Energy Matters: David Hobbs on Trump, NATO, Oil, ESG and AI
This week, our guest is David Hobbs, Executive Chairman of Pantheon Resources PLC and Chairman of Proton Green LLC. David has an extensive background in energy research, having served as Head of Research at King Abdullah Petroleum Studies and Research (KAPSARC) in Riyadh, Saudi Arabia, and as Chief Energy Strategist at IHS CERA (now part of S&P Global Commodities Insights).
The podcast is a new game-style format this week, where Jackie and David engaged in a lively debate on some of the big issues in energy, with Peter as the moderator. Some topics they discussed include: How would a second Trump presidency affect NATO’s future? How do the US presidential candidates differ in terms of energy policy? When is the end of oil? How would a Pierre Poilievre-led Conservative Party of Canada alter energy policy in Canada? How are the Middle East and Ukraine conflicts impacting the oil market? How will AI impact the future of energy? What will be the next acronym after ESG? Should any change be expected as the UN Climate meetings mark the 10th anniversary of the Paris Agreement?
Content referenced in this podcast:
- Remarkable digital notepad
- Roger Pielke Jr. from the University of Colorado
- Vaclav Smil, Distinguished Professor Emeritus at the University of Manitoba
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Episode 245 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. And welcome back. Well, today’s going to be a really good session. I’m very excited because we have with us in the studio someone I’ve known, we calculated, 18 years. And Jackie, I know you’ve known him a lot longer and we’ll come to that, but I’m delighted to welcome David Hobbs, who is currently the executive chairman of Pantheon Resources PLC, and he’s also chairman of Proton Green LLC. David, welcome.
David Hobbs:
Thanks very much, Peter. And it’s great to see you and Jackie, it’s one of the reasons I look forward to coming to Calgary.
Jackie Forrest:
Right. And while I want to thank you, David, because you gave me my first job in research, I wouldn’t be sitting here today talking to you if you hadn’t given me that job. I was an engineer with not a lot of background in research and I remember the interview well. I went out to Boston to meet David, who was the head of research for CERA, I think it was called at the time. And yeah, he took a chance on me.
David Hobbs:
Well, it wasn’t that much of a chance to be quite honest. There are some fairly easy hires, Jackie, you were an easy hire and you more than repaid any risk that we thought we were taking at the time. So, it was the start of a great relationship.
Peter Tertzakian:
So, Jackie I noticed you’ve got pen and paper, and you can tell from David’s accent he’s quite sophisticated, but he’s also sophisticated like me because we have recently converted from pen and paper to this device here, which I think is quite remarkable.
David Hobbs:
It is indeed.
Peter Tertzakian:
Because it is called a reMarkable.
David Hobbs:
It is.
Peter Tertzakian:
I know it’s not actually new. I think it’s on the second generation, but it is the closest thing I have experienced to writing on paper and it’s all digital.
David Hobbs:
Well, we’ll only judge the success of this podcast today if by the end Jackie has gone out and bought a reMarkable. I’m going to tell you; it was life changing for me.
Peter Tertzakian:
It’s life changing for me. And Jackie, you’re so old school.
Jackie Forrest:
I know, I’m still taking notes in my notebook.
David Hobbs:
And how incredible, because we have to use more adjectives here. I actually, I broke the golden rule of gifts for spouses. I mean, I know enough to know never to buy a steam iron or a washing machine or whatever, but I bought her a reMarkable for Christmas two years ago, or 18 months ago, and she was very huffy about it, initially. She said, “Well, this isn’t really a gift, this is a work device.” And two months later she bought me one for my birthday saying, “Actually, it’s the best present I’ve had in years.” Which either says that I am a sucky present giver or it’s remarkable.
Peter Tertzakian:
Right. Well, it may be the end of paper. I don’t know, because people have been saying that for 30 years since the computer age.
David Hobbs:
Well, this is the nearest it’s come, I’m-
Peter Tertzakian:
This is the nearest it’s come.
David Hobbs:
I’ll tell you what, I’m converting people one reMarkable at a time.
Peter Tertzakian:
Yeah, fantastic. And this is not a paid advertisement. But David, welcome. Tell us a little bit about yourself so our audience can get calibrated before we start an exciting dialogue here.
David Hobbs:
Well, as you can tell, I’ve got a very old-fashioned American or North American accent, 200 and whatever years it is, long enough to forgive and forget. I started out as a petroleum engineer working in the UK sector of the North Sea and then branching out into internationally, ended up at Cambridge Energy Research Associates informally at the end of the 1990s, formally at the start of this new century. And-
Peter Tertzakian:
That was with Daniel Yergin?
David Hobbs:
Daniel Yergin, yeah. And Joe Stanislaw, Jamey Rosenfield. It was a time of change. The company ended up being acquired by IHS and then onward into IHS market and now S&P Global. So, the DNA is in there for one of the largest information providers in the world. And along the way got to meet a lot of really cool people, some as colleagues, some as clients, and all of them ultimately as friends. That came to an end in 2013 when I went to Saudi Arabia to help establish the King Abdullah Petroleum Studies and Research Center, or KAPSARC, which is easier to say. And spent six years there building a team of really first-rate researchers. And then from there, what did I do? I went sailing and we sailed-
Peter Tertzakian:
That’s very net zero of you.
