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The Energy Overlap: Can Oil and Green Co-Exist?

Episode #40  |  June 16th, 2021
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In This Episode:

With Green Energy initiatives front and center at the G7 summit, the commitment to renewable energy is gaining steam on the international stage. Politics aside, this represents an undeniable opportunity for investors — just ask BlackRock.

Listen, oil’s not going anywhere anytime soon, but we’re undeniably in a transitional period when it comes to the energy sector. One crack in the rosy glasses of the Green Energy movement is, as always, China. For these lofty environmental measures to work, China would have to stop burning a hole in the ozone the size of Taiwan while exploiting emerging markets in smaller countries with shark loans. How can the free world lead an eco-conscious charge if the Red Dragon continues to operate without a conscience? 

Andrew Wheeler, former administrator of the EPA and current fellow at the Heritage Foundation think tank, is an equal-opportunity energy enthusiast who applauds advances in clean energy. But he illustrates the irony that our progress in the Green space often come at the expense of the environment and national security. 

 The two also discuss the nuances of energy diplomacy, the realities of EV battery creation, and the hottest companies in the Green Energy sector.

Guests:

Andrew Wheeler

Former Administrator of the U.S. Environmental Protection Agency
Andrew Wheeler served as the 15th Environmental Protection Agency (EPA) administrator from 2018 to 2021. As EPA administrator, Wheeler was responsible for shaping federal environment policy under the Trump administration.  Before working for the EPA during the Trump administration, Wheeler worked as a lobbyist for FaegreBD Consulting and as an attorney at Faegre Baker Daniels. Before that, he served as general counsel to U.S. Sen. Jim Inhofe. He also served as staff director and chief counsel for the U.S. Senate Committee on Environment and Public Works and the U.S. Senate Subcommittee for Clean Air Wetlands and Nuclear Safety.

Episode Extras:

  • We’re privy to the environmental repercussions of extracting fossil fuels with fracking, drilling, and mining coal. But we need to give more mind to the impact of producing and disposing of solar panels, wind turbines, and EV batteries.
  • In the U.S., our greenhouse gas emissions have gone down steadily since 2005. Still, they’re rising in India and China, bringing us to nature’s truth: pollution doesn’t care about international boundaries.
  • It makes no environmental sense to take ourselves off the trough of Middle East oil only to be an energy sector slave to China. They’ll use dirty coal-fired power to provide us “Green-friendly” solar cells or EV batteries in the ultimate cosmic joke.
  • Kudos for tweeting out your eco-conscious wokeness Gen Z, but the iPhone you’re posting from uses plenty of raw materials and products from fossil fuels, plastics, and natural gas.
  • The investor-play in the Green Energy sector will be in ancillary companies dedicated to creating, storing, and recycling EV and solar panel batteries, e.g., Sila Nanotechnologies, Romeo Power, and Lithium Americas Corp.

Transcript:

Trish Regan:               Green energy is front and center, and politics aside, there may be a way for investors to benefit from the current environment. Hello, everyone. Welcome to American Consequences With Trish Regan. I am Trish. And, you know, I have my reservations, right? When it comes to green energy, look, I can think back to Solyndra and how miserable that whole experience was for those that might have invested in it or were unfortunate enough to invest in it. I can think about how frustrating it is that so many countries are out there at G7 saying, “We want to lead the way on this green energy front.” While simultaneously, China is burning a hole right through the ozone layer with chemicals that they’re still manufacturing – CFC-11, which is used in home insulation and building insulation – that they were supposed to stop manufacturing back in 2010 when the rest of the world realized that this was a problem. Well, in northeastern China, they just kept doing it.

 

                                    And so, in order for these green energy initiatives to work, you really need buy-in from the whole wide world. It’s the reason why the U.S. did not sign on previously to the Paris Accord, because how is it fair if China and India are allowed to operate factories and effectively pollute the world while everybody else is trying to clean it up? It’s not fair. But there seems to be some recognition of that. And I would give some positive feedback, if you would, to those nations that are trying to do something about it. I mean, they’ve got to collectively work together.

