Oil Market Outlook: Expectation for higher WTI driven by historically low speculative positioning, robust global demand, and limited OPEC+ spare capacity; fair value cited near $80–$85 with an upward trajectory.
OPEC Transparency: Anticipated third-party audit of member capacity could reveal minimal spare capacity, counter the glut narrative, and support structurally higher oil prices.
Canadian Energy: Bullish on Canadian producers given weak CAD boosting USD-priced revenues, potential pipeline progress, and attractive profitability versus U.S. peers.
Oilfield Services: Prefers small-cap onshore drilling and services at deep discounts to replacement cost with high free cash flow; less constructive on large caps like Schlumberger (SLB) and Baker Hughes (BKR) chasing higher-multiple adjacencies.
Mining Boom: Sees a surge in mining financings translating into 0.5–1.0+ mb/d of incremental oil demand over the next 1–2 years, a driver largely absent from current models.
China Demand: Belief that China understates oil consumption and stock levels and overstates EV adoption, implying stronger underlying oil demand than consensus.
Geopolitics & Sanctions: Argues sanctions only work when enforced; near-term Venezuela supply changes could briefly depress prices but medium term would boost demand and support higher oil.
Overall Stance: Constructive on energy equities, especially Canadian producers and small-cap services, with potential upside from short-position unwinds and underappreciated demand catalysts.
Transcript
Oil is low because we have nearly historical low net speculative positioning in the oil futures markets. I think it might actually be more than a billion barrels of oil that have been sold in the futures market. We're going to see potentially a million barrels a day more oil demand just from the mining sector. IIA has been wrong 100% of the time since 2007. So, I don't think it's a demand problem. Demand is actually booming even here in the US. >> Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. >> Josh, thank you very much for joining us today. How are things in Houston? >> Uh, things are great. It's a nice uh rainy late fall uh morning. >> So yeah, this is the perfect time of year to be in Texas. So you and your team at Bison focus on the energy market and this is where I want to focus our discussion today. And we had some big news recently out of OPEC where they want to measure the production capacity of the ver of OPEC members. Can you just speak to the significance of this news and what it means? >> Yeah. Yeah. It's so fascinating. Um this has been something we've been writing about for years at Bison Interest and um the uh we got a lot of push back when we put out our initial our assessment of OPEC plus spare capacity in 2021. um many consultants for various OPEC countries and international um energy consultants and so on um claimed that there was way more spare capacity than we measured based on our uh analytical approach. And again, we didn't go through and measure, you know, point by point the exact reserves. It's it's almost impossible to do that without a lot more data, but it's possible to tell um from certain market indicators and certain historical supply indicators as well as development activity subsequent to those indicators how much supply there was. So anyway, um what I think is happening and what I think people should take away from this interview in particular, the big point is that OPEC brought back most of their spare capacity onto the market right now. And I think they expected it was going to be price neutral to price positive. And instead, what they got was a media narrative of glut and they got prices down, not up. And so I think their new approach is transparency. And again, it sounds sort of funny because it's this cartel, they hate the word, but it's a cartel that is famously opaque. And so when they tell you that they're going to start showing you their reserves and production capacity and they're bringing in a US uh audit firm, one of the biggest in the world and best regarded in the world um to do this. Um I think they're not going to go and show that there's giant spare capacity. I think they're going to go show that there's almost none. And so again, I think people are sleeping on this. I think there's going to be a much higher price. And I think when you read between the lines, what they're really trying for is to avoid an oil crisis like we saw in the 1970s. And I think they would ra way way rather have a normal oil price of let's say, you know, 100 to 120 a barrel, which inflation adjusted gets you back to sort of 70 from, you know, 10 years ago or whatever. Um, I think they'd way rather have that than have low prices for the period of time like we're experiencing. and collapsing investment in the industry and then an oil crisis like the 1970s with all-time high oil prices. So, I got my 250 WTI uh hat in the background. Like, that's a nightmare scenario for them because it destroys demand. So, anyway, that's what I think they're going for. I think they expected price to go up, not down. There's been really negative media narratives, really negative oil analyst reports and investment bank reports. And I think there's just this big disconnect between what's actually happened in the oil market and what's being reported and how it's being understood. And I think that's what's motivating this big change. And we'll see. Maybe they're going to come out with some report that shows a huge amount of spare capacity. And I'll be wrong on this, but that's not what I'm seeing here. And that's not what would I think make the most sense from an economic perspective. >> And what's the timeline associated with this report? Yeah. So, it looks like it's supposed to come out later next year. And the best I can tell, they'll have sort of a formal, you know, report that comes out, let's say, early 2027. But, um, by that point, it will have been reported on 10 different times. Uh, it will have been leaked to Bloomberg and Wall Street Journal and then the OPEC countries will formally deny it and then whatever. So, I actually think that we'll we'll have some pretty good color on this in the next, let's say, 6 months or so. Um, and again, they'll formally deny it and then it'll turn out that whatever is leaked is going to be like 95% correct. >> So, oil is trading around $60 a barrel. I'm talking about WTI. You [clears throat] made mention of the fact that it is relatively cheap when adjusted for inflation. And I guess my question to you is why is it so cheap? Because I want to know if it is a demand factor. Is it because we have a slowing uh global economy and therefore we're using less oil or it has has does it have more to do with the supply side issue where we have OPEC in the US pumping out a lot more oil? >> So I actually think it's neither. I think oil is low because we have nearly historical low net speculative positioning in the oil futures markets. And so you have these various narratives like you mentioned both on the supply side where there's an argument that oh there's too much oil being supplied and then there's an argument oh there's too little demand and the reality is as the confirmed data so not the initial sort of madeup weekly numbers from the EIA or the nonsensical stuff that comes out from the IEA where apparently they've been wrong on oil demand since 2007. Every year they've had to every year since 2007 they had to revise up which is amazing. People give like Jim Kramer and various other sort of talking heads a hard time for being wrong 55% of the time. IIA has been wrong 100% of the time since 2007. Um so I don't think it's a demand problem. Demand is actually booming. Even here in the US, we have demand up almost 3% year-over-year in the latest monthly numbers um from the EIA, which are the edited ones that are sort of more likely to be actually correct uh revised, sorry. And so um it's not demand and it's not supply where yeah there's more oil being produced but a lot of it's being produced out of the essentially supply cushion of spare capacity from countries like Saudi Arabia and UAE um and and so on. And so um it's not not demand and not supply. It's just that you have um hundreds of millions I think it might actually be more than a billion barrels of oil that have been sold in the futures market. And so that's the best I can tell. I think a fair price given where global inventories are would be closer to let's say 80 or $85 a barrel WTI and I think that the trajectory should be higher and not lower because demand is beating expectations even in countries by the way the reason it matters so much that US oil demand is up almost 3% year-over-year is that the consensus is that that uh developed economies just see oil demand fall because of efficiencies not rise and so for us oil demand to be up often leads various developed markets in Europe and Asia with some lag. So you can actually see other developed economies also grow their demand. And so this is so so significant to the market and so different from this narrative of peak oil demand. And again, we're sort of moving away from that, but there's still a lot of folks that will repeat it. Um so anyway, I think I think it's really just a speculative positioning answer. And that's really exciting because yeah, speculative positioning could get worse, but we're already at very, very low levels. And we've seen what's happened in various other commodities as well as with various famous stocks where if you get too short positioned and then there's some fundamental or speculative demand, you could see prices sore. We're seeing it right now in silver. We've seen it with various other precious metals. We've seen it again with certain stocks that got, you know, memeified or short squeezed or whatever. And so I think we're setting up for um strong fundamentals for oil and then this potential for this speculative positioning um to get a little less negative. And going from terrible positioning to just less terrible could actually drive price up a lot more than I think people expect. >> The good thing about $60 oil is it means you and I pay a lot less at the pumps. I'm paying $130 Canadian for a liter of gas. Uh if you do the FX and you convert from liters into gallons, it works out to about 350 a gallon. What are you paying for a gallon of gas in Houston? >> Yeah, I just refilled this weekend uh at Costco. Uh I paid $2.30 a gallon US. And that's that's before the about 5% cash back that I get from Costco for that. So net effectively what is that like 220 215 something like that a gallon that I'm paying. So and you know um the amazing thing is that Canada is actually even more of a net producer than the US. So you know what you're paying is almost all tax in terms of that difference between uh what I'm paying what you're paying. >> And it's a big range too because if you go to Vancouver for example it's about a$160 a liter. In Calgary uh it's closer to a dollar a liter. So, it all depends on where you are, just like it is in the US. I mean, I think in the state of California, they're probably paying 450, maybe five bucks a gallon. >> Yeah. I mean, again, that's tax and just broken regulations. They used to have local refiners. They shut them almost all of them down. Um, you know, just sort of catastrophically stupid energy policies and regulations. And so, um, I actually wrote about that. I launched a newsletter recently uh just to share in a more organized manner some of my stock ideas and various other oil market thoughts and wrote an article about how um there's like these weird contortions in California energy policy where you know they've gone after offshore and refineries but they're actually starting to allow onshore drilling again. It's just so weird and inconsistent and illogical. And so we have exposure to this um drilling rig company that's actually Canadian headquartered and they're the number one drilling rig provider in California, which is terrible, right? It's been like the worst market to be a drilling rig provider for, you know, over a decade. But they're going from again, it's that terrible where, you know, they went from running, I think, 20 or 40 or something rigs at their peak 15 years ago to running five recently. But, you know, if it goes from terrible to less bad, let's say it gets back up to 20, so down 50% from before, that's still a uh, you know, 400% increase from where it is right now. So, you know, it's pretty pretty fantastic uh to have that sort of inflection, but also just wildly illogical policy. Like, why would you punish your people that badly to make them go pay 450? And then the narrative was, oh, hey, let's like move them over to electric vehicles. But the local power prices in California are also the highest in the country other than Hawaii. And so you don't really have a choice. It costs you a ton of money to refill your car at the pump or a ton of money to recharge your car. And then there's all these home fires and other issues from people trying to charge at home. So anyway, just an absolute dumpster fire. And don't worry, I won't hold back. I'll tell you I'll tell you more about California if you want. >> Oh, that's fine. I love that. That's one of the reasons why I love speaking with you because you don't hold back. So we cannot have a discussion on oil and energy without talking about geopolitics is this is one of the reasons why I really enjoy this sector because there's so much going on from a geopolitical point of view. And when Russia invaded Ukraine in 2022, the price of oil ripped to 125 bucks a barrel just because we thought it was going to have a big impact on supply. But here we are three years later and oil's at $60 a barrel and now there's a lot of chatter about, you know, Russia and and Ukraine resolving this issue. And so if that were to happen here in the next few months, what do you think that does, if anything at all, to the price of oil? >> Yeah, I mean, I think the the very short term you'd probably see oil prices fall. Um, one of the weird thing that's one of the weird things that's happened is since that um we've seen news articles um talking about potential ceasefire between Russia and Ukraine come out dozens of times. I don't know the exact number, but I know for sure it's more than one dozen as probably, you know, it might be as much as hundred times that there's been um