David Hobbs:
It was very net zero of me. I had a turbine generator that drags off the back of the boat for power, so we tried to use the engine as little as possible. I can unfortunately attest to the fact there are occasions when you really, really need an engine. The people who’ve tried to do it all electric have found that that’s just not possible.
But the result of that was transatlantic and then up and down in the Caribbean before trying to head off to the Pacific. And we’d actually just turned off towards Panama from the Windward Islands when a bat with a taste for pangolins or a pangolin with a taste for bats, I’m not sure which leaked out of a lab and shut the world down. So, plans had to go on hold for a bit. And during that time of lockdown, I think we all discovered something about ourselves. One of the things that I discovered is that apparently you can have too much David and my wife told me that I had to go and do something to keep me out of her hair. I saw you both look shocked at the idea that you could have-
Jackie Forrest:
Well, she survived on a sailboat with you. So, I mean, how could COVID be worse?
David Hobbs:
Exactly, exactly. I thought we’d pass the audition. But anyway, she encouraged me to find something to keep me busy. And so, I’ve ended up, two roles, one, helping Pantheon Resources develop some giant oil fields on the North Slope of Alaska. I’ll come back to that in a second, I’m sure. And also with an old friend, Steve Looper setting up a helium and carbon dioxide production company called Proton Green. And that’s just again, at an exciting point. We should be uplifting to a major stock exchange in the next month or two, and that will really turbocharge what we’re doing. But along the way, I glossed over, I think one of the more exciting episodes, Peter and I were jointly professors on the University of Calgary’s Global Energy Executive MBA program.
Peter Tertzakian:
Yeah. And that’s pushing 10 years ago.
David Hobbs:
Yeah, that was… hang on, that started 12 years ago.
Peter Tertzakian:
Yeah, 12 years ago.
David Hobbs:
Because it started before, I went to Saudi Arabia. I remember those first lectures with quite the most rebellious group of students. We thought it all through brilliantly except for the idea that if we had people who all had 10 to 20 years’ experience, and in one case about 40 years’ experience and some pretty firm ideas that actually our job was not so much to teach as to facilitate their exchange of ideas. And I can tell you that everyone on the faculty found it both the scariest and probably the most enjoyable and rewarding thing they’d ever done.
Peter Tertzakian:
All right, great intro. So, Jackie, what are we doing today?
Jackie Forrest:
Well, that connection actually to the University of Calgary and the Haskayne School of Business brought us to know Kevin Krausert and he-
Peter Tertzakian:
Yeah, he was a student.
Jackie Forrest:
Yeah, he was a student?
Peter Tertzakian:
Mm-hmm.
David Hobbs:
He was in that first cohort.
Peter Tertzakian:
Cohort.
Jackie Forrest:
And he’s gone on to create Avatar Innovations. And it wasn’t maybe a couple months ago, David and I participated in one of their events and we tried this new format, and we thought it would be fun to bring to the podcast. And of course, David, I can’t take any credit for the idea because David’s always the innovative one when it comes to this, but this is coming from a show, what was the show again?
David Hobbs:
She’s selling herself short. Jackie refined this idea by arguing continuously against it for about a month before we actually arrived in Calgary. And then afterwards said, “This was a great idea I had.”
No, what we thought was we wanted a little bit of Jeopardy in the whole experience. And so, some of you will have been aware of, Pardon the Interruption, the sports show with Tony Kornheiser and Mike Wilbon.
Jackie Forrest:
Which I wasn’t.
David Hobbs:
And you weren’t and you said, “This will never work.” And the guys at Avatar who are meant to be, Avatar Innovation ecosystem, they said, “This will never work.” And at the end everyone said, “Oh, that worked.” So, I have no idea if it’ll work without a large crowd intervening the whole time, but I’m sure we can.
Peter Tertzakian:
Well, all right, what’s the format?
Jackie Forrest:
So, the format’s going to be Peter’s going to ask a question. There’s going to be a timer-
Peter Tertzakian:
Yeah, I’ve got it.
Jackie Forrest:
… we have two minutes to debate it and then Peter gets the last word. But Peter, you can surprise us.
Peter Tertzakian:
Oh, I will.
Jackie Forrest:
We have a preset list of questions here, but you can just-
Peter Tertzakian:
These are far too boring, but we’ll get through them.
Jackie Forrest:
You can throw a question at us.
David Hobbs:
Well, we know the answer to one of them, the Flames didn’t make 50%.
Jackie Forrest:
Yeah, will the Flames break 500? Maybe, will the Oilers win the Stanley Cup? That’s-
David Hobbs:
We can safely say that’s not going to happen either.
Peter Tertzakian:
All right, and you guys have these questions in front of you, which is actually not completely fair, so I am going to throw some in. However, I’m not going to necessarily stick to the order either. So are you ready?
Jackie Forrest:
Yes, we’re ready.
David Hobbs:
We’re ready.