 

                                    The problem we have right now in this world is that China is out there offering – I call them “shark loans,” very predatory loans to a lot of emerging market countries. Why? Because they want the resources. So, they go over to the continent of Africa and they say, “Hey, we’ll give you all this money to build up this mine or to build up this port or whatever it is that will help grow your economy. So, here you go. Blank check.” Of course, it comes with some pretty onerous interest rates. And then, when that country, as often these countries typically have problems with, cannot manage their finances well enough and they can’t pay the debts back, well, what does China do? China swoops up those resources because those resources are effectively collateral. And so, they’re acting as an alternative, if you would, to, say, the IMF or the U.S. that might be investing in some of these parts of the world.

 

                                    And so, China doesn’t necessarily care – I mean, we know China doesn’t care about the environment the way we do and maybe some of these G7 countries do. It makes it much harder for us to have any kind of impact. And before we sell our economy down the river and jobs down the river with all this environmental stuff we ought to be thinking about whether or not we can get everybody else on board.

 

                                    And so, that’s what’s now being discussed at G7. The cool kids, as I like to call them, from Trudeau to Macron to Joe Biden to Angela Merkel, they’re all talking about how do we actually influence the world in this way? I’ve said all along you need a TPP 2.0. You need the world to collectively mobilize against China so that their way of doing things, whether it be leaking viruses from the Wuhan lab or whether it be – and we’re still waiting for proof on that, although some of the intelligence indicates that that’s exactly what happened. We shall see. But whether it’s that, whether it’s predatory lending practices all over the world so they can get their hands on all these resources, we need to be smarter. We need to be thinking about how we can continue to be the hegemonic power of the world without having to invest a ton. That’s the other thing, because we don’t have the money. We’re $28 trillion in debt and counting. And so, we’ve got to get other countries involved, other countries onboard.

 

                                    So, the Biden administration, along with some of these G7 countries, they’re talking about offering kind of an alternative, if you would. An alternative to China. And so, countries could conceivably sign on to some of these agreements to try and improve their economies and their climate change initiatives, and they would theoretically want to do that because it’s signing on with the free world. Of course, you’ve got to do a little bit more than offer some ego-stroking. You’ve got to actually come up with programs that will benefit them economically.

 

                                    Here’s what I would say. As an investor, you need to think about this because it’s very easy to say, “All right, well, I don’t agree with the politics that,” or, “I don’t agree with this energy nonsense and the little Swedish girl.” But you’ve got to be realistic and sensible about your portfolio. And I have to tell you, they’re committed. I mean, they are committed. The train has left the station. You’ve got BlackRock involved. I wrote a paper on this a couple of months ago about the amount of the money, really, that’s going into these initiatives. And BlackRock is the largest asset manager in the entire world, so they’re controlling the whole kit and caboodle. And they’re making decisions on how to allocate capital. So, they have their initiatives and that’s very much a thing.

 

                                    Now, simultaneously I would point out it doesn’t mean the end of oil. On the contrary, I actually think oil prices are going to go up. On the contrary, I actually think oil companies and drillers will do even better, in part because of the scarcity of product with the Biden administration coming down on that industry. The reality is it’s not going away. I mean, it’s going to continue to be there. We’re going to still have gas-guzzling cars, even though they’re trying to phase them out. And you should check out my piece on americanconsequences.com this week because I write about that. There are things that government can do to affect consumer behavior. I’ve seen it happen. A great case study that I point to with my reporting that I did down in Portugal back in 2006, when – forgive me, not Portugal – Brazil, down in Brazil in 2006 when Brazil became energy-independent, and it was a really big deal because at the time the Bush administration was trying to get the U.S. to be energy-independent. And they did it via sugarcane ethanol because they were like “Well, we’ve got tons of sugarcane. We can convert this stuff into fuel and we can affect consumer behavior by putting in some stipulations like gas stations had to offer ethanol.” And a lot of the cars that were being manufactured, especially the foreign car manufacturers – Volkswagen was a big one in terms of offering these hybrid vehicles – they had to be able to offer these to consumers. And sure enough, given the long oil – long lines and high prices for oil, people started to transition.