news headlines or batches of news cycles about potential ceasefire or peace between Russia and Ukraine. And so just to be clear, I think that if there was world peace and um you know, if things got better, both Russia and Ukraine as well as various other conflicts in the world, I still think that we're going to go towards all-time high oil prices on an inflationadjusted basis over time. I think that there's plenty of room from a demand perspective and if anything the rebuilding from these catastrophes in these various countries like Ukraine, Venezuela, you know, some of the Middle East problems, you know, and and across subsaharan Africa where there's so many people living in dire poverty because of these conflicts. I think if we got rid of those conflicts altogether, there would actually be such a demand boom for oil that you'd see much higher prices, not much lower prices. So that's my general view. I'm not rooting for any sort of supply disruptions or conflicts or anything like that. I think it gets sort of some sometimes um convoluted or people mishar and say, "Hey, oh hey, Josh thinks this is going to happen, therefore he wants it to happen." I don't want it to happen. But the reality is that we're probably not that close, unfortunately, still to peace between Russia and Ukraine. And there are various conflicts that are likely to happen or disruptions that are likely to occur that are going to further disrupt oil supply. So actually very recently uh Ukraine attacked a Russian port um and knocked off supply from one of the supply lines from the CPC which is a pipe that mostly just um or a system that mostly actually brings Kazak oil uh through Russia to export to the global market. So oil supplies are down about 500,000 barrels a day just from that. But prior to that you had actually nearly a historic low of oil supplies that were offline because of conflict. And so um typically you have between 2 million a day and 5 million a day of oil supplies offline because of geopolitical issues and conflicts whether it's a civil war in Libya or whether it's you know some issue with Iran or sanctions or whatever. And so actually um we were at really really low levels of supply offline. We're now getting back towards more normal levels. But again, I don't think you need conflict for oil prices to rise a lot. And I'm actually much more in the camp of, hey, I just love a global economic boom and the peace dividends associated with peace. And I actually think that that would be a more sustainable oil demand increase of the sort that we saw when China boomed in the early 2000s. um rather than the sort of sort of spike and then collapse that we saw in oil in 2022. >> Many people thought uh with all the sanctions placed on Russia was going to result in a crippling of their economy, but it hasn't. And once again, I go back to the fact that why the oil market is so interesting is because there's always a buyer for oil, right? And so maybe you can't sell it to Europe, you can sell it to India, you can sell it to China. And that's what Russia's done. And now there's this whole shadow economy going on that I find quite interesting. >> Yeah. Well, I think it's a really good point, but I actually I think I disagree with that. Um, and I think there's just a point of clarification. I think that sanctions work. US sanctions plus, you know, European sanctions, they work when they're enforced. And so the very worst thing, it's almost like parenting. Like threatening to punish your child and not punishing them is way worse than just not threatening them at all. And so um but punishing them, you know, is appropriate and leads to sort of better behavior over time. So, um, when you look at what we've done with Russian sanctions, what we've done with Iranian sanctions and so on, where we've enforced those sanctions meaningfully and consistently, they've been highly effective, where we've been inconsistent with that enforcement or threatened it and then not enforced it or partially enforced it repeatedly to a small degree. What that's led to is increased volumes, not decreased volumes of oil sold. Um maybe it's led to a little less money in in Russian hands, maybe less. That's debatable. And the different measures show different um show different outcomes. But I think the biggest problem isn't that sanctions aren't enforceable. It's that we've chosen from a policy perspective, our leaders have chosen to not to impose or claim to impose sanctions and not enforce them. It's, you know, Teddy Roosevelt says, you know, speak quietly and hold a big stick. And we've done the exact opposite. And, you know, that's a failing policy. It's a terrible idea. And again, I think the reason to clarify there is it's not that sanctions don't work. It's that sanctions that you don't enforce don't work. And like you said about the shadow economy, by announcing sanctions and not enforcing them or only uh inconsistently enforcing them, you lead to uh building a shadow economy and you end up dissipating power, enabling some of the worst folks, funding terrorism, funding the drug trade, funding all kinds of terrible stuff. And so I think uh I think we should be limited in our sanctions and then we should strictly enforce them with severe punishments. And unfortunately, we're doing none of that. So, in this context, they definitely don't work. But I would argue it's because we choose not to enforce them. >> Valid point. And and I think that's where politics comes into play, right? Because it doesn't matter what administration you have in the US. They want a low oil price so you can keep the economy going and keep inflation down. So, let's talk about Venezuela now because many people might not realize this, but Venezuela was one of the co-founding members of OPEC. It produces somewhere between 900,000 to a million barrels a day. So somewhat meaningful. There's a lot of speculation the US will invade Venezuela or try to impose some sort of regime change. Who knows what that's going to look like? But if this were to happen, what do you think happens to the price of oil? >> So two things. First of all, um the the reason politicians, from what I can tell, in the US are so averse to higher oil prices is because they're old. And we have this sort of weird system where we're ruled by persistently like you know oxygenarians or whatever. Um they sort of control politics both from a donor perspective as well as the actual our leaders. Somehow we just you know it's this race to like old incompetent whatever on both sides, right? It's not really a particular party issue. And so if you're if you're 80 years old, you think, hey, oil higher oil prices are bad for the US economy because you you formed your views at a time where the US was a massive net oil importer. In about 2016, the US flipped from being a net oil importer to a net oil exporter. And so if you look at the last decade, there's actually been a really high correlation between higher oil prices and more US economic activity. Um, interestingly actually Ben Bernani wrote about this and it just got subsumed. No one wanted to talk about it, so it just disappeared. And I'm not the world's biggest Ben Bernanki fan, but what an interesting analysis, right, by the former head of the Federal Reserve and a brilliant economist. Again, imperfect, but brilliant economist. And so, you know, we wrote about it for Bison Interest. We published this and just got tons of flack like, "Oh, that's wrong." And it's like, well, okay, before you say it's wrong, why don't you look at the numbers and then just think for a minute about what it means to be the net exporter of something. So, I do think that higher oil prices are good for the US economy. They're great for the Canadian economy if Canada could sort of get out of its own way from a political perspective and lower taxes and regulations and allow the economy to thrive. Um, but there's just this weird belief that's and just people like often there's this phenomenon where when something's untrue, uh, there's a need to repeat it more and more and say it louder and louder and publish it in more and more articles and whatever. And so I think you've sort of seen that phenomenon. And the nice part is that as you see it, as things need to get repeated more and more, that's actually often the beginning of the end of that thing. And so it's like the the COVID stuff, right, where you saw people, you know, developing different views on it. And towards the end of, you know, lockdowns and, you know, mass requirements, various other things, people were just saying these things over and over again so often that you could tell it was like a religious catechism rather than actually like a fact. So I think we're getting closer to that sort of popular understanding of the economic link between higher oil prices and a strong economy here in the US and in Canada and various other countries. And so then we're going to move away from that. In terms of Venezuela, look, like similar idea where if we were to secure more oil supply from Venezuela, that would obviously be negative for oil um in the short term and it would probably send oil prices down more again in the short term. I think almost any circumstance where we're getting much more oil from Venezuela is going to be a circumstance where there's a regime change, hopefully again peacefully and not violently. Um, but in a circumstance of regime change where you introduce a USbacked or westernbacked sort of liberal democracy or anything that looks like that, um, you're going to see an enormous rebuilding effort that's going to require millions of barrels of oil a day. And then you're going to move Venezuelans, Venezuela's local consumption, the consumption of Venezuelans of gasoline and diesel and jet fuel and so on from almost nothing right now where their economy is collapsed, there's starvation, there's just horrible things happening to the people in Venezuela and you'll see that move over towards um a lot more consumption. So my expectation would be terrible for the oil price in the immediate term, fantastic for oil demand and ultimately oil prices over the medium term and then eventually over let's say 15 years or something the broken infrastructure gets fixed and you have a lot more development and you have a lot more refining and you you end up with you know incremental oil supplies beyond the increased local consumption. And so, you know, maybe it's 5 years, maybe it's 15 years, but you'd see a lot more production, net production, net of consumption eventually. But I think the first step would actually be a lot more consumption, a lot more net consumption. And so, I think it'd actually be quite positive for oil prices. And then, you know, we'll see how quickly they can repair their refineries, which I'm actually optimistic on. I think those are a lot easier to fix and build out than the the oil fields which um you know just to give people context the underinvestment in oil fields especially heavy oil fields and then of heavy oil infrastructure um is quite challenging. You'd have to rebuild a lot of their pipelines because there's holes in them both because people drilled holes to steal the oil to survive or for whatever reason um and then also just with undermaintenance you end up with just real problems. There are some of these pipes that are just solid because you basically are running asphalt through it and now you have an as asphalt former pipe instead of a a pipe that's able to convey heavy oil. In other cases, you have just holes and basically no oil running or oil running through and just terrible leaks. And then you have enormous environmental catastrophes which again is so it's so abhorent. You had the Greta Thumbbergs of the world and various other folks pushing against Canadian and American producers of oil who produce the cleanest, most environmentally friendly barrels of oil anywhere in the world when you have uh Lake Marbo and various other spots that are just absolute environmental catastrophes. Um, and so a lot of that would need to get addressed and I think people would be shocked when they found out just how bad things got from an oil industry perspective in Venezuela. So anyway, lots of different demand factors, lots of things that would need to get addressed to be able to ramp up supply. Um, and so again, I just think it's a little different than it's presented, but the the day one reaction, I would expect oil prices to fall. And my interpretation of that, I don't know if it's day one or month one, but I would see that as a great buying opportunity to, you know, buy the sorts of things that sold off most on that news. If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hardass Assets Alliance at hardassetsalliance.com. That's hardassallalliance.com. Josh, let's talk about China now. It's the world's second largest economy representing 20% of global GDP. And if they were to come back online or at least um stabilize and start growing their economy again, would this be a big demand push for oil? Yeah. So I actually think China's been consuming more oil than they say. Um and uh so I've chatted with various uh folks that are active in their oil supply chain and they all agree. Um I posted about on social media and basically people decided I was like the craziest person in history. But it's sort of one of those weird things where like the people doing the like billions of dollars of transactions with the Chinese are like, "Oh yeah, like for sure they're lying." Like we don't know which direction, but like definitely that's like the standard negotiating practice for oil buying and so on in China. So one, I think their consumption is higher than they're showing and their storage levels of oil are probably lower than they're showing, which again are very very easy to fabricate. Um, and I think that the people that the Chinese government hate the most in the world, maybe by a lot, are the satellite data providers and then the folks that comment on that data where they don't want anyone spying on them. And, you know, if they were in China, they would have been sent to a correction camp and maybe they wouldn't be around anymore. But, um, outside of China, it's harder for them to do that. And you know, Russia's done some of that stuff, but China hasn't, at least as far as I'm aware of, in terms of pursuing external critics who who don't visit their country. Um, and