Episode Summary: Running On Empty ft. Wil VanLoh

Podcast: The 47 Morning Update with Ben Ferguson
Host: Ben Ferguson
Guest: Will VanLoh, CEO of Quantum Energy Partners
Release Date: April 11, 2020

1. Introduction to the Crisis

The episode opens with a stark portrayal of the multifaceted crises facing the United States in early 2020. Ted Cruz sets the stage by highlighting the severity of the global pandemic, economic downturn, and collapsing energy markets.

• Ted Cruz [00:00]: "A global pandemic. Over 16,000 Americans dead and over 17 million Americans have lost their job. And global energy markets crushed by collapsing oil prices. These are extraordinary times in which we live."

2. The Dual Impact of Low Oil Prices

Michael Knowles steers the conversation towards the plummeting oil prices, questioning whether low prices are beneficial for consumers or detrimental in the long run. Ted Cruz elaborates on the broader implications of the energy market crash.

• Michael Knowles [00:27]: "Low oil prices are not necessarily a bad thing when we look at it. What are we missing here?"
• Ted Cruz [00:56]: "If you end up seeing American energy producers driven out of business, that also has massive implications in terms of you and me paying higher prices at the pump in years to come and also geopolitically making us dependent on foreign countries."

3. Direct Engagement with Saudi Arabia

Cruz details his proactive approach in addressing the energy crisis by meeting with the President and engaging directly with the Saudi ambassador to confront the strategies threatening American energy producers.

• Ted Cruz [02:23]: "We started by writing a letter to the Saudi ambassador... it was the most bare knuckled, candid conversation, really, I've ever had with a foreign leader in eight years in the Senate."

4. The Shale Revolution and Its Drivers

Introducing Will VanLoh, the conversation delves into the technological advancements that fueled America's rise in energy independence. VanLoh emphasizes the role of independent companies over major oil corporations in driving innovation.

• Will VanLoh [06:43]: "So what's an independent?... The independents are the ones that have made this independence of energy possible."
• Ted Cruz [07:57]: "The shale revolution was started and driven by independence."

5. Environmental Concerns and Fracking

Addressing common environmental criticisms, VanLoh provides clarity on fracking processes, assuring listeners of its safety and dispelling myths about its impact on drinking water.

• Ted Cruz [17:58]: "So is that for real? Should I be worried that fracking makes it dangerous to drink the water?"
• Will VanLoh [18:00]: "No. You're fracking 10,000ft below that. That's two miles away from the water."

6. The Price War: Saudi Arabia vs. U.S. Energy

The discussion shifts to the strategic price war initiated by Saudi Arabia and Russia, aimed at undermining U.S. energy producers. VanLoh explains the geopolitical motivations and the economic ramifications of such tactics.

• Ted Cruz [14:58]: "Saudi and Russia have decided they were going to basically launch a market share war on the US..."
• Will VanLoh [16:19]: "Saudi ... break even cost today is probably $80 a barrel... Russia's is only about 40 to $45 a barrel."

7. Financial Pressures: The ESG Movement and Access to Capital

Cruz introduces the challenge of restricted access to capital for energy producers, exacerbated by the ESG (Environmental, Social, and Governance) movement, which discourages investment in the energy sector.

• Ted Cruz [27:35]: "There is a real problem with the banks cutting off capital to these American energy producers..."
• Will VanLoh [28:45]: "Banks are saying, you need to put equity in and pay down this loan or we're going to throw your loan over to the workout group."

8. The Urgent Need for Policy Intervention

Recognizing the critical state of the energy sector, Cruz recounts his efforts to influence presidential policy, urging support to prevent the collapse of American energy producers and safeguard millions of jobs.

• Ted Cruz [31:18]: "The President said, I'll do it... Make sure that the banks are not discriminating and bankrupting these energy companies."

9. The Ticking Clock: Time is Running Out

VanLoh underscores the limited timeframe to reverse the downturn in the energy sector, warning of irreparable declines in production and the loss of technological momentum essential for future recovery.

• Will VanLoh [34:16]: "We are running out of time to solve this problem."
• Ted Cruz [34:25]: "That's hitting the energy sector and the American energy producers."

10. Personal Reflections and Conclusion

Ted Cruz shares a poignant personal story about his family's experience during the oil price collapse of 1986, illustrating the human cost behind the statistics and reinforcing the urgency of preserving the energy sector.

• Ted Cruz [35:30]: "I still remember my dad... We lost the company, we lost our home, the home I grew up in."

Ben Ferguson concludes the episode by emphasizing the multifaceted impact of the energy crisis on jobs, the economy, and national security, leaving listeners with a sense of the pressing need for effective solutions.

• Ben Ferguson [36:00]: "It has implications for national security. There's so much more to talk about... Hopefully, we turn it around before it's too late."

Key Takeaways

1. Energy Independence is Crucial: The stability of American energy producers is vital for both economic health and national security. Dependence on foreign oil, especially from adversarial nations, poses significant risks.

2. Technological Innovation Driven by Independents: The shale revolution, which boosted American energy production, was primarily driven by independent companies leveraging horizontal drilling and fracking technologies.

3. Geopolitical Price Wars: Saudi Arabia and Russia are strategically lowering oil prices to outcompete American producers, aiming to reassert their dominance in the global energy market.

4. Financial Constraints Exacerbated by ESG: The ESG movement is restricting access to capital for energy companies, making it increasingly difficult for them to sustain operations during price downturns.

5. Urgent Policy Intervention Needed: Immediate government action is essential to support energy producers, prevent bankruptcies, and maintain energy independence.

6. Human and Economic Costs: The collapse of the energy sector leads to significant job losses and economic hardship, as illustrated by Ted Cruz's personal anecdote.

Notable Quotes

• Ted Cruz [00:56]: "If you end up seeing American energy producers driven out of business... it also has massive implications... making us dependent on foreign countries."

• Will VanLoh [06:43]: "Independents are the ones that have made this independence of energy possible."

• Ted Cruz [14:58]: "Saudi and Russia have decided they were going to basically launch a market share war on the US."

• Will VanLoh [28:45]: "We're hearing stories every single day about banks going to companies and saying, you need to put equity in and pay down this loan or we're going to throw your loan over to the workout group."

• Ted Cruz [34:25]: "That's hitting the energy sector and the American energy producers."

• Ted Cruz [35:30]: "We lost the company, we lost our home, the home I grew up in."

Conclusion

The episode "Running On Empty" provides a comprehensive analysis of the intertwined crises facing the American energy sector amid the COVID-19 pandemic. Through insightful dialogue between Ted Cruz and Will VanLoh, listeners gain a deeper understanding of the economic, geopolitical, and human dimensions of the energy market collapse. The discussion underscores the critical need for strategic interventions to preserve energy independence, protect jobs, and ensure national security.