 

                                    So, government can have that effect. You want to make sure that you’re doing it in a way that is not onerous enough to shut out certain industries entirely but start to sort of change a landscape. And I think that this is a government that very much is trying to do that. But they’ve got to do it in a way – or, they will do it in a way, I suspect, that will not completely get rid of oil because you can’t. I mean, that’s just the reality, right? It’s unrealistic to think that we’re just going to completely do away with oil. Oil is still here to stay. If for some reason the landscape changed drastically tomorrow and suddenly the world had no oil because it just dried up and all the drillers were gone because there was just no oil in the ground, well, then, we’re innovative enough that we would figure out a workaround. But the government just shutting off the supply, that’s not going to work because we’re innovative enough that we’re going to find a workaround to that one too.

 

                                    And so, you’ve got to balance all of this as an investor. I think you still want to be in oil. I think as the economy gets better you’re going to be looking at $75 to $100 oil as early as this summer. I’ve been calling for it since January. Again, with the economy revving up, people getting back to traveling people getting back to work, those oil prices naturally will go higher, combined with the fact that you have an administration that’s trying to suffocate the industry. That then in turn causes prices to go higher.

                                   

                                    So, oil is a very good place to be while simultaneously green energy, given the commitment that we are seeing from the world at this point – outside of China and probably Russia and some of these other developing countries – you’re seeing a real commitment from G7, and I suspect they’re going to try and translate that commitment – we’ll see how well they do this, but where there’s a will there’s a way, and they’ve got BlackRock behind them to try and really influence some of these countries all over the world. So, consequently, think about that in your investing. Think about having both the new energy play as well as the old energy play, because I think in this environment for the foreseeable future both will do better.

 

                                    I’m really excited to have on the program today Andrew Wheeler. He’s the former head of the EPA and I want to get his sense of where we’re heading. He may not like what’s happening. We’ll see. He may think it’s too drastic. But my concern from a national security standpoint is if we’re committed to this and China is committed to something else, how do we make sure that it’s the U.S. and the free world that really are triumphant in this environment?

 

                                    So, I am so excited to have Andrew Wheeler here with me today on the program. Andrew, good to have you. Welcome, sir.

                                   

Andrew Wheeler:        Thank you, Trish, for having me on. It’s great to be with you today.

 

Trish Regan:               It’s good to talk to you again. And I’m looking at what’s going on in G7 right now, and I was just telling the listeners if for a moment we can take off our sort of political hats and just wear our economic ones and maybe national security ones, I mean, investors are saying, “OK, is this time going to be any different?” I recall eight years of Barack Obama where we got sort of tied up with regulatory red tape and there was this effort to really make this green push but it just never really happened. I’ve got to say, I’m just going to tell you, I think – my feeling – and you may disagree, but I feel like this time it is a little bit different because – and maybe it’s the young Swedish girl, I don’t know, but the world has gotten so wrapped up in this effort for green energy that, again, politics aside, if I’m thinking about it as an investor, do I think that this time they have any better shot than previous efforts?

 

Andrew Wheeler:        Well, there certainly seems to be a lot of stars aligning and the push for greener energy, renewable energy. But it’s – I think it’s getting a little ahead of the science and a little ahead of what’s available. I think the transition is happening a little too fast. For example, if we’re going to move away from fossil fuels in terms of automobiles and go to electric vehicles, we don’t really have the rare earth materials needed for the batteries – at least to change over the fleet as quickly as companies are promising and as quickly as administrations are promising.

 

Trish Regan:               Yeah, China does, and that actually alarms me because they have all these battery makers and I’m like “Whoa, whoa, whoa, whoa, whoa.” If we’re going to get into this whole EV thing can we at least have battery makers here in the U.S.? I mean, are we really trusting China to make these batteries? And so, it strikes me that – and there’s a few companies here in the U.S., but it seems to me you’re totally right: We need a bigger investment in that if we’re really committed.

 

Andrew Wheeler:        We do. And China uses forced labor. Now, I was heartened to see at the end of the G7 some comments from President Biden and some of the leaders saying, “We need to hold China accountable.” But at the same time, we’re increasing purchases from China. It’s – and the batteries themselves, I’m actually a visiting fellow at the Heritage Foundation… I’m working on a paper right now taking a look at the disposal issues around renewable energy. And it’s something we don’t really focus on too much. If you look at an energy source, whether it’s for utilities to power for electricity or for automobiles you’ve got – at the front end, you’ve got the mining and the production of the materials themselves. In the middle, you have the use of the materials, whether it is the cars generating emissions and of course powering the automobiles or the power plants themselves. And at the end of the life stream, the third sector, you have the disposal of the materials as well as the disposal of the burning of the fossil fuels – or in this case solar panels… how you dispose of solar panels, how you dispose of the windmills for the electric generation.