so I think one, they're they're they're using more. Two, um, they're preparing to sort of publicly embarrass the folks that have been saying that their economy is doing so poorly. And not that I'm a big fan of, you know, uh, command economies or think that that's sustainable. their debt levels are really really high but they've been doing a lot of stimulus and they've built out a lot of um export capacity on a number of different fronts and so um one I don't think their consumption is as low as people think two I don't think their economic activity is as low as people think but three it's also quite unsustainable so I was let's say four years ago looking for sort of a big reopening in China and a lot more consumption and so on I think we've sort of got that we've also got some of that consumption and maybe we'll get more of that consumption and Maybe not. But I think what we should be looking for from China is economic reform. And I think we're starting to see it. But shifting away from this glut every market possible that you participate in and drive down price and make no profits, but you know, win on volume in employment and moving away from that top- down economic model towards sort of more rationally competitive models where there's some producer profits. And maybe it's not full employment, but maybe it's profits that are reinvested and people making money and sort of spending on personal consumption. So I think you need to see that shift. That shift should be oil positive, but there's also going to be a lot of pain. So I'm not really looking for China to be this giant swing consumer of oil. I just also think that their consumption of oil is maybe a million or two million barrels a day higher than people are thinking. And it much better explains their buying activity. And it's really not that weird. Anyone that you talk to, actually we're the some of the people that liked this idea the most were buyers and sellers of um commodities to China and products from China. Um where just they they just they look at the official numbers for their various, you know, components and then they look at what they're doing and there's just total inconsistency in both directions, higher, lower, whatever. It's just made up. And so, um, I think it's the weirdest thing that we basically don't believe any economic data from China at all, except we we like you see for sure, you know, goldplated their oil demand numbers and, you know, everyone just like repeats them over and over again. So, no one would believe, you know, they put out their GDP number, no one believes it, right? They put out their debt numbers, no one believes them. They put out their whatever. But but that number Oh, and the other one that everyone believes, which I think has been pretty clearly proven wrong, is um their claims about electric vehicle adoption. And it's not that they're not using a lot more electric vehicles, but the numbers that they report make no sense. Um there's just not the inputs to be able to build those electric vehicles. And then there's a lot of evidence that basically you have vehicles that are sold new in China and then they're stuck on a boat right after they're sold new. Um, and I think that part that sale is also counted as sold new and then they're shipped to uh, you know, XYZ country in South America or Africa or whatever where they're then sold new again. And so you'll end up with this sort of car laundering essentially to show much higher prices. and that there's actually a lot of evidence of China Beechbook and various other folks have talked about this and that's apparently sort of well understood but yet you still have this weird narrative that China is consuming less oil than than they actually are. So I don't know for sure but I'd say let's say 80 or 90% chance that I'm right on that. Um, and I don't know that anyone that watches China in any other aspect other than oil would be surprised at all to hear that their uh economic figures are not perfectly accurate when it comes to this one other thing that again nonsensically everyone sort of trusts. >> Okay, so let's move it closer to home. I'm based in Toronto and uh so I want to get your views on Canada and what's happening here with our oil and gas industry and uh I don't mind if you bash the government here. I always like to bash my government, but uh just for the for people who might not be familiar, uh the Liberals have been in power for the last 10 years. They've done everything in their power to suppress any form of resource development. Doesn't matter if you're talking about energy or precious metals, base metals, whatever. And yet oil is a very important important component to our economy. It's the largest export, 20% of all exports. Um, so maybe you can speak to it and tell me what you think we're doing wrong as a nation. >> Uh, well, there's this chart I shared on social media uh showing I think Pierre Poly or someone in his campaign when he was running last year um posted this originally where it showed uh US economic growth and then Canadian economic growth and I can't remember if it was industrial or business investment or if it was per capita GDP growth, but basically the same chart. And so, um, over the last decade, the US has grown a lot and Canada has languished. And then when I've shared this, the biggest push back I get is, oh, well, oil prices fell in 2014. And so, if you look at a chart of Texas, which is the country's largest oil producer here in the US versus Canada, the Texas chart looks almost identical to the US chart. there's one or two years where it does worse and many years where it actually does better. And so, you know, there isn't a good, I think, excuse other than policy failure. Uh, on the Canadian side, it's not oil, it's not any one thing. It's just sort of comprehensive policy failure. So, um, it's really hard when there's been policy failure for a decade and you have the same party in power and most of the same parliamentarians and too many of the same cabinet members and so on. I think it's really hard to expect that those people are suddenly going to behave differently. Like the best bet in life is that people will just keep doing what they've been doing. That being said, we are in the golden age of grift. We see um various world leaders and their families cashing in in sort of unprecedented ways. Unfortunately, it's bipartisan. We had, you know, the former US president's son making money on weird stuff. Now you have uh the current president's sons and son-in-law, whatever, cashing in in other sort of weird, inappropriate ways. So this is not unique to Canada, but the current prime minister of Canada was was he was the vice chairman, I think it was, of Brookfield, which is this big asset manager that's involved in um various pipeline businesses and real estate and various other things. And so it would not be the most shocking thing to me that Canada would shift very slightly. And again, generally, I think the right way to think about it is that people don't change, but also people do what's in their personal economic interest. And even if the the prime minister doesn't have direct interests anymore in Brookfield, which I'm not sure that that's true, he he may still have interests, but even if he didn't, it's really hard to change also. And so he's going to end up really favoring Brookfield and that sort of world even if he doesn't have those interests which he may or may not have uh economic interests anymore just because that was his world for so long. And so and we we've seen evidence of other again politicians and other places in the world and other leaders behaving in a similar manner. So um I guess what I'm saying is that's a reason to think that maybe this time is different for Canadian pipeline policy. And I would say I'm cautiously optimistic that this pipeline announcement that was made um is going to go forward. And I think that there could be very significant consequences to the Canadian Federation um uh to the extent that this is promised and Alberta moves forward to try to get this done and then it's blocked or killed, I think that could actually trigger um much more division in the Canadian Federation than um than people are expecting and which could actually be quite bullish for you know Albertan and Saskatchewan. on oil companies and so on. But you know I think this sort of I think there might be an understanding possibly at the federal level of this but just more basic just real simple you know if you come out of a world where you own infrastructure and that's where all your money is from on an institutional level and now you have the ability to go get more built but not infinite just like one incremental project that maybe your affiliates or former affiliates get to go own or run or build or cash in on 10 different ways. You know, I think sadly we're we've moved towards this world where you sort of just want to understand uh incentive alignment um personal incentive alignment and bet on that to some extent rather than just assessing you know the historical policy trajectory and and betting on that. >> Yeah, the best quote ever out of Charlie Munger was show me the incentive and I'll show you the outcome. So I agree with most of what you said. Just to provide a little more context uh in terms of Canada's GDP per capita uh in the US it's around 85,000 uh per capita and in Canada it's around 55,000. So in the last 10 years we've had virtually zero economic growth under the uh liberal leadership. Now you talk about Mark Carney, full transparency, I didn't vote for him. My view is if you can't get it together in 10 years, you don't deserve another chance. but the majority of Canadians did. So, I totally accept that. I will say since he's he's been in power, I think six or eight months now, he's brought a whole new level of professionalism back to the PMO. So, I'm hoping he's the guy. He just announced this. You were alluding to this, but just announced this uhou uh with the premier of Alberta, Daniel Smith, uh with regard to uh the construction of a pipeline. Who knows whether or not this will get done. uh takes anywhere from 8 to 10 years to build a pipeline. But it's a step in the right direction and I I really really hope for this sake of this country that uh he's a lot more friendly when it comes to res resources and the development of resources. >> Jimmy, let me just uh one one quick uh clarification. It takes about six months to build the pipeline. Um it takes about eight years to jump through the various regulatory hurdles and to you know bring in the special union whatever thing and special like you know local indigenous whatever and so but actually building a pipeline takes very little time and you know I think China has shown us this where they can build it in a week. The problem is that you know within a month it might spring a leak. Um, but building a real pipeline that's well-built, that won't leak, that'll be around for a long time, it does not take very much time with the right coordination and planning, let's say a couple of years of coordination, planning, pre- buying, whatever, you can have a pipe built in months, if not in, you know, one or two years, something along those lines. There's a lot of really talented people who have successfully built fantastic pipes in Canada, and it's just a question of tax and regulatory burden. And so it's worth highlighting that because the thing that people um probably know, but just in case they don't, is that if you rewind 15 years, per capita GDP in Canada and US were the same. And that's where it's so shocking that there's been this divergence. Um, the funniest proposal, and I'm not saying I'm backing this or anything, but it's pretty funny, was um the to trade to offer to Canada to trade Minnesota where there have been lots of issues and there's a billion dollars that was just stolen and sent to Somalia to fund some terrible uh, you know, local people that are, you know, committing violence or whatever, um, to trade Minnesota for Alberta and Saskatchewan. And it turns out, this may sound surprising, but the per the total GDP of Minnesota is actually much higher than the combined GDP on a currency adjusted basis for um uh for um Alberta and Saskatchewan. And the per capita GDP is actually a lot higher too. It's one of those like weird statistics like there should be almost no world in which that's the case. uh you know, Alberta and Saskatchewan are blessed with immense oil resources and agricultural resources and mining resources and many hardworking people and great local uh innovative companies and and again Minnesota is a great state. Um, but just when you when you think about it like that, and again, I'm not advocating for that or anything, but just framing it as like these two provinces with all of this just tremendous natural resource versus a US state that's, you know, one of the northernmost states that doesn't quite have the same sort of resource blessings or really that much industry either. and then framing the um relative economic activity. I think it highlights the varying um economic growth and wealth from better and not that the US has been perfect but from better or less bad economic policy versus more bad. And I do think like you're saying that Canada I think you know the Carney administration they've sort of gotten the memo a little and they are professionalizing it to some extent and there have been some cabinet changes including there was a recent um was it the culture minister or something resigned there was seems staged but sort of resigned over thisou about this pipe that's going to get built and so um you know it does seem like that's a positive trajectory but there's a very very big gap and I'll just say here, I do think that Canadian oil and gas companies despite these very ownorous regulations and taxes are extremely interesting partly because the currency has collapsed. And so when you look at a commodity like oil measured in US dollars um but costs that are measured in local Canadian dollars, the profitability of these companies is extraordinary. again, even with higher regulations, higher taxes, a sort of more difficult operating environment, um, and like a naturally more difficult operating environment with various winter access issues and various other things. Um, so Canadian oil and gas companies have weirdly been, you know, they they've