came out the other day and said, "Our remit is reliable energy," or something like that. It wasn't like cleaning up the environment.

 

Dave Ernsberger:

Like, wait. Are you the EPA? I don't recognize that statement. But let me ask you, what did you think about Secretary Burgum's speech? Because that was my second big takeaway was that speech. But what did you think about that speech?

 

Jeff Mower:

Well, I thought... Okay, I thought it was interesting. I liked the idea, that of the approach was more... I'm trying to think of the right word. Experimental. At least the way he described it. Or empirical. I liked the way he described their approach as taking on a project, the idea which you would take on a project, you'd prioritize it, and through that project, seeing that project through, you would discover where the redundancies are and weed those out. Which I thought was... It sounds like a better approach than just coming out from the beginning and slashing the budget for regulations.

 

Dave Ernsberger:

So the redundancies that he was talking about were overlaps between agencies and multiple permitting.

 

Jeff Mower:

Yeah, exactly. Yes.

 

Dave Ernsberger:

So he was talking about if you are looking to build one piece of infrastructure, why would you need three, seven, or 16 permits? Why wouldn't you simplify that into the smallest possible number? I think I see what you're talking about with the empirical study. And he was talking about 15-day, 30-day, 45-day timelines, which is interesting.

My big takeaway from that... I thought it was a very important speech. And after opening up with a big thank you to the audience and thank you to energy and thank you to everybody, what you'd expect, that you're playing to the crowd there, he actually outlined something that I haven't heard anybody do before, which is... Now, this is my impression of what was said, right? But what is driving US foreign policy? Economic and industrial policy? And by the way, as somebody living in London coming back to America, I could tell you, that's the question everybody wakes up with every now, is what's the endgame here? What's America driving for? What's the administration driving for, probably more correctly here.

And he talked about how everybody talks about US debt. All the time. I forget what the number was, $34.5 trillion, something like that. Nobody talks about what he called the US balance sheet. And when you listened to what he was talking about, he was talking about, look, we have all these natural resources. We have minerals, we have oil, we have gas, we have infrastructure, we have these different areas. That should be on a balance sheet somewhere. And people shouldn't see America as chronically debt-laden. They should see America as a business.

And where I'm going with this, and we could have a whole other podcast about this, but it was fascinating because it's pretty clear that this administration has been staffed by business people. There's a lot of language of business. There's a lot of cadence of business going on in these conversations. So it seems like US policy, whether it's tariffs or it's what's going on in Europe right now with some of the negotiation around Ukraine-Russia, is really all about tearing up the status quo and putting in place business expectations. "I want returns the next quarter, the quarter after that, the quarter after that." And you know what? It makes sense. Because if you're thinking about midterm elections and the life cycle of a presidency, you need to work on that kind of rhythm. But it began to make more sense. I mean, Secretary Burgum didn't talk about foreign policy. He didn't even talk that much about what the administration was doing. But when he talked about reinventing American government as a business, it kind of made more sense.

 

Jeff Mower:

I do get that, and I get the idea that the whole idea of energy dominance isn't necessarily... Even though we keep hearing the "drill, baby, drill" mantra.

 

Dave Ernsberger:

Or, "Map, baby, map," as he talked about it.

 

Jeff Mower:

Exactly.

 

Dave Ernsberger:

Which actually was more interesting from an intellectual perspective.

 

Jeff Mower:

Yeah. So it's like, I get that. But I wonder what... I kept thinking, what does this mean for oil? So on the dominance front, I get that you'd want bring... That's something he brought up. You want to bring down the cost of producing, and that makes, let's say, US oil more competitive on the market. And that's part of the whole dominance theme. But at the same time, I kept thinking, yeah, but who wants to drill at this point?

 

Dave Ernsberger:

Correct. That's right.

 

Jeff Mower:

And if you're successful in getting oil down to... This $50 a barrel number has been thrown around by the Trump administration. Now, that was something that's always interesting too. You're throwing that $50 a barrel number around. I don't know how serious they're about that. But people on the sidelines of the conference were like, "Hmm, I don't know about $50 a barrel."

 

Dave Ernsberger:

Yeah. So here's important about what you're saying. The Department of the Interior and the Department of Energy is talking about building a balance sheet. They're not talking about expanding production. If you map it out and you do some exploratory drilling or whatever else goes on there, you don't have to produce those assets. You just have to recognize them.

 

Jeff Mower:

I see what you mean.

 

Dave Ernsberger:

And that's pretty interesting when you think about it, right?

 

Jeff Mower:

Mm-hmm.

 

Dave Ernsberger:

Yeah. So lots of questions asked there. I will say, I want to go to a third observation for you, and then also hear what else you took away from the conference. But that speech was so impactful that a number of people said to me on the way out of the room, "You know, he's probably going to be the next president."

 

Jeff Mower:

Wow.

 

Dave Ernsberger:

Yeah. I mean, that was the kind of impact that had in that room. And these are people who are not energy nerds. These are people who are watching the political scene.

 

Jeff Mower:

Interesting. Yeah.

 

Dave Ernsberger:

So it'll be fascinating to see how that plays out over the next couple of months.