 

                                    So, you have three different sectors or three different parts of the life cycle of energy. And that middle section… the renewables are incredible as far as zero to no emissions, and that is great for the environment. But you’ve also got to look at the front end and the back end. What does it take to generate the solar panels to put on the homes? What are the rare earth minerals? What are the mining impacts, as we get so much of that from – we don’t mine those materials here in the United States for the most part. And then you’ve got to look at the end of the lifespan. You’ve got to look at how do you dispose of those solar panels once the end of the lifespan of those solar panels happens? Same for windmills. Same with batteries.

 

                                    We know as a society quite a bit on the fossil fuel side. We know that there are environmental consequences to extraction. We know that there are environmental consequences to mining coal or for drilling oil or fracking natural gas. We also know what the consequences are in the middle section of the life cycle as far as the emissions. And emissions have gotten much cleaner over time. Most people in the country don’t realize that our air emissions are down 77% since 1970. Last year the EPA celebrated its 50th anniversary, and through the work of the EPA, states, environmental groups, industry, and the demands of the public we’ve reduced air emissions 77%.

 

                                    And then, the end of the life cycle, you’ve got the disposal of the materials. It’s not just the disposal of the fossil fuels, but you also have to look at the disposal of renewable energy. Every energy source has both positives and negatives and we can’t just gloss over the negatives of a preferred energy source like renewables without taking a look at all of the aspects across the board.

 

Trish Regan:               No, I think that’s a really, really good point. I mean, and then – and we don’t have to necessarily get into this for time reasons, and I’ve hit this over and over again in the past, but there’s the economic impact of trying to dismantle the coal industry or dismantle the oil industry. I don’t think they can dismantle it, first of all. I mean, think that that’s not happening. They can gunk it up with red tape and make it more difficult. All that does is actually increase the price of oil, which has the economic effect. But I hate that if we say we’re getting rid of the Keystone Pipeline that that’s actually livelihoods and jobs. And again, in this transition, it could be kind of ugly.

 

                                    But getting back to this transition for a moment and the need for us to think through some of these things, I mean, Andrew, what’s your feeling – why don’t we do more, for example, with nuclear energy, which is considered pretty clean?

 

Andrew Wheeler:        I really wish we would. Nuclear energy is clean. The biggest issue there is on the disposal side. Unfortunately, we’ve created a lot of regulatory hurdles in the United States on the use of nuclear and it has driven the cost up to unsustainable levels for anyone wanting to invest. They took a look at what the costs are on the regulatory side. We had – back around 2000 we were looking at relicensing the current nuclear fleet, and at that point, they were projecting that it could take anywhere from five to 10 years. And the United States Senate under my then-boss, Senator Jim Inhofe from Oklahoma, we held the NRC’s, the Nuclear Regulatory Commission’s feet to the fire and we got them to do a relicensing program within two years, and that gave certainty to the utility industry. So, they looked at it and said, “OK, if I can get a decision within two years on whether or not I have to relicense, I’ll go forward with it.” You’ve got to have regulatory certainty. You can’t have a permit sitting out there for five to 10 years without any action because that drives up the cost overall and nobody’s going to want to invest in that.

 

                                    So, we have driven nuclear power – nuclear is still being used by France… China, of course… Japan. Even with Fukushima, they still have nuclear power. Nuclear power is a really good energy source, and there has been a lot of advancements on the small modular reactors over the last few years. And hopefully, the small modular reactors are going to allow a resurgence or a renaissance of nuclear energy. We were promised a nuclear renaissance about 10 years ago, and it didn’t really happen here in the United States. The cost overruns of the nuclear plants that have been under construction over the last 10 years, the two plants, it didn’t provide the certainty for other people to invest. When a utility is going to build a new facility, they look at how long the facility will take to get built and licensed, what are the costs, what are the disposal costs at the end of the lifespan? And for the last 10 years or so it’s been natural gas, and that’s been the real driver on the utility side. The cost there with the fracking and the shale play has just made other forms of energy noncompetitive.