suffered a lot from bad pipeline policies and bad regulations, but right now they're huge beneficiaries of this shift in the relative value of currencies. And so this very very weak Canadian dollar has been just a bonanza for these these companies. And even with the professionalism increased and with some of these reforms, uh, Canada's still on a relatively negative trajectory and even with all the mess here in the US and the corruption and so on, the US is on a relatively positive trajectory. And so you can't know for sure what's going to happen with currency. But if things just continue how they have been and if the relative strength of the US dollar and weakness of Canadian dollar continues based on that relative strength and weakness of economic policy, you could see the profitability of these companies improve even more. Like net effectively, Canadian oil companies are getting almost $100 a barrel where US oil companies are getting you know 58 or $60 a barrel. So it's just a huge difference. That's a real reason to pay attention to these policy variances. And then obviously the pipelines matter a lot for these companies and for the service companies too. But that that currency difference makes all of the world of difference. I keep getting asked, hey, why are your Canadian oil companies up? Why is the why are Canadian oil companies up? And the answer is by and large just this currency effect. >> Uh okay, good. I'm glad you brought that up. So first of all, I got to make a comment on the currency. It's killing me here. It's like every time I go to the US now, I got to pay like a 45% premium for a cup of coffee. But, uh, we're So, can I assume you see better value with Canadian producers as opposed to US producers? And maybe you can just speak to the valuation between Canada and the US. >> So, so it's complicated. So, um, there's sort of two ways to go about investing, I think, generally from a fundamental perspective. One is to find companies that make more money and the other is to find companies that are trading at a larger discount to their replacement cost or book value or various sort of other um metrics. And so the make more money way is more fun because that when companies are profitable, they pay dividends, they buy back stock, they grow, etc. Um when they are at a larger discount to replacement cost, uh it's way less fun. But sometimes those companies, you know, sort of value versus growth investing sort of as a as a microcosm with, you know, US versus Canadian oil and gas companies. Um, often if you buy them when they're making less money and they're cyclical, then their stocks can actually way outperform. And then again, there's not certainty that the Canadian dollar will underperform versus the US dollar. If we got back to dollar parody for whatever reason, um, that would be catastrophic for the Canadian oil and gas industry. So, I like both. Um, and my explanation for that is basically just, hey, you know, growth versus value. I think there's good arguments for both sides. There's really interesting resources. There's really interesting companies. I guess I will say that on the smaller cap side, um, because oil and gas is so far out of favor in downturns, you get secondary markets like the TSX trade at much bigger discounts than primary markets like the New York Stock Exchange. And again, the TSX is a big exchange and it's great, but relatively speaking, the dollar volume traded and so on is just way way the number of shares traded way lower than New York Stock Exchange, NASDAQ, etc. And so, um, you do still see small Canadian companies trading at a bigger discount than large Canadian companies in sectors that are out of favor. And so, to me, that's really promising still to own these small Canadian names. And then there's this added benefit which is that they're actually more profitable. So you can own these things at wild low cash flow valuations and at large discounts to replacement cost. Um but you're also um getting this uh getting this potential upside. Um I mean they're actually like making more money. So you get them real cheap and you get the profitability. So maybe those are my favorite, but it's more because of this sort of weird secondary market effect rather than, you know, liking Canada more than the US or something like that. >> And Josh, what about the service sector? Uh names like Slumber or Baker Hughes, do you see value there? >> So I like the service sector a lot, but similar idea where the large services companies um actually a lot of them have pivoted over to uh data center development and power generation. So like Baker Hughes for example is buying um I think it's Chart Industries which is a big provider of equipment for LG facilities but also on the power side. And so um I worry on those you're actually starting to see a growth multiple on those services companies and it's not because of a currency effect or anything. It's because they're sort of chasing after the the hot new thing and those companies records of chasing after the hot new thing are u what's the rule line? uh not marred with success. So, [laughter] you know, it's a little scary, I think, on the larger side. On the smaller side, um some companies are chasing that and again, like maybe they'll be successful, maybe not. Some of the smaller ones have better records of chasing after growth and actually, you know, profiting from it. Um but some of the smaller oil field services names, I think, are wildly cheap. Uh we own some onshore rigs at, you know, a fifth or a seventh of replacement cost. And these are companies that are at huge free cash flow yields too and getting a ton of replacement, you know, discount, which is great as a value investor and a huge free cash flow yield, which is great as sort of a growth or profitability investor at the same time in the same company almost never happens. So that I love. And comparing that to a Schlumbumberge or Baker or whatever where they're chasing the hot new thing, they're not that cheap. They're at sort of reasonably high multiples. Their stocks aren't down that much. I don't know. Um so and and they're in the same sector. So I can get radically cheap stocks um just by going down from a size and trading liquidity perspective um that are superior in many ways and arguably better run too. If you look at sort of um the history of some of these companies and sort of the writedowns they've had to take and the challenges they've had. Um I don't think that the large oil field services names are nearly as well as the large oil and gas uh producers, for example. unfortunately. >> So, I want to wrap up by asking you what a potential black swan event could be. And I mentioned this earlier, but one of the reasons why I really enjoy watching the energy market is because of these the volatility. Despite how large the market is, it's amazing how volatile the price can be. And in I believe it was in Q1 of 2020, we saw the price of spot oil go down to 25 bucks a barrel. two years later in Q1 or Q2 of uh 2022 with the invasion of Ukraine, oil ripped to $125 a barrel. And you made a couple of references to the 1970s. And just as uh just to provide some more context, but the Yan Kapor war, I believe it was 73, that resulted in the oil embargo. In a short period of time, we saw the price of oil go from $3 a barrel up to $12 a barrel. and then all hell broke loose. But what sort of event could result in the same sort of thing happening now? Like if the price of oil were to double from 60 to 120 or triple to 180. >> Yeah. So actually um I'm going to I'm going to answer uh in a way that I don't know if you'll love or hate or both. Uh so I think the thing that everyone's sleeping on so I don't think anyone's sleeping on oil supply geopolitical risk right now. I think it's not priced in, but I think people I think probably correctly understand that the Trump administration and the Western European governments, they'll do basically anything they can to avoid a 1970s uh supply shock. Uh, you know, to the point where they'll prop up the, you know, horrible Iranian regime that oppresses their people and sponsors terrorism all around the world. They'll buddy up with the Qatar government. and they'll butter buddy up with whatever all these things. They're they're doing weird stuff in Venezuela rather than just replacing the oppressive Maduro regime which is responsible for hundreds of thousands or more civilian deaths. I mean just truly terrible things that they're supporting in order to try to suppress the oil price. So I actually think the risk of oil prices skyrocketing uh you know famous last words watch tomorrow something goes down oil prices go up. I think they're doing everything they can to suppress that risk and they're ignoring the really easy sort of obvious risk which is that the US economy is growing and US oil demand is rising and that by suppressing the oil price they've been actually been inducing oil demand where you see bigger and bigger SUVs getting bought and used here in the US and various other places. um you're seeing slowing electric vehicle adoption both because there's less subsidies but also because they don't work as well for many applications as um our our energy system is not set up the right way and we're experiencing power spikes from a cost perspective and grid unreliability at the same time as we're experiencing very low gasoline prices in many markets and so um I think they're sleeping on that and I would say the thing that almost no one's talking about I really haven't seen anyone talk about this in maybe it's been 15 years is that we're seeing a boom in mining financing activity. And what you see after they go print a whole bunch of shares and knock your stock prices down is they go drill a bunch more holes and then they go expand a bunch more mines or start a bunch more mines. And I think over the next couple of years, we're going to see potentially a million barrels a day, more oil demand just from the mining sector and sort of the related supply chain associated with that. Um, I think you could end up if it was like the last commodity boom, you could end up with something closer to 2 million barrels a day because of reduced efficiency, larger required mine size, lower grade, etc. And so I think by this time next year, you could be way over 500,000 barrels a day of incremental demand just for mining of incremental oil demand. And I think that's I don't know if it's a black swan. It's not like a one-day thing, but it's going to be this thing where no one has it in their models. You look at the investment bank models, no one's considering natural resource extraction as a line item that's as a material, you know, summary level line item for oil demand. and you show up with an extra million barrels a day of demand and you can see price way higher and then let's say it's half a million of that half a million of more demand here in the US and a couple other developed market countries and then a million barrels a day more demand just because demand grows in emerging markets as the world population grows and more people buy scooters and various other sort of basic things and plastics and so on and you could be in a situation where you have all this demand and whoops there's no more OPEC plus spare capacity and then maybe you have like one thing knocked offline or whatever and that's where you see much much higher prices. And I'm not sure it'll be linear or sort of normal. I think you could have a day where you just suddenly see maybe it's one of the big mining companies puts in an order for, you know, 10 million barrels of diesel or something that they're going to need for some big mine and there's just not that diesel available and it like steps up the price for diesel which then, you know, you get a bunch of refinery runs way higher or something like that. Um, so that would be my bet rather than the geopolitical risk bet. Again, I do think there will be supply disruptions on the geopolitical side. I just think they'll be minimized because our leaders are so so focused on this myopically to our detriment, to their detriment. Um, but you know, there are things that they can do like prop up terrible regimes in order to maintain oil supplies. So, they're doing that. It's bad. We'll suffer for it for a long time because of that. So I would look away from that towards the things that they are not focused on that are much more likely to happen. And again, just literally I think I get maybe it's two or three different emails a day from different investment banks and whatever on, you know, oh, XYZ mining company is raising and you know, sometimes it's a lot of money, sometimes it's little money. And, you know, that money is going to salaries and it's going towards mine uh development and delineation and so on. And so, you know, mining demand for oil is coming and it's coming soon. And I think it's going to be way bigger. I mean, no one's thinking about this at all. So, it's going to be radically bigger than anyone's thinking. >> Well, Josh, this has been a great discussion. I want to thank you very much for spending time with us today. If someone would like to follow you online or find out more about what you do, where can they go? >> Yeah, so I now have two places to to find stuff about me. So, uh, I run an investment firm, uh, Bison Interest. And so, bisoninterest.com is a great place to go to learn about what I do as a professional, uh, fund manager and investor. And then um I launched a newsletter recently that's sort of more relevant. Fortunately, I've had a lot of traction growing on social media and have over a hundred thou over a 100,000 followers on X, which is sort of this wild thing I never expected. So that's great. And so to help serve the broader population for whom a investment fund is not really relevant, that's only available to qualified investors and accredited investors and so on. Um I launched bisonins.info info, which is a newsletter, and I share some of the my favorite stock ideas and market analysis and so on. So, bisoninsights.info is a good good spot to check out, too. >> Josh, once again, thank you. Stay well. >> Thank you. >> Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. With markets hitting all-time highs, now is a great time to stress test your strategy and be prepared for what comes next. Thank you all for watching. We'll see you again next time.