Peter Tertzakian:
All right, so I’m about to start the timer and you have two minutes. Maybe Jackie, no David, you go first, you’re our guest. Can NATO survive a Trump presidency?
David Hobbs:
Well, it already has in two senses. The first is, of course, it survived his first term. The second is that probably he’s already saved NATO without having become president a second time. It only took him speculating about whether or not he thought it was reasonable for America to commit blood and treasure to support allies who haven’t met their obligations for increases in expenditure across the board for people to start taking NATO seriously from a position where previously NATO members had treated it as, America will come to the rescue and we’ll do our bit if we need to. So I would argue not only can it survive, it will thrive because Trump has demonstrated one thing, which is if you have an alternative, no matter how unappealing and you are prepared to run with it, then it does focus the mind.
Peter Tertzakian:
Mm-hmm. So, you’re arguing it survived it?
Jackie Forrest:
Now, I would just say, do you think that it could create some short-term problems if he says, “I’m not going to support the Ukraine, the Europeans need to.” And it could create some geopolitical issues in the short term, even though it may solve a long-term problem, which I think is important, the more equitable-
David Hobbs:
But that’s a different question, isn’t it? Is, can Ukraine survive a Trump presidency? Well, Ukraine’s not a member of NATO and actually I suspect it can. I think that Trump’s shown himself to be pretty pragmatic about doing what needs to be done through the lens of what’s best for the United States of America. And to be honest with you, unless the rest of the world gets on board and elects him president of the world, he’s only president of the United States if he wins an election in November. So, my view is, we survived once before. The apocalyptic predictions of how the world would end with a Trump presidency turned out not to be… there we go.
Peter Tertzakian:
There we go.
David Hobbs:
That’s an editorial interruption.
Peter Tertzakian:
Well, I have to say, David, I think I agree with you. I think that the move by Trump, initially though unsettling, did revive NATO and certainly strengthened it. So David, one for you.
David Hobbs:
One for me?
Peter Tertzakian:
One for you. So, let’s move onto the next question.
David Hobbs:
It’s only taken 20 years to score one against Jackie.
Jackie Forrest:
I didn’t know there were going to be totals and stuff.
David Hobbs:
Oh, there’s more Jeopardy. More Jeopardy. Points and winners.
Peter Tertzakian:
All right, so let’s move on. That was a militaristic type question, though with relevance to energy security. But let’s talk about the difference between US presidential candidates on energy policy. And what might the different outcomes be depending on which of the two old gentlemen win?
Jackie Forrest:
Hey, I better get to start because underdog now.
Peter Tertzakian:
All right, we are starting now.
Jackie Forrest:
Okay. So, first of all, let’s talk about inside the US. I actually think it’ll be less impactful than maybe people think, and it’s because obviously Trump is more pro-hydrocarbons and pro-oil and gas and may do some policies to try to create more oil and gas production, but I actually think the past has shown that presidents don’t really have much impact. They can open up federal lands, but honestly those aren’t the lands that people want to develop anyway.
Maybe in Alaska there could be some change, but generally I think oil and gas production probably won’t be that impacted. They may lift this ban on LNG permits, but I think there’s so many new LNG facilities coming on in the short term, it probably won’t affect things very much. The EPA is probably the area that will have the biggest impact. So maybe we’ll have more coal-fired power plants, because I’m sure he’s going to roll back some of those rules that were going to reduce the amount of coal power, probably roll back some of the EV mandates and requirements for lower carbon in the transportation sector.
But actually, I think the biggest impact is actually not going to be in the United States. I think it’s going to be with Iran. If you go back into 2018, Trump was very harsh on Iran. And in fact, under the Trump presidency, their production was some of the lowest it’s been in a long time. And so, it could actually affect the global oil markets, and that might be the biggest impact in that he may constrain the production that’s coming out of Iran.
Now, Saudi Arabia might be quite happy about that because, if you’ve been following the news, they seem eager to get some of those voluntary cuts back on the market. So maybe it won’t cause a shortage.
David Hobbs:
I’m not sure it depends whether they’re voluntary or involuntary. I think they’d like to see some oil taken out of the market on a more consistent basis. I don’t disagree with you that it doesn’t make a lot of difference which of those two gentlemen ends up winning in terms of overall energy policy within the United States, but I absolutely agree that it’s going to be regulatory rather than legislative impact. I don’t think that there’s an appetite for significant legislative change, regardless of the agendas of either of the candidates. And isn’t it funny that we’re sitting here without any idea who’s going to win?
Jackie Forrest:
Wait, wait, wait. What about the IRA? We didn’t talk about that.
David Hobbs:
Well, we can talk about the IRA but-
Jackie Forrest:
We’re out of time.
David Hobbs:
Heir Timer Meister.
Peter Tertzakian:
Yeah, sorry. If we’re going to get through all these questions, we’ve got to cut it off.
David Hobbs:
Trust him to come back to it.
Peter Tertzakian:
No, no. It’s fairly serious discussion on both sides of it. I think the winning comment on this one would be, what is Trump going to do on day one? Because when he won the presidency last time, he pulled the US out of the Paris Agreement. And I think that may be forthcoming again, which will ripple through many of the legislative things, I think.