The third area I picked up a lot on was the quiet but important persistence of the conversation around decarbonization. And I was expecting to come here and have the whole conversation, either rewind the tape back to 1995 and it's all hydrocarbons all the time, and don't worry about the carbon, or it was just going to be some sort of victory lap around, well, carbon schmarbon and all this. Actually, no, everybody I saw speaking about investment, development, all the things we've been talking about today, often dropped in, "Oh, and by the way, we're going to be working on a carbon accounting basis." Even if they didn't use those exact words. Like the value of having lower carbon projects, more efficient projects.

And I think two things come from that really. In a world where not only are you not expected in the US, the same way you were maybe a year ago, to speak about your decarbonization efforts, it's still happening. Because number one, these businesses and this industry is a multi-decade investment cycle business. They want to be strong and robust and persist through any administration, any set of economic policies. So there's almost a policy neutrality that comes out of that, where I need to be here five years, 10 years, 15, 20 years from now. Who knows what the expectation will be.

But also when you get into it, a lot of the decarbonization that has happened in the last five years has been about maximizing efficiency. And actually these companies don't want to stop doing that. So people were talking about using Internet of Things, lots of surveillance devices, and applying some AI to do proactive maintenance on a gas pipeline, proactive maintenance on a liquefaction facility. Which, by the way, brings down your methane emissions because you're getting ahead of a leak, but also makes your business run at a higher usage rate, so you make more money.

So it's fascinating to hear that decarbonization is continuing because of policy neutrality, the need to invest over long life cycles, but also people are making money as well and being more profitable, which is pretty interesting.

 

Jeff Mower:

Yeah, it was. I thought that, again, on the oil front, I kept thinking that the mood was sort of long-term excited because of expected reduction of regulations and so on and so forth, like streamlining, but short-term, a little concerning, a little bearish, because of the tariff issues and uncertainty on the global economy. And again, that sort of continued.

Another thing I really enjoyed hearing about were a couple of panels on geopolitics. And I really enjoyed those. Especially the sort of idea that the Trump administration is embracing more of a sphere of influence idea that would allow China and Russia their own spheres and not interfere with those, as a way to sort of expand your own sphere, whether it's a North America build this sort of energy powerhouse and other minerals and so on and so forth. But there's a risk with that. And I found that really fascinating.

 

Dave Ernsberger:

Was it your impression that the world is, from the point of view of these speakers and your own observations, going that way?

 

Jeff Mower:

Yes. And the concern is like, well, what does that mean for, say, Taiwan? What's it mean for... Does that mean... What's it mean... Well, there's negotiations going on right now, for peace between Russia and Ukraine. But what does that mean for Ukraine and so on and so forth?

 

Dave Ernsberger:

Well, I don't know about you, but I grew up in a bipolar world divided between a US-dominated western world and a Soviet Union-dominated eastern world. That was the way it was in the eighties. My parents grew up in a world of quasi-19th century, early 20th century multipolarity between the UK, Germany, the US, Japan. I would argue the world's been operating the way you were hearing about in the panels actually for much longer than it's been globalized. So it's pretty interesting to see if we swing back that way, whatever it means.

 

Jeff Mower:

Do you think though that there's a risk that you could see... And maybe this is just my own bias. A risk that you could see these sort of spheres grow of sort of mergers and acquisitions? Forced mergers and acquisitions.

 

Dave Ernsberger:

If we're going back to a world of energy and political hegemony, I suppose that that will naturally occur. Who's running each sphere is the interesting question. And is there really room for three, or is there actually only room for two? And if there's only room for two, who will that be?

 

Jeff Mower:

Yeah, but even within those spheres, you're going to need... You're negotiating, right? You're going to need help to deal with the risks to your own sphere.

 

Dave Ernsberger:

Yeah. I want to ask you about flat price, by the way, Jeff. I'm going to ask you a question.

 

Jeff Mower:

Sure.

 

Dave Ernsberger:

In all those panels you were in, you mentioned some of the bearishness, fears of recession, economic crisis. Did you pick up on anybody... You mentioned $50 oil. Was there a general bearishness out there around price, or what was your perception? Or was there any case being made for a bullish outlook?

 

Jeff Mower:

Not really. I think possibly longer term, but there's just so much supply around right now. Even this week, I think even today, the IEA came out and said they were downgrading their demand forecast because of the concerns over the tariffs. And that's an interesting thing, right? It's like when it comes to the tariff risk, a few people addressed that, and sort of like, how can you plan for the future? How can you as an oil company plan down the road when you have these tariff risks every month popping up? And even some of the... I shouldn't even say, even some of the applause, I guess, that was given to some of the Trump policies that are more pro-oil. Like even Chevron came out and said, "Hey, that's great, but we need that legislated." Because how do you plan when four years from now, let's say, another president, someone else comes in, Democrats maybe, and issue another 90 executive orders reversing all of that?

 

Dave Ernsberger:

Agree.

 

Jeff Mower:

Yeah. It makes a big challenge.

 

Dave Ernsberger:

Yeah.

 

Jeff Mower:

Yeah. All right, well thanks, Dave. I appreciate it. I'll see you next-

 

Dave Ernsberger:

Yeah, Jeff, it's been so good to be here with you. And if I may make a plug, we have just wrapped up CERAWeek but we have FUJCON coming in April, we have MPGC happening in May or June, and APPEC in September. So these conversations will continue all around the world in the energy market, and I hope to see you there and everybody else too.

 

Jeff Mower:

Excellent.