Josh Young: Oil Is Totally Mispriced
Summary
Transcript
Oil is low because we have nearly historical low net speculative positioning in the oil futures markets. I think it might actually be more than a billion barrels of oil that have been sold in the futures market. We're going to see potentially a million barrels a day more oil demand just from the mining sector. IIA has been wrong 100% of the time since 2007. So, I don't think it's a demand problem. Demand is actually booming even here in the US. >> Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. >> Josh, thank you very much for joining us today. How are things in Houston? >> Uh, things are great. It's a nice uh rainy late fall uh morning. >> So yeah, this is the perfect time of year to be in Texas. So you and your team at Bison focus on the energy market and this is where I want to focus our discussion today. And we had some big news recently out of OPEC where they want to measure the production capacity of the ver of OPEC members. Can you just speak to the significance of this news and what it means? >> Yeah. Yeah. It's so fascinating. Um this has been something we've been writing about for years at Bison Interest and um the uh we got a lot of push back when we put out our initial our assessment of OPEC plus spare capacity in 2021. um many consultants for various OPEC countries and international um energy consultants and so on um claimed that there was way more spare capacity than we measured based on our uh analytical approach. And again, we didn't go through and measure, you know, point by point the exact reserves. It's it's almost impossible to do that without a lot more data, but it's possible to tell um from certain market indicators and certain historical supply indicators as well as development activity subsequent to those indicators how much supply there was. So anyway, um what I think is happening and what I think people should take away from this interview in particular, the big point is that OPEC brought back most of their spare capacity onto the market right now. And I think they expected it was going to be price neutral to price positive. And instead, what they got was a media narrative of glut and they got prices down, not up. And so I think their new approach is transparency. And again, it sounds sort of funny because it's this cartel, they hate the word, but it's a cartel that is famously opaque. And so when they tell you that they're going to start showing you their reserves and production capacity and they're bringing in a US uh audit firm, one of the biggest in the world and best regarded in the world um to do this. Um I think they're not going to go and show that there's giant spare capacity. I think they're going to go show that there's almost none. And so again, I think people are sleeping on this. I think there's going to be a much higher price. And I think when you read between the lines, what they're really trying for is to avoid an oil crisis like we saw in the 1970s. And I think they would ra way way rather have a normal oil price of let's say, you know, 100 to 120 a barrel, which inflation adjusted gets you back to sort of 70 from, you know, 10 years ago or whatever. Um, I think they'd way rather have that than have low prices for the period of time like we're experiencing. and collapsing investment in the industry and then an oil crisis like the 1970s with all-time high oil prices. So, I got my 250 WTI uh hat in the background. Like, that's a nightmare scenario for them because it destroys demand. So, anyway, that's what I think they're going for. I think they expected price to go up, not down. There's been really negative media narratives, really negative oil analyst reports and investment bank reports. And I think there's just this big disconnect between what's actually happened in the oil market and what's being reported and how it's being understood. And I think that's what's motivating this big change. And we'll see. Maybe they're going to come out with some report that shows a huge amount of spare capacity. And I'll be wrong on this, but that's not what I'm seeing here. And that's not what would I think make the most sense from an economic perspective. >> And what's the timeline associated with this report? Yeah. So, it looks like it's supposed to come out later next year. And the best I can tell, they'll have sort of a formal, you know, report that comes out, let's say, early 2027. But, um, by that point, it will have been reported on 10 different times. Uh, it will have been leaked to Bloomberg and Wall Street Journal and then the OPEC countries will formally deny it and then whatever. So, I actually think that we'll we'll have some pretty good color on this in the next, let's say, 6 months or so. Um, and again, they'll formally deny it and then it'll turn out that whatever is leaked is going to be like 95% correct. >> So, oil is trading around $60 a barrel. I'm talking about WTI. You [clears throat] made mention of the fact that it is relatively cheap when adjusted for inflation. And I guess my question to you is why is it so cheap? Because I want to know if it is a demand factor. Is it because we have a slowing uh global economy and therefore we're using less oil or it has has does it have more to do with the supply side issue where we have OPEC in the US pumping out a lot more oil? >> So I actually think it's neither. I think oil is low because we have nearly historical low net speculative positioning in the oil futures markets. And so you have these various narratives like you mentioned both on the supply side where there's an argument that oh there's too much oil being supplied and then there's an argument oh there's too little demand and the reality is as the confirmed data so not the initial sort of madeup weekly numbers from the EIA or the nonsensical stuff that comes out from the IEA where apparently they've been wrong on oil demand since 2007. Every year they've had to every year since 2007 they had to revise up which is amazing. People give like Jim Kramer and various other sort of talking heads a hard time for being wrong 55% of the time. IIA has been wrong 100% of the time since 2007. Um so I don't think it's a demand problem. Demand is actually booming. Even here in the US, we have demand up almost 3% year-over-year in the latest monthly numbers um from the EIA, which are the edited ones that are sort of more likely to be actually correct uh revised, sorry. And so um it's not demand and it's not supply where yeah there's more oil being produced but a lot of it's being produced out of the essentially supply cushion of spare capacity from countries like Saudi Arabia and UAE um and and so on. And so um it's not not demand and not supply. It's just that you have um hundreds of millions I think it might actually be more than a billion barrels of oil that have been sold in the futures market. And so that's the best I can tell. I think a fair price given where global inventories are would be closer to let's say 80 or $85 a barrel WTI and I think that the trajectory should be higher and not lower because demand is beating expectations even in countries by the way the reason it matters so much that US oil demand is up almost 3% year-over-year is that the consensus is that that uh developed economies just see oil demand fall because of efficiencies not rise and so for us oil demand to be up often leads various developed markets in Europe and Asia with some lag. So you can actually see other developed economies also grow their demand. And so this is so so significant to the market and so different from this narrative of peak oil demand. And again, we're sort of moving away from that, but there's still a lot of folks that will repeat it. Um so anyway, I think I think it's really just a speculative positioning answer. And that's really exciting because yeah, speculative positioning could get worse, but we're already at very, very low levels. And we've seen what's happened in various other commodities as well as with various famous stocks where if you get too short positioned and then there's some fundamental or speculative demand, you could see prices sore. We're seeing it right now in silver. We've seen it with various other precious metals. We've seen it again with certain stocks that got, you know, memeified or short squeezed or whatever. And so I think we're setting up for um strong fundamentals for oil and then this potential for this speculative positioning um to get a little less negative. And going from terrible positioning to just less terrible could actually drive price up a lot more than I think people expect. >> The good thing about $60 oil is it means you and I pay a lot less at the pumps. I'm paying $130 Canadian for a liter of gas. Uh if you do the FX and you convert from liters into gallons, it works out to about 350 a gallon. What are you paying for a gallon of gas in Houston? >> Yeah, I just refilled this weekend uh at Costco. Uh I paid $2.30 a gallon US. And that's that's before the about 5% cash back that I get from Costco for that. So net effectively what is that like 220 215 something like that a gallon that I'm paying. So and you know um the amazing thing is that Canada is actually even more of a net producer than the US. So you know what you're paying is almost all tax in terms of that difference between uh what I'm paying what you're paying. >> And it's a big range too because if you go to Vancouver for example it's about a$160 a liter. In Calgary uh it's closer to a dollar a liter. So, it all depends on where you are, just like it is in the US. I mean, I think in the state of California, they're probably paying 450, maybe five bucks a gallon. >> Yeah. I mean, again, that's tax and just broken regulations. They used to have local refiners. They shut them almost all of them down. Um, you know, just sort of catastrophically stupid energy policies and regulations. And so, um, I actually wrote about that. I launched a newsletter recently uh just to share in a more organized manner some of my stock ideas and various other oil market thoughts and wrote an article about how um there's like these weird contortions in California energy policy where you know they've gone after offshore and refineries but they're actually starting to allow onshore drilling again. It's just so weird and inconsistent and illogical. And so we have exposure to this um drilling rig company that's actually Canadian headquartered and they're the number one drilling rig provider in California, which is terrible, right? It's been like the worst market to be a drilling rig provider for, you know, over a decade. But they're going from again, it's that terrible where, you know, they went from running, I think, 20 or 40 or something rigs at their peak 15 years ago to running five recently. But, you know, if it goes from terrible to less bad, let's say it gets back up to 20, so down 50% from before, that's still a uh, you know, 400% increase from where it is right now. So, you know, it's pretty pretty fantastic uh to have that sort of inflection, but also just wildly illogical policy. Like, why would you punish your people that badly to make them go pay 450? And then the narrative was, oh, hey, let's like move them over to electric vehicles. But the local power prices in California are also the highest in the country other than Hawaii. And so you don't really have a choice. It costs you a ton of money to refill your car at the pump or a ton of money to recharge your car. And then there's all these home fires and other issues from people trying to charge at home. So anyway, just an absolute dumpster fire. And don't worry, I won't hold back. I'll tell you I'll tell you more about California if you want. >> Oh, that's fine. I love that. That's one of the reasons why I love speaking with you because you don't hold back. So we cannot have a discussion on oil and energy without talking about geopolitics is this is one of the reasons why I really enjoy this sector because there's so much going on from a geopolitical point of view. And when Russia invaded Ukraine in 2022, the price of oil ripped to 125 bucks a barrel just because we thought it was going to have a big impact on supply. But here we are three years later and oil's at $60 a barrel and now there's a lot of chatter about, you know, Russia and and Ukraine resolving this issue. And so if that were to happen here in the next few months, what do you think that does, if anything at all, to the price of oil? >> Yeah, I mean, I think the the very short term you'd probably see oil prices fall. Um, one of the weird thing that's one of the weird things that's happened is since that um we've seen news articles um talking about potential ceasefire between Russia and Ukraine come out dozens of times. I don't know the exact number, but I know for sure it's more than one dozen as probably, you know, it might be as much as hundred times that there's been um news headlines or batches of news cycles about potential ceasefire or peace between Russia and Ukraine. And so just to be clear, I think that if there was world peace and um you know, if things got better, both Russia and Ukraine as well as various other conflicts in the world, I still think that we're going to go towards all-time high oil prices on an inflationadjusted basis over time. I think that there's plenty of room from a demand perspective and if anything the rebuilding from these catastrophes in these various countries like Ukraine, Venezuela, you know, some of the Middle East problems, you know, and and across subsaharan Africa where there's so many people living in dire poverty because of these conflicts. I think if we got rid of those conflicts altogether, there would actually be such a demand boom for oil that you'd see much higher prices, not much lower prices. So that's my general view. I'm not rooting for any sort of supply disruptions or conflicts or anything like that. I think it gets sort of some sometimes um convoluted or people mishar and say, "Hey, oh hey, Josh thinks