David Hobbs:
Oh, without a doubt. But again, it’ll be actions that are within his power, executive authority, rather than spending. I think if he learned anything from the first time around, it is to avoid the battle of trying to push stuff through Congress if he can avoid that. And I think that the Biden presidency showed that, notwithstanding how much distaste his administration had for the prior administration’s use of the regulatory state, they just did more of the same.
In fact, America is starting to become more presidential, which actually, if there’s one point I might disagree with Jackie on, it is that the president used to be far less relevant than the president is becoming because of the use of the regulatory and executive state.
Peter Tertzakian:
Right.
Jackie Forrest:
Right.
Peter Tertzakian:
So, he may not shred the IRA. Unlikely. But I’m going to shred the script for a moment here and give you the next question, which is, when is the end of oil, David?
David Hobbs:
I’m pretty confident I’m going to be dead before it, but that may not be saying much. The end of oil as a fuel burned without any kind of mitigation, I suspect probably later in the century, but with huge regional differences. The use of oil as a feedstock, all those people who think that there are greener feedstocks to create the plastics, the petrochemicals, and everything that we rely on, I think that people will find that oil or hydrocarbons provides a lower footprint way of achieving those things.
So, I think that land usage is going to trump the concerns about oil. I would actually throw three names into the ring that are well worth thinking about. One is Roger Pielke. Roger Pielke Jr. at University of Colorado talks about Pielke’s iron law. When environmental legislation and policy impacts people’s wellbeing, they very quickly turn around. And we’re starting to see, and people are talking about, we’re at peak ESG. That’s an example of Pielke’s iron law. I would point them at Vaclav Smil, who I don’t think needs any introduction or description to you or your listeners. And if you haven’t had him on the podcast, then he really should.
Jackie Forrest:
Well, we’ve invited him. He doesn’t like to come on things that go on the internet apparently.
David Hobbs:
Yeah. No, I didn’t blame him.
Peter Tertzakian:
Well, there’s only 30 seconds left here-
Jackie Forrest:
Yeah. David’s hogging the time.
Peter Tertzakian:
I’m going to give you an extra 30 seconds, Jackie, so go ahead, because it’s such an important question.
Jackie Forrest:
Well, I think when you look at, let’s talk about 2050 because everyone talks about that. If you look at not scenarios but predictions, it’s actually very hard to find a prediction that sees more than a 20% drop in oil by 2050, which would imply that we use a lot in the second half of this century. So, I think we’re going to be using oil for a lot longer. I do think, though, we come back to the climate issue, there’s going to be a lot of actions taken around, how do we mitigate the climate impacts of that? And how do we adapt to the climate change? And I hope that’s going to become a greater focus, including geoengineering and other things to cool the earth in a world that uses more hydrocarbons.
Peter Tertzakian:
Well, I’m afraid I can’t offer any points to either of you because really neither of you answered the specific question, when is the end of oil? I was looking for a specific date, but-
David Hobbs:
The 17th of January 2104. And you can hold me to it.
Peter Tertzakian:
All right, well, I think it’s beyond our lifetimes. And I think your point, David, that oil is much more than a combustible fuel. What’s the percentage, Jackie? 60% of oil is used for things other than light duty vehicles.
Jackie Forrest:
Yeah. Basically about 60% of the uses of oil today we don’t have a commercial alternative to. We may have pilots for things like shipping and airplanes, but we actually don’t have a commercial pilot. So, when you think about it, the Tesla was… we started hand building the Tesla in 2009. So, it takes over a decade to get from the pilot to having a meaningful impact and starting to erode oil demand.
Peter Tertzakian:
Right.
Jackie Forrest:
And so, for many of these other segments of oil, it’s going to be awhile. And then there’s also the petrochemical feedstocks, which is in the range of, I think, 10% or something like that.
Peter Tertzakian:
Yeah. Yeah. Right.
Jackie Forrest:
Non-combustible uses. Yeah.
David Hobbs:
Yeah. No, exactly. With lubricants and stuff, a big piece on top, because we’ve run out of whales so we can’t use them for lubrication.
Peter Tertzakian:
So, let’s go off script and follow this thread here a minute because, David, you talked about your sailboat, how you pulled a water turbine to recharge the batteries. And occasionally you had to resort to combustion of hydrocarbons to keep your boat running. So, my question is, for both of you-
David Hobbs:
Well, to keep it moving through the water when the wind’s in the wrong direction.
Peter Tertzakian:
Yeah. So, my question, is it possible to be a fegan, a fossil fuel vegan? In other words, someone who can go completely off fossil fuels?
David Hobbs:
Oh, I think it’s possible. It’s possible to delude yourself that you are being so
Peter Tertzakian:
Two minutes. Two minutes.
David Hobbs:
Two minutes. It’s possible to delude yourself that you are being so in the same way as some of these net-zero towns in Europe deluded themselves into thinking they were net zero because they were drawing the boundary in a way that they didn’t understand all of the indirect impacts of fossil fuels they were having, whether they were dumping excess power or they were importing power. If you were to try to live a life that had no indirect fossil fuel impact from the ecosystem around you-
Peter Tertzakian:
So, a scope two fegan.