 

                                    Now, at this point, the Biden administration is looking at increasing the regulatory costs for natural gas. And that’s going to drive up the price of natural gas for a generation and it’s going to cause companies to take a harder look and a closer look at renewables and other sources. When you equalize the costs of the different energy sources and then you take a look at what the impacts are when you’re operating the facility, then it does make wind and solar more competitive. But is it more competitive because of a free market or is it more competitive because of regulatory burdens placed on the competitors of the renewable energy?

 

                                    And I’m a big fan of across the board. I think energy – I think solar energy, I think windmills, I think all of it is fine and we need a robust, diverse energy source, because when you have a diverse energy source you have reliability and you have affordability. And that is what powers our manufacturing base. When energy prices go up too high in the United States it literally drives manufacturing offshore to other countries.

 

                                    The horrible thing about the canceling of the pipeline here in the United States while at the same time allowing the pipeline to go forward for Russia is it’s going to make our allies more dependent on Russian natural gas instead of the U.S., and I’d much rather them purchase their natural gas from us. One, just as far as allies, we never extract anything from our trading partners like the Russians or other international competitors do. Plus, we produce our energy, whether it is renewable or fossil fuel, we produce it here in the United States in a much more environmentally conscious manner than anyone else does. Our natural gas produced here is much cleaner than natural gas produced in Russia.

 

Trish Regan:               Speaking of the – what we extract, etc., versus what they extract, from a national security standpoint, I mean, when you look at the efforts that China is trying to engage in to have influence all over the world and you compare and contrast it with the U.S. and the G7 – we could say the free world – do you have concerns about that? I mean, I’m not – look, I like being the hegemonic power. I want us to continue being the hegemonic power of the world. I actually – I’m just going to get this out there – I think that there’s a reason we’re continuing to have such low interest rates – which is debatable, whether or not we should right now. But one of the reasons we do is because everybody still wants to be in U.S.-denominated assets, the U.S. dollar, people still want Treasury bonds, and it’s because we are the hegemonic power of the world. So, if that shifts, if that changes we have a whole set of economic problems that we’re not ready to confront. And that would actually, I think, reduce our standard of living significantly. With that in mind, can we use the energy play in a positive way? Because I look at – for goodness sakes, I mean, in 2010 the world outlawed the CFC-11 chemical that’s used in home insulation, and sure enough, China is still making it, burning a hole through the ozone layer at the same time while everybody else said, “OK, we’re not going to do this.”

 

                                    And so, I have real concerns about them not signing on to the same kind of deals and then trying to use their weight in other countries around the world. I mean, if we’re serious about this and we’re committed to a diverse energy supply, shouldn’t we be influencing the rest of the world to kind of be with us on this? You know, “You’re sort of with us or you’re against us.”

 

Andrew Wheeler:        I completely agree with you. And the shale play in the United States made us energy-dominant and it allowed us to be able to provide energy to our allies around the world and make them less dependent on Middle Eastern energy, Chinese energy. What we’re seeing here – and again, I totally support all forms of energy and the renewable energy here in the United States, but what concerns me is the push now toward solar and wind when we don’t have the infrastructure here in the United States for the development of the solar panels, for example. And there’s been a few mining projects over the last year or two for the rare earth minerals that have been opposed by environmental groups. If we’re not going to mine for that here in the U.S., then we’re going to be reliant on China where they’ve cornered the market around the world. And when they mine for it, they’re doing it at a much worse environmental manner.

 

                                    So, it just doesn’t make sense. And I think that there are certainly some people in the environmental community that would prefer our standard of living, I think, to go down, to use less energy overall no matter what the energy source is. And if we are going to make a push toward more solar and more wind in the United States, then we have to develop those resources here so that we’re not dependent upon China for access to rare earth and critical minerals. China is – they go down to South America and they buy up resources and then they don’t extract those resources in an environmentally conscious manner. They leave those countries worse off. They take the resources from them, they give them some money, but then they end up leaving environmental degradation in its wake. And that’s not acknowledged by most of the western world.