this is going to happen, therefore he wants it to happen." I don't want it to happen. But the reality is that we're probably not that close, unfortunately, still to peace between Russia and Ukraine. And there are various conflicts that are likely to happen or disruptions that are likely to occur that are going to further disrupt oil supply. So actually very recently uh Ukraine attacked a Russian port um and knocked off supply from one of the supply lines from the CPC which is a pipe that mostly just um or a system that mostly actually brings Kazak oil uh through Russia to export to the global market. So oil supplies are down about 500,000 barrels a day just from that. But prior to that you had actually nearly a historic low of oil supplies that were offline because of conflict. And so um typically you have between 2 million a day and 5 million a day of oil supplies offline because of geopolitical issues and conflicts whether it's a civil war in Libya or whether it's you know some issue with Iran or sanctions or whatever. And so actually um we were at really really low levels of supply offline. We're now getting back towards more normal levels. But again, I don't think you need conflict for oil prices to rise a lot. And I'm actually much more in the camp of, hey, I just love a global economic boom and the peace dividends associated with peace. And I actually think that that would be a more sustainable oil demand increase of the sort that we saw when China boomed in the early 2000s. um rather than the sort of sort of spike and then collapse that we saw in oil in 2022. >> Many people thought uh with all the sanctions placed on Russia was going to result in a crippling of their economy, but it hasn't. And once again, I go back to the fact that why the oil market is so interesting is because there's always a buyer for oil, right? And so maybe you can't sell it to Europe, you can sell it to India, you can sell it to China. And that's what Russia's done. And now there's this whole shadow economy going on that I find quite interesting. >> Yeah. Well, I think it's a really good point, but I actually I think I disagree with that. Um, and I think there's just a point of clarification. I think that sanctions work. US sanctions plus, you know, European sanctions, they work when they're enforced. And so the very worst thing, it's almost like parenting. Like threatening to punish your child and not punishing them is way worse than just not threatening them at all. And so um but punishing them, you know, is appropriate and leads to sort of better behavior over time. So, um, when you look at what we've done with Russian sanctions, what we've done with Iranian sanctions and so on, where we've enforced those sanctions meaningfully and consistently, they've been highly effective, where we've been inconsistent with that enforcement or threatened it and then not enforced it or partially enforced it repeatedly to a small degree. What that's led to is increased volumes, not decreased volumes of oil sold. Um maybe it's led to a little less money in in Russian hands, maybe less. That's debatable. And the different measures show different um show different outcomes. But I think the biggest problem isn't that sanctions aren't enforceable. It's that we've chosen from a policy perspective, our leaders have chosen to not to impose or claim to impose sanctions and not enforce them. It's, you know, Teddy Roosevelt says, you know, speak quietly and hold a big stick. And we've done the exact opposite. And, you know, that's a failing policy. It's a terrible idea. And again, I think the reason to clarify there is it's not that sanctions don't work. It's that sanctions that you don't enforce don't work. And like you said about the shadow economy, by announcing sanctions and not enforcing them or only uh inconsistently enforcing them, you lead to uh building a shadow economy and you end up dissipating power, enabling some of the worst folks, funding terrorism, funding the drug trade, funding all kinds of terrible stuff. And so I think uh I think we should be limited in our sanctions and then we should strictly enforce them with severe punishments. And unfortunately, we're doing none of that. So, in this context, they definitely don't work. But I would argue it's because we choose not to enforce them. >> Valid point. And and I think that's where politics comes into play, right? Because it doesn't matter what administration you have in the US. They want a low oil price so you can keep the economy going and keep inflation down. So, let's talk about Venezuela now because many people might not realize this, but Venezuela was one of the co-founding members of OPEC. It produces somewhere between 900,000 to a million barrels a day. So somewhat meaningful. There's a lot of speculation the US will invade Venezuela or try to impose some sort of regime change. Who knows what that's going to look like? But if this were to happen, what do you think happens to the price of oil? >> So two things. First of all, um the the reason politicians, from what I can tell, in the US are so averse to higher oil prices is because they're old. And we have this sort of weird system where we're ruled by persistently like you know oxygenarians or whatever. Um they sort of control politics both from a donor perspective as well as the actual our leaders. Somehow we just you know it's this race to like old incompetent whatever on both sides, right? It's not really a particular party issue. And so if you're if you're 80 years old, you think, hey, oil higher oil prices are bad for the US economy because you you formed your views at a time where the US was a massive net oil importer. In about 2016, the US flipped from being a net oil importer to a net oil exporter. And so if you look at the last decade, there's actually been a really high correlation between higher oil prices and more US economic activity. Um, interestingly actually Ben Bernani wrote about this and it just got subsumed. No one wanted to talk about it, so it just disappeared. And I'm not the world's biggest Ben Bernanki fan, but what an interesting analysis, right, by the former head of the Federal Reserve and a brilliant economist. Again, imperfect, but brilliant economist. And so, you know, we wrote about it for Bison Interest. We published this and just got tons of flack like, "Oh, that's wrong." And it's like, well, okay, before you say it's wrong, why don't you look at the numbers and then just think for a minute about what it means to be the net exporter of something. So, I do think that higher oil prices are good for the US economy. They're great for the Canadian economy if Canada could sort of get out of its own way from a political perspective and lower taxes and regulations and allow the economy to thrive. Um, but there's just this weird belief that's and just people like often there's this phenomenon where when something's untrue, uh, there's a need to repeat it more and more and say it louder and louder and publish it in more and more articles and whatever. And so I think you've sort of seen that phenomenon. And the nice part is that as you see it, as things need to get repeated more and more, that's actually often the beginning of the end of that thing. And so it's like the the COVID stuff, right, where you saw people, you know, developing different views on it. And towards the end of, you know, lockdowns and, you know, mass requirements, various other things, people were just saying these things over and over again so often that you could tell it was like a religious catechism rather than actually like a fact. So I think we're getting closer to that sort of popular understanding of the economic link between higher oil prices and a strong economy here in the US and in Canada and various other countries. And so then we're going to move away from that. In terms of Venezuela, look, like similar idea where if we were to secure more oil supply from Venezuela, that would obviously be negative for oil um in the short term and it would probably send oil prices down more again in the short term. I think almost any circumstance where we're getting much more oil from Venezuela is going to be a circumstance where there's a regime change, hopefully again peacefully and not violently. Um, but in a circumstance of regime change where you introduce a USbacked or westernbacked sort of liberal democracy or anything that looks like that, um, you're going to see an enormous rebuilding effort that's going to require millions of barrels of oil a day. And then you're going to move Venezuelans, Venezuela's local consumption, the consumption of Venezuelans of gasoline and diesel and jet fuel and so on from almost nothing right now where their economy is collapsed, there's starvation, there's just horrible things happening to the people in Venezuela and you'll see that move over towards um a lot more consumption. So my expectation would be terrible for the oil price in the immediate term, fantastic for oil demand and ultimately oil prices over the medium term and then eventually over let's say 15 years or something the broken infrastructure gets fixed and you have a lot more development and you have a lot more refining and you you end up with you know incremental oil supplies beyond the increased local consumption. And so, you know, maybe it's 5 years, maybe it's 15 years, but you'd see a lot more production, net production, net of consumption eventually. But I think the first step would actually be a lot more consumption, a lot more net consumption. And so, I think it'd actually be quite positive for oil prices. And then, you know, we'll see how quickly they can repair their refineries, which I'm actually optimistic on. I think those are a lot easier to fix and build out than the the oil fields which um you know just to give people context the underinvestment in oil fields especially heavy oil fields and then of heavy oil infrastructure um is quite challenging. You'd have to rebuild a lot of their pipelines because there's holes in them both because people drilled holes to steal the oil to survive or for whatever reason um and then also just with undermaintenance you end up with just real problems. There are some of these pipes that are just solid because you basically are running asphalt through it and now you have an as asphalt former pipe instead of a a pipe that's able to convey heavy oil. In other cases, you have just holes and basically no oil running or oil running through and just terrible leaks. And then you have enormous environmental catastrophes which again is so it's so abhorent. You had the Greta Thumbbergs of the world and various other folks pushing against Canadian and American producers of oil who produce the cleanest, most environmentally friendly barrels of oil anywhere in the world when you have uh Lake Marbo and various other spots that are just absolute environmental catastrophes. Um, and so a lot of that would need to get addressed and I think people would be shocked when they found out just how bad things got from an oil industry perspective in Venezuela. So anyway, lots of different demand factors, lots of things that would need to get addressed to be able to ramp up supply. Um, and so again, I just think it's a little different than it's presented, but the the day one reaction, I would expect oil prices to fall. And my interpretation of that, I don't know if it's day one or month one, but I would see that as a great buying opportunity to, you know, buy the sorts of things that sold off most on that news. If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hardass Assets Alliance at hardassetsalliance.com. That's hardassallalliance.com. Josh, let's talk about China now. It's the world's second largest economy representing 20% of global GDP. And if they were to come back online or at least um stabilize and start growing their economy again, would this be a big demand push for oil? Yeah. So I actually think China's been consuming more oil than they say. Um and uh so I've chatted with various uh folks that are active in their oil supply chain and they all agree. Um I posted about on social media and basically people decided I was like the craziest person in history. But it's sort of one of those weird things where like the people doing the like billions of dollars of transactions with the Chinese are like, "Oh yeah, like for sure they're lying." Like we don't know which direction, but like definitely that's like the standard negotiating practice for oil buying and so on in China. So one, I think their consumption is higher than they're showing and their storage levels of oil are probably lower than they're showing, which again are very very easy to fabricate. Um, and I think that the people that the Chinese government hate the most in the world, maybe by a lot, are the satellite data providers and then the folks that comment on that data where they don't want anyone spying on them. And, you know, if they were in China, they would have been sent to a correction camp and maybe they wouldn't be around anymore. But, um, outside of China, it's harder for them to do that. And you know, Russia's done some of that stuff, but China hasn't, at least as far as I'm aware of, in terms of pursuing external critics who who don't visit their country. Um, and so I think one, they're they're they're using more. Two, um, they're preparing to sort of publicly embarrass the folks that have been saying that their economy is doing so poorly. And not that I'm a big fan of, you know, uh, command economies or think that that's sustainable. their debt levels are really really high but they've been doing a lot of stimulus and they've built out a lot of um export capacity on a number of different fronts and so um one I don't think their consumption is as low as people think two I don't think their economic activity is as low as people think but three it's also quite unsustainable so I was let's say four years ago looking for sort of a big reopening in China and a lot more consumption and