Jackie Forrest:
Or four.
David Hobbs:
Yeah. Actually, a scope three, but that’s a different argument. Does scope three even exist? Because every scope three emission is someone else’s scope two.
Peter Tertzakian:
Right.
David Hobbs:
So, in that sense, you cannot possibly be a fegan in that sense unless you’re prepared to go back to the stone age.
Peter Tertzakian:
Jackie?
Jackie Forrest:
Yeah, fegan, that’s a new term for me.
Peter Tertzakian:
I just made it up.
Jackie Forrest:
Hey, I think… have you ever tried back country camping? Yeah, okay. So, some of the things that you might be using like your tent and your raincoat and things like that.
Peter Tertzakian:
Okay. But that’s, what do we call it? The scope two.
Jackie Forrest:
Yeah.
Peter Tertzakian:
You don’t burn your shoes; you don’t burn your tent. I’m talking about a combustion fossil fuel vegan.
Jackie Forrest:
Yeah, you can do it. It wouldn’t be a really nice lifestyle.
Peter Tertzakian:
You think you can do it today?
Jackie Forrest:
Yeah. Well, I know someone that lives in one of those tents.
David Hobbs:
Well, can one of one person, do it?
Peter Tertzakian:
And-
David Hobbs:
Can one person, do it? Maybe because, look… but it’s the system effects. If everyone said, “Well, we actually now need to burn wood because we do actually need heat and we do need light and we do need these other things,” that, at the system level, 9 billion people doing it is going to create an air quality problem and a land shortage that’s going to starve two, three, four billion people straight off the bat. So as long as you don’t mind being the person who identifies the three to four billion people who need to be killed so that you can live as a fegan, and then that becomes… because you’ve raised fegan as a moral question. And is it more moral to have people living without fossil fuels than it is to murder billions of people?
Peter Tertzakian:
Ding, ding, ding, ding. Okay, on that note we will move on to the next question.
David Hobbs:
What, no points? No points.
Peter Tertzakian:
That’s a fairly compelling set of arguments on both of you. I’d give you a point each, and I’d chime in and say I don’t think it’s really possible. I think it’s very, very, very difficult to do. Moving on, David, you are in the colonies here in Canada.
David Hobbs:
I think we used to call them the dominions.
Peter Tertzakian:
The dominions. All right, so let’s talk about the Canadian election. Likely in the fall of 2025, though I offer that I have an outstanding bet with Jackie that it’s maybe going to come earlier. But the question is, how would a conservative party of Canada victory under Pierre Poilievre change energy policy here?
Jackie Forrest:
Okay, I get the first word on this one.
Peter Tertzakian:
You get the first word in. Yeah.
Jackie Forrest:
Well first of all, this is all speculation because they haven’t come out with their energy plan. But if we look at the last two elections and some of the things they’ve said, I will venture to say that any of these sorts of policies that are wading into provincial jurisdiction, I think they have a high possibility of getting rid of it. I mean, I can’t see, for example, in the case of the Clean Electricity Reg or the oil and gas cap or even the methane rules that want 75% reduction of methane by 2030, that our Conservative party that just gets in is going to fight the provinces at the Supreme Court on any of these issues. Right?
So I think a lot of those go away. I think that’ll be a relief to the Western provinces that these types of policies are very expensive for them. I think obviously Axe the Tax, that if you haven’t driven out to Banff lately, you’ll know there’s some Axe the Tax-
Peter Tertzakian:
Or Edmonton.
Jackie Forrest:
Yeah, there’s another one on the way to Edmonton-
Peter Tertzakian:
Last time I drove up, there was one on the way to Edmonton too.
Jackie Forrest:
Yeah, they’ll Axe the Tax. The question is it just the retail tax or is it the industrial emitter’s tax? Which I think many people would say that’s actually been a positive policy so far. However, there’s concerns as it ramps up to $170 and the stringency increases, it’s going to become more difficult for industry to be competitive. So potentially they keep that but the stringency goes away. Or if they get rid of it altogether, I think the provinces probably keep it.
So, there are also I think going to be things like incenting technology. That was always a part of their platform in the last couple of actions.
Peter Tertzakian:
All right, Jackie, we only have two minutes, not two hours.
Jackie Forrest:
So, you get the idea.
Peter Tertzakian:
So, David.
Jackie Forrest:
So, they’re going to keep investing in tax credit.
David Hobbs:
She’s passionate about it. Look, I think the only thing that really matters, Alberta, wake up. He’s not going to say thank you on behalf of the rest of Canada. So just get on with life rather than mooching around waiting for them to appreciate you. The flip side is don’t be passive-aggressive and say, “You are welcome to the rest of Canada.” Let’s just move on and get on. It’s not going to make a huge amount of difference of substance. It’s going to make a huge amount of difference of tone, because to be honest with you, a lot of the current policies were going to fail by their own terms in due course. Whether it’s Poilievre or whomever else. The seeds of the destruction of taxes or policies that make people worse off are in their own implementation.
Jackie Forrest:
Yeah, I’d agree with that.