 

Trish Regan:               It’s very interesting. It seems so black-and-white and yet, as in many things, that’s hardly at all what it is. It’s very nuanced. There’s a lot of layers. I mean, I think investors would be smart to be looking at sort of this middle ground. So, for example, how do we better invest in the resources? If you’re committed to green energy, then you need to make sure that we have sort of all our ducks in a row, if you would. I’ll go back to the battery example because it’s the one I’m most familiar with. There’s a couple of companies that I’ve come across out of California, relatively new. One’s public… one’s not. There’s another company that actually doesn’t do this as their main business out of Canada. And the majority still – I mean, there’s a Korean company and there’s a multitude of Chinese companies. And I’m sorry, but I’m not so confident putting a Chinese battery in my car for reasons that I still think that their standards for their products are not going to be similar to what we have, No. 1. And No. 2, if we really want to conquer this and commit to it, then we ought to be all in.

 

Andrew Wheeler:        Absolutely. And when you’re – when we’re talking about climate change, when we’re talking about greenhouse gas emissions, you have to look at the worldwide greenhouse gas emissions. Here in the United States, our greenhouse gas emissions have gone down steadily since 2005 while they’re going up in China, India, other countries. So, when we export – when we decide “OK, we’re not going to make – we’re not going to do heavy industry anymore… we’re going to export those –” because we’re still going to use the products – “we’re going to export those to other countries,” well, the countries we’re exporting it to have worse environmental regulations and standards than we do, so they end up producing more CO2… they end up producing more traditional pollutants. And we get more mercury deposited in the United States from emissions in China than we do from emissions in the United States, because mercury goes up into the atmosphere and it can travel halfway around the world. So, just one of the traditional pollutants.

                                   

                                    Their coal-fired power plants – and they’re still building the coal-fired power plants left and right – their coal-fired power plants are polluting more here in the United States than our coal-fired power plants are. And that’s kind of lost in the debate on energy because China is using those coal-fired power plants to make the solar cells that they then sell to us here in the United States. So, the green energy that they’re producing is powered by coal-fired power plants that are nowhere near as clean as ours and it’s actually producing pollution here in the United States. So, it’s – the world is getting smaller and pollution travels – does not recognize international batteries.

 

Trish Regan:               Do you have any national security concerns about it?

 

Andrew Wheeler:        Absolutely. I think under the Trump administration the natural gas, the LNG, that gave us incredible assistance in our national security and our diplomacy, energy diplomacy, and I don’t want to see us walk away from that. But I’m very concerned that we’re going to become more and more dependent upon China for products, not just for manufactured products but now possibly also for the raw materials for our energy production. If we are dependent upon China or another country in order to produce energy, and then in order to purchase the products that we want, and all this is being funded by selling our bonds and what have you to China, I’m very concerned about what this is doing to our national security.

 

                                    You go back – every major conflict, the person that has controlled the energy has generally won the conflict. You go back to World War II, World War I, the countries that won those wars controlled the energy at the time and they were able to power the military and the defense. And that’s just in the case of warfare. But we’re in economic warfare every day with other countries. And when a country can produce products much cheaper by using cheaper forms of energy than we do, then we’re at a disadvantage.

 

Trish Regan:               Look, I mean, you don’t want to be in a situation where like “OK, great, we’re energy-independent, we’ve weaned ourselves off the Middle East” and now all of a sudden we’re dependent on China. I mean, what good is that? I mean, it seems to me if you’re really committed to this idea then all this sort of middle ground that you’re talking about, making sure you have the right infrastructure, etc., in place to be able to support this while simultaneously not ignoring the other industries that you have here that are doing well – I mean, I don’t think you can just cut them off. I think that the world is still – granted, I mean, and Andrew, I think that you would agree with this, if suddenly tomorrow we all woke up and there was no oil in the ground and nobody could get it out, period, it was done, we’re creative enough and flexible enough that we would find a new energy source immediately. But as long as that oil is there we’re also creative enough and flexible enough to find ways to get it, aren’t we?

 

Andrew Wheeler:        Yes, we are. And we’re getting it in much – in a more environmentally conscious manner than we ever have before. But we’re going to be dependent on oil for the foreseeable future. And it will come down to whether or not we will be producing that oil here or dependent upon other countries for that oil. Even if we sell electric vehicles, 50% electric vehicles by 2030, which I think is one of the targets that’s out there, we still have all of the existing automobiles and vehicles out on the roads today that will still need oil to power those vehicles. We’re going to be using oil and we’re going to be using natural gas for at least the next 20 to 30 years. You don’t just turn off the spigot and switch automatically to another energy form. In fact, energy in general over the last 200 years has followed a bell curve where it starts off slow, whatever the energy source is – wood actually peaked in the late 1800s. Coal worldwide still has not peaked yet because of the use of coal in China and India and other countries. It’s almost to the top of its bell curve, probably. Oil and natural gas have not peaked yet worldwide in usage.