so on I think we've sort of got that we've also got some of that consumption and maybe we'll get more of that consumption and Maybe not. But I think what we should be looking for from China is economic reform. And I think we're starting to see it. But shifting away from this glut every market possible that you participate in and drive down price and make no profits, but you know, win on volume in employment and moving away from that top- down economic model towards sort of more rationally competitive models where there's some producer profits. And maybe it's not full employment, but maybe it's profits that are reinvested and people making money and sort of spending on personal consumption. So I think you need to see that shift. That shift should be oil positive, but there's also going to be a lot of pain. So I'm not really looking for China to be this giant swing consumer of oil. I just also think that their consumption of oil is maybe a million or two million barrels a day higher than people are thinking. And it much better explains their buying activity. And it's really not that weird. Anyone that you talk to, actually we're the some of the people that liked this idea the most were buyers and sellers of um commodities to China and products from China. Um where just they they just they look at the official numbers for their various, you know, components and then they look at what they're doing and there's just total inconsistency in both directions, higher, lower, whatever. It's just made up. And so, um, I think it's the weirdest thing that we basically don't believe any economic data from China at all, except we we like you see for sure, you know, goldplated their oil demand numbers and, you know, everyone just like repeats them over and over again. So, no one would believe, you know, they put out their GDP number, no one believes it, right? They put out their debt numbers, no one believes them. They put out their whatever. But but that number Oh, and the other one that everyone believes, which I think has been pretty clearly proven wrong, is um their claims about electric vehicle adoption. And it's not that they're not using a lot more electric vehicles, but the numbers that they report make no sense. Um there's just not the inputs to be able to build those electric vehicles. And then there's a lot of evidence that basically you have vehicles that are sold new in China and then they're stuck on a boat right after they're sold new. Um, and I think that part that sale is also counted as sold new and then they're shipped to uh, you know, XYZ country in South America or Africa or whatever where they're then sold new again. And so you'll end up with this sort of car laundering essentially to show much higher prices. and that there's actually a lot of evidence of China Beechbook and various other folks have talked about this and that's apparently sort of well understood but yet you still have this weird narrative that China is consuming less oil than than they actually are. So I don't know for sure but I'd say let's say 80 or 90% chance that I'm right on that. Um, and I don't know that anyone that watches China in any other aspect other than oil would be surprised at all to hear that their uh economic figures are not perfectly accurate when it comes to this one other thing that again nonsensically everyone sort of trusts. >> Okay, so let's move it closer to home. I'm based in Toronto and uh so I want to get your views on Canada and what's happening here with our oil and gas industry and uh I don't mind if you bash the government here. I always like to bash my government, but uh just for the for people who might not be familiar, uh the Liberals have been in power for the last 10 years. They've done everything in their power to suppress any form of resource development. Doesn't matter if you're talking about energy or precious metals, base metals, whatever. And yet oil is a very important important component to our economy. It's the largest export, 20% of all exports. Um, so maybe you can speak to it and tell me what you think we're doing wrong as a nation. >> Uh, well, there's this chart I shared on social media uh showing I think Pierre Poly or someone in his campaign when he was running last year um posted this originally where it showed uh US economic growth and then Canadian economic growth and I can't remember if it was industrial or business investment or if it was per capita GDP growth, but basically the same chart. And so, um, over the last decade, the US has grown a lot and Canada has languished. And then when I've shared this, the biggest push back I get is, oh, well, oil prices fell in 2014. And so, if you look at a chart of Texas, which is the country's largest oil producer here in the US versus Canada, the Texas chart looks almost identical to the US chart. there's one or two years where it does worse and many years where it actually does better. And so, you know, there isn't a good, I think, excuse other than policy failure. Uh, on the Canadian side, it's not oil, it's not any one thing. It's just sort of comprehensive policy failure. So, um, it's really hard when there's been policy failure for a decade and you have the same party in power and most of the same parliamentarians and too many of the same cabinet members and so on. I think it's really hard to expect that those people are suddenly going to behave differently. Like the best bet in life is that people will just keep doing what they've been doing. That being said, we are in the golden age of grift. We see um various world leaders and their families cashing in in sort of unprecedented ways. Unfortunately, it's bipartisan. We had, you know, the former US president's son making money on weird stuff. Now you have uh the current president's sons and son-in-law, whatever, cashing in in other sort of weird, inappropriate ways. So this is not unique to Canada, but the current prime minister of Canada was was he was the vice chairman, I think it was, of Brookfield, which is this big asset manager that's involved in um various pipeline businesses and real estate and various other things. And so it would not be the most shocking thing to me that Canada would shift very slightly. And again, generally, I think the right way to think about it is that people don't change, but also people do what's in their personal economic interest. And even if the the prime minister doesn't have direct interests anymore in Brookfield, which I'm not sure that that's true, he he may still have interests, but even if he didn't, it's really hard to change also. And so he's going to end up really favoring Brookfield and that sort of world even if he doesn't have those interests which he may or may not have uh economic interests anymore just because that was his world for so long. And so and we we've seen evidence of other again politicians and other places in the world and other leaders behaving in a similar manner. So um I guess what I'm saying is that's a reason to think that maybe this time is different for Canadian pipeline policy. And I would say I'm cautiously optimistic that this pipeline announcement that was made um is going to go forward. And I think that there could be very significant consequences to the Canadian Federation um uh to the extent that this is promised and Alberta moves forward to try to get this done and then it's blocked or killed, I think that could actually trigger um much more division in the Canadian Federation than um than people are expecting and which could actually be quite bullish for you know Albertan and Saskatchewan. on oil companies and so on. But you know I think this sort of I think there might be an understanding possibly at the federal level of this but just more basic just real simple you know if you come out of a world where you own infrastructure and that's where all your money is from on an institutional level and now you have the ability to go get more built but not infinite just like one incremental project that maybe your affiliates or former affiliates get to go own or run or build or cash in on 10 different ways. You know, I think sadly we're we've moved towards this world where you sort of just want to understand uh incentive alignment um personal incentive alignment and bet on that to some extent rather than just assessing you know the historical policy trajectory and and betting on that. >> Yeah, the best quote ever out of Charlie Munger was show me the incentive and I'll show you the outcome. So I agree with most of what you said. Just to provide a little more context uh in terms of Canada's GDP per capita uh in the US it's around 85,000 uh per capita and in Canada it's around 55,000. So in the last 10 years we've had virtually zero economic growth under the uh liberal leadership. Now you talk about Mark Carney, full transparency, I didn't vote for him. My view is if you can't get it together in 10 years, you don't deserve another chance. but the majority of Canadians did. So, I totally accept that. I will say since he's he's been in power, I think six or eight months now, he's brought a whole new level of professionalism back to the PMO. So, I'm hoping he's the guy. He just announced this. You were alluding to this, but just announced this uhou uh with the premier of Alberta, Daniel Smith, uh with regard to uh the construction of a pipeline. Who knows whether or not this will get done. uh takes anywhere from 8 to 10 years to build a pipeline. But it's a step in the right direction and I I really really hope for this sake of this country that uh he's a lot more friendly when it comes to res resources and the development of resources. >> Jimmy, let me just uh one one quick uh clarification. It takes about six months to build the pipeline. Um it takes about eight years to jump through the various regulatory hurdles and to you know bring in the special union whatever thing and special like you know local indigenous whatever and so but actually building a pipeline takes very little time and you know I think China has shown us this where they can build it in a week. The problem is that you know within a month it might spring a leak. Um, but building a real pipeline that's well-built, that won't leak, that'll be around for a long time, it does not take very much time with the right coordination and planning, let's say a couple of years of coordination, planning, pre- buying, whatever, you can have a pipe built in months, if not in, you know, one or two years, something along those lines. There's a lot of really talented people who have successfully built fantastic pipes in Canada, and it's just a question of tax and regulatory burden. And so it's worth highlighting that because the thing that people um probably know, but just in case they don't, is that if you rewind 15 years, per capita GDP in Canada and US were the same. And that's where it's so shocking that there's been this divergence. Um, the funniest proposal, and I'm not saying I'm backing this or anything, but it's pretty funny, was um the to trade to offer to Canada to trade Minnesota where there have been lots of issues and there's a billion dollars that was just stolen and sent to Somalia to fund some terrible uh, you know, local people that are, you know, committing violence or whatever, um, to trade Minnesota for Alberta and Saskatchewan. And it turns out, this may sound surprising, but the per the total GDP of Minnesota is actually much higher than the combined GDP on a currency adjusted basis for um uh for um Alberta and Saskatchewan. And the per capita GDP is actually a lot higher too. It's one of those like weird statistics like there should be almost no world in which that's the case. uh you know, Alberta and Saskatchewan are blessed with immense oil resources and agricultural resources and mining resources and many hardworking people and great local uh innovative companies and and again Minnesota is a great state. Um, but just when you when you think about it like that, and again, I'm not advocating for that or anything, but just framing it as like these two provinces with all of this just tremendous natural resource versus a US state that's, you know, one of the northernmost states that doesn't quite have the same sort of resource blessings or really that much industry either. and then framing the um relative economic activity. I think it highlights the varying um economic growth and wealth from better and not that the US has been perfect but from better or less bad economic policy versus more bad. And I do think like you're saying that Canada I think you know the Carney administration they've sort of gotten the memo a little and they are professionalizing it to some extent and there have been some cabinet changes including there was a recent um was it the culture minister or something resigned there was seems staged but sort of resigned over thisou about this pipe that's going to get built and so um you know it does seem like that's a positive trajectory but there's a very very big gap and I'll just say here, I do think that Canadian oil and gas companies despite these very ownorous regulations and taxes are extremely interesting partly because the currency has collapsed. And so when you look at a commodity like oil measured in US dollars um but costs that are measured in local Canadian dollars, the profitability of these companies is extraordinary. again, even with higher regulations, higher taxes, a sort of more difficult operating environment, um, and like a naturally more difficult operating environment with various winter access issues and various other things. Um, so Canadian oil and gas companies have weirdly been, you know, they they've suffered a lot from bad pipeline policies and bad regulations, but right now they're huge beneficiaries of this shift in the relative value of currencies. And so this very very weak Canadian dollar has been just a bonanza for these these companies. And even with the professionalism increased and with some of these reforms, uh, Canada's still on a relatively negative