Peter Tertzakian:
Well, I set my timer accidentally for 20 minutes, not two minutes.
David Hobbs:
Well, that’s because you knew that Jackie was going to have a real go at this one.
Jackie Forrest:
I still have more to say. This is perfect.
Peter Tertzakian:
We’ll just say ding, time’s up. Well, I think Jackie, you get the point. I mean, not surprisingly as a Canadian who is steeped into the local politics, but I would chime in and basically say that the policy density and complexity here is so high that it’s going to take a while before change. I mean, Axe the Tax on the retail, okay, that’s easy to do at the stroke of a pen. But a lot of these other policies and things are so intertwined and entrenched it’s going to be difficult to sort out first.
David Hobbs:
But it’s tough to unpick it without unintended consequences because the system has already sort of recalibrated to a different expected environment.
Peter Tertzakian:
To a different paradigm. Exactly.
David Hobbs:
Yeah, I agree. Policy is really hard. It’s easy to poke fun at them, but it’s …
Peter Tertzakian:
There’s a lot of armchair policy wonks out there.
All right. So how is AI going to impact energy markets, David?
David Hobbs:
Well of course there’s the obvious question about power demand from AI and how that’s going to change the structure. Interesting question about whether AI is going to lead to breakthroughs in energy production and consumption that potentially offsets that. I have yet to see a technology no matter how brilliant that has reduced energy consumption on a consistent basis. I remember that first lecture you gave in Calgary where you brought along your old steamer. And it wasn’t even a steamer. It was an iron piece of coal in, wasn’t it?
Peter Tertzakian:
Coal, that’s right. Yeah.
David Hobbs:
A coal iron. I think that there is very little evidence for people being able to find greater well-being without greater use of energy, that energy efficiency makes previously unreachable levels of well-being now attainable.
Peter Tertzakian:
So, the effect on energy broadly is just greater energy consumption.
David Hobbs:
Yeah, I think AI is going to find lots of cool things to do with energy, as well as how to make energy consumption and production more efficient.
Jackie Forrest:
Well, I’m going to agree with you in the short term. I think in the between now and 2030, it’s probably going to be a net increase in energy. But if we go beyond that, the chips are going to get more efficient. The use of the demand side management and how these technologies can really affect demand side management. I’m more optimistic that maybe it could come more into balance as we get out into 2030.
David Hobbs:
Okay, So let me just ask you.
Jackie Forrest:
Late 2030s or ’40s.
David Hobbs:
Let me just ask you. Star Trek, do you think they use less energy in the world of Star Trek per capita than we do today?
Peter Tertzakian:
Dilithium crystals?
Jackie Forrest:
Yeah.
David Hobbs:
I didn’t talk about whether it was going to be cleaner energy or whatever. I’m simply asking. Do you think that any of those futuristic worlds use, and there are two kinds of futuristic worlds. There’s this sort of dystopian for some reason they’ve got all sorts of technology, but they still live with swords in their belts and bad social mores. Or there are these visions of the future which are high tech. Everything’s technology. I don’t see any lack of energy in Star Trek.
Peter Tertzakian:
Star Wars obviously has already-
Jackie Forrest:
Well, I would agree.
David Hobbs:
Star Wars. Star Wars, I mean they’re using enough energy to blow up planets for God’s sake.
Jackie Forrest:
I’ve often thought about that. Why don’t they ever talk about the source of energy? But I think it’s probably fusion. And if we get there, then we’re not so worried about it.
Peter Tertzakian:
Dilithium.
David Hobbs:
Dilithium.
Peter Tertzakian:
Dilithium.
David Hobbs:
Does she not watch this stuff?
Peter Tertzakian:
No. No. David, I’m going to give you the point on this one. I mean, I think that’s a great analogy. We’re recalling Captain Kirk say, “Scotty, I need more power now.”
David Hobbs:
Exactly.
Jackie Forrest:
He always has it.
Peter Tertzakian:
Right.
So, both of you talked about the demand side. I would offer that AI is going to facilitate the ability to bring more energy to market much more cheaply because they enable new designs and solar panels, wind turbines, but also the ability to bring hydrocarbons and other types of energy to market much more cheaply. So …
David Hobbs:
I agree with you.
Peter Tertzakian:
Cheaper energy, but maybe we need a lot more of it and how the supply and the demand balance.
David Hobbs:
No, I agree with you 100%. The argument that it’s somehow going to result in less energy consumption I think is to ignore the lessons of thousands of years of history.
Peter Tertzakian:
Can we avoid the Middle East in this discussion? I don’t think so. How will the hostilities in the Middle East … well, let’s throw in Ukraine as well. Let’s just say we’ve got two hot wars in the world right now. How will those manifest themselves with a lens on, let’s talk about oil, global oil politics, geopolitics.
David Hobbs:
Isn’t it odd that we’re worrying about the oil price falling too far in the face of these two hot wars, one of which is potentially taking a whole bunch of Eurasian oil out of the market and the other one taking a whole bunch of Gulf oil out of the market potentially.