 

                                    And the question is going to come down to: are we going to be dependent like we were in the 1970s? I’m old enough to remember the 1970s and the gas lines in the 1970s. I was actually surprised and shocked – I live in Northern Virginia – to see gas lines a month ago when you had the Colonial Pipeline issue, and gas stations – eight gas stations within a couple miles of my house, and six of them were completely out of fuel by that Friday. I don’t want that to become a common occurrence here in the United States again. And we are in danger of that if we stop – if we stopped extracting the fuel ourselves.

 

                                    Again, we need – we do need more research on batteries, on battery storage, both for cars as well as battery storage for solar and wind farms if we’re going to use it for non-peaking purposes. So, there needs to be a lot more work done. There needs to be a lot more research and experimentations. And we should do that and we need to do that. I think battery storage and probably solar to get to the batteries is vital to our long-term interests as far as energy production in the United States. But you can’t just turn off one and turn on the other without a lot of work in between the two.

 

Trish Regan:               Yeah, I hear you. I – and your point about the transition to a new source is an important one. I did some reporting down in Brazil back in I think it was 2006 when they first announced that they were energy-independent, and they had sugarcane ethanol to thank. We don’t have the same ability with sugarcane, and corn ethanol is not as easy to produce. But sugarcane ethanol, they were able to – they invested in it, they produced it, and by 2006 – that goes all the way back to the ’70s, by the way, because it was in the 1970s, because of those oil lines that they said, “Wait a second, we’ve got to find an alternative and get ourselves less dependent on the Middle East and on OPEC.” And that’s when they invested in sugarcane and by 2006, it had worked.

 

                                    But it shows you how long it takes, right? It doesn’t – it’s not like you just snap your fingers and it happens. And they still use oil obviously there and they’ve had an increase in drilling actually off the coast there in Brazil that has been a big resource for them. But their point was they wanted that diversification because for national security reasons… for economic reasons, it was important to not be reliant on the Middle East. I don’t think you want to, when it comes to energy, to your point, be reliant on anyone, do you?

 

Andrew Wheeler:        You don’t. And you don’t for energy, but it’s also not just when you think of energy as far as heating or cooling homes or businesses or powering transportation. Fifteen years ago, before the shale play expansion here in the United States, there were 30 chemical plants being built worldwide, none of them here in the United States. Our fertilizer industry, which is highly dependent upon natural gas as a feed stock, they were shutting down facilities here in the United States because of the high price of natural gas. So, that natural gas shale play that reduced the price of natural gas to pennies on the dollar, compared to what it was… not just helped us on our energy expansion here and allowed us to export energy to other countries, but it also allowed us to do more on chemical manufacturing, which we use every single day in products, and also on fertilizer. It helped us on national security as far as food production.

 

                                    So, it’s not just how we use the energy source itself to power homes, vehicles, etc., but it’s the other uses of the raw material of the fossil fuels, which is – a lot of young millennials are very conscious about the environment, and that’s great I applaud them for that. And they tweet out on their smartphones all day long. But that smartphone uses an awful lot of rare earth minerals and products and materials from fossil fuels, from natural gas, from plastics to the metals and the circuits, that they don’t realize where that comes from. They don’t realize that the materials that they use in everyday products… They need to be produced here in the United States through extraction and through production and manufacturing. We don’t need to become dependent on other countries for the things that we use every day.

 

Trish Regan:               So, Andrew, how should investors think about this? I mean, I think that there’s a battery play. There’s probably a play for some of these windmills. But some of these – there’s the obvious stuff like Tesla, and I don’t think people want to be going and pouring money into the obvious stuff necessarily. A lot of that space is super crowded. But when you talk about the need for these intermediaries to help service the Teslas of the world or other EV makers or windmills, etc., what is it that they need to be looking at?