trajectory and even with all the mess here in the US and the corruption and so on, the US is on a relatively positive trajectory. And so you can't know for sure what's going to happen with currency. But if things just continue how they have been and if the relative strength of the US dollar and weakness of Canadian dollar continues based on that relative strength and weakness of economic policy, you could see the profitability of these companies improve even more. Like net effectively, Canadian oil companies are getting almost $100 a barrel where US oil companies are getting you know 58 or $60 a barrel. So it's just a huge difference. That's a real reason to pay attention to these policy variances. And then obviously the pipelines matter a lot for these companies and for the service companies too. But that that currency difference makes all of the world of difference. I keep getting asked, hey, why are your Canadian oil companies up? Why is the why are Canadian oil companies up? And the answer is by and large just this currency effect. >> Uh okay, good. I'm glad you brought that up. So first of all, I got to make a comment on the currency. It's killing me here. It's like every time I go to the US now, I got to pay like a 45% premium for a cup of coffee. But, uh, we're So, can I assume you see better value with Canadian producers as opposed to US producers? And maybe you can just speak to the valuation between Canada and the US. >> So, so it's complicated. So, um, there's sort of two ways to go about investing, I think, generally from a fundamental perspective. One is to find companies that make more money and the other is to find companies that are trading at a larger discount to their replacement cost or book value or various sort of other um metrics. And so the make more money way is more fun because that when companies are profitable, they pay dividends, they buy back stock, they grow, etc. Um when they are at a larger discount to replacement cost, uh it's way less fun. But sometimes those companies, you know, sort of value versus growth investing sort of as a as a microcosm with, you know, US versus Canadian oil and gas companies. Um, often if you buy them when they're making less money and they're cyclical, then their stocks can actually way outperform. And then again, there's not certainty that the Canadian dollar will underperform versus the US dollar. If we got back to dollar parody for whatever reason, um, that would be catastrophic for the Canadian oil and gas industry. So, I like both. Um, and my explanation for that is basically just, hey, you know, growth versus value. I think there's good arguments for both sides. There's really interesting resources. There's really interesting companies. I guess I will say that on the smaller cap side, um, because oil and gas is so far out of favor in downturns, you get secondary markets like the TSX trade at much bigger discounts than primary markets like the New York Stock Exchange. And again, the TSX is a big exchange and it's great, but relatively speaking, the dollar volume traded and so on is just way way the number of shares traded way lower than New York Stock Exchange, NASDAQ, etc. And so, um, you do still see small Canadian companies trading at a bigger discount than large Canadian companies in sectors that are out of favor. And so, to me, that's really promising still to own these small Canadian names. And then there's this added benefit which is that they're actually more profitable. So you can own these things at wild low cash flow valuations and at large discounts to replacement cost. Um but you're also um getting this uh getting this potential upside. Um I mean they're actually like making more money. So you get them real cheap and you get the profitability. So maybe those are my favorite, but it's more because of this sort of weird secondary market effect rather than, you know, liking Canada more than the US or something like that. >> And Josh, what about the service sector? Uh names like Slumber or Baker Hughes, do you see value there? >> So I like the service sector a lot, but similar idea where the large services companies um actually a lot of them have pivoted over to uh data center development and power generation. So like Baker Hughes for example is buying um I think it's Chart Industries which is a big provider of equipment for LG facilities but also on the power side. And so um I worry on those you're actually starting to see a growth multiple on those services companies and it's not because of a currency effect or anything. It's because they're sort of chasing after the the hot new thing and those companies records of chasing after the hot new thing are u what's the rule line? uh not marred with success. So, [laughter] you know, it's a little scary, I think, on the larger side. On the smaller side, um some companies are chasing that and again, like maybe they'll be successful, maybe not. Some of the smaller ones have better records of chasing after growth and actually, you know, profiting from it. Um but some of the smaller oil field services names, I think, are wildly cheap. Uh we own some onshore rigs at, you know, a fifth or a seventh of replacement cost. And these are companies that are at huge free cash flow yields too and getting a ton of replacement, you know, discount, which is great as a value investor and a huge free cash flow yield, which is great as sort of a growth or profitability investor at the same time in the same company almost never happens. So that I love. And comparing that to a Schlumbumberge or Baker or whatever where they're chasing the hot new thing, they're not that cheap. They're at sort of reasonably high multiples. Their stocks aren't down that much. I don't know. Um so and and they're in the same sector. So I can get radically cheap stocks um just by going down from a size and trading liquidity perspective um that are superior in many ways and arguably better run too. If you look at sort of um the history of some of these companies and sort of the writedowns they've had to take and the challenges they've had. Um I don't think that the large oil field services names are nearly as well as the large oil and gas uh producers, for example. unfortunately. >> So, I want to wrap up by asking you what a potential black swan event could be. And I mentioned this earlier, but one of the reasons why I really enjoy watching the energy market is because of these the volatility. Despite how large the market is, it's amazing how volatile the price can be. And in I believe it was in Q1 of 2020, we saw the price of spot oil go down to 25 bucks a barrel. two years later in Q1 or Q2 of uh 2022 with the invasion of Ukraine, oil ripped to $125 a barrel. And you made a couple of references to the 1970s. And just as uh just to provide some more context, but the Yan Kapor war, I believe it was 73, that resulted in the oil embargo. In a short period of time, we saw the price of oil go from $3 a barrel up to $12 a barrel. and then all hell broke loose. But what sort of event could result in the same sort of thing happening now? Like if the price of oil were to double from 60 to 120 or triple to 180. >> Yeah. So actually um I'm going to I'm going to answer uh in a way that I don't know if you'll love or hate or both. Uh so I think the thing that everyone's sleeping on so I don't think anyone's sleeping on oil supply geopolitical risk right now. I think it's not priced in, but I think people I think probably correctly understand that the Trump administration and the Western European governments, they'll do basically anything they can to avoid a 1970s uh supply shock. Uh, you know, to the point where they'll prop up the, you know, horrible Iranian regime that oppresses their people and sponsors terrorism all around the world. They'll buddy up with the Qatar government. and they'll butter buddy up with whatever all these things. They're they're doing weird stuff in Venezuela rather than just replacing the oppressive Maduro regime which is responsible for hundreds of thousands or more civilian deaths. I mean just truly terrible things that they're supporting in order to try to suppress the oil price. So I actually think the risk of oil prices skyrocketing uh you know famous last words watch tomorrow something goes down oil prices go up. I think they're doing everything they can to suppress that risk and they're ignoring the really easy sort of obvious risk which is that the US economy is growing and US oil demand is rising and that by suppressing the oil price they've been actually been inducing oil demand where you see bigger and bigger SUVs getting bought and used here in the US and various other places. um you're seeing slowing electric vehicle adoption both because there's less subsidies but also because they don't work as well for many applications as um our our energy system is not set up the right way and we're experiencing power spikes from a cost perspective and grid unreliability at the same time as we're experiencing very low gasoline prices in many markets and so um I think they're sleeping on that and I would say the thing that almost no one's talking about I really haven't seen anyone talk about this in maybe it's been 15 years is that we're seeing a boom in mining financing activity. And what you see after they go print a whole bunch of shares and knock your stock prices down is they go drill a bunch more holes and then they go expand a bunch more mines or start a bunch more mines. And I think over the next couple of years, we're going to see potentially a million barrels a day, more oil demand just from the mining sector and sort of the related supply chain associated with that. Um, I think you could end up if it was like the last commodity boom, you could end up with something closer to 2 million barrels a day because of reduced efficiency, larger required mine size, lower grade, etc. And so I think by this time next year, you could be way over 500,000 barrels a day of incremental demand just for mining of incremental oil demand. And I think that's I don't know if it's a black swan. It's not like a one-day thing, but it's going to be this thing where no one has it in their models. You look at the investment bank models, no one's considering natural resource extraction as a line item that's as a material, you know, summary level line item for oil demand. and you show up with an extra million barrels a day of demand and you can see price way higher and then let's say it's half a million of that half a million of more demand here in the US and a couple other developed market countries and then a million barrels a day more demand just because demand grows in emerging markets as the world population grows and more people buy scooters and various other sort of basic things and plastics and so on and you could be in a situation where you have all this demand and whoops there's no more OPEC plus spare capacity and then maybe you have like one thing knocked offline or whatever and that's where you see much much higher prices. And I'm not sure it'll be linear or sort of normal. I think you could have a day where you just suddenly see maybe it's one of the big mining companies puts in an order for, you know, 10 million barrels of diesel or something that they're going to need for some big mine and there's just not that diesel available and it like steps up the price for diesel which then, you know, you get a bunch of refinery runs way higher or something like that. Um, so that would be my bet rather than the geopolitical risk bet. Again, I do think there will be supply disruptions on the geopolitical side. I just think they'll be minimized because our leaders are so so focused on this myopically to our detriment, to their detriment. Um, but you know, there are things that they can do like prop up terrible regimes in order to maintain oil supplies. So, they're doing that. It's bad. We'll suffer for it for a long time because of that. So I would look away from that towards the things that they are not focused on that are much more likely to happen. And again, just literally I think I get maybe it's two or three different emails a day from different investment banks and whatever on, you know, oh, XYZ mining company is raising and you know, sometimes it's a lot of money, sometimes it's little money. And, you know, that money is going to salaries and it's going towards mine uh development and delineation and so on. And so, you know, mining demand for oil is coming and it's coming soon. And I think it's going to be way bigger. I mean, no one's thinking about this at all. So, it's going to be radically bigger than anyone's thinking. >> Well, Josh, this has been a great discussion. I want to thank you very much for spending time with us today. If someone would like to follow you online or find out more about what you do, where can they go? >> Yeah, so I now have two places to to find stuff about me. So, uh, I run an investment firm, uh, Bison Interest. And so, bisoninterest.com is a great place to go to learn about what I do as a professional, uh, fund manager and investor. And then um I launched a newsletter recently that's sort of more relevant. Fortunately, I've had a lot of traction growing on social media and have over a hundred thou over a 100,000 followers on X, which is sort of this wild thing I never expected. So that's great. And so to help serve the broader population for whom a investment fund is not really relevant, that's only available to qualified investors and accredited investors and so on. Um I launched bisonins.info info, which is a newsletter, and I share some of the my favorite stock ideas and market analysis and so on. So, bisoninsights.info is a good good spot to check out, too. >> Josh, once again, thank you. Stay well. >> Thank you. >> Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. With markets hitting all-time highs, now is a great time to stress test your strategy and be prepared for what comes next. Thank you all for watching. We'll see you again next time.