Firstly, it just shows how interconnected and how the sanctions on Russia, they haven’t really reduced the amount of oil ending up in the market to the extent that they were intended. They have had an effect of reducing some of the revenue flowing back, but in reality, probably bigger impact on gas revenues than oil revenues in that regard.
In terms of the Middle East, I have a feeling that, and of course every prediction about the future turns out to be wrong. Even my predictions about the past, they’re quite often wrong. But-
Peter Tertzakian:
If you wait long enough, they might come true.
David Hobbs:
Eventually they do. Eventually they do. No, I think that nobody wants to see the kind of disruption to markets that would be catastrophic. And we’ve already seen that rerouting. So, the market is re-equilibrated in terms of routing south round the capes. You only have to look at the shipping maps to see where all the ships are. And so, it really comes down to is it going to kick off into something that nobody says they want?
And I think even the current US administration has realized that engaging with Saudi Arabia in a constructive way, rather than teaching them a lesson to play to your electoral base is a better approach. And recent news suggesting that there is serious diplomacy going on, recognizing that Saudi Arabia is an important player in the region, recognizing that there have been too many different agendas and that more of a combined agenda.
Peter Tertzakian:
All right, so David-
Jackie Forrest:
All right, to get in here, he’s taking his time-
Peter Tertzakian:
You’ve used up almost the entire time, so-
Jackie Forrest:
I mean, I do think, let’s talk about the Middle East that Iran is looking in their own self-interest and it’s interesting that we haven’t seen a lot of disruption out of the Strait of Hormuz. And I think that’s because they want to continue to send oil to China and I think they’re going to work in their own self-interest. But could we come back to, was it 2019 when, was it Yemen Houthi rebels attacked some Saudi Arabian infrastructure, backed by Iran? So, you could see something like that happen potentially. But today obviously the oil market thinks there’s no issues. And I think it’s-
David Hobbs:
Well, there were some norms that were established over time, which was that Iran kept pushing lines to see if we encourage people to beat up Israel, will we be slapped back? If we now use direct proxies to attack Israel, will we be slapped back? The fact that in response to the Israeli retaliation against Iran directly, they didn’t engage straight back, says that maybe we found a red line that gives us hope that it needn’t expand.
Look, it’s a terrible situation that’s going on. It’s really not good for Palestinians. It’s not good for anyone in Israel. It’s not good, whether they’re Jewish or Muslim or whatever, is really not good for the satellites around. So, a solution needs to be found. But touch wood, for the time being, Iran has decided that there are limits to how far it’s prepared to push to achieve its stated strategic objective.
Jackie Forrest:
Yeah, and the oil markets obviously believe that too.
David Hobbs:
Yeah. Exactly. Exactly.
Jackie Forrest:
Not the price of the … and from our view, any sort of premium in the price of oil because of geopolitical stuff is gone pretty much.
Peter Tertzakian:
Yeah. Well, time’s up. All a very interesting discussion. I don’t know if it was an inspiring enough discussion to hand out any points, but it is a very challenging topic and one that I’m sure we can continue over a glass of wine or Scotch, David and Jackie.
David Hobbs:
Sure, later.
Peter Tertzakian:
But let’s move on to the post-ESG. So, before ESG, let’s go pre-ESG. There was CSR. That was the alphabet, CSR, Corporate Social Responsibility. Then it morphed into ESG. And now we’ve even had a podcast I know Jackie where it was somewhat arguing we’re at the peak to post-ESG. So, what’s next? What’s after ESG?
Jackie Forrest:
I actually think that maybe companies aren’t going to be talking about it as much, but I actually think the bureaucrats and the regulators and that they’re still moving forward, right? There’s now this new integrated reporting. It’s now moving into the realm of required instead of voluntary reporting. So, I actually think we’re going to have a world where companies spend even more time and effort in order to meet the requirements to be on these public exchanges. The requirements for reporting are going to get higher and higher, but they’re going to talk a lot less about it. So, I think it’s still going to be happening. It’s still going to be mitigating climate risk, but I think there’s going to be more, and people employed in… maybe it’ll be called sustainability and reporting five years from now than there are today because of all of this.
David Hobbs:
Yeah. But isn’t that the key point? That moving to regulation where you know what the boundaries are, and you know what the penalties are for crossing the boundary that leads to commercial and economic decision making. That’s pragmatism. It’s when ESG was voluntary virtue signaling, it was a way of differentiating yourself by saying, “But I’m just this little bit greener. You should prefer to invest in me because I’m a little bit greener, therefore I’m exposed to a little bit less liability.” Look, the development we’re going to be doing on the North Slope, we absolutely have to minimize the footprint on the ground. We have to minimize the footprint in terms of emissions, both in terms of the upstream emissions at the development, where we intend to move to a net-zero emission development, but also in terms of thinking about the downstream emissions. Those are the things, but much easier to make good decisions when the rules are clear because regulators have actually established those rules rather than saying, “We’re going to leave it as a market of ideas.” And then you get people who say stuff and have no intention of doing it.
Peter Tertzakian:
Well, I’m not going to word any points on this one because I was looking for another three-letter acronym.
David Hobbs:
CCS.