 

Andrew Wheeler:        Well, I think there’s a lot of opportunities particularly in small- and medium-sized companies. There’s one aspect that I’ve been spending quite a bit of time myself on the last couple of years which is on the recycling. For these batteries for the solar panels, there are a lot of companies out there that are taking a look at how can we recycle these materials to make them more profitable? And that’s something that’s going to be a huge expense to some of the bigger companies if they don’t figure it out. And I like what I see with some of the small- and medium-sized companies that are taking a look at the science problems. They’re working with different research universities around the country and you have a lot of entrepreneurs that are investing time and resources here. And then, some of the solar companies here in the U.S. that are wanting to take advantage of the older solar panels. The solar industry has been around for a little while, and as the solar panels reach the end of their life they still have a lot of valuable materials in them.

 

                                    So, there are some things that are being done. On the battery storage side, there’s all kinds of different innovative technologies that are being used and deployed. You read about it in the press all the time. And I really think for an investor to take a look at where some of the advancements are occurring and happening – and I would be looking at some of these private partner – public-private partnerships and also these research hubs at some of the universities and some of the incubators that are putting money into some of these smaller companies that are becoming bigger companies overnight. That’s where I would certainly be looking.

 

Trish Regan:               Andrew, it is a pleasure talking with you. Andrew Wheeler, former head of the EPA, now at Heritage Foundation. It is really – what a fascinating conversation and it shows you how layered all of this is. I’m looking at it a little bit from the investment standpoint with this group of listeners and I think that there’s a lot of potential, both still in the traditional energy space and also in terms of trying to find ways to really meet the demand for new energy here in the U.S. Thank you, Andrew.

 

                                    So, a really insightful conversation. I think the big takeaway here is there is still lots of opportunity here. I do think – and I think even Andrew would agree with me – this administration is committed to trying to get this off the ground but there’s a lot that’s getting overlooked. There’s a lot that’s getting overlooked and increasingly people will start spending more time and more attention on the sort of ancillary businesses around all of these efforts. And that’s where there’s most likely an opportunity for investors. You want to not necessarily be investing in the obvious stuff but some of the companies around this space that are poised to benefit. And that’s, as he said, I think a really good place to look.       On americanconsequences.com on my piece this week I did write about this. I mean, just a few names that I took a look at, Sila Nanotechnologies – it’s out in Silicon Valley. It was started by a gentleman who actually developed Tesla’s – co-developed Tesla’s battery. It’s a private company still, but it’s very interesting to keep an eye on because who knows? Maybe at some point as it seeks more funding it will go public.

 

                                    Romeo Power did recently go public. It’s got a P/E ratio of about 22 right now. But that’s a company to watch, too, because if they’re successful on the EV front here in the U.S., then that’s a company that’s going to be very much needed because they’re making the batteries.

 

                                    There’s another company out of Canada called Lithium Americas that I think is worth taking a look at as well because its business, while a little bit more diverse, is related to batteries and they do have some U.S. operations. But I think, to Andrew’s point, we’ve got to actually have these companies operating here. We want to control the industry so that we’re not reliant on the Middle East or China or anyone else. And so, when you look at all the Chinese battery companies – you’ve got Yunnan Energy New Materials, you’ve got China’s Contemporary Amperex Technology, you’ve got a Korean battery maker called LG Chemical. I mean, all of these are overseas efforts. It’s critical for so many reasons that we start bringing this in-house. And as an investor, that represents, of course, a pretty big opportunity.

 

                                    So, I want to remind you all: Go check out the article on americanconsequences.com. You can get more from me there as well as on my website, trishintel.com, and we’ll continue this conversation because it’s a political environment, of course, but sometimes you just need to see through that politics to what really is your opportunity. I will see you right here next week on American Consequences. Enjoy your investing.

 

Voice over:                 Thank you for listening to this episode of American Consequences. Want more Trish? Read her weekly articles Thursdays in our magazine at americanconsequences.com. And subscribe for free to get all of our daily articles and the monthly magazine. We’d love to hear from you too. Send Trish a note: [email protected]com. This broadcast is for entertainment purposes only and should not be considered personalized investment advice. Trading stocks and all other financial instruments involves risk. You should not make any investment decision based solely on what you hear. Trish Regan’s American Consequences is produced by Stansberry Research and American Consequences and is copyrighted by the Stansberry Radio Network.

 

 

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