Peter Tertzakian:
CCS, that’s what I’ve written down here, and I think we’ve already entered into this new era. It’s just that nobody has bothered to label it yet. Cheap, clean, secure. What do you think of that?
David Hobbs:
Well, you know my view on the energy trilemma, because we’ve talked about this extensively and that it’s not a trilemma because it’s a three-dimensional pyramid. And technology and innovation has allowed us to move up the pyramid. So, the trade-offs between cheap, clean and secure are much less. It used to be this idea there was a huge trade-off between secure and clean, for example. But now we are seeing much less of a trade-off, and so we are in there. I think I’m going to give you fegan as your new word. But I don’t think necessarily that CCS is going to be as catchy.
Peter Tertzakian:
Okay. Well David, I’m going to deduct a point for going on too long. You’re going on far too long. We are going to get into the last question, which is we are on the eve of the 10-year anniversary of the Paris Agreement in 2025. What will people be saying, Jackie?
Jackie Forrest:
I actually think it’s going to be the same as always. Everyone’s going to meet at these UN meetings and nothing’s going to happen. And we talked about the US. If Trump were to get in pulling out of the accord, I don’t think it makes any difference at all because it hasn’t accomplished much at all. I think the UN body continues to not really drive much change.
David Hobbs:
I actually unexpectedly disagree with you, Jackie. In that I think from year to year it’s impossible to see very much change, which allows that narrative of nothing really changes. But if you compare the conversation that was considered normal 20 years ago to the conversation that was considered normal 10 years ago and to the conversation that’s considered normal today, I think that one shouldn’t underestimate the influence of how language can change the way people think. And the language has been the main thing that has developed in these meetings, and in some places, it’s gone too far. But in other places, I think that we are… we used to have a business-as-usual scenario 20 years ago, what was it?
Reference scenario 8.5 or whatever, which was the business-as-usual. Business as usual today is an entirely different scenario. Now that’s bad for climate scientists because their grants all depend on using the reference scenario 8.5 to scare the world into submission that it’s all going to end tomorrow. But actually, the UN meetings have resulted in a real business as usual that is a flattening of emissions and even a slight fall of emissions. That I think is an achievement of the UN body, even if we can all think of better ways of having got there. But if we look at what the compensation is-
Peter Tertzakian:
But 10 years on, the emissions were supposed to be far lower. It was always quoted as to start 2 °C, limitation 1.5 °C, which today, 10 years on… I mean
David Hobbs:
That’s a different-
Peter Tertzakian:
Should be down like 25 or 30%.
Jackie Forrest:
Yeah. There are 10% or something like that.
David Hobbs:
That’s a totally different conver… Has the Paris Agreement been successful? Hell no. An agreement with no obligations and no enforcement mechanism was never going to achieve its day to date. But are the emissions today lower than they would’ve been if we hadn’t had that in order? Just because the expectations are unreasonable, it doesn’t mean that the achievement is any less standard.
Peter Tertzakian:
Right. Okay. I think today that’s sort of the counterfactual, I think as they would say. But Jackie, so 10 years on, do you think that we will enter into some kind of different conversation about how to find solutions to the growing emissions?
Jackie Forrest:
Yeah, I mean, I do hope that we look at the situation and say it’s going to be difficult to meet these net-zero scenarios, and we start to be more constructive in terms of recognizing a realistic future and what we need to do to mitigate climate issues under that. We keep saying that, but I am not optimistic that we’re there yet. At this next UN meeting or the next few UN meetings, we’ll start talking about geoengineering, about really aggressive carbon capture storage and really pushing forward with direct air capture, recognizing we’re going to be burning more hydrocarbons. I don’t know if we’re there yet.
David Hobbs:
I’m optimistic about the future path, even if not about the impact of the UN meetings in that I think we’re gradually moving and the IRA was one step along that way, and I said we would come back to the IRA. Is that we’re putting an awful lot more money into the innovation part of it rather than the deployment part of it. And we’re testing scale up of ideas that otherwise wouldn’t have done, and I think that’s where the breakthrough is going to come, is actually from spending a good deal more on invention and innovation rather than from clunky top down.
Peter Tertzakian:
The 10 years of massive amount of capital spent on R&D and development in particular is going to pay fruit, I believe in five to 10 years from now.
David Hobbs:
Yeah. I mean, the old joke about fusion.
Peter Tertzakian:
It’s always 20 years away.
David Hobbs:
Yeah. We may actually be living with a generation who aren’t going to be able to tell that joke and get a cheap laugh out of it.
Peter Tertzakian:
Well, speaking of laughs, I’ve had a lot of laughs, and as is characteristic of any game that I participate in, I end up dispensing with the rules after about five minutes, dispensed with the timers, and we’ll also dispense with the score because I didn’t even keep track. I’d say we’re all winners in this because we had good laughs and enjoyed the conversation. I hope you, the audience as well enjoyed the conversation. And David Hobbs, thank you so much for coming and joining us today.
David Hobbs:
It’s been a great pleasure, Peter.
Jackie, always lovely to see you.
Jackie Forrest:
Thank you. And thanks to our listeners. If you enjoyed this podcast, please write us on the app that you listen to and tell someone else about us.
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